[LINCOLN FINANCIAL GROUP LOGO]
YEARLY RENEWABLE TERM
REINSURANCE AGREEMENT
EFFECTIVE AS OF JANUARY 1, 2001,
BETWEEN
SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY
OF JACKSON, MISSISSIPPI,
REFERRED TO IN THIS AGREEMENT AS THE "CEDING COMPANY," AND
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
OF FORT XXXXX, INDIANA,
REFERRED TO IN THIS AGREEMENT AS "LINCOLN".
AUTOMATIC TREATY
TABLE OF CONTENTS
ARTICLE DESCRIPTION PAGE
I BASIS OF REINSURANCE 1
II LIABILITY 3
III ADMINISTRATIVE REPORTING 4
IV PLANS OF REINSURANCE 7
V REINSURANCE PREMIUMS 7
VI PREMIUM ACCOUNTING 8
VII OVERSIGHTS 9
VIII REDUCTIONS, TERMINATIONS AND CHANGES 10
IX INCREASE IN RETENTION AND RECAPTURES 11
X REINSTATEMENTS, EXCHANGES, ETC 13
XI EXPENSE OF ORIGINAL POLICY 14
XII CLAIMS 14
XIII TAX CREDITS 17
XIV DAC TAX 17
XV INSPECTION OF RECORDS 18
XVI INSOLVENCY 18
XVII ARBITRATION 19
XVIII PARTIES TO AGREEMENT 20
XIX ENTIRE CONTRACT 20
XX TERMINATION OF AGREEMENT 21
SCHEDULE DESCRITPION
A SPECIFICATIONS
B BENEFITS AND NAR CALCULATIONS
C ADDITIONAL INFORMATION AND EXCEPTIONS
EXHIBIT DESCRIPTION
I RETENTION LIMITS
IA UNDERWRITING GUIDELINES
II REINSURANCE PREMIUMS
IIA POLICY FEES, FLAT EXTRAS, SUBSTANDARD PREMIUMS
IIB PERCENTAGES OF PREMIUM (YRT)
III COMMISSIONS AND ALLOWANCES (COINSURANCE)
REINSURANCE AGREEMENT
Reinsurance under this agreement must be individual insurance. The CEDING
COMPANY shall automatically reinsure the life insurance and waiver of premium
for the plan(s) as stated in Schedule A. The benefits covered and the net
amount at risk calculation shall be described in Schedule B.
ARTICLE I
BASIS OF REINSURANCE
1. REQUIREMENTS FOR AUTOMATIC REINSURANCE
A. The individual risk must be a permanent resident of the United States.
B. The individual risk must be underwritten by the CEDING OCMPANY
according to the standard underwriting practices and guidelines as
shown in Exhibit IA. The CEDING COMPANY shall immediately notify
LINCOLN of any changes in underwriting practices or guidelines. Any
risk falling into a category of special underwriting programs e.g.
guaranteed issue, simplified underwriting, internal or external
exchanges, shall be excluded from this Agreement unless specifically
included in Schedule A.
C. Any facultative application for reinsurance of current or prior
applications on the same life risk offered to LINCOLN or any other
reinsurer shall not qualify for automatic reinsurance.
D. The maximum issue age on any risk shall be as stated in Schedule A.
Applications with issue ages over the limit stated in Schedule A must
be submitted facultatively.
E. The mortality rating on any one risk shall not exceed the Table Rating
stated in Schedule A, or its equivalent on a flat extra premium basis.
Cases exceeding the Table Rating stated in Schedule A, or its
equivalent, must be submitted facultatively.
F. The maximum amount of insurance issued and applied for in all
companies on any one risk shall not exceed the Jumbo limits as stated
in Schedule A. For policies which contain automatic increase
provisions, the CEDING COMPANY shall provide the initial and ultimate
risk amounts.
G. On any risk, the CEDING COMPANY must retain the amounts of insurance
as stated in Exhibit I. A zero risk retention does not qualify for
automatic reinsurance.
H. The maximum amounts of insurance to be reinsured on any one life shall
not exceed the automatic binding limits as stated in Schedule A.
I. The minimum amount of insurance to be ceded shall be as stated in
Schedule A. When reinsurance is ceded on a pool basis, the minimum
amount is the amount applicable to the total pool, not each pool
participant.
2. REQUIREMENTS FOR FACULTATIVE REINSURANCE
A. Plan of Insurance Listed in Schedule A:
1) If the Requirements for Automatic Reinsurance are met but the
CEDING COMPANY prefers to apply for facultative reinsurance, or
2) If Requirements for Automatic Reinsurance are not met, then the
CEDING COMPANY must submit to LINCOLN all the underwriting
documentation relating to the insurability of the individual risk
for facultative reinsurance.
B. Plan of Insurance Not Listed in Schedule A:
On a yearly Renewable Term treaty the CEDING COMPANY may submit
application for facultative reinsurance on any plan(s).
On a Coinsurance treaty the CEDING COMPANY may submit an application
for facultative reinsurance only on plan(s) listed in Schedule A.
C. An application for facultative reinsurance may include life insurance
with or without either disability waiver of premium or accidental
death or both. Supplemental benefits without life are excluded from
this agreement.
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D. Copies of all underwriting papers relating to the insurability of the
individual risk must be sent to LINCOLN for facultative reinsurance.
After LINCOLN has examined the underwriting papers, LINCOLN will
promptly notify the CEDING COMPANY of the underwriting offer
subject to additional requirements, the final underwriting offer or
declination. Any final underwriting offer on the individual risk will
automatically terminate upon the earliest of:
1) The date LINCOLN receives notice of a withdrawal/cancellation by
the CEDING COMPANY,
2) 120 days after the date on which the offer was made, or
3) The date specified in LINCOLN's approval to extend the offer.
E. The minimum amount of reinsurance to be ceded shall be as stated in
Schedule A.
ARTICLE II
LIABILITY
1. LINCOLN's liability for automatic reinsurance shall begin simultaneously
with the CEDING COMPANY's liability.
2. Except for additional coverage pertaining to conditional receipt as
described in Schedule C, LINCOLN's liability for facultative reinsurance on
individual risks shall not begin unless and until the CEDING COMPANY has
accepted LINCOLN's final and unconditional written offer on the application
for facultative reinsurance.
3. LINCOLN's liability for reinsurance on individual risks shall terminate
when the CEDING COMPANY's liability terminates.
4. As long as the original policy remains in full force, all paid-up
additions, COLA's, GIR's, and accumulated dividends shall be the liability
of the CEDING COMPANY unless specifically included in Schedule A of this
agreement.
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5. In no event shall reinsurance under this Agreement be in force unless the
insurance issued directly by the CEDING COMPANY is in force and is issued
and delivered in a jurisdiction in which the CEDING COMPANY is properly
licensed.
6. The payment of reinsurance premiums in accordance with this Agreement shall
be a condition precedent to the liability of LINCOLN under reinsurance
covered by this Agreement. If the CEDING COMPANY does not pay premiums to
LINCOLN as provided in this Agreement and such amounts are more than 90
days in arrears, LINCOLN will have the right to terminate all reinsurance
under this Agreement.
ARTICLE III
ADMINISTRATIVE REPORTING
1. SELF-ADMINISTERED BUSINESS
Promptly after liability for insurance has begun on an individual risk, the
CEDING COMPANY shall have the responsibility of maintaining adequate
records for the administration of the reinsurance amount and shall furnish
LINCOLN with monthly reports, in substantial conformity with the following:
A. MONTHLY NEW BUSINESS REPORT
For new business, the CEDING COMPANY must identify the reinsurance
agreement and provide information adequate for LINCOLN to establish
reserves, check retention limits, and verify premium calculation.
1) policy number
2) full name of insured
3) date of birth
4) sex
5) issue age
6) policy date
7) underwriting classification
8) plan of insurance/code
9) amount issued
10) amount ceded
11) automatic/facultative indicator
12) state of residence
13) table rating
14) flat extra (amount + number of years)
15) death benefit option (UL products)
16) current net amount at risk
17) transaction code
18) riders (if applicable)
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B. MONTHLY CONVERSION REPORT
The CEDING COMPANY shall furnish LINCOLN with a separate listing of
reinsurance policies that are conversions or replacements from
policies previously reinsured with LINCOLN to the plan(s) as stated in
Schedule A. The listing should provide the following information:
1) 1 through 18 in 1.A above
2) original policy date
3) original policy number
4) attained age
5) duration
6) effective date if other than policy date
C. MONTHLY PREMIUM REPORT
At the end of each month the CEDING COMPANY shall send to LINCOLN a
listing of all reinsurance policies issued or renewing during the past
month accompanied by the reinsurance premiums for such policies. The
listing should be segregated into first year issues and renewals and
should provide the following information:
1) 1 through 18 in 1.A above
2) On Yearly Renewable Term treaties the net reinsurance premium due
for each reinsured policy with the premium for life and each
supplemental benefit separated.
3) On Coinsurance treaties the gross reinsurance premium,
commissions, net reinsurance premium and other amounts (e.g.
dividends, cash surrender values) with premium separated for life
and each supplemental benefit.
All monthly lists shall be submitted to LINCOLN no later than the 20th day
of the following month.
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D. MONTHLY CHANGE REPORT
The CEDING COMPANY shall report the details of all policy terminations
and changes on the reinsured policies. In addition to the data
indicated in 1.A above, the report should provide information about
the nature, the effective date, and the financial result of the change
with respect to reinsurance. For changes, the CEDING COMPANY shall
identify the reinsurance agreement and provide information adequate
for LINCOLN to establish reserves, check retention limits, and verify
premium calculation.
E. MONTHLY POLICY EXHIBIT REPORT
The CEDING COMPANY shall provide a summary of new issues,
terminations, recaptures, changes, death claims and reinstatements
during the month and the inforce reinsurance at the end of the month.
F. QUARTERLY REPORTING
1) Within ten (10) days following the end of the quarter, the CEDING
COMPANY shall provide LINCOLN with Premiums Due and Unpaid and
Commissions Due and Unpaid. This report may be in summary form
reporting totals by line of business with separate totals for
first year and renewals.
2) Within ten (10) days following the end of the quarter, the CEDING
COMPANY shall provide LINCOLN with totals for the reserve
liability including statutory reserves by valuation basis
segregated by Yearly Renewable Term and Coinsurance.
G. INFORCE LISTINGS
Within ten (10) days after the close of the quarter, the CEDING
COMPANY shall furnish LINCOLN a listing of reinsurance in force by
policy, by year of issue, segregated by Yearly Renewable Term and
Coinsurance and include statutory reserves for the same.
H. CLAIMS
Claims shall be reported as incurred on an individual basis.
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I. CHANGE IN REPORTING FORMAT
If the CEDING COMPANY chooses to report its reinsurance transaction
via electronic media, the CEDING COMPANY shall consult with LINCOLN to
determine the appropriate reporting format. Once determined, the
CEDING COMPANY shall communicate any change in the data format or code
structure to LINCOLN prior to the use of such changes in the reports
to LINCOLN.
ARTICLE IV
PLANS OF REINSURANCE
1. Life reinsurance shall be ceded on the basis stated in Schedule A.
2. Copies of all life insurance policies, riders, rate manuals, benefit forms,
commuted value tables, terminal reserves, or cash value tables shall be
provided by the CEDING COMPANY to LINCOLN, upon request and LINCOLN shall
be promptly notified of any changes therein.
ARTICLE V
REINSURANCE PREMIUMS
1. Life Reinsurance Premiums are payable annually in advance unless specified
differently on Exhibit II.
A. Life Reinsurance Premiums Paid on a Coinsurance Basis (IF APPLICABLE)
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The CEDING COMPANY shall pay the current annual premiums as shown in
Exhibit II based on the amount of life insurance reinsured, less the
allowance stated in Exhibit III. In addition, the CEDING COMPANY shall
pay any substandard table extra and flat extra premiums as outlined in
Exhibit IIA, but shall exclude the policy fee. In the event the
current premium is changed, LINCOLN shall be notified by the CEDING
COMPANY immediately.
B. Life Reinsurance Premiums on a Yearly Renewable Term Basis (IF
APPLICABLE)
The life reinsurance premium on the net amount at risk shall be based
on rates shown in Exhibit II.
The reinsurance premiums are not guaranteed. For those premiums less
than the current minimum valuation net premium, only the latter
premiums shall be guaranteed. Should LINCOLN increase the reinsurance
premiums to the current minimum valuation net premium, then the CEDING
COMPANY shall have the right to immediately recapture any business
affected by that change.
ARTICLE VI
PREMIUM ACCOUNTING
1. PAYMENT OF REINSURANCE PREMIUM
A. The reinsurance premiums shall be paid to LINCOLN using the rates
shown in Exhibits II and IIA, and applying the allowances (Exhibit
III) or, percentages of premium (Exhibit IIB), when applicable.
B. On self-administered business the CEDING COMPANY shall provide the
statement to LINCOLN using the format described in Article III,
Self-Administered Business.
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C. If a net reinsurance premium balance is payable to LINCOLN the CEDING
COMPANY shall pay this balance within forty-five (45) days after the
close of that month. If the full balance is not received within the
forty-five (45) day period, the reinsurance premiums for reinsurance
risks listed on the statement, for which payment was not received,
shall be delinquent and the liability of LINCOLN shall cease as of
the date reinsurance premiums were due.
D. If a net reinsurance premium balance is payable to the CEDING COMPANY,
LINCOLN shall pay this net balance within forty-five (45) days after
the monthly statement was sent to the CEDING COMPANY. If the monthly
statement has not been returned within forty-five (45) days, LINCOLN
shall assume the CEDING COMPANY has verified and is in agreement with
the net balance and shall make payment to the CEDING COMPANY.
2. INTEREST ON DELINQUENT PAYMENTS
If the CEDING COMPANY is more than 90 days in arrears in remitting premiums
to LINCOLN, such premiums will be considered delinquent and interest will
be added to the amount to be remitted. Interest will be calculated from (i)
the time the premiums are due LINCOLN to (ii) the date the CEDING COMPANY
pays the premium to LINCOLN. The rates of interest charged will be equal to
the rate listed in the Federal Reserve Statistical Release, as promulgated
by the Board of Governors of the Federal Reserve System, for the monthly
average of Corporate bonds, Xxxxx'x seasoned Aaa (the "Interest Rate").
3. CURRENCY
The reinsurance premiums and benefits payable under this Agreement shall be
payable in the lawful money of the United States.
ARTICLE VII
OVERSIGHTS
If there is an unintentional oversight or clerical error in the administration
of this Agreement by either the CEDING COMPANY or LINCOLN, it can be corrected
provided the correction takes place promptly after the time the oversight or
clerical error is first discovered. In that event, the CEDING COMPANY and
LINCOLN will be restored to the position they would have occupied had such
oversight or clerical error not occurred.
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ARTICLE VIII
REDUCTIONS, TERMINATIONS AND CHANGES
1. A. If in accordance with policy provisions the original policy is
converted to permanent life insurance, the life risk under the
converted policy which exceeds the amount of risk originally retained
by the CEDING COMPANY shall continue to be reinsured with LINCOLN.
B. If there is a replacement where full underwriting evidence is not
required according to the CEDING COMPANY regular underwriting rules,
the life risk which exceeds the amount of risk originally retained by
the CEDING COMPANY shall continue to be reinsured with LINCOLN.
C. If there is a replacement where full underwriting evidence is required
by the CEDING COMPANY, reinsurance may be ceded to LINCOLN subject to
a written agreement between LINCOLN and the CEDING COMPANY.
2. If the amount of insurance under a policy or rider reinsured under this
Agreement increases and
A. The increase is subject to new underwriting evidence, the provisions
of Article I shall apply to the increase in reinsurance.
B. The increase is not subject to new underwriting evidence, LINCOLN
shall accept automatically the increase in reinsurance but not to
exceed the automatic binding limit as stated in Schedule A.
3. If the amount of insurance under a policy or rider reinsured under this
Agreement is increased or reduced, any increase or reduction in reinsurance
for the risk involved shall be effective on the effective date of the
increase or reduction in the amount of insurance.
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4. If any portion of the prior insurance retained by the CEDING COMPANY on an
individual life reduces or terminates, the reinsurance under this Agreement
shall not be adjusted. The CEDING COMPANY shall maintain the same retention
on any policy reinsured under this agreement regardless of whether prior
issued policies lapse, terminate, or reduce. In this situation, the CEDING
COMPANY would pick up their full retention on new policies issued after the
first policy reinsured under this agreement.
5. If the insurance for a risk is shared by more than one reinsurer, LINCOLN's
percentage of the increased or reduced reinsurance shall be the same as
LINCOLN's percentage of initial reinsurance of the individual risk.
6. If a risk reinsured under this Agreement is terminated, the reinsurance for
that risk shall be terminated as of the effective date of the termination.
7. For facultative reinsurance, if the CEDING COMPANY reduces the mortality
rating, the reduction shall be subject to the facultative provisions of
this Agreement as stated in Article I, Section 2.
8. LINCOLN shall refund all unearned reinsurance premiums not including policy
fees, less applicable allowances, arising from reductions, terminations and
changes as described in this Article.
ARTICLE IX
INCREASE IN RETENTION AND RECAPTURES
1. If the CEDING COMPANY changes its retention limits, as listed in Exhibit I,
prompt written notice of the change shall be provided to LINCOLN.
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2. The CEDING COMPANY shall have the option of recapturing the reinsurance
under this Agreement in the event the CEDING COMPANY increases its
retention limit and the policies have been in force the required length of
time as stated in Schedule A. The CEDING COMPANY may exercise its option to
recapture by giving written notice to LINCOLN within ninety (90) days after
the effective date of the increase in retention. If the recapture option is
not exercised within ninety days (90) days after the effective date of the
increase in retention the CEDING COMPANY may choose to recapture at a later
date. In that case, the date of the written notification to LINCOLN shall
determine the effective date the recapture program shall begin.
3. If the CEDING COMPANY exercises its option to recapture, then:
A. The CEDING COMPANY shall reduce the reinsurance on all individual
risks on which it retained its maximum retention for the age and
mortality rating that was in effect at the time the reinsurance was
ceded.
B. The CEDING COMPANY shall increase its total amount of retained
insurance on the individual risk up to its new retention limit by
reducing the amount of reinsurance. If an individual risk is shared by
more than one reinsurer, LINCOLN's percentage of the reduced
reinsurance shall be the same as LINCOLN's initial percentage of
reinsurance on the individual risk.
C. The reduction of reinsurance shall become effective on the later of
the following dates:
1) The policy anniversary date immediately following the date the
recapture program is to begin as determined by paragraph 2. of
this Article;
2) The number of years stated in Schedule A starting with the
"policy date."
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D. In the event the CEDING COMPANY overlooks any reduction in the amount
of a reinsurance policy because of an increase in the CEDING COMPANY's
retention, the acceptance by LINCOLN of reinsurance premiums under
these circumstances shall not constitute a liability on the part of
LINCOLN for such reinsurance. LINCOLN shall be liable only for a
refund of premiums.
E. Once a recapture is initiated by the CEDING COMPANY, the recapture
will continue year after year until all eligible policies are
recaptured. Should a claim occur before an eligible policy has been
processed, LINCOLN shall deduct from the claim payment the amount the
CEDING COMPANY should have recaptured.
4. No recapture shall be permitted for reinsurance on an individual risk if
(a) the CEDING COMPANY retained less than its maximum retention for the age
and mortality rating in effect at the time the reinsurance was ceded to
LINCOLN, or if (b) the CEDING COMPANY did not retain any of the individual
risk.
ARTICLE X
REINSTATEMENTS EXCHANGES EXTENDED TERM REDUCED PAID UP
If a policy reinsured under this Agreement lapses for nonpayment of premium or
is continued on the Reduced Paid-up or Extended Term Insurance basis, and is
reinstated in accordance with the terms of the policy and the CEDING COMPANY's
rules, the reinsurance on such policy shall automatically be reinstated by
LINCOLN upon notification of such reinstatement. The CEDING COMPANY shall pay
LINCOLN all back reinsurance premiums.
Exchanges, term conversions or other changes in the insurance reinsured with
LINCOLN, where not fully underwritten as a new issue, will continue to be
reinsured with LINCOLN. When these changes are fully underwritten, the policy
will be handled the same as issuance of a new policy.
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Exchanges will be reinsured only if the original policy was reinsured with
LINCOLN; the amount of reinsurance will not exceed the amount of reinsurance on
the original policy immediately prior to the exchange. If the business is
subsequently exchanged to any plan reinsured by LINCOLN, then such business will
be reinsured at the rates shown in the treaty covering the new plan. Rates and
allowances applicable to the new plan will be determined at point-in-scale based
on the original policy that is being exchanged. If the business is subsequently
exchanged to a plan that is not reinsured with LINCOLN under a specific treaty,
then such business shall be reinsured at an agreed upon YRT rate.
Changes as a result of extended term or reduced paid-up insurance will be
handled the same as life reductions.
ARTICLE XI
EXPENSE OF ORIGINAL POLICY
The CEDING COMPANY shall bear the expense of all medical examinations,
inspection fees, and other charges in connection with the issuance of the
insurance.
ARTICLE XII
CLAIMS
1. The CEDING COMPANY shall give LINCOLN written notice within twenty (20)
days of submission to the CEDING COMPANY of any claim on a policy reinsured
under this Agreement, and written notice within ten (10) days of the
service of process upon the CEDING COMPANY in connection with any
litigation involving such claim. Copies of the proofs obtained by the
CEDING COMPANY together with a statement showing the amount due or paid on
such claim by the CEDING COMPANY shall be furnished to LINCOLN at the time
payment is requested.
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2. LINCOLN shall accept the decision of the CEDING COMPANY in payment of the
CEDING COMPANY's contractual liability for the claim and shall pay its
portion to the CEDING COMPANY upon receipt of proof that the CEDING COMPANY
has paid the claimant. It is agreed that if a lesser amount at risk is
retained by the CEDING COMPANY than the amount ceded to LINCOLN, the CEDING
COMPANY shall consult with LINCOLN concerning its investigation and/or
payment of the claim. However, such consultation shall not impair the
CEDING COMPANY's freedom to determine its course of action on the claim,
and the final decision shall be that of the CEDING COMPANY. In reaching its
decision, the CEDING COMPANY shall act with good faith and in accord with
its standard practices applicable to all claims, whether reinsured or not.
3. The CEDING COMPANY shall notify LINCOLN within ten (10) days from the date
of the CEDING COMPANY's decision to contest, compromise, or litigate a
claim involving reinsurance. Unless LINCOLN declines to be a party to such
action, LINCOLN shall pay its share of the settlement payment, up to the
maximum reinsurance that would have been payable by LINCOLN under the
specific policy had there been no controversy, plus its share of specific
"Claim Expenses" therein involved, expect as specified below. If LINCOLN
declines to be a party to the contest, compromise, or litigation LINCOLN
shall discharge all of its liability to the CEDING COMPANY by paying the
full amount reinsured under this Agreement to the CEDING COMPANY. "Claim
expenses" shall be deemed to mean only the reasonable legal and
investigative expenses connected with the litigation or settlement of
contractual liability claims. "Claim expenses" shall not include expenses
incurred in connection with a dispute or contest arising out of conflicting
claims of entitlement to policy proceeds which the CEDING COMPANY admits
are payable or any routine claim administrative expenses, including, but
not limited to, compensation of officers and employees of the CEDING
COMPANY.
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4. In the event the amount of insurance provided by a policy or policies
reinsured hereunder is increased or reduced because of a misstatement of
age or sex established after the death of the insured, LINCOLN shall share
in the increase or reduction in the proportion that the net liability of
LINCOLN bore to the sum of the retained net liability of the CEDING COMPANY
and the net liability of other reinsurers immediately prior to such
increase or reduction. The reinsurance with LINCOLN shall be written from
commencement on the basis of the adjusted amounts using premiums and
reserves at the correct ages and sex. The adjustment for the difference in
premiums shall be made without interest.
5. It is understood and agreed that the payment of a death claim by LINCOLN
shall be made in one sum regardless of the mode of settlement under the
policy of the CEDING COMPANY.
6. In no event shall LINCOLN have any liability for any extra-contractual
damages, including, but not limited to, punitive, exemplary, compensatory
and consequential damages which are assessed against the CEDING COMPANY,
whether by judgment, settlement or otherwise, as a result of acts,
omissions or course of conduct of the CEDING COMPANY or its agents. It is
recognized that special circumstances may arise which indicate that to the
extent permitted by law, LINCOLN should participate in certain assessed
damages. These circumstances are not subject to prior identification or
definition. However, the CEDING COMPANY and LINCOLN agree the circumstances
do not include any circumstance where LINCOLN did not give the CEDING
COMPANY written directions in advance, designated as such, instructing the
CEDING COMPANY to engage in the act, omission or course of conduct which
ultimately results in the assessment of such damages. Consultations with
the CEDING COMPANY pursuant to paragraph 2 of this Article shall not be
considered "written directions" as used herein. The extent of such
participation in such damages by LINCOLN will be determined based upon a
good faith assessment of culpability, but shall not exceed the ratio of
LINCOLN's net liability for policy benefits under this Agreement to the net
liability of the CEDING COMPANY and any other reinsurers.
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7. If a claim is approved for disability waiver of premium insurance reinsured
under this Agreement, the CEDING COMPANY shall continue to pay reinsurance
premiums to LINCOLN. LINCOLN shall reimburse the CEDING COMPANY LINCOLN's
share of the annual liability.
ARTICLE XIII
TAX CREDITS
In jurisdictions which impose premium taxes on the CEDING COMPANY without
deduction for reinsurance, LINCOLN shall reimburse the CEDING COMPANY for taxes
paid on the amount of the reinsurance premiums on the basis shown in Schedule A,
unless LINCOLN itself is required to pay a direct tax on such reinsurance
premiums.
ARTICLE XIV
DEFERRED ACQUISITION COSTS TAX
The CEDING COMPANY and LINCOLN elect under Regulation 1.848-2(g) (8) to compute
"specified policy acquisition expense", as defined in section 848(c) of the
Internal Revenue Code, in the following manner:
The party with net positive consideration as determined under Reg. 1.848-2(f)
and Reg. 1.848-3 shall compute specified policy acquisition expenses without
regard to the general deductions limitation of section 848(c)(I) for each
taxable year.
The parties will exchange information pertaining to the aggregate amount of net
consideration as determined under Regs. 1.848-2(f) and 1.848-3, for all
reinsurance agreements in force between them, to insure consistency for the
purposes of computing specified policy acquisition expenses. The CEDING COMPANY
shall provide the LINCOLN with the amount of such net consideration for each
taxable year no later than May 1 following the end of such year. The LINCOLN
shall advise the CEDING COMPANY if it disagrees with the amounts provided, and
the parties agree to amicably resolve any difference. The amounts provided by
CEDING COMPANY shall be presumed correct if it does not receive a response from
the LINCOLN by May 31.
LINCOLN represents and warrants that it is subject to U.S. taxation under
Subchapter L of the Internal Revenue Code.
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ARTICLE XV
INSPECTION OF RECORDS
LINCOLN shall have the right, at any reasonable time, to inspect at the office
of the CEDING COMPANY, all books and documents which relate to reinsurance under
this Agreement.
ARTICLE XVI
INSOLVENCY
1. In the event of insolvency of the CEDING COMPANY, all reinsurance shall be
payable by LINCOLN directly to the CEDING COMPANY or its liquidator,
receiver, or statutory successor, on the basis of the liability of the
CEDING COMPANY under the policy or policies reinsured, without dimunition
because of the insolvency of the CEDING COMPANY.
2. It is agreed that the liquidator, receiver, or statutory successor of the
insolvent CEDING COMPANY shall give written notice to LINCOLN of the
pending of a claim against the insolvent CEDING COMPANY on any policy
reinsured within a reasonable time after such claim is filed in the
insolvency proceedings. During the pendency of any such claim LINCOLN may
investigate such claim and interpose, in the proceeding where such claim is
to be adjudicated, any defense or defenses which LINCOLN may deem available
to the CEDING COMPANY or its liquidator, receiver, or statutory successor.
The expense thus incurred by LINCOLN shall be chargeable, subject to court
approval, against the insolvent CEDING COMPANY as part of the expense of
liquidation to the extent of a proportionate share of the benefit which may
accrue to the CEDING COMPANY solely as a result of the defense undertaken
by LINCOLN.
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3. Where two or more reinsurers are participating in the same claim and a
majority in interest elect to interpose a defense to such claim, the
expense shall be apportioned in accordance with the terms of the Agreement
as though such expenses had been incurred by the CEDING COMPANY.
4. Any debts or credits, matured or unmatured, liquidated or unliquidated, in
favor of or against either the CEDING COMPANY or LINCOLN with respect to
this agreement or with respect to any other claim of one party against the
other are deemed mutual debts or credits, as the case may be, and shall be
set off, and only the balance shall be allowed or paid.
ARTICLE XVII
ARBITRATION
1. It is the intention of the CEDING COMPANY and LINCOLN that the customs and
practices of the insurance and reinsurance industry shall be given full
effect in the operation and interpretation of this Agreement. The parties
agree to act in all things with the highest good faith. However, if LINCOLN
and the CEDING COMPANY cannot mutually resolve a dispute or claim which
arises out of or relates to this agreement, the dispute or claim shall be
settled through arbitration.
2. The arbitrators shall be impartial regarding the dispute, and shall base
their decision on the terms and conditions of this agreement plus, as
necessary, on the customs and practices of the insurance and reinsurance
industry.
3. There shall be three arbitrators who must be officers of life insurance
companies other than the parties to this agreement or their subsidiaries.
Each of the parties to this agreement shall appoint one of the arbitrators
and these two arbitrators shall select the third. If a party to this
agreement fails to appoint an arbitrator within thirty (30) days after the
other party to this agreement has given notice of the arbitrator
appointment, the American Arbitration Association shall appoint an
arbitrator for the party to this Agreement that has failed to do so. Should
the two arbitrators be unable to agree on the choice of the third, then the
appointment of this arbitrator is left to the American Arbitration
Association.
19
4. Except for the appointment of arbitrators in accordance with the provisions
of Section 3 of this Article, arbitration shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association which are in effect on the date of delivery of demand for
arbitration. Arbitration shall be conducted in Kansas City, Missouri.
5. Each party to this agreement shall pay part of the arbitration expenses
which are apportioned to it by the arbitrators.
6. The award agreed by the arbitrators shall be final, and judgment may be
entered upon it in any court having jurisdiction.
ARTICLE XVIII
PARTIES TO AGREEMENT
This is an Agreement for indemnity reinsurance solely between the CEDING COMPANY
and LINCOLN. The acceptance of reinsurance under this Agreement shall not create
any right or legal relation whatever between LINCOLN and the insured, owner, or
any other party to or under any policy reinsured under this Agreement.
ARTICLE XIX
ENTIRE CONTRACT
1. This agreement shall constitute the entire agreement between the parties
with respect to business being reinsured hereunder and that there are no
understandings between the parties other than those expressed in this
agreement.
2. Any change or modification to this agreement shall be null and void unless
made by addendum to this agreement signed by both parties.
20
ARTICLE XX
TERMINATION OF AGREEMENT
1. This Agreement may be terminated for new business at any time by either
party giving at least ninety (90) days written notice of termination. The
day the notice is deposited in the mail addressed to the Home Office, or to
an Officer of either company, shall be the first day of the ninety-day
(90) period.
2. The CEDING COMPANY shall continue to cede reinsurance and LINCOLN shall
continue to accept reinsurance, as provided for by the terms of this
Agreement, until the date of termination.
3. All automatic reinsurance which became effective prior to the termination
of this Agreement and all facultative reinsurance approved by LINCOLN based
upon applications received prior to termination of this Agreement shall
remain in effect until its termination or expiration, unless the CEDING
COMPANY and LINCOLN mutually decide otherwise.
21
EXECUTION
The CEDING COMPANY and LINCOLN, by their respective officers, executed this
Agreement in duplicate on the dates shown below.
SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY
Signed at Jackson, MS
By /s/ Xxxxxxx X. Xxxxxxxx By /s/ Xxxxxxx X. Xxxxxxxx
------------------------------- -------------------------
Title V.P., Product Development Title V.P., Chief Actuary
Date June 12, 2001 Date June 12, 2001
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Signed at Fort Xxxxx, Indiana
By /s/ Xxx Xxxxx By /s/ Xxxxxx Xxxxxxxx
------------------------------- -----------------------------
Vice President Assistant Secretary
Date June 26, 2001 Date June 27, 2001
ADDENDUM
To the Automatic Reinsurance Agreement
Dated January 1, 2001
Between
SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY
Jackson, Mississippi
(hereinafter referred to as the CEDING COMPANY)
and
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Fort Xxxxx, Indiana
(hereinafter referred to as Lincoln)
Purpose: To include Adjustable Premium Variable Life (APVL) under this
agreement.
1. The CEDING COMPANY shall reinsure the new APVL product under this Agreement
using the same rates and percentages of premium outlined in Exhibits II,
IIA, and IIB.
2. Terminating policies when the net amount at risk falls below the trivial
amount will not apply to this product. Once an APVL policy is ceded under
this Agreement, reinsurance will remain in force until:
a. the face amount of the policy is reduced such that the risk is fully
within the Ceding Company's retention,
b. the policy terminates due to death, surrender, lapse, or
c. the policy is recaptured by the Ceding Company.
Because of the nature of the plan reinsured under this Agreement, the Net
Amount of Reinsurance on a particular policy will fluctuate and may even
drop to zero. In the event that the Net Amount of Reinsurance on a policy
does drop to zero, the Ceding Company will discontinue payment of
reinsurance premiums but continue to show the policy on its
self-administered reporting, with a zero premium, until such time as
reinsurance is once again needed.
3. THE EFFECTIVE DATE of this Addendum shall be June 1, 2002.
Except as herein amended, the provisions of the said Reinsurance Agreement shall
remain unchanged.
IN WITNESS WHEREOF, this Addendum is hereby executed in duplicate between the
parties concerned, and is duly signed by both parties respective officers as
follows:
SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY
BY: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
TITLE: VP & Chief Actuary
----------------------------
DATE: 11/12/2002
----------------------------
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
BY: /s/ Xxxxxxx Xxxxx
-------------------------------
TITLE: VP
----------------------------
DATE: 10/31/02
-----------------------------
ADDENDUM
To the Automatic Reinsurance Agreement,
Dated January 1, 2001
Between
SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY
Jackson, Mississippi
(hereinafter referred to as the CEDING COMPANY)
and
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Fort Xxxxx, Indiana
(hereinafter referred to as Lincoln)
Purpose: To include Adjustable Premium Life (APL) under this Agreement.
1. The CEDING COMPANY shall reinsure the new APL product under this Agreement
using the same rates and percentages of premium outlined in Exhibits II, IIA,
and IIB.
2. THE EFFECTIVE DATE of this Addendum shall be April 1, 2002.
Except as herein amended, the provisions of the said Reinsurance Agreement shall
remain unchanged.
IN WITNESS WHEREOF, this addendum is hereby executed in duplicate between the
parties concerned, and is duly signed by both parties' respective officers as
follows:
SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY
BY: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
TITLE: VP & Chief Actuary
----------------------------
DATE: 11/12/2002
----------------------------
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
BY: /s/ Xxxxxxx Xxxxx
-------------------------------
TITLE: VP
----------------------------
DATE: 10/31/02
-----------------------------
