AUTOMATIC REINSURANCE AGREEMENT
Between
METLIFE INSURANCE COMPANY OF CONNECTICUT
and
EXETER REASSURANCE COMPANY, LTD.
AGREEMENT NO.
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TABLE OF CONTENTS
Preamble
Article I Scope of Agreement
Article II Commencement and Termination of Liability
Article III Errors and Omissions
Article IV Mortality Net Amount at Risk
Article V Reinsurance Premiums
Article VI Reinsurance Administration, Accounting and Settlements
Article VII Settlement of Claims
Article VIII Reserves
Article IX Recapture Privileges
Article X Inspection of Records
Article XI Insolvency
Article XII Negotiation
Article XIII Arbitration
Article XIV Right to Offset Balances Due
Article XV Contact and Program Changes
Article XVI Confidentiality
Article XVII Other Provisions
Article XVIII Entire Agreement
Article XIX DAC Tax
Article XX Direction of Agreement
Article XXI Non-Admitted Reinsurance
Article XXII Cedent Representations and Warranties
Article XXIII Reinsurer Representations and Warranties
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PREAMBLE
THIS REINSURANCE AGREEMENT (the "Agreement") is effective as of April 1, 2006 by
and between METLIFE INSURANCE COMPANY OF CONNECTICUT ("Cedent"), a life
insurance corporation organized and existing under the laws of Connecticut and
having it's principal place of business at Hartford, CT, and EXETER REASSURANCE
COMPANY, LTD. ("Reinsurer"), a life insurance corporation organized and existing
under the laws of Bermuda and having its principal place of business at
Xxxxxxxxx Xxxxx, 0 Xxxxxx Xxxxxx, Xxxxxxxx XX XX, Xxxxxxx.
THE BACKGROUND OF THIS AGREEMENT is that the Reinsurer has heretofore assumed,
as of the date hereof, quota share portions of certain ceded annuity contract
liabilities on Riders, listed in the attached Schedules, (the "Reinsured
Contract(s)") issued by METLIFE INSURANCE COMPANY OF CONNECTICUT.
THIS AGREEMENT provides for the indemnity cession of a portion of the ceded
liabilities of the Cedents with respect to the Reinsured Contracts and binds the
Cedent and the Reinsurer and their successors and permitted assignees,
respectively. This Agreement shall not create any right or legal relation
whatever between the Reinsurer and any Cedent or any insured, owner, annuitant,
beneficiary or other party to any Reinsured Contract.
THEREFORE, in consideration of the promises set forth in this Agreement, the
parties agree as follows:
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ARTICLE I
SCOPE OF AGREEMENT
A. This Agreement shall be effective as of April 1, 2006 (the "Effective
Date"). The Cedent may cede and the Reinsurer may accept, as indemnity
cessions hereunder, proposed Reinsured Contracts that are issued by the
Cedent on and after the Effective Date.
B. Guaranteed Minimum Death Benefit
1. The indemnity cession shall be the share of the MNAR (defined in
Article IV) that is generated, prior to the termination of the
Reinsurer's liability (defined in Article II), by the Guaranteed
Minimum Death Benefit ("GMDB").
2. The Reinsurer's maximum aggregate MNAR (defined in Article IV)
liability has no calculated aggregate limit.
3. This Agreement covers only the Cedent's contractual liability for
reinsured claims paid under variable annuity contracts specified in
Schedule A and its Amendments related to contract and program changes
that were submitted to the Reinsurer in accordance with the terms of
this Agreement as set forth in Article XV.
4. Contracts issued by the Cedent which have external reinsurance will
be excluded from this Agreement.
C. Special Acceptances
The Cedent may propose for special acceptance hereunder Reinsured Contract
liabilities that are not automatically ceded hereunder for Spousal
Continuances for GMDB as discussed under Article V, Paragraph E, and
contracts with certain issue dates as set forth in Schedule A, Paragraph B.
For a Special Acceptance, the Cedent shall report to the Reinsurer, as
promptly as possible, each Reinsured Contract that is proposed for special
acceptance, including proposed Reinsured Contracts that are pending
acceptance by the Cedent. The Cedent shall provide information about each
proposed Reinsured Contract in such scope and format as may be agreed.
Unless notified of rejection or special cession rates within thirty (30)
days, the proposed Reinsured Contract shall be deemed accepted as an
indemnity cession in accordance with the terms and conditions specified
herein.
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ARTICLE II
COMMENCEMENT AND TERMINATION OF LIABILITY
A. On liabilities ceded under the terms of this Agreement, the liability of
the Reinsurer shall commence simultaneously with that of the Cedent.
B. The liability of the Reinsurer for all ceded liabilities under this
Agreement may terminate in accordance with:
1. the Duration of Agreement provisions of this Agreement set forth in
Article XX;
2. the termination provisions set forth within Article VI; or
3. the Recapture Privileges set forth in Article IX.
C. Guaranteed Minimum Death Benefit
1. For an individual contract, the liability of the Reinsurer under
this Agreement will terminate either in accordance with Paragraph
B, above, or upon the earliest of the following occurrences
defined in the contracts ceded hereunder:
a. the date the owner elects to annualize;
b. surrender or termination of the contract;
c. the death of the owner or annuitant where such death triggers
the payment of a contractual benefit, except when spousal
continuance has been elected. On spousal continuance election,
the Reinsurer's liability will be terminated upon death of the
spouse; and
d. attainment of the maximum annuitization age or attained age 95,
if earlier.
2. The Reinsurer shall indemnify Reinsured Contract claims only on
those deaths as to which the actual date of death is on or after
the Effective Date.
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ARTICLE III
ERRORS AND OMISSIONS
A. Any inadvertent errors or omissions on the part of one party occurring in
connection with this Agreement or any transaction hereunder shall not
relieve the other party from any liability to the first party that would
have otherwise attached had such error or omission not occurred, provided
that such error or omission is rectified as soon as practicable after
discovery thereof.
B. The Reinsurer assumes no liability under this Agreement for any damages,
fines, penalties, costs or expenses, or portion thereof, levied on or
assessed against the Cedent by any court or regulatory body on the basis of
negligence, oppression, malice, fraud, fault, wrongdoing or bad faith by
the Cedent in connection with any claim or for any act or omission that is
not consistent with the generally accepted practices and standards of the
life insurance industry applicable at the time of such act or omission,
unless the Reinsurer shall have received notice of and concurred with the
actions taken or not taken by the Cedent that led to the levy or
assessment, in which case the Reinsurer shall pay, as its share of such
levy or assessment, the proportional amount determined by the ratio of
reinsurance held by the Reinsurer to the total limit of liability under the
Reinsured Contracts.
C. Each party will indemnify and hold the other party, its affiliates,
directors, officers, employees and all other persons and entities acting on
behalf of or under the control of any of them harmless from and against any
and all claims, including reasonable attorneys fees and court costs, that
result from any negligent, dishonest, malicious, fraudulent or criminal act
or omission or arising out of or related to any incorrect representation,
warranty or obligation of this Agreement or any failure or breach of this
Agreement by the indemnifying party, its directors, officers, employees,
other representatives or any other person or entity acting on behalf of or
under the control of any of them.
D. In no event shall any party to this Agreement be liable to any other party
for punitive, indirect or consequential damages arising under this
Agreement for any cause whatsoever, whether or not such party has been
advised or could have foreseen the possibility of such damages.
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ARTICLE IV
MORTALITY NET AMOUNT AT RISK
GMDB
A. The MNAR (Mortality Net Amount at Risk) for each variable annuity contract
ceded hereunder shall be based on the following:
The Guaranteed Minimum Death Benefit for each contract is the larger of the
amount stated in line (a) or line (b) below:
(a) Return of Premium
(b) Annual Step Up Death Benefit (e.g. annual ratchet death benefit)
The Mortality Net Amount of Risk (MNAR) for each contract is equal to the
amount stated in line (c) multiplied times (d).
(c) Guaranteed Minimum Death Benefit less the (account value less
surrender charge) where the MNAR cannot be less than zero.
(d) The reinsurance % is defined in Schedule A Paragraph A of this
Agreement.
Exhibit III identifies the administrative criteria that will be used by the
Cedent to identity the reinsured policies.
Spousal Continuances
The Reinsurer will indemnify the Cedent for the Reinsurer's Percentage of
the GMDB present with Spousal Continuance Benefit.
The Reinsurer shall indemnify the Cedent for the Reinsurer's Percentage of
surrender charges indemnified by the Cedent, if any, arising from
additional premium deposits contributed by the spouse to the contract on or
after the spousal continuance date.
In no event will the Reinsurer indemnify surrender charges arising from
the same premium deposits more than once.
B. The death benefit and the surrender charges will be as described in the
variable annuity contract forms specified in Schedule A.
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ARTICLE V
REINSURANCE PREMIUMS
A. The total Reinsurance Premium for the business ceded hereunder is the GMDB
Reinsurance Premium, which is defined in this article.
B. The Reinsurance Premium rates and structure described above are subject to
change in accordance with the criteria described in Article XV.
GMDB Cession Premium
C. The GMDB Reinsurance Premium rates is expressed in terms of basis points
and are defined in Exhibit I.
D. The Cedent shall calculate, for each premium class, the Reinsurer's
Percentage of the greater of the average aggregate GMDB value and the
average aggregate account value for the reporting month. This value shall
be applied to the GMDB Cession Premium rates per premium class on a
1/12(th) basis.
Spousal Continuances
E. The spousal continuances will be covered under this Agreement to the
extent that the surviving spouse satisfies the issue age restrictions and
benefit limitations, as described in Schedule A, at time of continuance,
and shall be deemed to be terminations followed by subsequent new issues
for purposes of calculating Reinsurance Premiums. The new reinsurance
premium rate applied shall be based off the attained age of the surviving
spouse at the time of election of spousal continuance. After the
termination of this Agreement for new cessions, a spousal continuance of a
Reinsured Contract may be ceded to this Agreement in accordance with the
procedure set forth in Article I, Paragraph C.
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ARTICLE VI
REINSURANCE ADMINISTRATION, ACCOUNTING AND SETTLEMENTS
A. Within thirty (30) days after the end of each calendar month, the Cedent
shall take all reasonable and appropriate steps to furnish the Reinsurer
with a seriatim electronic report, as detailed in Schedule B, for each
Reinsured Contract, valued as of the last day of that month.
On or before September 30, 2006, the Cedent shall provide the initial
seriatim electronic report, which shall cover the inforce from the
Effective Date. Failure to provide this information as required shall
constitute a material breach within the scope of Article XX, Paragraph E.
B. Additionally, within thirty (30) days after the end of each calendar month
the Cedent shall furnish the Reinsurer with a separate Summary Statement
containing the following:
1. Reinsurance Premiums due to the Reinsurer summarized separately for
each premium class by GMDB;
2. benefit claim recoverables due to the Cedent for each claim;
3. reimbursement for Deferred Acquisition Cost defined in Internal
Revenue Code Section 848; and
4. the month end date for the period covered by the Summary Statement.
C. If the net balance is due to the Reinsurer, the Cedent shall remit the
amount due with the Summary Statement, but no later than thirty (30) days
after the month end date for the period covered by the Summary Statement.
If the net balance is due to the Cedent, the Reinsurer shall remit the
amount due to the Cedent within ten (10) days after receipt of the Summary
Statement.
D. The payment of Reinsurance Premiums is a condition precedent to the
liability of the Reinsurer under this Agreement. In the event that the
Cedent does not pay the Reinsurance Premiums in a timely manner, as defined
below, the Reinsurer may exercise the following rights:
1. The Reinsurer shall charge interest if Reinsurance Premiums are not
paid within thirty (30) days of the due date, as defined in Paragraph
C of this Article. The interest rate charged shall be based on the
ninety-(90) day federal Treasury Xxxx, as published in The Wall Street
Journal on the first business day in the month following the due date
of the Reinsurance Premiums, plus one hundred (100) basis points. The
method of calculation shall be simple interest (360-day year).
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2. The Reinsurer may terminate this Agreement in the event that
Reinsurance Premium payments are more than sixty (60) days past due
after the due date, as described in Paragraph C of this Article, by
giving sixty (60) day written notice of termination to the Cedent. As
of the close of the last day of this sixty-(60) day notice period, the
Reinsurer's liability with respect to the ceded liabilities shall
terminate. If all Reinsurance Premiums that are the subject of a sixty
(60) day termination notice shall have been received by the Reinsurer
within the time specified, the termination notice shall be deemed
vacated and the Agreement shall remain in effect.
E. GMDB: The Cedent shall provide the summary data to the Reinsurer to
calculate and monitor its maximum MNAR liability throughout the calendar
year. Until the receipt of the final report for the calendar year, the MNAR
shall be estimated in accordance with reasonable actuarial methods that
will approximate the actual amounts. Adjustments to benefit claim
recoverables based upon such estimates will then be made to reflect actual
amounts upon the receipt of the final report for the calendar year.
F. If the amounts required this Article cannot be determined by the required
dates on an exact basis, such amounts shall be estimated in accordance with
reasonable methods that shall approximate the actual amounts. Adjustments
to payments based upon such estimates shall then be made to reflect actual
amounts when such amounts become available.
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ARTICLE VII
SETTLEMENT OF CLAIMS
A. GMDB: The Reinsurer shall indemnify the Cedent under this Agreement only
for benefit claims that the Cedent paid to the Cedent as contractually
required under a Reinsured Contract with respect to deaths that occur on or
after the Effective Date, subject to the liability limitations described in
Article I.
B. In the event that the Cedent provides satisfactory proof of claim
liability to the Reinsurer, benefit claim settlements made by a Cedent and
accepted by the Reinsurer shall be unconditionally binding on the
Reinsurer. The Cedent shall report all approved benefit claims in bordereau
including cause of death, as available, in such format as may be agreed to
from time to time.
C. GMDB: Within thirty (30) days after the end of each calendar month, the
Cedent shall notify the Reinsurer of the ceded contractual death benefit
claims paid in respect of Reinsured Contracts in that month, based on the
net amount at risk definition, set forth in Article IV, and the Reinsurer
shall indemnify the Cedent as provided in Article VI for the ceded benefit
claim liabilities.
D. In no event will the Reinsurer be liable for expense incurred in
connection with a dispute or contest arising out of conflicting or any
other claims of entitlement to Reinsured Contract proceeds or benefits.
E. Settlements hereunder by the Reinsurer shall be made in a lump sum
regardless of the mode of payment made by the Cedent.
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ARTICLE VIII
RESERVES
A. The Reinsurer shall hold and report in its statutory financial statements
reserves (the "Reserves") with respect to liabilities ceded under this
Agreement in amounts equal to or greater than those required by the state
in which its statement is filed.
B. If required by the Cedent, as a condition of securing ceded reinsurance
statement credit for a Cedent with respect to Reinsured Contracts, the
Reinsurer shall contractually require any subsequent reinsurers to hold and
report in their statutory financial statements reserves in amounts equal to
or greater than those that would have been required of the Reinsurer.
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ARTICLE IX
RECAPTURE PRIVILEGES
A. The Cedent may recapture existing cessions in force in accordance with the
following rules:
1. The Cedent shall notify the Reinsurer of its intention to recapture
in full at least ninety (90) days prior to any recapture.
2. The Cedent may not recapture a cession unless this Agreement shall
have been in force for fifteen (15) years, as measured from the
Effective Date until the date of recapture.
3. The recapture shall be mutually agreed upon by the Cedent and the
Reinsurer.
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ARTICLE X
INSPECTION OF RECORDS
A. The Reinsurer and the Cedent and their employees and authorized
representatives, respectively, may audit, inspect and examine, during
regular business hours, at the home office of the other party, provided
that reasonable advance notice has been given, any and all books, records,
statements, correspondence, reports, and their related documents or other
documents that relate to Reinsured Contracts.
B. The audited, inspected or examined party shall provide a reasonable work
space for such audit, inspection or examination, cooperate fully and
disclose the existence of and produce any and all necessary and reasonable
materials requested by such auditors, investigators or examiners. Each
party will bear its own audit expenses.
C. All such information, including audit, inspection and examination reports
and analyses, shall be kept confidential as provided herein.
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ARTICLE XI
INSOLVENCY
A. In the event of the insolvency of the Cedent, any amount payable hereunder
shall be paid by the Reinsurer pursuant to the terms of this Agreement will
be made directly to the Cedent or its conservator, liquidator, receiver or
statutory successor. The reinsurance will be payable by the Reinsurer on
the basis of the liability of the Cedent under the Reinsured Contracts
without diminution because of such insolvency.
B. The conservator, liquidator, receiver or statutory successor of the Cedent
will give the Reinsurer written notice of the pendency of a claim against
the Cedent on any policy reinsured within a reasonable time after such
claim is filed in the insolvency proceeding.
C. During the pendency of any such claim, the Reinsurer may investigate such
claim and interpose in the Cedent's name or in the name of the Cedent's
conservator, liquidator, receiver or statutory successor, in the proceeding
where such claim is to be adjudicated, any defense or defenses which the
Reinsurer may deem available to the Cedent or its conservator, liquidator,
receiver or statutory successor. The expense thus incurred by the Reinsurer
will be chargeable, subject to court approval, against the Cedent as a part
of the expense of liquidation to the extent of a proportionate share of the
benefit that may accrue to the Cedent solely as a result of the defense
undertaken by the Reinsurer.
D. In the event of the Reinsurer's insolvency, as defined below, this
Agreement will be terminated with respect to all cessions that occurred on
or after the date of the insolvency. The liability of the Reinsurer
hereunder shall continue with respect to cessions that occurred prior to
the date of the insolvency and are subject to the payment of a Terminal
Accounting and Settlement.
E. Insolvency, for purposes of the preceding paragraph, is defined to be:
1. the filing of a voluntary petition for liquidation by or on behalf of
the Reinsurer;
2. any assignment for the benefit of creditors; or
3. the appointment of a conservator, liquidator, receiver or statutory
successor to conserve or administer the Reinsurer's properties or
assets
The effective date of such termination will be the date of the earliest of (1),
(2) or (3).
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ARTICLE XII
NEGOTIATION
A. Within ten (10) days after one of the parties shall have given to the
other a first written notice of a specific dispute, each party shall
designate an officer to seek a negotiated settlement. The designated
officers shall promptly meet at an agreed location and negotiate in good
faith.
B. If the officers cannot resolve the dispute within thirty (30) days after
their first meeting, either party may commence arbitration proceedings. The
parties may, however, agree, at any time to forego or terminate
negotiations and proceed immediately to arbitration or to extend
negotiations for an additional time certain.
C. All rights shall be reserved to each party pending a settlement of a
dispute and no admissions, offers or other actions taken in such
negotiations in efforts to effect a voluntary settlement of the disputed
matter shall be admissible in any subsequent arbitration proceedings.
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ARTICLE XIII
ARBITRATION
A. All disputes and differences between the parties will be decided by
arbitration, regardless of the insolvency of either party, unless the
liquidator, receiver or statutory successor is specifically exempted from
an arbitration proceeding by applicable law.
B. Either party may initiate arbitration by providing written notification to
the other party that sets forth (a) a brief statement of the issue(s); (b)
the failure of the parties to reach agreement; and (c) the date of the
demand for arbitration.
C. The arbitration panel shall consist of three arbitrators who must be
impartial and each of whom must, at that time, either be accredited as an
arbitrator by XXXXX-US or be an active or former officer of a life
insurance or reinsurance companies other than the parties or their
affiliates.
D. Each party shall select an arbitrator within thirty (30) days from the
date of the demand. If either party shall refuse or fail to appoint an
arbitrator within the time allowed, the party that has appointed an
arbitrator may notify the other party that, if it has not appointed its
arbitrator within the following ten (10) days, the arbitrator will appoint
an arbitrator on its behalf. The two (2) arbitrators shall select the third
arbitrator, who must also be, at that time, accredited by XXXXX-US as an
Umpire, within thirty (30) days of the appointment of the second
arbitrator. If the two arbitrators fail to agree on the selection of the
third arbitrator within the time allowed, the Umpire Selection Procedures
of XXXXX-US, as in force at that time, shall be used to select the third
arbitrator.
E. The arbitrators shall interpret this Agreement as an honorable engagement
rather than merely as a legal obligation and shall consider equitable
principles as well as industry custom and practice regarding the applicable
insurance and reinsurance business. The arbitrators are released from
judicial formalities and shall not be bound by strict rules of procedure
and evidence.
F. The arbitrators shall determine all arbitration schedules and procedural
rules and may, in their discretion, use applicable XXXXX-US forms and
procedures. Organizational and other meetings will be held in New York, NY,
unless the arbitrators shall otherwise provide. The arbitrators shall
decide all matters by majority vote.
G. The decisions of the arbitrators shall be final and binding on both
parties. The arbitrators may, in their discretion, award costs and expenses
as they deem appropriate, including but not limited to legal fees and
interest. Judgment may be entered upon the final decisions of the
arbitrators in any court of competent jurisdiction. The arbitrators may not
award any exemplary or punitive damages.
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H. Unless the arbitrators shall provide otherwise, each party will be
responsible for (a) all fees and expenses charged by its respective
counsel, accountants, actuaries and other representatives in connection
with the arbitration and (b) one-half of the expenses of the arbitration,
including the fees of the arbitrators.
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ARTICLE XIV
RIGHT TO OFFSET BALANCES DUE
All moneys due either the Cedent or the Reinsurer under this Agreement shall be
offset against each other, dollar for dollar, regardless of any insolvency of
the other party.
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ARTICLE XV
CONTRACT AND PROGRAM CHANGES
A. The Cedent may amend, substitute, add or delete variable investment funds
to the investment options supporting the annuity contracts as described in
the contract general provisions. The Cedent shall make the change and
provide notification to the Reinsurer, which notification shall be promptly
forwarded to the Reinsurer, and without the prior approval of the
Securities and Exchange Commission (SEC) or applicable self-regulatory body
approval, if necessary. The Cedent shall provide written notice to the
Reinsurer, unless otherwise agreed to by the Cedent and the Reinsurer, of
any proposed change in the investment options supporting Reinsured
Contracts.
B. The Cedent shall give the Reinsurer thirty (30) days prior written notice,
unless otherwise agreed to by the Cedent and the Reinsurer, of any other
accepted changes to the Reinsured Contracts relating to a Cedent's annuity
product design and/or death benefit design, fees and charges, distribution
systems and/or methods or addition of any riders to any Reinsured Contract
forms.
C. The Cedent shall provide to the Reinsurer a copy of each general
communication that the Cedent sends to contract holders in any state.
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ARTICLE XVI
CONFIDENTIALITY
A. Each party shall maintain the confidentiality of all information,
including legally protected personal information pertaining to individuals,
that is provided to it by the other party in connection with this
Agreement; provided, however, that this obligation of confidentiality shall
not apply (a) if and to the extent that disclosure is required by
applicable law or any court, governmental agency or regulatory authority or
by subpoena or discovery request in pending litigation; (b) if the
information is or becomes available from public information (other than as
a result of prior unauthorized disclosure by the disclosing party); (c) if
the information is or was received from a third party not known by the
disclosing party to be under a confidentiality obligation with regard to
such information; or (d) if the information was in the possession of the
disclosing party (having received such information on a non-confidential
basis) other than by reason of the services performed pursuant to this
Agreement; provided, further, that legally protected information shall not
be disclosed or used in violation of applicable law.
B. In the event that either party becomes legally compelled to disclose any
such confidential information, such party will give prompt written notice
of that fact to the other party so that such other party may seek an
appropriate remedy to prevent such disclosure; provided, however, that this
provision shall not apply to information that is or otherwise becomes
available to the public or that was previously available to the public on a
non-confidential basis.
C. Information may be disclosed (duplicating is permitted for such
disclosure) to a party's directors, officers, employees, agents, affiliates
(excluding Reinsurance Group of America, Incorporated, as an affiliate of
the Cedent) and external advisors and their directors, officers, employees,
professional advisers, agents and rating agencies (collectively, the
"Representatives") and all such Representatives shall be advised of the
terms of this Agreement and each party shall be responsible for any breach
of the terms of this Agreement by its Representatives.
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ARTICLE XVII
OTHER PROVISIONS
A. Notice. Written notices under this Agreement shall be effective when
delivered to any party at the address provided herein:
1. If to the Cedent:
Xxxx X. Xxxxxxxxxx
MetLife Insurance Company of Connecticut
Vice President
Hartford, Connecticut
2. If to the Reinsurer:
Xxxx Xxxxxxxx, C.A., Agent
Exeter Reassurance Company, Ltd.
C/O Xxxxxxx Xxxxxxx Management, Ltd.
Continental Xxxxxxxx
00 Xxxxxx Xxxxxx
P.O. Box HM 2461
Xxxxxxxx XX JX, Bermuda
Either party may change its address by giving the other party written
notice of its new address; provided, however, that any notice of a change
of address shall be effective only upon receipt.
B. Administrative Communications and Payment Remittances. Each party shall,
by written notice to the other, designate offices and depositaries for the
receipt of administrative communications and payment remittances.
Administrative communications and payments remittances shall be deemed
delivered only upon actual receipt by the designated office or depositary,
respectively.
C. Amendment and Non Waiver. Any change or modification of this Agreement
shall be null and void unless made by amendment to the Agreement and signed
by both parties. No waiver by either party of any default by the other
party in the performance of any promise, term or condition of this
Agreement shall be construed to be a waiver by such party of any other or
subsequent default in performance of the same or any other promise, term or
condition of this Agreement. No prior transactions or dealings between the
parties shall be deemed to establish any custom or usage waiving or
modifying any provision hereof. The failure of either party to enforce any
part of this Agreement shall not constitute a waiver by such party of its
right to do so, nor shall it be deemed to be an act of ratification or
consent.
D. Assignment. This Agreement shall be binding on the parties and their
respective successors and permitted assignees. This Agreement may not be
assigned by either party without the written consent of the other, which
consent shall not be unreasonably withheld.
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E. Reinsured Contract Assignments. The Cedent may, in its discretion and
without the separate consent of the Reinsurer, accept a substitution of a
majority-owned affiliate of Metropolitan Life Insurance Company in lieu of
any Cedent as to any Reinsured Contract, whether by assumption reinsurance
or otherwise, with the Reinsured Contract continuing in force unchanged,
which substitution shall be binding on the Reinsurer.
F. Severability. In the event that any provision or term of this Agreement
shall be held invalid, illegal or unenforceable, all of the other
provisions and terms shall remain in full force and effect to the extent
that their continuance is practicable and consistent with the original
intent of the parties. In addition, if provisions or terms are held
invalid, illegal or unenforceable, the parties will attempt in good faith
to renegotiate the Agreement to carry out its original intent.
G. Survival. All provisions of this Agreement shall, to the extent necessary
to carry out the purposes of this Agreement or to ascertain and enforce the
parties' rights hereunder, survive its termination.
H. Choice of Law, Forum and Consent to Service. This Agreement is subject to
and is to be interpreted in accordance with the laws of the State of
Connecticut without regard to the New York choice of law rules. While the
parties contemplate that all disputes will be decide through negotiation or
arbitration as provided herein, in the event of any legal proceedings, the
parties shall submit to the exclusive jurisdiction of courts of the State
of Connecticut and the United States of America located in the City of New
York and shall abide by the final decision of such courts. Each party
hereby designates the Superintendent of Insurance of the State of
Connecticut as its true and lawful attorney upon whom may be served any
lawful process in any action, suit or proceeding instituted by or on behalf
of the other party arising out of the Agreement. Process accepted by the
Superintendent on behalf of party shall be forwarded to that party at the
address specified herein.
I. Settlements. Claim settlements made by the Cedent in good faith, including
compromises, shall be unconditionally binding on the Reinsurer.
J. Payments. All reinsurance settlements and other payments will be effected
through off-setting balances, electronic funds transfers or as the parties
may otherwise agree to carry out the purposes of this Agreement.
K. Currency. All financial transactions under this Agreement shall be made in
U. S. dollars.
L. Intermediaries. Each party represents that all negotiations relative to
this Agreement and the transactions contemplated hereby, including any
subsequent Assumption Reinsurance Agreement with respect to the Reinsured
Contracts, have been carried out by the Cedent and the Reinsurer directly
and without the intervention of any person in such manner as to give rise
to any valid claim by any other person for a finder's fee, brokerage
commission or similar payment.
Page 23
M. Construction Rules. Each party represents that its has been represented by
and relied on the advice of counsel of its choice in the negotiation and
drafting of the Agreement. The parties affirm that their respective counsel
have had a substantial role in the drafting and negotiation of this
Agreement and, therefore, the rule of construction that any ambiguities are
to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any Schedule attached hereto.
N. Authority. Each party represents that it has full power and authority to
enter into and to perform this Agreement and that the person signing this
Agreement on its behalf has been properly authorized and empowered to do
so. Each party further acknowledges that it has read this Agreement,
understands it and agrees to be bound by it.
O. Changes. In the event the Cedent's liability to make any payment is
changed due to a modification or cancellation of a Reinsured Contract,
Reinsurer's liability to make any such payment shall also be changed in the
same manner and to the same extent. In the event that the amount of
liability provided by a Reinsured Contract is increased or reduced because
of a misstatement of age or sex, the reinsurance liability of the Reinsurer
shall be increased or reduced by the same amount. Any adjustments for this
reason shall be made without interest.
P. Unreasonable Refusal of Agreement. Neither party, acting unreasonably,
will withhold agreement to any discretionary action for the sole purpose of
terminating this Agreement or otherwise frustrating its purpose.
Q. Independent Contractor. The parties shall be deemed to be independent
contractors, each with full control over its respective business affairs
and operations. This Agreement shall not be construed as a partnership or
joint venture and neither party hereto shall be liable for any obligations
incurred by the other party except as expressly provided herein.
R. Schedules, Exhibits and Captions. Schedules and Exhibits attached hereto
are incorporated into this Agreement. Captions are provided for reference
only.
S. Counterparts. This Agreement may be signed in any number of counterparts,
each of which shall be deemed an original and all of which shall constitute
one and the same instrument.
T. The Cedent shall notify the Reinsurer in advance of entry into any
amendment to the Reinsurance Agreement and, in the event that such
amendment would materially change the ceded liabilities, the parties shall
modify the provisions of this Agreement to restore the Reinsurer to its
original position unless the parties shall agree otherwise.
Page 24
ARTICLE XVIII
ENTIRE AGREEMENT
This Agreement, together with Schedules A and B, and Exhibits I and II
supercedes all prior discussions and agreements between the parties and
constitutes their sole and entire agreement with respect to Reinsured Contracts
and there are no understandings between the parties other than as expressed
herein.
Page 25
`
ARTICLE XIX
DAC TAX
A. The parties will make a joint election, in accordance with Treas. Reg.
1.848-2(g)(8), issued December 28, 1992, under Section 848 of the Internal
Revenue Code and the party with the net positive consideration under this
Agreement will capitalize specified policy acquisition expenses with
respect to this Agreement without regard to the general deductions
limitations of Section 848(c)(1) of the Code;
1. the election will take effect on the Effective Date and will remain
in effect for all subsequent years that this Agreement remains in
effect; and
2. each party shall attach a schedule to its federal income tax return
for its first taxable year ending after the election becomes effective
that identifies the agreements (including this Agreement) for which
joint elections have been made under this Regulation.
B. Pursuant to this joint election:
1. each party will exchange information pertaining to the amount of net
consideration under this Agreement to assure consistency or as may
otherwise be required by the Internal Revenue Service;
2. Cedent will submit its calculation of the "net consideration" as
defined under the above referenced regulation to Reinsurer not later
than May 1 for each and every tax year for which this Agreement is in
effect;
3. Reinsurer may challenge such calculation within ten (10) working days
of receipt of the Cedent's calculation; and
4. the parties will act in good faith to reach agreement as to the
correct amount of net consideration whenever there is disagreement as
to the amount of net consideration as determined under Treas. Reg.
1.848-2(f).
C. Each party represents and warrants that it is subject to U. S. taxation
under Subchapter L of Chapter 1 of the Code.
D. Within ten (10) Business Days following the final determination of the net
consideration, as defined in U.S. Internal Revenue Code Section 848 and the
Treasury Regulations thereunder, for a given calendar year (including the
calendar year in which this Agreement terminates), the party that had
negative net consideration shall pay the other party an amount equal to
.22% of the net consideration to cover, on a present value basis, the
liability for the deferred acquisition cost (DAC) tax under Section 848 of
the U.S. Internal Revenue Code. The parties shall equitably adjust the
formula for the charge or credit to take into account future changes in tax
laws, including, without limitation, changes in tax rates and changes in
the U.S. Internal Revenue Code Section 848(c)(1) factor applicable to this
Agreement.
Page 26
ARTICLE XX
DURATION OF AGREEMENT
GMDB
A. The GMDB exposure associated with this Agreement through June 30, 2006,
subject to a limit of five billion dollars (3,500,000,000) of account value
to the Reinsurer on the product(s) ceded hereunder; provided, however, that
the parties may, by agreement, amend this Agreement at anytime to provide
for cessions of ceded liabilities under Reinsured Contracts beyond or in
excess of the limitations set forth herein.
B. Anytime on or after June 30, 2006, or anytime on or after the attainment
of the limit for total new considerations described in Paragraph A, and
upon ninety (90) days prior written notice, either the Cedent of the
Reinsurer may cancel this Agreement for future cessions.
GENERAL
C. Except as otherwise provided herein, the Agreement shall be unlimited in
duration but may be reduced or terminated for future cessions.
D. This Agreement shall remain in force as provided herein until the
termination of the Cedent's liability on the Reinsured Contracts.
E. Either party may terminate this Agreement in the event that the other
party is in material breach of the terms of conditions of this Agreement
provided that the terminating party has notified the other party of the
breach and the other party has not initiated the cure of such breach within
thirty (30) days after such notice to be effectuated as promptly as
possible.
F. In the event that a Cedent shall terminate a Reinsurance Agreement for the
cession of new annuity contract liabilities because, in its discretion,
after a good faith effort it was unable to obtain regulatory credit for
reinsurance ceded to the Reinsurance Agreement, this Agreement shall
continue in effect, on a run-off basis, for all annuity contract
liabilities ceded by that Cedent prior to the Cedent has made a good faith
effort to obtain regulatory credit for reinsurance ceded to the Reinsurance
Agreement.
Page 27
ARTICLE XXI
NON-ADMITTED REINSURANCE
A. Security Requirement. In the event that the Cedent shall, at any time,
notify the Reinsurer of its determination that security for reinsurance
recoverables hereunder is or may be necessary for the Cedent to obtain any
associated regulatory statement credit for reinsurance ceded to this
Agreement on account of the Reinsurer being neither admitted or accredited
as a reinsurer, the Reinsurer shall establish a trust ("the Trust") in
accordance with Section B of this Article or the Reinsurer shall provide a
letter of credit (an "LOC") in accordance with Section C of this Article.
B. Trust Agreement.
1. Except as may be provided in Section C of this Article, the Cedent
and the Reinsurer shall enter in to a Trust Agreement that complies
with regulations of the domiciliary state of the Cedent, establishing
a Trust Account for the benefit of the Cedent to cover the
recoverables and/or Statutory Reserves attributable to the Reinsured
Policies. The Trustee shall be a bank, acceptable to each party, that
is organized in the United States; that is regulated, supervised and
examined by federal or state banking regulatory authorities; and that
meets any other applicable regulatory financial condition standards.
The bank shall not be a parent, subsidiary or affiliate of the Cedent
or Reinsurer.
2. This Trust Agreement is intended to secure Annual Statement credit
for reinsurance ceded by the Cedent to the Reinsurer in accordance
with regulations of the domiciliary state of the Cedent and, in the
event that the parties fail to enter into the Trust Agreement and fund
the Trust Account, as provided herein, within five (5) working days
after this Agreement shall have been signed by both parties, this
Agreement, unless the parties otherwise provide, shall be null and
void.
3. Assets having a value at least equal to 102% of the Statutory
Reserves attributable to the Reinsured Policies shall be deposited
into the Trust Account and maintained at all times until its
dissolution. Statutory reserves are defined using the regulations
required by the Cedent or successor's domicilary state. Assets
deposited in the Trust Account shall be valued according to their
current fair market value, as determined under the statutory
accounting rules of the domiciliary state of the Cedent, and shall
consist only of cash (United States legal tender) and such domiciliary
state statutorily permitted investments that are not issued by a
parent, subsidiary or affiliate of either party.
4. Prior to depositing assets with the Trustee, the Reinsurer shall
execute assignments, endorsements in blank or transfer legal title to
the Trustee of all shares, obligations or any other assets requiring
assignment in order that the Cedent or the Trustee, upon direction of
the Cedent, may, whenever, necessary, negotiate any such assets
without consent or signature from the Reinsurer of an other person or
entity, other than the Trustee, in accordance with the terms of the
Trust Agreement.
Page 28
5. Assets in the Trust Account, established hereunder, may be withdrawn
by the Cedent at any time, notwithstanding any other provisions of
this Agreement, and shall be utilized and applied by the Cedent or any
successor of the Company by operation of law, including without
limitation any liquidator, rehabilitator, receiver or conservator of
the Cedent, without diminution because of insolvency on the part of
the Ceding Company or the Reinsurer, only for the following purposes:
i. to reimburse the Cedent for the Reinsurer's share of premiums
returned to the owners of the Policies on account of
cancellations of such Policies;
ii. to reimburse the Cedent for the Reinsurer's share of benefits
claims paid by the Cedent under the terms and provisions of the
Policies;
iii. to fund an account with the Cedent in an amount at least equal
to the ceded reinsurance deduction from the Cedents Policy
liabilities hereunder, which amount shall include, but not be
limited to, reserves for benefit claims incurred (including
benefit claims incurred but not reported)
iv. to pay any other amounts that the Cedent claims to be due
hereunder
6. With the approval of the Cedent, the Reinsurer may withdraw from the
Trust Account all or any part of the assets contained therein and
transfer such assets to the Reinsurer; provided
i. the Reinsurer shall, at the time of such withdrawal, replace the
withdrawn assets with other qualified assets having a market
value equal to the market value of the assets withdrawn so as to
maintain the Trust Account at the required amount at all times;
or
ii. after such withdrawals and transfers, the market value of the
Trust Account is not less than 102% of the required amount.
The Cedent shall be the sole judge as to the application of this
provision,but shall not unreasonably or arbitrarily withhold its
approval.
7. The Cedent will return any amounts drawn on the LOC in excess of the
actual amounts required for subparagraphs (i), (ii) and (iv) of
paragraph 5 or, in the case of subparagraph (iii) of paragraph 5, any
amounts that are subsequently determined not to be due. The Cedent
will pay interest on amounts withdrawn in excess of the actual amount
required under subparagraph (iii) of paragraph 5 at a rate equal to
the "Prime Rate" published in The Wall Street Journal (currently the
base rate on corporate loans posted by at least 75% of the nation's 30
largest banks), which rate shall be adjusted on the last day of each
month; and
8. All of the foregoing provisions are to be applied without diminution
because of insolvency on the part of either party.
Page 29
C. Letters of Credit.
1. The Reinsurer will provide an LOC that complies with regulations of
the domiciliary state of the Cedent.
2. The Reinsurer shall be the LOC applicant. The Trustee shall be a
bank, acceptable to each party, that is organized in the United
States; that is regulated, supervised and examined by federal or state
banking regulatory authorities; and that meets National Association of
Insurance Commissioners-Securities Valuation Office standards for
acceptable LOC issuance. The bank shall not be a parent, subsidiary or
affiliate of the Cedent or Reinsurer.
3. The LOC may be drawn at any time, notwithstanding any other
provisions herein and may be utilized by the Cedent or any successor
by operation of law, including without limitation any liquidator,
rehabilitator or receiver of the Cedent for the following purposes:
i. to reimburse the Cedent for the Reinsurer's share of Policy
premiums returned on account of cancellations;
ii. to reimburse the Cedent for the Reinsurer's share of benefit
claims paid by the Cedent under the terms and provisions of the
Policies;
iii. to fund an account with the Cedent in an amount at least equal
to the ceded reinsurance deduction from the Cedents Policy
liabilities hereunder, which amount shall include, but not be
limited to, reserves for benefit claims incurred (including
benefit claims incurred but not reported)
iv. to pay any other amounts that the Cedent claims to be due
hereunder
4. The Cedent will return any amounts drawn on the LOC in excess of the
actual amounts required for subparagraphs (i), (ii) and (iv) of this
paragraph or, in the case of subparagraph (iii) of this paragraph, any
amounts that are subsequently determined not to be due. The Cedent
will pay interest on amounts withdrawn in excess of the actual amount
required under subparagraph (iii) at a rate equal to the "Prime Rate"
published in The Wall Street Journal (currently the base rate on
corporate loans posted by at least 75% of the nation's 30 largest
banks), which rate shall be adjusted on the last day of each month;
and
(e) All of the foregoing provisions are to be applied without
diminution because of insolvency on the part of either party.
Page 30
ARTICLE XXII
CEDENT REPRESENTATIONS AND WARRANTIES
The Cedent represents and warrants, to the best of its knowledge, the following:
1. Corporate Status. The Cedent is duly licensed, qualified or admitted to do
business and is in good standing in all jurisdictions in which it is
required to be so qualified, licensed or admitted to do business by the
laws thereof.
2. Authority. The Cedent has the full corporate power and authority to carry
out and perform its undertakings and obligations under this Agreement. This
Agreement has been duly and validly signed and delivered by the Cedent. The
Cedent shall maintain in force all such legal and regulatory authorizations
as may be reasonably necessary or appropriate for the performance of its
obligations under this Agreement.
3. Tax Status. The Cedent represents and warrants that it is subject to U.
S.taxation under Subchapter L of Chapter 1 of the Code.
Page 31
ARTICLE XXIII
REINSURER REPRESENTATIONS AND WARRANTIES
The Reinsurer represents and warrants, to the best of its knowledge, the
following:
1. Corporate Status. The Reinsurer is duly licensed, qualified or admitted to
do exempt insurance business and is in good standing in Hamilton, Bermuda.
2. Authority. The Reinsurer has the full corporate power and authority to
carry out and perform its undertakings and obligations under this
Agreement. This Agreement has been duly and validly signed and delivered by
the Reinsurer. The Reinsurer shall at maintain in force all such legal and
regulatory authorizations as may be reasonably necessary or appropriate for
the performance of its obligations under this Agreement.
3. License Status. The Reinsurer is not an authorized insurer or accredited
reinsurer in Connecticut. The Reinsurer shall notify the Ceding Company
within five (5) days after the date of any change in its status.
4. Tax Status. The Reinsurer is subject to U.S. taxation under Subchapter L
of Chapter 1 or Subpart F of Part II of Subchapter N or Chapter 1 of the
Internal Revenue Code.
Page 32
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of
the date first above written.
METLIFE INSURANCE COMPANY OF CONNECTICUT
By: -s- [ILLEGIBLE]
----------------------------------
Title: Vice President
EXETER REASSURANCE COMPANY, LTD.
By: -s- [ILLEGIBLE]
----------------------------------
Title: Vice President
Page 33
SCHEDULES
Schedule A Plans of Reinsurance
Schedule B Required Data and Suggested Layout
Exhibit I Reinsurance Premiums: GMDB
Exhibit II Summary of Monetary Transactions
Exhibit III Administrative Criteria
Page 34
SCHEDULE A
PLANS OF REINSURANCE
A. Reinsurer's Percentage:
100% of the Cedent's share of the business containing the Annual Step Up
Minimum Death Benefit guarantees described in paragraph B of this Schedule
and described in the Administrative Criteria in Exhibit III.
Page 35
SCHEDULE A
PLANS OF REINSURANCE
B. Effective Date:
April 1, 2006, for Variable Annuity Contracts inforced on December
31, 2005 contingent upon the Reinsure's review and acceptance of business.
PRODUCT NAME SURRENDER CHARGE MAX RATCHET AGE MAX ISSUE AGE
------------ ---------------- --------------- -------------
ASSET MGR No SC 80 80
MARQUIS No SC 80 80
PA(S)/PADV 7 Yr 80 80
PIONANNVALU 7 Yr 80 80
PIONEER XXX 7 Yr 80 80
PIONEERFLEX 4 Yr 80 80
PIONEERPLUS 7 Yr 80 80
PORT A XTRA 9 Yr 80 80
PORT ACCESS No SC 80 80
PORT ARCH 3 3 Yr 80 80
PORT II 7 Yr 80 80
PORT PLUS 9 Yr 80 80
PRE UA 5 YR N/A N/A
PREM ADV 2 7 Yr 80 80
PREM ADV 3 7 Yr 80 80
PREM ADV X 0 Xx 00 00
XXXX XXX0X0 7 Yr 80 80
PRIMELITE 8 Yr N/A N/A
PRIMELITE 2 8 Yr 75 75
SCUD ADV ST No SC 80 80
XXXXXXX ADV No SC 80 80
XXXXXXX XXX 0 Xx 00 00
XX 0 XX X/X X/X
XXX 5 YR 75 75
USA 5 YR 75 75
VINT ACCESS No SC 80 80
XXXX XX NEW 8 Yr 80 80
VINT XTRA 9 Yr 80 80
VINTAGE 3 3 Yr N/A N/A
VINTAGE II 8 Yr 80 75
VINTAGE L 4 Yr 80 80
VINTXTRANEW 9 Yr 80 80
Page 36
C. Death Benefits Ceded:
Guaranteed Minimum Death Benefits (GMDB)
- Annual Step Up Minimum Death Benefit for issue ages defined in the
Plan of Insurance defined in Schedule A.
- Greater Maximum Anniversary Value is defined in the underlying
insurance contract for those plans covered in Schedule A.
- Treatment of withdrawals on the calculation of the Death Benefit are
defined in the underlying insurance contract.
Page 37
SCHEDULE B
REINSURANCE ACCOUNTING REPORT
FROM COMPANY TO REINSURER
Accounting Period:
-------------------
Date Report Completed:
-------------------
Reinsured Risks Paid During the Prior Accounting Period:
(v) (viii)
(iii) Annual (vi) Account (ix)
Date (iv) Step-up Return (vii) Value - MNAR
(i) (ii) of- Date of Death of Larger of Surrender [(vii) -
Name SSN Death Issue Benefit Premium (v) or (vi) Charge (viii)]
Aggregate
Totals
MNAR in column (ix) cannot be less than 0.
Page 38
EXHIBIT I
REINSURANCE PREMIUMS: GMDB
A. GMDB PROGRAM
GMDB PROGRAM PRODUCTS COVERED ISSUE AGES REINSURANCE PREMIUM (BASIS POINTS)
-------------- ---------------- -------------- ----------------------------------
Annual Step-up All Classes All issue ages 20.00
Page 39
EXHIBIT II
SUMMARY OF MONETARY TRANSACTIONS
ACCOUNTING PERIOD
MONTH/DAY/YEAR
1) Reinsurance Premiums (1)
2) Death Benefits (2)
3) Reimbursement to Reinsurer (Payment) for DAC Tax (3)
4) Net Reinsurance Consideration Due to the Reinsurer (Ceding Company)
(1) - (2) + (3)
5) Statutory Reserve Credit Taken by the Cedent
6) US Tax Reserve Credit Taken by the Cedent
Note: In addition to the foregoing, the Cedent shall provide information to
support the calculation of the statutory reserve credit and the tax reserve
credit. This information should include, by way of example, the reserve method,
and the valuation assumptions for the tax and statutory reserves held by the
parties.
Page 40
EXHIBIT III
ADMINISTRATIVE CRITERIA
The Cedent will use the criteria specified in this Exhibit to identify the
policies reinsured from MetLife Insurance Company of Connecticut. The source of
information will originate for database fields and values from the 55-H file
using the criteria established in the table below.
The reinsured inforce includes those policies (issued before January 1, 2006)
that are active having the Annual Step Up Death Benefit with no external
reinsurance.
FIELD VALUE DEFINITION
----------- ----------------- --------------------------
Stat AC Policy Status
DTHBEN ASU Death Benefit Code
COMPANY TIC Company
TLA
effdt less than 2006001 Effective Date of Policy
dbtreatyid 105 Reinsurance Treaty Number (105 means no external reinsurance)
pacustep GMDB Ratchet benefit base amount
ROP GMDB Return of Premium benefit base amount
CV Account Value
Page 41
