Automatic YRT
Reinsurance Agreement
between
NATIONAL LIFE INSURANCE COMPANY
MONTPELIER, VERMONT
(hereinafter referred to as the "Ceding Company")
and
REINSURER
(hereinafter referred to as "REINSURER")
Effective October 1, 2005
Treaty # 3350
TABLE OF CONTENTS
PAGE
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ARTICLE 1 - PREAMBLE...........................................................1
1.1 PARTIES TO THE AGREEMENT..............................................1
1.2 COMPLIANCE............................................................1
1.3 CONSTRUCTION..........................................................1
1.4 ENTIRE AGREEMENT......................................................1
1.5 SEVERABILITY..........................................................1
ARTICLE 2 - AUTOMATIC REINSURANCE..............................................2
2.1 GENERAL CONDITIONS....................................................2
2.2 NEW BUSINESS..........................................................2
2.3 RETAINED AMOUNTS......................................................2
2.4 UNDERWRITING STANDARDS................................................2
ARTICLE 3 - FACULTATIVE REINSURANCE............................................4
ARTICLE 4 - COMMENCEMENT OF LIABILITY..........................................5
4.1 AUTOMATIC REINSURANCE.................................................5
4.2 FACULTATIVE REINSURANCE...............................................5
4.3 CONDITIONAL RECEIPT OR TEMPORARY INSURANCE............................5
ARTICLE 5 - REINSURED RISK AMOUNT..............................................6
5.1 LIFE..................................................................6
ARTICLE 6 - PREMIUM ACCOUNTING.................................................7
6.1 PREMIUMS..............................................................7
6.2 PAYMENT OF PREMIUMS...................................................7
6.3 DELAYED PAYMENT.......................................................
6.4 FAILURE TO PAY PREMIUMS...............................................
6.5 PREMIUM RATE GUARANTEE................................................
ARTICLE 7 - REDUCTIONS, TERMINATIONS AND CHANGES...............................9
7.1 REDUCTIONS AND TERMINATIONS...........................................9
7.2 INCREASES.............................................................9
7.3 RISK CLASSIFICATION CHANGES..........................................10
7.4 REINSTATEMENT........................................................10
7.5 NONFORFEITURE BENEFITS...............................................10
ARTICLE 8 - CONVERSIONS, EXCHANGES, AND REPLACEMENTS..........................11
8.1 CONVERSIONS..........................................................11
8.2 EXCHANGES AND REPLACEMENTS...........................................11
ARTICLE 9 - CLAIMS............................................................12
9.1 NOTICE...............................................................12
9.2 PROOFS...............................................................12
9.3 AMOUNT AND PAYMENT OF REINSURANCE BENEFITS...........................12
9.4 CONTESTABLE CLAIMS...................................................12
9.5 CLAIM EXPENSES.......................................................13
9.6 MISREPRESENTATION OR SUICIDE.........................................13
9.7 MISSTATEMENT OF AGE OR SEX...........................................13
9.8 EXTRA-CONTRACTUAL DAMAGES............................................13
ARTICLE 10 - CREDIT FOR RESERVES..............................................15
10.1 RESERVE METHODOLOGY AND REPORTING....................................15
ARTICLE 11 - RETENTION LIMIT CHANGES..........................................16
ARTICLE 12 - RECAPTURE........................................................17
12.1 OPTION 1 (EXCESS REINSURANCE)........................................17
ARTICLE 13 - GENERAL PROVISIONS...............................................18
13.1 CURRENCY.............................................................18
13.2 PREMIUM TAX [INSERT (IF APPLICABLE) AND EXCISE TAX]..................18
13.4 MINIMUM CESSION......................................................18
13.5 INSPECTION OF RECORDS................................................18
13.6 FORMS, MANUALS & ISSUE RULES.........................................18
13.7 INTEREST RATE........................................................18
13.8 OTHER (YRT AGREEMENTS)...............................................18
ARTICLE 14 - DAC TAX..........................................................19
ARTICLE 15 - OFFSET...........................................................20
ARTICLE 16 - INSOLVENCY.......................................................21
16.1 INSOLVENCY OF A PARTY TO THIS AGREEMENT..............................21
16.2 INSOLVENCY OF THE CEDING COMPANY.....................................21
16.3 INSOLVENCY OF REINSURER..............................................22
ARTICLE 17 - ERRORS AND OMISSIONS.............................................23
ARTICLE 18 - DISPUTE RESOLUTION...............................................24
ARTICLE 19 - ARBITRATION......................................................25
ARTICLE 20 - CONFIDENTIALITY..................................................27
ARTICLE 21 - DURATION OF AGREEMENT............................................29
ARTICLE 22 - EXECUTION........................................................30
Exhibits
A - Retention Limits of the Ceding Company
B - Plans Covered and Binding Limits
C - Forms, Manuals, and Issue Rules
D - Allocation Rules for Placement of Facultative Cases
E - Reinsurance Premiums
F - Conversion Premiums
G - Self-Administered Reporting
H - List of Risks Reinsured
I - List of Amendments
J - In-Force Summary
K - Application for Facultative Reinsurance Form
ARTICLE 1 - PREAMBLE
1.1 PARTIES TO THE AGREEMENT
This is a YRT agreement for indemnity reinsurance (the "Agreement") solely
between National Life Insurance Company of Montpelier, Vermont (the
"Ceding Company"), and Reinsurer ("REINSURER"), collectively referred to
as the "parties".
The acceptance of risks under this Agreement will create no right or legal
relationship between REINSURER and the insured, owner or beneficiary of
any insurance policy or other contract of the Ceding Company.
The Agreement will be binding upon the Ceding Company and REINSURER and
their respective successors and assigns.
1.2 COMPLIANCE
This Agreement applies only to the issuance of insurance by the Ceding
Company in a jurisdiction in which it is properly licensed.
The Ceding Company represents that, to the best of its knowledge, it is in
compliance with all state and federal laws applicable to the business
reinsured under this Agreement. In the event the Ceding Company is found
to be in non-compliance with any law material to this Agreement, the
Agreement will remain in effect and the Ceding Company will indemnify
REINSURER for any direct loss REINSURER suffers as a result of the
non-compliance, and will seek to remedy the non-compliance.
1.3 CONSTRUCTION
This Agreement will be construed in accordance with the laws of the state
of Vermont.
1.4 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties with
respect to the business reinsured hereunder. There are no understandings
between the parties other than as expressed in this Agreement. Any change
or modification to this Agreement will be null and void unless made by
amendment to this Agreement and signed by both parties.
1.5 SEVERABILITY
If any provision of this Agreement is determined to be invalid or
unenforceable, such determination will not impair or affect the validity
or the enforceability of the remaining provisions of this Agreement.
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ARTICLE 2 - AUTOMATIC REINSURANCE
2.1 GENERAL CONDITIONS
The Ceding Company will automatically cede to REINSURER new business as
defined in Section 2.2 on the life insurance policies, supplementary
benefits, and riders listed in Exhibit B issued on and after the effective
date of this Agreement. The basis for the automatic reinsurance is shown
in Exhibit B.
REINSURER will automatically accept its share of the above-referenced
policies up to the limits shown in Exhibit B, provided that:
(a) the insured, at the time of the application, must be a permanent
resident of the United States or Canada,
(b) the Ceding Company keeps its full retention, as specified in Exhibit
A, or otherwise holds its full retention on a life under previously
issued inforce policies and applies the same underwriting standards
it would have applied if the new policy had fallen completely within
its regular retention,
(c) the Ceding Company applies its normal underwriting guidelines in
accordance with Section 2.4 of this article and Section 13.6,
(d) the total of the new ultimate amount of reinsurance required
including contractual increases, and the amount already reinsured on
that life under this Agreement and all other agreements between
REINSURER and the Ceding Company, does not exceed the Automatic
Binding Limits set out in Exhibit B,
(e) the amount of life insurance in force in all companies, including
any coverage to be replaced plus the amount currently applied for on
that life in all companies, does not exceed the Jumbo Limit stated
in Exhibit B, and
(f) the application is on a life that has not been submitted
facultatively to REINSURER or any other reinsurer, unless the reason
for any prior facultative submission was solely for capacity that
may now be accommodated within the terms of this Agreement or unless
the reason for any prior facultative submission no longer applies.
2.2 NEW BUSINESS
New business as defined in this article and Article 8.2 are those policies
on which (a) the Ceding Company has obtained complete and current
underwriting evidence on the full amount issued, (b) the full normal
commissions are paid by the Ceding Company for the new plan, and (c) the
suicide and contestable provisions apply from the effective date of the
new plan unless state regulations prohibit new suicide or contestable
periods on exchanged policies.
2.3 RETAINED AMOUNTS
The Ceding Company may not reinsure on any basis any portion of the amount
it has retained on the business covered under this Agreement, without
prior notification to REINSURER.
2.4 UNDERWRITING STANDARDS
The parties hereby declare and agree that all policies and benefits
covered under this Agreement shall be issued in accordance with the Ceding
Company's normal underwriting standards and guidelines. Any subsequent
material changes to the underwriting standards and guidelines shall be
subject to the approval of REINSURER in writing before being applied to
policies and benefits to be covered by this Agreement.
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ARTICLE 3 - FACULTATIVE REINSURANCE
3.1 The Ceding Company may submit any application on a plan or rider
identified in Exhibit B to REINSURER for its consideration on a
facultative basis.
The Ceding Company will apply for reinsurance on a facultative basis by
sending to REINSURER an Application for Facultative Reinsurance, providing
the information outlined in Exhibit K. Accompanying this Application will
be copies of all underwriting evidence that is available for risk
assessment including, but not limited to, copies of the application for
insurance, medical examiners' reports, attending physicians' statements,
inspection reports, and any other information bearing on the insurability
of the risk. The Ceding Company also will notify REINSURER of any
outstanding underwriting requirements at the time of the facultative
submission. Any subsequent information received by the Ceding Company that
is pertinent to the risk assessment will be immediately transmitted to
REINSURER.
After consideration of the Application for Facultative Reinsurance and
related information, REINSURER will promptly inform the Ceding Company of
its underwriting decision. REINSURER's offer will expire at the end of 120
days, unless otherwise specified by REINSURER.
If the underwriting decision is acceptable, the Ceding Company will notify
REINSURER in writing of its acceptance of the offer during the lifetime of
the insured.
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ARTICLE 4 - COMMENCEMENT OF LIABILITY
4.1 AUTOMATIC REINSURANCE
For automatic reinsurance, REINSURER's liability for amounts ceded
hereunder will commence at the same time as the Ceding Company's
liability.
4.2 FACULTATIVE REINSURANCE
For facultative reinsurance, REINSURER's liability will commence at the
same time as the Ceding Company's liability, provided that REINSURER has
made a facultative offer and that offer was accepted, during the lifetime
of the insured, in accordance with the terms of this Agreement.
4.3 CONDITIONAL RECEIPT OR TEMPORARY INSURANCE
Reinsurance coverage under a conditional receipt or temporary insurance
provision is limited to REINSURER's share of amounts within the
Conditional Receipt or Temporary Insurance Limits specified in Exhibit B
less the Ceding Company's standard retention on the policy applied for. In
no event, however, shall REINSURER's liability on any one life, including
previous reinsurances, exceed the automatic limits in Exhibit B. REINSURER
will accept liability provided that the Ceding Company has followed its
normal cash-with-application procedures for such coverage.
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ARTICLE 5 - REINSURED RISK AMOUNT
5.1 LIFE
The net amount at risk of the policy is defined as the policy face amount
less the cash value, account value, or terminal reserve. The reinsured net
amount at risk for automatic policies is determined by multiplying the
total net amount at risk on the policy by REINSURER's share as defined in
Exhibit B. For variable amount plans, the net amount at risk is calculated
using the account value in effect at the end of the monthly reinsurance
billing period. The Ceding Company will maintain a quota share retention
on each policy, up to the maximum limits of its retention per life for the
insured's issue age and rating, as shown in Exhibit A. Risk amounts above
that limit will be reinsured under the terms of this Agreement on an
excess basis.
Any change in the net amount at risk due to changes in the policy's cash
value or account value will be shared proportionately between the Ceding
Company and REINSURER.
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ARTICLE 6 - PREMIUM ACCOUNTING
6.1 PREMIUMS
Reinsurance premium rates for life insurance and other benefits reinsured
under this Agreement are shown in Exhibit E. The rates will be applied to
the reinsured net amount at risk.
6.2 PAYMENT OF PREMIUMS
Reinsurance premiums are payable annually and in advance. The Ceding
Company will calculate the amount of reinsurance premium due and, within
ten (10) days after the end of the month, will send REINSURER a statement
that contains the information shown in Exhibit G, showing reinsurance
premiums due for that period. If an amount is due REINSURER, the Ceding
Company will remit that amount together with the statement. If an amount
is due the Ceding Company, REINSURER will remit such amount within twenty
(20) days of receipt of the statement.
6.3 DELAYED PAYMENT
Premium balances that remain unpaid for more than thirty (30) days after
the Remittance Date will incur interest from the end of the reporting
period. The Remittance Date is defined as thirty (30) days after the end
of the reporting period. Interest will be calculated using the index
specified in Article 13.7.
6.4 FAILURE TO PAY PREMIUMS
The payment of reinsurance premiums is a condition precedent to the
liability of REINSURER for reinsurance covered by this Agreement. In the
event that reinsurance premiums are not paid within thirty (30) days of
the Remittance Date, REINSURER will have the right to terminate the
reinsurance under all policies having reinsurance premiums in arrears. If
REINSURER elects to exercise its right of termination, it will give the
Ceding Company thirty (30) days written notice of its intention. Such
notice will be sent by certified mail.
If all reinsurance premiums in arrears, including any that become in
arrears during the thirty (30) day notice period, are not paid before the
expiration of the notice period, REINSURER will be relieved of all
liability under those policies as of the last date to which premiums have
been paid for each policy. Reinsurance on policies on which reinsurance
premiums subsequently fall due will automatically terminate as of the last
date to which premiums have been paid for each policy, unless reinsurance
premiums on those policies are paid on or before their Remittance Dates.
Terminated reinsurance may be reinstated, subject to approval by
REINSURER, within thirty (30) days of the date of termination, and upon
payment of all reinsurance premiums in arrears including any interest
accrued thereon. REINSURER will have no liability for any claims incurred
between the date of termination and the date of the reinstatement of the
reinsurance. The right to terminate reinsurance will not prejudice
REINSURER's right to collect premiums for the period during which
reinsurance was in force prior to the expiration of the thirty (30) days
notice.
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The Ceding Company will not force termination under the provisions of this
Article solely to avoid the provisions regarding recapture in Article 12,
or to transfer the reinsured policies to another reinsurer.
6.5 PREMIUM RATE GUARANTEE
REINSURER does not guarantee the premium rates for more than one (1) year,
hence deficiency reserves are not required.
Although REINSURER anticipates that the premium rates in Exhibit E will
apply indefinitely, it guarantees only that the premium rates applicable
to the business reinsured under this Agreement will not exceed the greater
of:
(1) the reinsurance premium rates specified in Exhibit E, and
(2) YRT net premiums at the applicable statutory minimum valuation
mortality table and statutory maximum interest rate for the
reinsured business.
If REINSURER raises its reinsurance premium rates on any block of inforce
business reinsured under this Agreement on which the Ceding Company has
not raised its retail premiums or cost-of-insurance charges, the Ceding
Company may recapture that block of business as of the effective date of
the increase in reinsurance premiums. The recapture will become effective
on individual policy anniversary dates beginning no sooner than 30 days
after the Ceding Company has provided notice of its intent to recapture.
If the Ceding Company raises its retail premiums or cost-of-insurance
charges on any block of inforce business reinsured under this Agreement,
REINSURER may increase its premium rates on that block of business by a
corresponding amount. The Ceding Company will provide REINSURER with 30
days notice of any such increase. The increase in reinsurance premiums
will become effective on individual policy anniversary dates beginning no
sooner than 30 days after REINSURER has provided notice of its intent to
increase premiums and no sooner than the increase in retail premiums or
cost-of-insurance charges becomes effective.
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ARTICLE 7 - REDUCTIONS, TERMINATIONS AND CHANGES
Whenever a change is made in the status, plan, amount or other material feature
of a policy reinsured under this Agreement, REINSURER will, upon receipt of
notification of the change, provide adjusted reinsurance coverage in accordance
with the provisions of this Agreement. The Ceding Company will notify REINSURER
of any such change within thirty (30) days of its effective date.
7.1 REDUCTIONS AND TERMINATIONS
In the event of the reduction, lapse, or termination of a policy or
policies reinsured under this Agreement or any other agreement, the Ceding
Company will, reduce or terminate reinsurance on that life. The reinsured
amount on the life with all reinsurers will be reduced, effective on the
same date, by the amount required such that the Ceding Company maintains
its retention as defined under this Agreement.
The reinsurance reduction will apply first to the policy or policies being
reduced and then, on a chronological basis, to other reinsured policies on
the life, beginning with the oldest policy. If a fully retained policy on
a life that is reinsured under this Agreement is terminated or reduced,
the Ceding Company will reduce the existing reinsurance on that life by a
corresponding amount, with the reinsurance on the oldest policy being
reduced first. If the amount of reduction exceeds the risk amount
reinsured, the reinsurance on the policy or policies will be terminated.
REINSURER will refund any unearned reinsurance premiums net of allowances.
However, the reinsured portion of any policy fee will be deemed earned for
a policy year if the policy is reinsured during any portion of that policy
year.
7.2 INCREASES
(A) NONCONTRACTUAL INCREASES
If the amount of insurance is increased as a result of a
noncontractual change and the increase will be underwritten by the
Ceding Company in accordance with its customary standards and
procedures as set forth in Article 2.2, it will be considered new
reinsurance under this Agreement. Otherwise, the increase is not
reinsured under this Agreement. REINSURER's approval is required if
the original policy was reinsured on a facultative basis or if the
new amount will cause the reinsured amount on the life to exceed
either the Automatic Binding Limits or the Jumbo Limits shown in
Exhibit B.
The Ceding Company and REINSURER will share the increased amount
proportionately. Once the Ceding Company's maximum retention has
been reached, the remaining amount will be reinsured on a
proportional basis. Premiums for the additional reinsurance will be
at the new-issue rate from the point of increase.
(B) CONTRACTUAL INCREASES
For policies reinsured on an automatic basis, reinsurance of
increases in amount resulting from contractual policy provisions
will be accepted only up to the Automatic Binding Limits shown in
Exhibit B. For policies reinsured on a facultative basis,
reinsurance will be limited to the ultimate amount shown in
REINSURER's facultative offer. Reinsurance premiums for contractual
increases will be on a point-in-scale basis from the original issue
age of the policy.
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7.3 RISK CLASSIFICATION CHANGES
If the policyholder requests a Table Rating reduction or removal of a Flat
Extra, such change will be underwritten according to the Ceding Company's
normal underwriting practices. Risk classification changes on facultative
policies will be subject to REINSURER's approval.
7.4 REINSTATEMENT
If a policy reinsured on an automatic basis is reinstated in accordance
with its terms and in accordance with Ceding Company rules and procedures,
REINSURER will, upon notification of reinstatement, reinstate the
reinsurance coverage. If a policy reinsured on a facultative basis is
reinstated, approval by REINSURER will be required prior to the
reinstatement of the reinsurance if the Ceding Company's regular
reinstatement rules indicate that more evidence than a Statement of Good
Health is required.
Upon reinstatement of the reinsurance coverage, the Ceding Company will
pay the contractual reinsurance premiums plus accrued interest for the
period and at the interest rate for which it receives premiums in arrears.
7.5 NONFORFEITURE BENEFITS
(A) EXTENDED TERM
If the original policy lapses and extended term insurance is elected
under the terms of the policy, reinsurance will continue on the same
basis as under the original policy until the expiry of the extended
term period.
(B) REDUCED PAID-UP
If the original policy lapses and reduced paid-up insurance is
elected under the terms of the policy, the amount reinsured will be
reduced.
The amount reinsured and the amount retained will be reduced
proportionately. The reinsurance premiums will be calculated in the
same manner as reinsurance premiums were calculated on the original
policy.
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ARTICLE 8 - CONVERSIONS, EXCHANGES, AND REPLACEMENTS
If a policy reinsured under this Agreement is converted, exchanged or replaced,
the Ceding Company will promptly notify REINSURER. Unless mutually agreed
otherwise, policies that are not reinsured with REINSURER and that exchange or
convert to a plan covered under this Agreement will not be reinsured hereunder.
8.1 CONVERSIONS
REINSURER will continue to reinsure policies resulting from the
contractual conversion of any policy reinsured under this Agreement, in an
amount not to exceed the original amount reinsured hereunder. If the plan
to which the original policy is converting is reinsured by REINSURER,
either under this Agreement or under a different Agreement, reinsurance
premium rates for the resulting converted policy will be those contained
in the Agreement that covers the plan to which the original policy is
converting. However, if the new plan is not reinsured by REINSURER,
reinsurance premiums for a policy resulting from a contractual conversion
will be agreed upon between the parties. Reinsurance premiums and any
allowances for conversions will be on a point-in-scale basis from the
original issue age of the policy.
If the conversion results in an increase in the risk amount, the increase
will be underwritten by the Ceding Company in accordance with its
customary standards and procedures. REINSURER will accept such increases,
subject to the new business provisions of this Agreement. Reinsurance
premiums and any allowances for increased risk amounts will be first-year
premiums at the agreed-upon premium rate.
8.2 EXCHANGES AND REPLACEMENTS
A policy resulting from an internal exchange or replacement will be
underwritten by the Ceding Company in accordance with its underwriting
guidelines, standards and procedures for exchanges and replacements. If
the Ceding Company's guidelines treat the policy as new business, then the
reinsurance will also be considered new business. For purposes of this
Article, new business is defined as those policies on which:
(a) the Ceding Company has obtained complete and current underwriting
evidence on the full amount; and
(b) the full normal commissions are paid by the Ceding Company for the
new plan; and
(c) the Suicide and Contestable provisions apply from the effective date
of the new plan unless state regulations prohibit new Suicide or
Contestable periods on exchanged policies.
REINSURER's approval to exchange or replace the policy will be required if
the original policy was reinsured on a facultative basis.
If the Ceding Company's guidelines do not treat the policy as new
business, the exchange or replacement will continue to be ceded to
REINSURER. The rates will be based on the original issue age, underwriting
class and duration since the issuance of the original policy.
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ARTICLE 9 - CLAIMS
Claims covered under this Agreement include only death claims, which are those
due to the death of the insured on a policy reinsured under this Agreement, and
any additional benefits specified in Exhibit B, which are provided by the
underlying policy and are reinsured under this Agreement.
9.1 NOTICE
The Ceding Company will notify REINSURER, as soon as reasonably possible,
after it receives a claim on a policy reinsured under this Agreement.
9.2 PROOFS
The Ceding Company will promptly provide REINSURER with proper claim
proofs, including a copy of the proof of payment by the Ceding Company, a
copy of the claimant statement and a copy of the insured's death
certificate. In addition, for contestable claims, the Ceding Company will
send to REINSURER a copy of all papers in connection with the claim,
including investigation papers and the underwriting file and underwriter's
notes.
9.3 AMOUNT AND PAYMENT OF REINSURANCE BENEFITS
As soon as REINSURER receives proper claim notice and proof of the claim,
REINSURER will promptly examine the claim and pay the reinsurance benefits
due the Ceding Company as appropriate. The Ceding Company's contractual
liability for policies reinsured under this Agreement is binding on
REINSURER. However, for claims incurred during the contestable period if
the total amount of reinsurance ceded to all Reinsurers on the policy is
greater than the amount retained by the Ceding Company, or if the Ceding
Company retained less than its usual retention on the policy, the Ceding
Company will consult with REINSURER before conceding liability or making
settlement to the claimant. The Ceding Company will wait at least ten (10)
business days for REINSURER's recommendation.
The total reinsurance recoverable from all companies will not exceed the
Ceding Company's total contractual liability on the policy, less the
amount retained. The maximum reinsurance death benefit payable to the
Ceding Company under this Agreement is the risk amount specifically
reinsured with REINSURER. REINSURER will also pay its proportionate share
of the interest that the Ceding Company pays on the death proceeds until
the date of settlement.
Life benefit payments will be made in a single sum, regardless of the
Ceding Company's settlement options.
9.4 CONTESTABLE CLAIMS
The Ceding Company will promptly notify REINSURER of its intention to
contest, compromise, or litigate a claim involving a reinsured policy. The
Ceding Company will also promptly and fully disclose all information
relating to the claim. Once notified, REINSURER will have fifteen (15)
business days to notify the Ceding Company in writing of its decision to
accept participation in the contest, compromise, or litigation. If
REINSURER has accepted participation, the Ceding Company will promptly
advise REINSURER of all significant developments in the claim
investigation, including notification of any legal proceedings against it
in response to denial of the claim.
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If REINSURER does not accept participation, REINSURER will then fulfill
its obligation by paying the Ceding Company its full share of the
reinsurance amount, and will not share in any subsequent reduction or
increase in liability.
If REINSURER accepts participation and the Ceding Company's contest,
compromise, or litigation results in a reduction or increase in liability,
REINSURER will share in any such reduction or increase in proportion to
its share of the risk on the contested policy.
9.5 CLAIM EXPENSES
REINSURER will pay its share of reasonable claim investigation and legal
expenses connected with the litigation or settlement of contractual
liability claims unless REINSURER has discharged its liability pursuant to
Section 9.4 above. If REINSURER has so discharged its liability, REINSURER
will not participate in any expenses incurred thereafter.
REINSURER will not reimburse the Ceding Company for routine claim and
administration expenses, including but not limited to the Ceding Company's
home office expenses, compensation of salaried officers and employees, and
any legal expenses other than third party expenses incurred by the Ceding
Company. Claim investigation expenses do not include expenses incurred by
the Ceding Company as a result of a dispute or contest arising out of
conflicting claims of entitlement to policy proceeds or benefits.
Furthermore, REINSURER will not reimburse the Ceding Company for any
expenses if said expense was not incurred by the Ceding Company while
investigating, defending or settling a claim.
9.6 MISREPRESENTATION OR SUICIDE
If the Ceding Company returns premium to the policyowner or beneficiary as
a result of misrepresentation or suicide of the insured, REINSURER will
refund its proportionate share of the premium refund to the Ceding Company
in lieu of any other form of reinsurance benefit payable under this
Agreement.
9.7 MISSTATEMENT OF AGE OR SEX
In the event of a change in the amount of the Ceding Company's liability
on a reinsured policy due to a misstatement of age or sex, REINSURER's
liability will change proportionately. The face amount of the reinsured
policy will be adjusted from the inception of the policy, and any
difference will be settled without interest.
9.8 EXTRA-CONTRACTUAL DAMAGES
REINSURER will not participate in punitive or compensatory damages that
are awarded against the Ceding Company as a result of an act, omission, or
course of conduct committed solely by the Ceding Company, its agents, or
representatives in connection with claims covered under this Agreement.
REINSURER will, however, pay its share of statutory penalties awarded
against the Ceding Company in connection with claims covered under this
Agreement if REINSURER elected in writing to join in the contest of the
coverage in question.
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The parties recognize that circumstances may arise in which equity would
require REINSURER, to the extent permitted by law, to share
proportionately in punitive and compensatory damages. Such circumstances
are difficult to define in advance, but would generally be those
situations in which REINSURER was an active party and, in writing,
recommended, consented to, or ratified the act or course of conduct of the
Ceding Company that ultimately resulted in the assessment of the
extra-contractual damages. In such situations, REINSURER and the Ceding
Company will share such damages so assessed, in equitable proportions.
For purposes of this Article, the following definitions will apply.
"Punitive Damages" are those damages awarded as a penalty, the amount of
which is neither governed nor fixed by statute.
"Compensatory Damages" are those amounts awarded to compensate for the
actual damages sustained, and are not awarded as a penalty, nor fixed in
amount by statute.
"Statutory Penalties" are those amounts awarded as a penalty, but are
fixed in amount by statute.
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ARTICLE 10 - CREDIT FOR RESERVES
10.1 RESERVE METHODOLOGY AND REPORTING
The parties intend that the Ceding Company will receive full statutory
reserve credit in its state of domicile for the insurance risks ceded to
REINSURER. The parties agree to make all reasonable efforts to ensure that
this is accomplished.
The Ceding Company will provide a reserve summary for business reinsured
under this agreement to REINSURER on a quarterly basis, along with a
detailed description of its reserving assumptions and any changes in these
assumptions applicable to each calendar year.
14
ARTICLE 11 - RETENTION LIMIT CHANGES
11.1 If the Ceding Company changes its maximum retention limits as shown in
Exhibit A, it will provide REINSURER with written notice of the intended
changes thirty (30) days in advance of their effective date.
A change to the Ceding Company's maximum retention limits will not affect
the reinsured policies in force except as specifically provided elsewhere
in this Agreement. Furthermore, unless agreed between the parties, an
increase in the Ceding Company's retention schedule will not effect an
increase in the total risk amount that it may automatically cede to
REINSURER.
15
ARTICLE 12 - RECAPTURE
12.1 Recapture is not available until the end of the 20th policy year, and then
must be in conjunction with an increase in the Ceding Company's maximum
schedule of retention. The amount eligible for recapture will be the
difference between the amount originally retained and the amount the
Ceding Company would have retained on the same quota share basis had the
new retention schedule been in effect at the time of issue.
16
ARTICLE 13 - GENERAL PROVISIONS
13.1 CURRENCY
All payments and reporting by both parties under this Agreement will be
made in United States dollars.
13.2 PREMIUM TAX
REINSURER will not reimburse the Ceding Company for premium taxes.
13.3 MINIMUM CESSION
The Ceding Company will not cede a policy to REINSURER unless the amount
to be reinsured at issue exceeds the Initial Minimum Cession amount shown
in Exhibit B.
Reinsurance will be cancelled on any policy when its reinsured net amount
at risk falls below the Trivial Amount limit shown in Exhibit B.
13.4 INSPECTION OF RECORDS
REINSURER and the Ceding Company, or their duly authorized
representatives, will have the right to inspect original papers, records,
and all documents relating to the business reinsured under this Agreement
including underwriting, claims processing, and administration. Such access
will be provided during regular business hours at the office of the
inspected party.
13.6 FORMS, MANUALS & ISSUE RULES
The Ceding Company affirms that its retention schedule, underwriting
guidelines, issue rules, premium rates, policy forms, and normal standards
and guidelines relating to exchanges and replacements applicable to the
Reinsured Policies and in use as of the effective date, have been supplied
to REINSURER.
It is the Ceding Company's responsibility to ensure that its practice and
applicable forms are in compliance with current Medical Information Bureau
(MIB) guidelines.
13.7 INTEREST RATE
If, under the terms of this Agreement, interest is accrued on amounts due
either party, such interest will be calculated using the 180 day treasury
rate as reported in the Wall Street Journal on the date the payment
becomes due, except as it pertains to Article 9 and as outlined elsewhere
in this Agreement.
13.8 OTHER
REINSURER will not participate in gross annual premiums and policy fees
paid by the policyholder, expense charges, cash values, accumulation fund
amounts, dividends, nor any benefits not expressly referred to herein.
17
ARTICLE 14 - DAC TAX
14.1 The parties to this Agreement agree to the following provisions pursuant
to Section 1.848-2(g)(8) of the Income Tax Regulations effective December
29, 1992, under Section 848 of the Internal Revenue Code of 1986, as
amended:
(a) The term 'party' refers to either the Ceding Company or REINSURER,
as appropriate.
(b) The terms used in this Article are defined by reference to
Regulation Section 1.848-2, effective December 29, 1992.
(a) The party with the net positive consideration for this Agreement for
each taxable year will capitalize specified policy acquisition
expenses with respect to this Agreement without regard to the
general deductions limitation of Section 848(c)(1).
(b) Both parties agree to exchange information pertaining to the amount
of net consideration under this Agreement each year to ensure
consistency, or as otherwise required by the Internal Revenue
Service.
(c) The Ceding Company will submit a schedule to REINSURER by April 1 of
each year with 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.
REINSURER may contest such calculation by providing an alternative
calculation to the Ceding Company in writing within thirty (30) days
of REINSURER's receipt of the Ceding Company's calculation. If
REINSURER does not so notify the Ceding Company within the required
timeframe, REINSURER will report the net consideration as determined
by the Ceding Company in REINSURER's tax return for the previous
calendar year.
(f) If REINSURER 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 within thirty (30) days of the
date REINSURER submits its alternative calculation. If the Ceding
Company and REINSURER reach an agreement on an amount of net
consideration, each party will report the agreed upon amount in its
tax return for the previous calendar year.
(g) Both the Ceding Company and REINSURER represent and warrant that
they are subject to United States taxation under either Subchapter L
or Subpart F of Part III of Subchapter N of the Internal Revenue
Code of 1986, as amended.
18
ARTICLE 15 - OFFSET
15.1 Any debts or credits, in favor of or against either REINSURER or the
Ceding Company with respect to this Agreement or any other reinsurance
agreement between the parties, are deemed mutual debts or credits and may
be offset and only the balance will be allowed or paid.
The right of offset will not be affected or diminished because of the
insolvency of either party.
19
ARTICLE 16 - INSOLVENCY
16.1 INSOLVENCY OF A PARTY TO THIS AGREEMENT
A party to this Agreement will be deemed insolvent when it:
(a) applies for or consents to the appointment of a receiver,
rehabilitator, conservator, liquidator or statutory successor of its
properties or assets; or
(b) is adjudicated as bankrupt or insolvent; or
(c) files or consents to the filing of a petition in bankruptcy, seeks
reorganization to avoid insolvency or makes formal application for
any bankruptcy, dissolution, liquidation or similar law or statute;
or
(d) becomes the subject of an order to rehabilitate or an order to
liquidate as defined by the insurance code of the jurisdiction of
the party's domicile.
16.2 INSOLVENCY OF THE CEDING COMPANY
In the event of the insolvency of the Ceding Company, all reinsurance
payments due under this Agreement will be payable directly to the
liquidator, rehabilitator, receiver, or statutory successor of the Ceding
Company, without diminution because of the insolvency, for those claims
allowed against the Ceding Company by any court of competent jurisdiction
or by the liquidator, rehabilitator, receiver or statutory successor
having authority to allow such claims.
In the event of insolvency of the Ceding Company, the liquidator,
rehabilitator, receiver, or statutory successor will give written notice
to REINSURER of all pending claims against the Ceding Company on any
policies reinsured within a reasonable time after such claim is filed in
the insolvency proceeding. While a claim is pending, REINSURER may
investigate and interpose, at its own expense, in the proceeding where the
claim is adjudicated, any defense or defenses that it may deem available
to the Ceding Company or its liquidator, rehabilitator, receiver, or
statutory successor.
The expense incurred by REINSURER 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 that may accrue to
the Ceding Company solely as a result of the defense undertaken by
REINSURER. 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 this Agreement as though such expense had been incurred by the
Ceding Company.
REINSURER will be liable only for the amounts reinsured and will not be or
become liable for any amounts or reserves to be held by the Ceding Company
on policies reinsured under this Agreement.
20
16.3 INSOLVENCY OF REINSURER
In the event of REINSURER's insolvency, the Ceding Company may cancel the
Agreement for future new business and will notify REINSURER in writing of
its intent. The parties agree to waive the notification period for this
cancellation, and the effective date will be no earlier than the effective
date of REINSURER's insolvency.
Upon giving written notice to REINSURER, the Ceding Company may also
recapture all of the inforce business reinsured by REINSURER under this
Agreement. In the event the Ceding Company exercises this recapture
option, REINSURER will refund any unearned premium.
21
ARTICLE 17 - ERRORS AND OMISSIONS
17.1 If through unintentional error, oversight, omission, or misunderstanding
(collectively referred to as "errors"), REINSURER or the Ceding Company
fails to comply with the terms of this Agreement and if, upon discovery of
the error by either party, the other is promptly notified, each thereupon
will be restored to the position it would have occupied if the error had
not occurred, including interest, except as provided for in Article 3.
If it is not possible to restore each party to the position it would have
occupied but for the error, the parties will endeavor in good faith to
promptly resolve the situation in a manner that is fair and reasonable,
and most closely approximates the intent of the parties as evidenced by
this Agreement.
However, REINSURER will not provide reinsurance for policies that do not
satisfy the parameters of this Agreement, nor will REINSURER be
responsible for negligent or deliberate acts or for repetitive errors in
administration by the Ceding Company that have not been corrected in a
reasonable period of time. If either party discovers that the Ceding
Company has failed to cede reinsurance as provided in this Agreement, or
failed to comply with its reporting requirements, REINSURER may require
the Ceding Company to audit its records for similar errors and to take the
actions necessary to avoid similar errors in the future. If REINSURER has
received no evidence that the Ceding Company has taken action to remedy
such a situation, REINSURER's liability is limited to correctly reported
policies only.
ARTICLE 18 - DISPUTE RESOLUTION
18.1 In the event of a dispute arising out of or relating to this agreement,
the parties agree to the following process of dispute resolution. Within
thirty (30) days after REINSURER or the Ceding Company has first given the
other party written notification of a specific dispute, each party will
appoint a designated company officer to attempt to resolve the dispute.
The officers will meet at a mutually agreeable location as soon as
possible and as often as necessary, in order to gather and furnish the
other with all appropriate and relevant information concerning the
dispute. The officers will discuss the problem and will negotiate in good
faith without the necessity of any formal arbitration proceedings. During
the negotiation process, all reasonable requests made by one officer to
the other for information will be honored. The designated officers will
decide the specific format for such discussions.
If the officers cannot resolve the dispute within thirty (30) days of
their first meeting, the dispute will be submitted to formal arbitration,
unless the parties agree in writing to extend the negotiation period for
an additional thirty (30) days.
22
ARTICLE 19 - ARBITRATION
19.1 It is the intention of REINSURER and the Ceding Company that the customs
and practices of the life insurance and reinsurance industry will be given
full effect in the operation and interpretation of this Agreement. The
parties agree to act in all matters with the highest good faith. If
REINSURER and the Ceding Company cannot mutually resolve a dispute that
arises out of or relates to this Agreement, and the dispute cannot be
resolved through the dispute resolution process described in Article 18,
the dispute will be decided through arbitration.
To initiate arbitration, either the Ceding Company or REINSURER will
notify the other party in writing of its desire to arbitrate, stating the
nature of its dispute and the remedy sought. The party to which the notice
is sent will acknowledge to the notification in writing within fifteen
(15) days of its receipt.
There will be three arbitrators who will be current or former officers of
life insurance or life reinsurance companies other than the parties to
this Agreement, their affiliates or subsidiaries. Each of the parties 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 (60) days of the initiation of the arbitration, the other party may
appoint the second arbitrator. If the two arbitrators do not agree on a
third arbitrator within sixty (60) days of the appointment of the second
arbitrator, then each arbitrator shall nominate three candidates [within
ten (10) days thereafter], two of whom the other shall decline, and the
decision shall be made by drawing lots for the final selection.
Once chosen, the arbitrators are empowered to select the site of the
arbitration and decide all substantive and procedural issues by a majority
of votes. As soon as possible, the arbitrators will establish arbitration
procedures as warranted by the facts and issues of the particular case.
The arbitrators will have the power to determine all procedural rules of
the arbitration including but not limited to inspection of documents,
examination of witnesses and any other matter relating to the conduct of
the arbitration. The arbitrators may consider any relevant evidence; they
will weigh the evidence and consider any objections. Each party may
examine any witnesses who testify at the arbitration hearing.
The arbitrators will base their decision on the terms and conditions of
this Agreement and the customs and practices of the life insurance and
reinsurance industries rather than on strict interpretation of the law.
The decision of the arbitrators will be made by majority rule and will be
submitted in writing. The decision will be final and binding on both
parties and there will be no appeal from the decision. Either party to the
arbitration may petition any court having jurisdiction over the parties to
reduce the decision to judgment. The arbitrators may not award any
exemplary or punitive damages.
23
Unless the arbitrators decide otherwise, each party will bear the expense
of its own arbitration activities, including its appointed arbitrator and
any outside attorney and witness fees. The parties will jointly and
equally bear the expense of the third arbitrator and other costs of the
arbitration.
This Article will survive termination of this Agreement.
24
ARTICLE 20 - CONFIDENTIALITY
20.1 PRIVACY
REINSURER agrees to treat Customer Information provided by the Ceding
Company as confidential, as prescribed under Federal and State laws and
regulations related to privacy. Customer Information includes, but is not
limited to, medical, financial, and other personal information about
proposed, current, and former policyowners, insureds, applicants, and
beneficiaries of policies issued by the Ceding Company. REINSURER may
disclose such information to its retrocessionaires as necessary to perform
its internal risk-management functions and to comply with retrocessionaire
requirements. REINSURER may also disclose such information to its external
auditors as necessary to comply with audit requirements. REINSURER will
take reasonable steps to assure such outside parties maintain the
confidentiality of Customer Information.
REINSURER will furnish to the Ceding Company a copy of REINSURER's privacy
policy upon request.
20.2 PROPRIETARY INFORMATION
(a) The Ceding Company and REINSURER acknowledge that compliance with
the terms of this agreement requires that they exchange Proprietary
Information with each other.
(b) Proprietary Information includes, but is not limited to, business
plans, trade secrets, experience studies, underwriting manuals,
guidelines and decisions, applications, policy forms, quote terms,
actuarial data and assumptions, valuations, financial condition, and
the specific terms and conditions of this agreement.
(c) Proprietary Information will not include information that:
(i) is or becomes available to the general public other than as a
result of disclosure by the party receiving the information (
hereinafter the "Recipient");
(ii) is developed independently by the Recipient;
(iii) is acquired by the Recipient from a third party that is not
known by the Recipient to be bound to keep the information
confidential; or
(iv) was already within the possession of the Recipient, and not
subject to a confidentiality agreement, prior to being
furnished by the other party.
20.3 REINSURER and the Ceding Company shall hold all Proprietary Information
received from the other party in confidence and will not disclose such
information except to their own directors, officers, employees,
affiliates, and advisors (collectively the "Representatives") who need to
know such information in connection with the proper execution of this
agreement. REINSURER and the Ceding Company shall inform all
Representatives of the confidentiality of the Proprietary Information and
will direct such Representatives to treat the information accordingly.
20.4. REINSURER may disclose Proprietary Information to its retrocessionaires or
MIB as necessary to perform its internal risk-management functions and to
comply with retrocessionaire requirements. The Ceding Company or REINSURER
may disclose Proprietary Information to its external auditors as necessary
to comply with audit requirements. The parties will take reasonable steps
to assure such outside parties maintain the confidentiality of such
Proprietary Information.
25
20.5 Either party may disclose Proprietary Information when legally compelled
to do so. In such event, the party so compelled will provide the other
party with prompt notice prior to disclosure so that the other party may
seek an appropriate remedy.
20.6 The provisions of this Article survive for two years beyond the
termination of the last in force policy reinsured under this Agreement.
26
ARTICLE 21 - DURATION OF AGREEMENT
21.1 This Agreement is indefinite as to its duration. The Ceding Company or
REINSURER may terminate this Agreement with respect to the reinsurance of
new business by giving thirty (30) days written notice of termination to
the other party, sent by certified mail. The first day of the notice
period is deemed to be the date the document is postmarked.
During the notification period, the Ceding Company will continue to cede
and REINSURER will continue to accept policies covered under the terms of
this Agreement. Reinsurance coverage on all reinsured policies will remain
in force until the termination or expiry of the policies or until the
contractual termination of reinsurance under the terms of this Agreement,
whichever occurs first.
27
ARTICLE 22 - EXECUTION
22.1 This Agreement is effective as of October 1, 2005, and applies to all
eligible policies with issue dates on or after such date and to eligible
policies applied for on and after such date that were backdated for up to
six (6) months to save age. This Agreement has been made in duplicate and
is hereby executed by both parties.
NATIONAL LIFE INSURANCE COMPANY REINSURER
By: By:
---------------------------- ----------------------------
(signature) (signature)
---------------------------- ----------------------------
(print or type name) (print or type name)
Title: Title:
---------------------------- ----------------------------
Date: Date:
---------------------------- ----------------------------
Location: Location:
---------------------------- ----------------------------
Attest: Attest:
---------------------------- ----------------------------
(signature) (signature)
Title: Title:
---------------------------- ----------------------------
28
EXHIBIT A
CORPORATE RETENTION LIMITS OF THE CEDING COMPANY
A.1 (A) LIFE INSURANCE - MAXIMUM LIMITS OF RETENTION
ISSUE AGES STANDARD - TABLE 16
All Ages $2,000,000 on each life, but not
to exceed $2,000,000 per policy
(A) FIRST DOLLAR QUOTA SHARE - CEDING COMPANY'S QUOTA SHARE PERCENTAGE
The Ceding Company will retain 10% of each policy up to the above
maximum dollar retention limits.
A.2 WAIVER OF PREMIUM DISABILITY BENEFITS: Not applicable
A.3 ACCIDENTAL DEATH BENEFITS: Not applicable
EXHIBIT B
PLANS COVERED AND BINDING LIMITS
The business automatically reinsured under this Agreement is defined as follows.
B.1 PLANS, RIDERS AND BENEFITS
Policies issued on plans with effective dates within the applicable period
shown below may qualify for automatic reinsurance under the terms of this
Agreement.
Commencement
Plan Identification Form No. Date
--------------------------------------------------------------------------------
Plan Name or Code, e.g.:
Survivorship Variable Universal Life 7461 October 1, 2005
Benefit & Riders:
Policy Split Option Rider 7465 October 1, 2005
Continuing Coverage Rider 7462 October 1, 2005
Estate Preservation Rider 7467 October 1, 2005
Enhanced Death Benefit Rider 7466 October 1, 2005
Additional Protection Benefit Rider 7463 October 1, 2005
Automatic Increase Rider 7630 October 1, 2005
The above plans underwritten by Beneficial Life Insurance Company may be
reinsured under this Reinsurance Agreement at the same terms as the Ceding
Company.
B.2 BASIS
REINSURER's share will be 25% of the total face amount on each policy on a
first dollar quota share basis. This amount will not exceed REINSURER's
share of the maximum Automatic Binding Limits specified in Exhibit B. If
NL's retention is full on one or both lives, REINSURER's share can be up
to 27.78% of the policy.
B.3 AUTOMATIC BINDING LIMITS
(a) Life
-------------------------------------------------------------------------------------------------------------
Issue Ages Maximum Automatic Limit REINSURER's REINSURER's
Standard - Table 16 Share Max Share
if NL Retention Full
-------------------------------------------------------------------------------------------------------------
Both Insureds Ages Up to 75, $20,000,000 $5,000,000 $5,556,000
Standard Rating
-------------------------------------------------------------------------------------------------------------
One or Both Insureds 76 - 80 & $15,000,000 $3,750,000 $4,167,000
Standard
-------------------------------------------------------------------------------------------------------------
4 Table Program $5,000,000 $1,250,000 $1,389,000
-------------------------------------------------------------------------------------------------------------
One or Both Insureds 76-80 & Facultative Facultative Facultative
Substandard, Ages Over 80 or One or Both Only Only Only
Insureds Rated
-------------------------------------------------------------------------------------------------------------
Exhibit B
(continued)
The pool maximum autobind amounts above include the Ceding Company's
retention.
(b) Waiver of Premium Disability Benefits: Not Reinsured Hereunder
(b) Accidental Death Benefits: Not Reinsured Hereunder
B.4 Jumbo Limits
The Ceding Company will not cede any risk automatically if, according to
information available to the Ceding Company, the total amount in force and
applied for on the life with all insurance companies, including any amount
to be replaced, exceeds the applicable amounts shown below. Life:
$35,000,000
B.5 Conditional Receipt or Temporary Insurance Agreement
The amount of such coverage provided by REINSURER will be limited to its
share of the following amounts provided by the Ceding Company's
Conditional Receipt or Temporary Insurance Agreement.
-----------------------------------------
Age Maximum Amount
-----------------------------------------
All Ages $1,000,000
-----------------------------------------
B.6 Cession Limits
(a) Minimum Initial Cession: $100,000 (Fac shopped cessions only)
(b) Trivial Amount: None
EXHIBIT C
FORMS, MANUALS, AND ISSUE RULES
EXHIBIT D
ALLOCATION RULES FOR PLACEMENT OF FACULTATIVE CASES
First-in, best offer
EXHIBIT E
REINSURANCE PREMIUMS
E.1 LIFE
Plans covered under this Agreement will be reinsured on a YRT basis and
the following single life rates (including any extra premium charges) will
be frazierized, using the attached formula, to achieve the applicable last
survivor rates. Reinsurance premiums will be based on the annual Society
of Actuaries 1990-95 Select and Ultimate Age Nearest Birthday table shown
in this Exhibit E, multiplied by the following percentages.
UNDERWRITING CLASS PERCENTAGE OF RATES
------------------ -------------------
Preferred Nonsmoker xx%
Standard Nonsmoker xx%
Preferred Smoker xxx%
Standard Smoker xxx%
The minimum premium will be $.12.
The maximum joint life premium will be $500 per thousand.
When one life is uninsurable, the rate will be $400 per thousand.
Standard nonsmoker rates will be assumed for juveniles 0-19.
Policies qualifying for the Standard to Table 4 shaving program (Express
Standard Program), with a maximum age of 75, will be reinsured at xxx% of the
applicable "standard" reinsurance rates.
Policies issued under the CUP program will be reinsured at the above automatic
rates.
E.2 AGE BASIS
Age Nearest Birthday
E.3 POLICY FEES
REINSURER will not participate in any policy fees.
E.4 RECAPTURE PERIOD
Number of years: 20 Years
E.5 SUBSTANDARD RATINGS
Premiums will be based on the standard rate increased by an extra 25% per
table of assessed rating.
E.6 FLAT EXTRAS
The total premium remitted to REINSURER will include the flat extra
premium minus the allowances shown below.
Type of Flat Extra Premium First Year Renewal
-------------------------- ---------- -------
Temporary (1-5 years) xx% xx%
Permanent (6 years & greater) xx% xx%
EXHIBIT E
(CONTINUED)
E.7 RIDERS AND BENEFITS
Continuing Coverage Rider
For the Continuing Coverage Rider, REINSURER will participate in the $2.50
per month per $1,000 less a xx% allowance. This charge is to be paid from
ages 90 to 100.
Other Reinsured Riders
The base plan rates will apply to the riders. If the rider is exercised
after issue, point-in-scale rates will be effective where no underwriting
is done. If the rider is newly underwritten, first year rates will apply.
Policy Split Option Rider
There is no charge for the Policy Split Option Rider until it is exercised
and the single life rates on a point-in-scale basis, measured from the
issue date of the joint life policy, will apply.
PREMIUM RATES FOR PLANS, BENEFITS AND RIDERS
EXHIBIT F
CONVERSION PREMIUMS
Term conversions from the Ceding Company's and Life of the Southwest Insurance
Company's plans to the Survivorship Variable Universal Life Plan wil be on a
point-in-scale basis at the reinsurance rates in Exhibit E.
EXHIBIT G
SELF-ADMINISTERED REPORTING
G.1 The Ceding Company will self-administer all reinsurance reporting. The
Ceding Company will send REINSURER the reports listed below.
TRANSACTION REPORTS
1. New Business
2. First Year - Other than New Business
3. Renewal Year
4. Changes and Terminations
5. Accounting Information
PERIODIC REPORTS
6. Statutory Reserve Information, Quarterly
7. Policy Exhibit Information, Monthly
8. Inforce, Monthly
A brief description of the data requirements follows below.
TRANSACTION REPORTS
SELECT:
The Ceding Company agrees to provide the following policy data in each
report as outlined in Exhibits H, I and J, and as referenced below:
1. New Business
This report will include new issues only, the first time the policy
is reported to REINSURER. Automatic and Facultative business will be
identified separately.
2. First Year - Other than New Business
This report will include policies previously reported on the new
business detail and still in their first duration, or policies
involved in first year premium adjustments.
3. Renewal Year
All policies with renewal dates within the Accounting Period will be
listed.
4. Changes and Terminations
Policies affected by a change during the current reporting period
will be included in this report. Type of change or termination
activity must be clearly identified for each policy.
The Ceding Company will identify the following transactions either
by separate listing or unique transaction codes: Terminations,
Reinstatements, Changes, Conversions, and Replacements. For
Conversions and Replacements, the Ceding Company will report the
original policy date, as well as the current policy date.
5. Accounting Information
Premiums and allowances will be summarized for Life coverages,
Benefits, and Riders by the following categories: Automatic and
Facultative, First Year and Renewals.
PERIODIC REPORTS
6. Statutory Reserve Information
Statutory reserves will be summarized for Life coverages, Benefits
and Riders. The Ceding Company will specify the reserve basis used.
7. Policy Exhibit Information
This is a summary of transactions during the current period and on a
year-to-date basis, reporting the number of policies and reinsured
amount.
8. Inforce
This is a detailed report of each policy in force.
EXHIBIT H
LIST OF RISKS REINSURED
The "List of Risks Reinsured," showing all renewing policies, should be prepared
and submitted monthly, quarterly, or annually according to the terms of the
Agreement. At least once a year at the end of each year, a list must be
submitted by the Ceding Company to REINSURER including ALL risks reinsured under
this Agreement. Premiums due should be included only for the period being
reported. The information required to be shown on such lists is set out below.
A. Policy number
B. Name of insured (minimum is surname and first initial; prefer to
have first name and middle initial as well.)
C. Sex
D. Date of birth (month, day, year)
E. Issue age *
F. Attained age
G. Policy date (month, day, year) or date of increase/decrease in
specified amount
H. Transaction code (in force)
1. First year, newly reported (i.e., new business)
2. First year, previously reported (i.e., renewal business in
first policy year)
3. Renewal
I. Substandard rating (table, mortality percentage, flat extra amount
and duration. Show multiple of standard for ADB or WPD.)
J. Plan or plan code (if more than one plan is covered by the
Agreement) K. Underwriting class (smoker, nonsmoker, preferred,
etc.)
L. Specified amount issued (life, ADB, WPD)
M. Death benefit option (i.e., cash value included in or in addition to
the specified amount)
* N. Current death benefit (under original policy)
O. Proportion reinsured this policy (where applicable)
P. Amount reinsured
Q. Current reinsurance amount at risk
R. Reinsurance premium (life, ADB, WPD)
* S. Net cash amount due REINSURER (life, ADB, WPD)
* T. Automatic or facultative
* U. Currency code if not U.S. currency
* Desirable but not required
EXHIBIT H
(CONTINUED)
There should be separate subtotals for all items listed below. Each subtotal
should include:
Policy count (life--separately for new business, renewals, and combined)
Reinsurance amount at risk (separately for new business, renewals, and combined)
Reinsurance premium (separately for new business, renewals, and combined)
Reinsurance commission (separately for new business, renewals, and combined) Net
amount due REINSURER (separately for new business, renewals, and combined)
The various policy details including reinsurance amount at risk and proportion
reinsured shown on the "List of Risks Reinsured" should correspond to the in
force after any changes reported concurrently on the "List of Amendments." We
need a grand total each reporting period for policy count in force and
reinsurance amount at risk in force (separately for new business, renewals, and
combined). A separate total of ADB in force is needed. This need not be
separated into new business and renewals.
A grand total of reinsurance premium and net amount due REINSURER, including all
in force and amendments, should be shown (separately for first year, renewals,
and combined categories). Separate totals should be provided for life, ADB, and
WPD. This may be shown on the "List of Risks Reinsured" or may be included in a
separate summary.
Where premiums for more than one period are being reported on a single list, the
basic identification (policy number, name of insured, sex, date of birth, age,
and policy date) need be shown only one time on the first line for the policy.
Subsequent lines should each relate to a different period and the period
involved should be indicated.
Although an increase or decrease in the specified amount will not, as a rule,
result in the issuance of a new policy, the amount of such increase or decrease
should be reported separately from the base specified amount so that differences
in premium rates can be reflected. For example, the amount of increase in
specified amount might involve a substandard rating that differs from the rating
for the base specified amount. In any such case, it might be a good idea to
assign a separate policy number suffix.
Any significant deviations from these reporting guidelines must be agreed to by
REINSURER.
EXHIBIT I
LIST OF AMENDMENTS
Each "List of Amendments" (monthly, quarterly, or annual) should show details
for each policy for which any transaction (see codes 4-12 below) occurred which
has an effect on either the reinsurance amount at risk or reinsurance premium.
The basic policy details to be shown include the following:
a. Policy number
b. Name of insured
* x. Xxxx of birth
d. Transaction code (changes to in force)
4. Termination without value
5. Policy not placed (NTO)
6. Surrender (full or partial)
7. Reinstatement
8. Increase in specified amount
9. Decrease in specified amount
10. Conversion or change of plan (e.g., Option A to Option B)
11. Death
12. Other (Please describe.)
Under item 12, we would like you to describe any other
amendments such as partial recapture, full recapture, table
rating reduction, etc,
e. Effective date of transaction
f. Net increase or decrease in reinsurance amount at risk from the
reinsurance amount at risk last reported to REINSURER before the
change
g. Reinsurance premium adjustment (separately for first year/renewal)
h. Net adjustment due REINSURER (separately for first year/renewal)
i. Currency code if not U.S. currency
Subtotals of policy count and reinsurance amount at risk should be provided for
each transaction code where the transaction is such that the life policy count
in force is altered by the transaction. For items g and h only grand totals are
required (separately for first year/renewal/combined).
The premium adjustments should include adjustments up to the current reporting
period (e.g., month, quarter). Premiums for the current reporting period should
appear on the "List of Risks Reinsured."
It is not necessary to adhere strictly to the set of transaction codes shown
above as long as the amendments are clearly identified and appropriate subtotals
and totals can be provided.
* Desirable but not required
EXHIBIT J
IN-FORCE SUMMARY FORM
SELF-ADMINISTERED LIFE REINSURANCE
Summary Report
For the Period _______ through
To Reinsurer
Account
Company Name ___________________________________ Number ______________________
Treaty ID: ___________________________________
Plan ID: ___________________________________
Prepared By ___________________________________ Date ________ Phone _________
I. Policy Exhibit Summary (Life Reinsurance Only)
================================================================================
Number of Amount of
Policies Reinsurance
--------------------------------------------------------------------------------
A. In Force As Of Last Report
--------------------------------------------------------------------------------
B. New Paid Reinsurance Ceded
--------------------------------------------------------------------------------
C. NTO
--------------------------------------------------------------------------------
D. Reinstatements
--------------------------------------------------------------------------------
E. Administrative New Business (Conversions, Etc.)
--------------------------------------------------------------------------------
F. Lapses
--------------------------------------------------------------------------------
G. Recaptures
--------------------------------------------------------------------------------
H. Surrenders (Coinsurance Only)
--------------------------------------------------------------------------------
I. Death
--------------------------------------------------------------------------------
J. Expiries
--------------------------------------------------------------------------------
K. Administrative Lapses
--------------------------------------------------------------------------------
L. Increase/Decrease XXXXXX
--------------------------------------------------------------------------------
M. In Force As Of Current Report
--------------------------------------------------------------------------------
N. ADB In Force As of Current Report XXXXXX
================================================================================
II. Accounting Summary
================================================================================
Premiums Commissions
Net Due
Category Other* REINSURER-
-------------------------------------------------- Life
First Year Renewal Year First Year Renewal Year
--------------------------------------------------------------------------------
Life
--------------------------------------------------------------------------------
WP
--------------------------------------------------------------------------------
ADB
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total
================================================================================
* If more than one category is included (e.g., surrender benefits,
dividends), please show details on the reverse side of this form. RADF61
FACULTATIVE-AUTOMATIC SUBMISSION
ORIGINAL-ADDITIONAL-MIB Inquiry Only
Reinsurer______________________________________________________________
Address:_______________________________________________________________
Ceding Co.:____________________________________________________________
Underwriter's Name:____________________________________________________
DATE:__________________________________________________________________
Underwriting Area:_____________________________________________________
Insured's Name (Lst, Fst, M)
Policy Number: Original Pol No.:
Date of Birth: Issue Age: Sex:
Policy Date:
Original Pol Date:
Birth State: Birth Country:
Reins Eff Date:
Original Iss Age:
Reside State: Reside Country:
Continuation: Duration:
Occupation:
Policy Certificate ID:
Second Insured's Name:
Date of Birth: Issue Age: Sex:
Plan Name: Smoker Code:
Rider Name: Smoker Code:
Life Rates:
Reserve Basis:
Benefit 1: Ben 1 Rating:
Benefit 2: Ben 2 Rating:
Benefit 3: Ben 3 Rating:
Benefit 4: Ben 4 Rating:
Benefit 5: Ben 5 Rating:
Flat Extra 1: Flat Ex 1 Dur:
Flat Extra 2: Flat Ex 2 Dur:
Submission Type: Fac Auto
Original Submission Date:
Offer Accepted Date:
Withdrawal Date:
_____________________________________________________________________________
LIFE WPD ADB
_____________________________________________________________________________
Previous In Force ____________________________________
Previous Retained ____________________________________
Issued This Policy ____________________________________
Retained This Policy ____________________________________
Reinsured Amount ____________________________________
____________________________ _____________________________________________
Policy Amount Inforce Policies:
Year Age At Risk _____________________________________________
============================ Policy Number Issue Amount Retained Amount
____________________________ _____________________________________________
____________________________ _____________________________________________
____________________________ _____________________________________________
____________________________ _____________________________________________
____________________________ _____________________________________________
____________________________ _____________________________________________
____________________________ Commments ___________________________________
____________________________ _____________________________________________
____________________________ _____________________________________________
Fac Auto
Original Submission Date:
Offer Accepted Date:
Withdrawal Date:
_______________________________________________________________________
Circle Withdrawal Reason:
1. Underwriting Not Complete
2. Policy Not Delivered
3. All Within Our Retention
4. Placed With Automatic Reinsurer
5. Placed With Another Reinsurer:
a) Rating b) Requirements c) Quicker Response
_______________________________________________________________________
=======================================================================
Submitted File Includes:
=======================================================================
Application X_Ray
_______________________________________________________________________
Medical Examination Other Medical Underwriting Data
_______________________________________________________________________
Blood Profile Inspection Report
_______________________________________________________________________
Heart Chart Additional Inspection Report
_______________________________________________________________________
Attending Physician's Report Aviation Questionnaire
_______________________________________________________________________
Microscopic Urinalysis Other Non-medical Data
_______________________________________________________________________
Electrocardiogram
=======================================================================
