AUTOMATIC
REINSURANCE AGREEMENT
(hereinafter, "the Agreement")
between
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
of Newark, Delaware
(hereinafter, "Cedent")
And
Advanced Market Reinsurance Agreement
EFFECTIVE JUNE 19, 2001
[SPECIMEN]
NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
ARTICLES TABLE OF CONTENTS PAGE
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I Reinsurance Coverage 4
II Requirements for Automatic Reinsurance 4
III Requirements for Facultative Reinsurance 5
IV Liability 6
V Reinsurance Ceded to NYLARC 6
VI Notification of Reinsurance 7
VII Types of Reinsurance 7
VIII Reinsurance Premiums 7
IX Reinsurance Accounting 8
X Oversights 10
XI Reductions, Terminations and Changes 10
XII Increase In Retention 11
XIII Reinstatement 12
XIV Expenses 13
XV Claims 13
XVI Premium Tax Reimbursement 15
XVII DAC Tax Requirements 15
XVIII Inspection Of Records 17
XIX Insolvency 17
XX Arbitration 18
XXI Parties To Agreement 19
XXII Entire Agreement 19
XXIII Duration Of Agreement 19
XXIV Choice of Law and Forum 20
XXV Compliance with Privacy Laws 20
XXVI Reinsurance Credit 20
SCHEDULES
A Policies
B Reinsurance Premium Rates
C Cedent's Retention Limits
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NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
EXHIBITS
1 DAC Tax Calculation
2 Reinsurance Questionnaire
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NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
ALL SCHEDULES AND EXHIBITS ATTACHED HERETO WILL BE CONSIDERED
PART OF THIS AGREEMENT.
ARTICLE I
REINSURANCE COVERAGE
1. Reinsurance under this Agreement shall be individual life insurance of
the type of business stated in Schedule A. Cedent shall automatically
reinsure and Reinsurer shall automatically accept the life insurance
for the plans and riders as stated in Schedule A that meet the
requirements of Article II below. Reinsurer's liability for the risks
ceded hereunder shall be based on the quota share specified in Schedule
A unless a greater amount is reinsured pursuant to Article III.
(Individual life insurance reinsured pursuant to Article I and II or
Article III hereinafter referred to as a "Covered Policy(ies)".)
Reinsurer shall hold policy year reserves based on 1/2Cx where the
commutation functions are based on the 1980 CSO Table (Smoker or
Non-Smoker) without select factors, and using the Frasierized method
based on exact issue ages and risk classification for each of the two
insureds for joint life policies.
2. The effective date of this Agreement shall be June 19, 2001.
ARTICLE II
REQUIREMENTS FOR AUTOMATIC REINSURANCE
Cedent shall not cede, and Reinsurer shall not accept, any individual life
insurance for reinsurance under this Agreement unless it meets the following
requirements:
1. The individual risk must be a resident of the United States or Canada.
2. The individual risk must be underwritten by Cedent in accordance with
Cedent's usual underwriting practices and guidelines, or arise out of a
conversion from a prior term policy issued by Cedent. Conversions need
not have been previously reinsured with the Reinsurer to be reinsured
under this agreement. The individual must be classified as select
preferred, preferred, non-smoker, select standard, standard or
substandard, in accordance with those guidelines.
3. The age of the individual risk at issue must be no greater than the
maximum issue age shown on Schedule A.
4. The amount of insurance issued and applied for in all insurance
companies on each life must not exceed the jumbo limits shown on
Schedule A.
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NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
5. The amount of insurance issued and applied for with Cedent on each life
must not exceed the automatic binding limits shown on Schedule A.
6. The initial amount of life insurance on each Covered Policy must not be
less than the minimum amount at issue as shown on Schedule A.
7. The issuance of the insurance must constitute the doing of business in
a jurisdiction in which Cedent is properly licensed.
8. On each Covered Policy, Cedent must retain at least the percentage
amount of each risk as shown in Schedule A (hereinafter referred to as
the "Automatic Retained Percentage"), notwithstanding any portion of a
Covered Policy that is reinsured under an agreement with New York Life
Agents Reinsurance Company ("NYLARC") or MLIFE Insurance Company
("MLIFE").
ARTICLE III
REQUIREMENTS FOR FACULTATIVE REINSURANCE
1. If the requirements for automatic reinsurance on an individual life are
not met, or are met but Cedent prefers to apply for facultative
reinsurance, then Cedent may apply to Reinsurer for facultative
reinsurance. In order to apply for facultative reinsurance, Cedent must
submit to Reinsurer complete copies of the original application,
medical examiner's reports, inspection reports, attending physicians'
statements plus any other papers or information that may have a bearing
on the insurability of the risk.
2. After Reinsurer has examined the underwriting information submitted in
accordance with Paragraph 1 above, Reinsurer shall promptly notify
Cedent in writing of either a final underwriting offer for facultative
reinsurance or an underwriting offer for facultative reinsurance
subject to additional requirements. Either underwriting offer of
facultative reinsurance on an individual life will automatically
terminate on the first of the following dates:
(a) The date Reinsurer receives notice from Cedent that Cedent has
withdrawn Cedent's application for facultative reinsurance;
(b) A date that is one hundred twenty (120) days after the date
Reinsurer made the offer; or
(c) The date specified in Reinsurer's offer.
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NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
3. If an underwriting offer made by Reinsurer in accordance with Paragraph
2 is accepted by Cedent in writing prior to the date the offer
terminates, that individual life is reinsured under the terms of this
Agreement.
ARTICLE IV
LIABILITY
1. Reinsurer's liability for automatic reinsurance on each Covered Policy
will begin simultaneously with Cedent's liability.
2. Reinsurer's liability for facultative reinsurance on each Covered
Policy will begin simultaneously with Cedent's liability once Reinsurer
has accepted the application for facultative reinsurance in writing and
Cedent has accepted Reinsurer's offer.
3. Reinsurer's liability for reinsurance on each Covered Policy will
terminate when Cedent's liability terminates.
4. The initial and subsequent Reinsurance Premiums (as defined herein)
must be received by Reinsurer on a timely basis as provided in Article
IX for Reinsurer to maintain Reinsurer's liability for each individual
risk.
5. Reinsurer agrees to accept policies backdated to December 19, 2000 for
reinsurance coverage under this Agreement. However, it is agreed that
Reinsurer shall not be liable for any mortality risk on such policies
until June 19, 2001. When the policy is reinsured, Cedent will pay an
annual premium from the policy date. Reinsurer shall be liable for
proceeds paid under Cedent's conditional receipt or temporary insurance
agreement for risks reinsured automatically pursuant to the terms of
this Agreement. Reinsurer shall not be liable for proceeds paid under
Cedent's conditional receipt or temporary insurance agreement for risks
submitted on a facultative basis, where Cedent's liability for payment
under the conditional receipt or temporary insurance is established
before Reinsurer has accepted the application for facultative
reinsurance in writing and Cedent has accepted Reinsurer's offer.
ARTICLE V
REINSURANCE CEDED TO NYLARC OR MLIFE
In determining the amount of a Covered Policy to be reinsured under this
Agreement, where the Covered Policy is reinsured under an agreement between
either NYLARC or MLIFE and Cedent, the net amount of any reinsurance eligible to
be assumed by NYLARC or MLIFE and not retroceded back to New York Life Insurance
and Annuity Corporation ("NYLIAC") will first be deducted and then the terms of
Article I through III
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NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
and Schedule A will be applied to the remainder to determine the amount of
reinsurance.
The amount of reinsurance assumed by NYLARC or MLIFE and not retroceded back to
NYLIAC will be __% of the net amount at risk of each eligible Covered Policy up
to a maximum amount of $_______ per life. Generally, if __% of the net amount at
risk of a Covered Policy issued on an individual life is greater than $_______,
the difference between such amounts will be retroceded to NYLIAC and will be
reinsured under this Agreement. This Article will not apply to any Covered
Policy until the reinsurance agreement between NYLARC or MLIFE and Cedent
becomes effective with respect to that Covered Policy. The following policies or
riders are not eligible for reinsurance with NYLARC (these limitations are not
applicable to MLIFE):
A. Policies or riders which are initially Substandard or
rated (i.e. prior to shaving program)
B. Policies or riders issued to insureds under age 15 or
over age 65.
ARTICLE VI
NOTIFICATION OF REINSURANCE
Within thirty-one (31) days after the end of each calendar quarter, Cedent will
send Reinsurer an in force listing of all Covered Policies reinsured under this
Agreement.
ARTICLE VII
TYPES OF REINSURANCE
1. Automatic reinsurance under this Agreement shall be on a yearly
renewable term basis, based on the net amount at risk. The net amount
at risk shall be the death benefit under the Covered Policy less the
total cash value.
2. If requested, Cedent shall furnish Reinsurer with a copy of each policy
form, form of rider and rate book that applies to the life insurance
reinsured.
ARTICLE VIII
REINSURANCE PREMIUMS
1. The premium for each Covered Policy reinsured pursuant to this Agreement
will be: (a) the quota share shown on Schedule A; multiplied by (b) the
reinsurance premium rate calculated in accordance with Schedule B applied
to the net amount at risk (hereinafter, the "Reinsurance Premium").
2. For technical reasons relating to the uncertain status of deficiency
reserve requirements, the reinsurance premium rates shown in Schedule B
cannot be
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NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
guaranteed for more than one year. However, Reinsurer anticipates
continuing to accept premiums on the basis of the reinsurance premium rates
as described in Schedule B for reinsurance ceded. If Reinsurer deems it
necessary to increase reinsurance premium rates, such increased rates shall
not be higher than the valuation net premiums for yearly renewable term
insurance calculated using the minimum statutory mortality rates and
maximum statutory interest rate for each year of issue.
3. Reinsurer shall notify Cedent of its intention to change the reinsurance
premium rates by giving ninety (90) days written notice. Reinsurer and
Cedent will have this ninety (90) day period to negotiate a change in the
rates. Any rate change that is agreed to will take effect at the end of
this period. Should no agreement be reached by the end of this period,
Cedent shall have the right to terminate this Agreement and recapture all
or part of the reinsurance ceded under this Agreement by providing ninety
(90) days written notice of termination. During the ninety (90) day
termination notice period, premiums shall be calculated based on the
current premium rate. With respect to any notice given under this
Paragraph, the day the notice is deposited in the mail addressed to the
home office or to an officer of the party receiving such notice will be the
first day of the ninety (90) day period.
ARTICLE IX
REINSURANCE ACCOUNTING
1. PAYMENT OF REINSURANCE PREMIUMS
A. Cedent shall prepare and submit to Reinsurer a monthly statement,
either electronically or by regular U.S. postal service, which
will provide the pertinent policy premium details in a mutually
agreed upon report format, within thirty (30) days following the
last day of the same calendar month. The net monthly premiums due
will be (i) the balance of the monthly Reinsurance Premiums due on
reinsurance in force at the end of the immediately preceding
calendar month plus (ii) Reinsurance Premiums due on new business
reinsured during the current month, minus (iii) the refunds of
Reinsurance Premiums due Cedent on deaths, lapses and changes,
plus or minus (iv) Reinsurance Premiums adjustments due to a
misstatement of age or sex, without interest.
B. If the monthly statement shows a net Reinsurance Premium balance
is payable to Reinsurer, Cedent shall remit this amount due
Reinsurer within thirty (30) days. If the amount is not paid
within the prescribed period, the premiums for all of the
reinsurance risks listed on the statement will be delinquent.
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NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
C. If the monthly statement shows a net Reinsurance Premium balance
is payable to Cedent, Reinsurer shall remit Reinsurer's payment to
Cedent within thirty (30) days after receiving Cedent's statement.
2. TERMINATION BECAUSE OF NON-PAYMENT OF PREMIUMS
When Reinsurance Premiums are delinquent, Reinsurer shall have the
right to terminate the reinsurance risks on the statement by giving
Cedent thirty (30) days' written notice. As of the close of this thirty
(30) day period all of Reinsurer's liability will terminate for:
A. The risks described in the preceding sentence, and
B. The risks where the Reinsurance Premiums became delinquent during
the thirty (30) day period.
Regardless of these terminations, Cedent will continue to be liable to
Reinsurer for all unpaid Reinsurance Premiums earned by Reinsurer.
Cedent agrees that Cedent will not force termination under this
provision solely to avoid the recapture requirements or to transfer the
block of business reinsured to another reinsurer.
3. REINSTATEMENT OF A DELINQUENT STATEMENT.
Cedent may reinstate the terminated risks within sixty (60) days after
the effective date of termination by paying the unpaid Reinsurance
Premiums for the risks in force prior to the termination. However,
Reinsurer will not be liable for any claim incurred between the date of
termination and reinstatement. The effective date of reinstatement will
be the day that Reinsurer receives the required back Reinsurance
Premiums.
4. CURRENCY.
The Reinsurance Premiums and claims payable under this Agreement will
be payable in the lawful money of the United States.
5. OFFSET
Any debts or credits incurred on and after June 19, 2001 in favor of or
against either Cedent or Reinsurer with respect to this Agreement 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.
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NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
6. BALANCES IN DEFAULT
Reinsurer reserves the right to charge interest at the Prime Rate plus
2% as stated in the Wall Street Journal on the first business day in
January prior to the due date of the premium when renewal premiums are
not paid within sixty (60) days of the due date or premiums for new
business are not paid within one hundred twenty (120) days of the date
the policy is issued.
ARTICLE X
OVERSIGHTS
Inadvertent delays, errors or omissions made in connection with this Agreement
or any transaction hereunder shall not relieve either party from any liability
which would have attached had such delay, error or omission not occurred,
provided always that such error or omission is rectified as soon as possible
after discovery, and provided that the party making such error or omission or
responsible for such delay shall be responsible for any additional liability
which attaches as a result.
ARTICLE XI
REDUCTIONS, TERMINATIONS AND CHANGES
1. If there is a contractual or non-contractual replacement or change in
the insurance reinsured under this Agreement where full medical
underwriting evidence according to Cedent's regular underwriting rules
is not required, the insurance will continue to be reinsured with
Reinsurer.
2. If the insurance reinsured under this Agreement increases and
A. The increase is subject to new underwriting evidence, the
provisions of Article I and II or Article III shall apply to
the increase in reinsurance.
B. The increase is not subject to new underwriting evidence,
Reinsurer will accept automatically the increase in
reinsurance but not to exceed Reinsurer's automatic binding limit.
3. If the insurance reinsured under this Agreement is increased or
reduced, the reinsurance for each policy involved will be
proportionately increased or reduced on the effective date of increase
or reduction.
4. If any portion of the total insurance retained by Cedent on an
individual life reduces or terminates, any reinsurance under this
Agreement based on the same life will also be reduced or terminated.
Cedent will reduce Cedent's reinsurance by applying the retention
limits that were in effect at the time the policy was
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NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
issued. Cedent will not be required to retain an amount in excess of
Cedent's regular retention limit for the age, mortality rating and risk
classification at the time of issue for any policy on which reinsurance
is being reduced.
Cedent must first reduce the reinsurance of the insurance that has the
same mortality rating as the terminated insurance. If further reduction
is required, the reinsurance to be terminated or reduced will be
determined by chronological order in which the reinsurance was first
reinsured.
5. If the insurance for a risk is shared by more than one reinsurer,
Reinsurer's percentage of the increased or reduced reinsurance will be
the same as Reinsurer's percentage of the initial reinsurance of each
policy.
6. If insurance reinsured under this Agreement is terminated, the
reinsurance for the policy involved will be terminated on the effective
date of termination.
7. On facultative reinsurance, if Cedent wishes to reduce the mortality
rating, this reduction will be subject to the facultative provisions of
this Agreement.
8. Reinsurer will refund to Cedent all unearned reinsurance premiums,
arising from reductions, terminations and changes as described in this
Article.
ARTICLE XII
INCREASE IN RETENTION
1. If Cedent should increase Cedent's Retention Limits shown in Schedule
C, Cedent shall give Reinsurer prompt written notice of this increase.
1. Cedent will have the option to recapture a portion of the reinsurance
under this Agreement when Cedent's Retention Limits increase.
A. Automatic Cessions: The recapture will be effected
through a proportional increase in Cedent's Automatic
Retained Percentage, defined in Article II Section 8.
The increase in the Automatic Retained Percentage will
be proportionate to the increase in Cedent's Retention
Limit for the corresponding issue ages.
B. Facultative Cessions: The recapture will be effected
through a proportional increase in Cedent's Facultative
Retained Percentage, defined as the percentage of the
total net amount at risk on the policy that the ceding
company retains at policy issue. The increase in the
Facultative Retained Percentage will be proportionate to
the increase in Cedent's Retention Limit for the
corresponding issue ages.
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NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
Cedent may exercise Cedent's option to recapture by giving Reinsurer
ninety (90) days prior written notice of such recapture.
3. If Cedent exercises this option to recapture, then
A. Cedent must reduce the reinsurance on each individual life on
which Cedent retained its Automatic Retained Percentage or
Facultative Retained Percentage that was in effect on this
treaty at the time of the increase in retention limit.
B. If an individual life is shared by more than one reinsurer,
Reinsurer's percentage of the reduced reinsurance will be the
same as Reinsurer's percentage of the initial reinsurance on
the individual life.
4. The reduction of reinsurance will become effective on the later of the
following dates:
A. The policy anniversary date immediately following the
effective date of Cedent's increase in Retention Limits.
B. The number of years stated in Schedule A starting with the
original policy date shown on Cedent's listing.
ARTICLE XIII
REINSTATEMENT
If a Covered Policy lapses for nonpayment of premium and is reinstated under
Cedent's terms and rules, the reinsurance will be reinstated by Reinsurer.
Cedent must pay Reinsurer all back Reinsurance Premiums in the same manner as
Cedent received insurance premiums under Cedent's policy. If Reinsurer is
requested to reinstate a policy that was originally ceded to Reinsurer on a
facultative basis, then Cedent must submit the policy and associated papers
concerning the individual's insurability to Reinsurer to be underwritten and
approved for the reinsurance to be reinstated if:
1. the policy lapsed for six months or longer, or
2. Cedent seeks additional underwriting information, or
3. Cedent reinsures ___% of the policy.
If the above conditions are not present, Cedent may automatically reinstate a
policy that was originally ceded to Reinsurer on a facultative basis.
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NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
ARTICLE XIV
EXPENSES
Cedent shall pay the expense of all medical examinations, inspection fees and
other underwriting expenses in connection with the issuance of the insurance.
ARTICLE XV
CLAIMS
1. Reinsurer shall pay Reinsurer's quota share of any claim under a
Covered Policy within a reasonable time after Cedent submits the claim
to Reinsurer. Reinsurer shall make payment to Cedent in a single sum
regardless of Cedent's mode of settlement.
2. All reinsurance claim settlements made in accordance with Paragraph 1
above will be subject to the terms and conditions of the Covered Policy
under which Cedent is liable.
3. When Cedent is advised of a claim for insurance benefits reinsured
under this Agreement, Cedent must promptly notify Reinsurer.
4. If a claim is made under a Covered Policy reinsured under this
Agreement, Reinsurer will abide by the issue as it is settled by
Cedent. The maximum benefit payable to Cedent under each Covered Policy
is the amount specifically reinsured with Reinsurer. When Cedent
requests payment of the reinsurance proceeds, Cedent must deliver a
copy of the proof of death, proof of payment and the claimant's
statement to Reinsurer.
5. A. Cedent must promptly notify Reinsurer of Cedent's intent to
contest insurance reinsured under this Agreement or to assert
defenses to a claim for such insurance. Reinsurer shall
participate in the contest or assertion of defenses unless
Reinsurer notifies Cedent promptly that Reinsurer declines to
participate. If Cedent's contest of such insurance results in the
reduction of Cedent's liability, Reinsurer will share in this
reduction. Reinsurer's percentage of the reduction will be
Reinsurer's net amount of risk on the individual life as it
relates to Cedent's total net amount at risk on the date of the
death of the insured.
B. If Reinsurer should decline to participate in the contest or
assertion of defenses, Reinsurer will then release all of
Reinsurer's liability (i) by paying Cedent the full amount of
reinsurance as if there had been no contest, compromise or
litigation of a claim, and Reinsurer's proportionate share of
covered expenses incurred to the date, from the date Reinsurer
notifies
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Cedent that Reinsurer declined to be a party, and (ii) by not
sharing in any subsequent reduction in liability.
6. If the amount of insurance provided by a Covered Policy reinsured under
this Agreement is increased or reduced because of a misstatement of age
or sex established after the death of the insured, Reinsurer will share
with Cedent in this increase or reduction. Reinsurer's share of this
increase or reduction will be the percentage that Reinsurer's net
liability relates to Cedent's total net liability, immediately prior to
this increase or reduction.
7. Cedent shall pay the routine expenses incurred in connection with
settling claims. These expenses may include compensation of agents and
employees and the cost of routine investigations.
8. Reinsurer shall share with Cedent all expenses that are not routine.
Expenses that are not routine are those directly incurred in connection
with the contest or the possibility of a contest of insurance or the
assertion of defenses. These expenses will be shared in proportion to
the net sum at risk for both parties. However, if Reinsurer has
released Reinsurer's liability under Paragraph 5 of this Article,
Reinsurer will not share in any expenses incurred after Reinsurer's
date of release.
9. Notwithstanding anything contained in this Article to the contrary,
Reinsurer will pay Reinsurer's proportionate share of a judgment which
includes extra-contractual damages awarded against Cedent in a lawsuit
arising out of a contested claim unless Reinsurer has declined to
participate in the contest pursuant to Paragraphs 5A and 5B of this
article.
The extent of Reinsurer's liability for extra-contractual damages,
however, exclude those damages assessed against Cedent as a result of
acts, omissions or a course of conduct committed by Cedent and/or
Cedent's agents, other than those that arise out of the investigation
processing and settlement of claims in connection with insurance
reinsured under this Agreement.
10. If either a misrepresentation or misstatement on an application or a
death of an insured by suicide results in Cedent returning the policy
premiums to the policy owner rather than paying the policy benefits,
Reinsurer will refund all of the Reinsurance Premiums Reinsurer
received on that policy to Cedent. This refund given by Reinsurer will
be in lieu of all other reinsurance benefits payable on that policy
under this Agreement.
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NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
ARTICLE XVI
PREMIUM TAX REIMBURSEMENT
Reinsurer shall not reimburse Cedent for any premium taxes Cedent may be
required to pay with respect to reinsurance hereunder.
ARTICLE XVII
DAC TAX REQUIREMENTS
1. In accordance with Treasury Regulations Section 1.848-2(g)(8), Cedent
and Reinsurer hereby elect to determine specified policy acquisition
expenses with respect to this Agreement without regard to the general
deductions limitation of Section 848(c)(1) of the Internal Revenue Code
(the "IRC"). This election shall be effective for the calendar year in
which this Agreement commenced and for all subsequent taxable years for
which this Agreement remains in effect.
2. All uncapitalized terms used herein shall have the meanings set forth
in the regulations under section 848 of the IRC.
3. Any party with the net positive consideration under this Agreement for
each taxable year shall capitalize specified policy acquisition
expenses with respect to this Agreement without regard to the general
deductions limitation of Section 848(c)(1) of the IRC.
4. Both parties agree to exchange information pertaining to the amount of
net consideration under this Agreement each year to ensure consistency.
5. Cedent shall submit a schedule in the format specified in Exhibit 1 to
Reinsurer by March 1 of each year of Cedent's calculations of the net
consideration under this Agreement for the preceding calendar year.
This schedule of calculations shall be accompanied by a statement
signed by an officer of Cedent stating that Cedent will report such net
consideration in its Federal income tax return for the preceding
calendar year.
6. Reinsurer may contest such calculation by providing an alternative
calculation to Cedent in writing within thirty (30) days of Reinsurer's
receipt of Cedent's calculation. If Reinsurer does not notify Cedent
within such time that it contests the calculation, Reinsurer shall
report the net consideration as determined by Cedent in Reinsurer's tax
return for the previous calendar year.
7. If Reinsurer contests Cedent's calculation of the net consideration,
the parties will act in good faith to reach an agreement as to the
correct amount within thirty (30) days of the date Reinsurer submits
its alternative calculation. If the parties reach
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NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
an agreement on an amount of net consideration, each party will report
the agreed upon amount in its Federal income tax return for the
previous calendar year. If during such period, Cedent and Reinsurer are
unable to reach agreement, they shall promptly thereafter cause
independent accountants of nationally recognized standing, satisfactory
to Cedent and Reinsurer (who shall not have any material relationship
with Cedent or Reinsurer) promptly to review (which review shall
commence no later than five (5) days after the selection of such
independent accountants), this Agreement and the calculations of Cedent
and Reinsurer for the purpose of calculating the net consideration
under this Agreement. In making such calculation, such independent
accountants shall consider only those items or amounts in Cedent's
calculation as to which Reinsurer has disagreed.
Such independent accountants shall deliver to Cedent and Reinsurer, as
promptly as practicable (but no later than sixty (60) days after the
commencement of their review), a report setting forth such calculation,
which calculation shall result in a net consideration between the
amount thereof shown in Cedent's calculation delivered pursuant to
Paragraph 5 and the amount thereof in Reinsurer's calculation delivered
pursuant to Paragraph 6. Such report shall be final and binding upon
Cedent and Reinsurer. The fees, costs and expenses of such independent
accountants shall be borne (i) by Cedent if the difference between the
net consideration as calculated by the independent accountants and
Cedent's calculation delivered pursuant to Paragraph 5 is greater than
the difference between the net consideration as calculated by the
independent accountants and Reinsurer's calculation delivered pursuant
to Paragraph 6, (ii) by Reinsurer if the first such difference is less
than the second such difference; and (iii) otherwise equally by Cedent
and Reinsurer.
8. Both parties agree to attach a schedule to their respective federal
income tax returns for the first taxable year ending after the date on
which this election becomes effective which identifies this Agreement
as a reinsurance agreement for which an election has been made under
Treasury Regulations Section 1.848-2(g)(8).
9. Reinsurer represents and warrants that it is subject to United States
taxation under Subchapter L of the IRC.
10. Reinsurer shall complete a Reinsurance Questionnaire in the format
specified in Exhibit 2 and submit it to Cedent by May 1st of each
calendar year.
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NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
ARTICLE XVIII
INSPECTION OF RECORDS
Reinsurer shall have the right, at any reasonable time, to inspect Cedent's
books and documents that relate to Cedent's reinsurance under this Agreement.
ARTICLE XIX
INSOLVENCY
1. If Cedent becomes insolvent, all of the reinsurance due Cedent will be
paid in full directly to Cedent or Cedent's liquidator (receiver or
statutory successor) on the basis of Cedent's liability under the
policy or policies reinsured, without diminution because of Cedent's
insolvency.
2. If Cedent becomes insolvent, the liquidator, receiver or statutory
successor will give Reinsurer written notice of a pending claim against
Cedent for insurance reinsured under this Agreement within a reasonable
time after the claim is filed in the insolvency proceeding. During the
insolvency proceedings where the claim is to be settled, Reinsurer may
investigate this pending claim and interpose in Cedent's or Cedent's
liquidator's, receiver's or statutory successor's name, but at
Reinsurer's own expense, any defense or defenses which Reinsurer may
believe available to Cedent or Cedent's liquidator, receiver or
statutory successor.
3. The expenses incurred by Reinsurer will be chargeable, subject to court
approval, against Cedent as part of the expense of liquidation, to the
extent of the proportionate share of the benefit that may accrue to
Cedent solely as a result of the defense undertaken by Reinsurer. Where
two or more reinsurers are involved in the same claim and a majority in
interest elects to interpose a defense or defenses to this claim, the
expense will be apportioned in accordance with the terms of this
Agreement as though such expense had been incurred by Cedent.
4. In the event of Reinsurer's insolvency, as determined by the department
of insurance responsible for such determination, all reinsurance ceded
under this Agreement may be recaptured immediately by Cedent without
penalty effective as of the day prior to the earlier of Reinsurer's
becoming insolvent or the date of such determination by the said
department of insurance.
5. Where two or more reinsurers are members of a pool of reinsurers
established hereby, the insolvency of one reinsurer shall not be deemed
to abrogate this Agreement with respect to the other reinsurers.
-17-
NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
ARTICLE XX
ARBITRATION
1. If the parties cannot mutually resolve a dispute or claim arising out
of or in connection with this Agreement, including the formation or
validity thereof, and whether arising during or after the period of
this Agreement, the dispute or claim shall be settled by arbitration.
The arbitrators shall have the authority to interpret this Agreement
and in doing so shall consider the customs and practices of the life
insurance and life reinsurance industries. The arbitrators shall have
the authority to interpret this Agreement as an honorable engagement,
and without regard to the law of any particular jurisdiction. To
initiate arbitration, either party shall notify the other party by
facsimile or by overnight delivery of its desire to arbitrate, stating
the nature of the dispute and the remedy sought (the "Notice of
Arbitration"). The party to which the notice is sent shall respond to
the notification in writing within ten (10) business days of receipt.
2. Arbitration shall be conducted by three arbitrators who shall be
current or past officers of life insurance companies other than the
contracting companies or their affiliates. Each party shall appoint one
arbitrator, and serve written notice of the appointment upon the other
party, within thirty (30) business days after the date of delivery of
the Notice of Arbitration. The two arbitrators so appointed shall
select the third arbitrator within thirty (30) business days after the
date of appointment of the second arbitrator to be appointed.
3. In the event either party fails to choose an arbitrator within thirty
(30) business days, as provided in Paragraph 2, the party which has
given written notice may choose two arbitrators who shall in turn
choose a third arbitrator before entering arbitration.
4. If the two arbitrators appointed in accordance with Paragraph 2 or
Paragraph 3 are unable to agree upon the selection of a third
arbitrator within thirty (30) business days after the appointment of
the second arbitrator to be appointed, each arbitrator shall nominate
three candidates within ten (10) business days thereafter, two of whom
the other shall decline and the decision shall be made by drawing lots.
5. Arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect on
the date of delivery of Notice of Arbitration.
6. Each party will pay the fees of its own attorneys, the arbitrator
appointed by that party, and all other expenses connected with the
presentation of its own case.
-18-
NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
The two parties will share equally in the cost of the third arbitrator.
The arbitration hearing will be held in New York City.
7. The award agreed to by the arbitrators will be final and binding, and
judgment may be entered upon it in any court having jurisdiction. The
arbitrators shall not award punitive damages.
ARTICLE XXI
PARTIES TO AGREEMENT
This is an Agreement solely between Cedent and Reinsurer. There will be no legal
relationship between Reinsurer and any person having an interest of any kind in
any Covered Policy.
ARTICLE XXII
ENTIRE AGREEMENT
1. This Agreement shall constitute the entire agreement between the
parties with respect to the subject matter of this Agreement and there
are no understandings between the parties other than as expressed in
this Agreement.
2. Any change or modification to this Agreement shall be null and void
unless made by amendment to this Agreement and signed by both parties.
ARTICLE XXIII
DURATION OF AGREEMENT
1. This Agreement may be terminated as to new business, with respect to
the percentage participation in the risks reinsured hereunder by
Reinsurer, as set forth in Schedule A, at any time by either party
giving 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 party will be the first day of the ninety (90) day
period. During the ninety (90) day period, new Covered Policies shall
be reinsured under this Agreement pursuant to Articles I and II or
Article III. Reinsurer's acceptance will be subject to the terms of
this Agreement and Cedent's payment of Reinsurance Premiums.
2. This Agreement may be terminated immediately as to new business by
either party if the other party materially breaches this Agreement. The
Cedent may also immediately recapture reinsurance and unearned
reinsurance premiums under this Agreement if either (a) the Reinsurer's
Authorized Control Level (ACL) risk-based capital ratio, as defined for
Annual Statement years 1999 and following by NAIC at its December 1992
meeting, falls below two hundred percent (200%) at the end of any
quarterly accounting period or (b) the Reinsurer shall be required
-19-
NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
by their State Insurance Department to file a plan of action responding
to the negative trend in such ratio, in accordance with applicable
insurance regulations ("Negative Trend Plan").
The Reinsurer agrees to report its ACL risk-based capital ratio to the
Cedent annually. The Reinsurer agrees to notify the Cedent in the event
that the Reinsurer's ACL risk-based capital ratio should fall below two
hundred percent (200%) or it should be required to file a Negative
Trend Plan.
3. After termination, Reinsurer will be liable for all automatic
reinsurance which becomes effective prior to termination of this
Agreement, and also for all facultative reinsurance approved by
Reinsurer based upon applications Reinsurer received prior to
termination of this Agreement.
4. If Cedent and Reinsurer are unable to reach an agreement regarding a
change in the reinsurance premium rates pursuant to Paragraph 3 of
Article VIII, Cedent may terminate this Agreement and recapture all or
part of the reinsurance ceded under this Agreement in accordance with
Paragraph 3 of Article VIII.
ARTICLE XXIV
CHOICE OF LAW AND FORUM
New York law shall govern the terms and conditions of the Agreement.
ARTICLE XXV
COMPLIANCE WITH PRIVACY LAWS
Except as required by law, the Reinsurer will not disclose Information to third
parties without the consent of the Cedent; however, the Cedent acknowledges that
the Reinsurer may, in the normal course of its business, share Information with
other insurance and reinsurance companies ("Retrocessionaires") to the extent
necessary to retrocede risk to the Retrocessionaires, so long as the
Retrocessionaires have agreed to maintain the confidentiality of the Information
on terms substantially similar to this Agreement.
ARTICLE XXVI
REINSURANCE CREDIT
It is the intention of Reinsurer and Cedent that Cedent qualify for reinsurance
credit for reinsurance ceded under this Agreement. Reinsurer, at its sole cost
and expense, shall do all that is necessary to comply with all applicable
insurance laws and regulations to enable Cedent to take credit for the
reinsurance ceded under this Agreement.
-20-
NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
IN WITNESS WHEREOF the said
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
and the
have by their respective officers executed and delivered these presents in
duplicate on the date shown below.
NEW YORK LIFE INSURANCE NEW YORK LIFE INSURANCE
AND ANNUITY CORPORATION AND ANNUITY CORPORATION
Signed at___________________________ Signed at___________________________
By__________________________________ By__________________________________
Its authorized representative Its authorized representative
Title_______________________________ Title_____________________________
Date________________________________ Date______________________________
Signed at_________________________ Signed at_________________________
By________________________________ By________________________________
Its authorized representative Its authorized representative
Title_____________________________ Title____________________________
Date____________________________ Date____________________________
-21-
NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
SCHEDULE A
POLICIES
1. DESCRIPTION OF LAYERS:
The reinsurance coverage is divided into three layers as follows:
Layer 1 is ceded on a quota share basis. It applies to the first $_________
of Net Amount at Risk.
Layer 2 is _______% retained by the cedent. It starts at the end of layer 1
and continues until
Cedent has filled its entire retention limit on the risk. Where
layer 2 ends will vary depending on the amount of prior coverage
retained on the risk. Layer 2 could be zero (if Cedent has
filled its retention in Layer 1). Cedent retention limits are
shown in Schedule C.
Layer 3 starts at the end of layer 2. Cedent retains [__%] layer 3. The
maximum size of Layer 3 (of which Reinsurer will receive a
percentage) is shown in the tables below. Note: for ages 86-90,
layer three does not exist.
1a. CEDED PERCENTAGES OF EACH LAYER ON A GIVEN RISK - SINGLE LIFE:
AGE LAYER 1 LAYER 2 LAYER 3 PERCENT/MAX TOTAL SIZE
----------------------------------------------------------------------------
0-65 % / $
----------------------------------------------------------------------------
66-75 % / $
----------------------------------------------------------------------------
76-85 % / $
----------------------------------------------------------------------------
86-90 N/A <- Single Life ages 86-90 are for UL only
----------------------------------------------------------------------------
CEDED PERCENTAGES OF EACH LAYER ON A GIVEN RISK - JOINT LIFE:
AGE LAYER 1 LAYER 2 LAYER 3
-------------------------------------------------------------------
0-65 % % % / $
-------------------------------------------------------------------
66-75 % % % / $
-------------------------------------------------------------------
76-85 % % % / $
-------------------------------------------------------------------
86-90 % % N/A
-------------------------------------------------------------------
1b. RETAINED PERCENTAGES OF EACH LAYER ON A GIVEN RISK - SINGLE LIFE:
AGE LAYER 1 LAYER 2 LAYER 3
------------------------------------------------------
0-65 % % %
------------------------------------------------------
66-75 % % %
------------------------------------------------------
76-85 % % %
------------------------------------------------------
86-90 % %
------------------------------------------------------
RETAINED PERCENTAGES OF EACH LAYER ON A GIVEN RISK - JOINT LIFE:
AGE LAYER 1 LAYER 2 LAYER 3
------------------------------------------------------
0-65 % % %
------------------------------------------------------
66-75 % % %
------------------------------------------------------
76-85 % % %
------------------------------------------------------
86-90 % %
------------------------------------------------------
-22-
NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
2. Type of Business: Individual and joint life Universal Life and Variable
Universal Life policies, and attached Supplementary
Term Rider (STR), Scheduled Term Increasing Rider
(STIR), and Living Benefits Rider (LBR)
3. Plans of Insurance AD 101 Pinnacle UL, VUL, SUL, SVUL (plus STR, STIR
and LBR riders attached to the base policy)
4. Maximum Issue Age: 85 for VUL, 90 for UL, 90 for joint life
5. Jumbo Limit: $__________
6. Automatic Binding Limit - Single Life:
$__________ per life for issue ages to age 65; $__________ per life for
issue ages 66 to 75; $12,500,000 per life for issue ages 76 to 85;
$__________ for ages 86 to 90.
Automatic Binding Limit - Joint Life*:
$__________ for issue ages to age 65; $__________ for issue ages 66 to 75;
$__________ for issue ages 76 to 85; $__________ for issue ages 86 and
over. (Based on younger insured.)
*Based on younger insured.
7. Minimum Amount at Issue: $_________ for single life cases, $_________ for
joint life cases
8. Recapture Period: 10 Years (Single Life)
20 Years (Joint Life)
-23-
NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
SCHEDULE B
REINSURANCE PREMIUM RATES
1A. REINSURANCE PREMIUMS FOR SINGLE LIFE CASES
The reinsurance premium rate per $1,000 of face amount ceded shall
be found in the tables attached hereto. Reinsurance premiums shall
be calculated as follows:
Reinsurance Premiums = Rate per $1,000 x Face Amount Ceded/1,000.
Slightly substandard insureds who qualify will be considered
standard as noted in section 2a below. More seriously substandard
insureds, and non-qualifying Table 2, 3 and 4 insureds, will use
standard rates adjusted as noted in section 3a below. Flat extra
premiums will be applied to this reinsurance premium as also shown
in section 3a below.
Term conversion policies will use point-in-scale rates with a 50%
first year discount. Term conversions will be limited to policies
which are within 5 years of issue.
1B. REINSURANCE PREMIUMS FOR JOINT LIFE CASES
Reinsurance premiums will be calculated using the following
methodology. First, mortality rates for each insured shall be
retrieved from the SOA 75/80 Select and Ultimate mortality tables
based on each insured's age, sex and duration. Next, the
appropriate multiplicative risk class factor from the following
table will be applied to this rate.
Duration
--------
1 2+
--- ---
Select Preferred (Non-Smoker)
Preferred (Non-Smoker
Standard Non-Smoker
Select Standard (Smoker)
Standard Smoker
(Slightly substandard insureds will be considered Standard as
noted in section 2b below. More seriously substandard insureds,
and non-qualifying Table 2, 3 and 4 insureds, will use standard
rates adjusted as noted in section 3b below.) These individual
rates will then be Frasierized to come up with a single mortality
rate for the policy. This rate shall be the charge per $1,000 of
face amount ceded. Total reinsurance premiums shall be calculated
as follows:
-24-
NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
Reinsurance Premium = Rate per $1,000 x Face Amount Ceded/
1,000.
Term conversion policies will use ___% of new issue rates with a
__% first year discount. Term conversions will be limited to
policies which are within 5 years of issue.
The net rates in all years will be a minimum of $____/$1,000.
Flat extra premiums will be applied to this reinsurance premium as
shown in section 3b below.
2A. SINGLE LIFE SHAVING PROGRAM ADJUSTMENT
The following lives will be reduced to Standard Non-smoker:
Table 2, 3 and 4 Non-smokers Standard Non-smokers with a medical
flat extra up to $____ Standard Non-smokers with a non-medical
flat extra up to $____
The following lives will be reduced to Standard Smoker:
Table 2, 3 and 4 Smokers Standard Smokers with a medical flat
extra up to $____ Standard Smokers with a non-medical flat extra
up to $____
Binding and Jumbo Limits
Issue Ages Limit
Binding 0-65 $__________
66-80 $__________
Jumbo 0-80 $__________
Additional Limitations for inclusion in Shaving Pool arrangement
Maximum issue age is 80.
No cases that present an alcohol, drug or criminal risk.
-25-
NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
2B. JOINT LIFE SHAVING PROGRAM ADJUSTMENT
The following lives will be reduced to Standard Non-smoker:
Table 2, 3 and 4 Non-smokers Standard Non-smokers with a medical
flat extra up to $____ Standard Non-smokers with a non-medical
flat extra up to $____
The following lives will be reduced to Standard Smoker:
Table 2, 3 and 4 Smokers Standard Smokers with a medical flat
extra up to $____ Standard Smokers with a non-medical flat extra
up to $____
Binding and Jumbo Limits
Issue Ages Joint
Binding 0-65 $___________
66-75 $___________
76-80 $___________
Jumbo 0-80 $___________
Additional Limitations for inclusion in Shaving Pool arrangement
Maximum issue age is 80.
No cases that present an alcohol, drug or criminal risk.
-26-
NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
3A. SUBSTANDARD TABLE 5-13 (AND NON-QUALIFYING TABLE 2-4) AND FLAT EXTRA
ADJUSTMENTS FOR SINGLE LIFE POLICIES
For individual insureds in tables 5 through 13, and individual insureds
in tables 2-4 who do not qualify for the Shaving Pool adjustment, the
premium rate will be:
The premium rate for a standard insured (non-smoker or smoker as
appropriate), multiplied by the appropriate factor from the following
tables based on the substandard insured's table rating.
Automatic Cessions (NYL Table) Facultative Cessions
----------------------------- --------------------
Non-Smoker Smoker
Table Factor Factor Table Factor
----- ------ ------ ----- ------
2 1
3 2
4 3
5 4
6 5
7 6
8 7
9 8
10 9
11 10
12 11
13 12
13
14
15
16
The total premium remitted to the reinsurer will include the flat extra
premium minus a __% allowance.
3B. SUBSTANDARD TABLE 5-13 (AND NON-QUALIFYING TABLE 2-4) AND FLAT EXTRA
ADJUSTMENTS FOR JOINT LIFE POLICIES
For individual insureds in tables 5 through 13, and individual insureds
in tables 2-4 who do not qualify for the Shaving Pool adjustment, the
mortality rate will be:
The mortality rate for a standard insured (non-smoker or smoker as
appropriate),
-27-
NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
multiplied by the appropriate factor from the following tables based on
the substandard insured's table rating.
Automatic Cessions (NYL Table) Facultative Cessions
----------------------------- --------------------
Non-Smoker Smoker Non-Smoker Smoker
Table Factor Factor Table Factor Factor
----- ------ ------ ----- -------- ------
2 1
3 2
4 3
5 4
6 5
7 6
8 7
9 8
10 9
11 10
12 11
13 12
13
14
15
16
Uninsurable
Constant Extra Deaths Limitation: At the later of attained age 65 or
duration 20, but not to exceed attained age 100, take a difference
between standard and substandard rates and apply it as an additive
factor for all the later durations (i.e. constant extra deaths at this
point.)
Overall Limitation: All individual mortality rates shall be limited to
____.
The total premium remitted to the reinsurer will include the flat extra
premium minus the allowances shown in the table below:
Term of flat extra Year 1 Years 2+
------------------ ------ --------
0-5 years __% __%
6+ years __% __%
4. RENEWAL OF INSURANCE
The renewal of insurance shall be considered as a continuation of the
original insurance for the purpose of calculating future reinsurance
premiums.
-28-
NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
SCHEDULE C
CEDENT'S RETENTION LIMITS
===================================================================================================================
Additional Amount at the
Discretion of the Chief
Ages Amount Underwriter
-------------------------------------------------------------------------------------------------------------------
Single Life 0-65 $__________ N/A
66-75 $__________ $_________
76+ $__________ $_________
===================================================================================================================
===================================================================================================================
Additional Amount at the
Discretion of the Chief
Ages Amount Underwriter
-------------------------------------------------------------------------------------------------------------------
Joint Life * 0-65 $__________ N/A
66-75 $__________ $_________
76+ $__________ $_________
===================================================================================================================
*based on the younger insured.
-29-
NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
EXHIBIT 1
DAC TAX CALCULATION
CEDING COMPANY: NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
ASSUMING COMPANY: ___________________________
DATE: _______________
DAC TAX - DEDUCTIONS FROM GROSS PREMIUM
DAC TAX CALCULATION AMOUNT
GROSS PREMIUM
LESS:
DEDUCTIONS FROM GROSS PREMIUMS
Commissions
Death Claims
Claim Interest
Premium Taxes
Claim Investigation Expense
Claim Legal Expense
Waiver Claims
Surrenders
Experience Refunds
Admin Fee
Fee Income
Miscellaneous Interest
Dividends
Termination Dividends
Productions Bonus
Reserve Adjustments
Other (specify)
TOTAL DEDUCTIONS
NET CONSIDERATIONS
Please sign below confirming agreement with net considerations or provide an
alternate calculation within 30 days
-------------------------------------
Signature
-------------------------------------
Type or Print Name
-------------------------------------
Title
-------------------------------------
Date
-30-
NYLIAC ADVANCED MARKET REINSURANCE AGREEMENT
EXHIBIT 2
REINSURANCE QUESTIONNAIRE
FOR FEDERAL INCOME TAX DETERMINATIONS
The purpose of this questionnaire is to secure sufficient information to allow
New York Life Insurance and Annuity Corporation ("NYLIAC") to account properly
under the federal income tax rules for the reinsurance transactions you have
with NYLIAC. Please provide NYL with the following information:
1. Are you either
(a) a company that is subject to U.S. taxation directly under the
provisions of subchapter L of chapter 1 of the Internal Revenue
Code (i.e., an insurance company liable for filing Form 1120L or
Form 1120-PC), or
(b) a company that is subject indirectly to U.S. taxation under the
provisions of subpart F of subchapter N of chapter 1 of the
Internal Revenue Code (i.e., a "controlled foreign corporation"
with the meaning of Internal Revenue Code Section 957)?
Answer: _____ Yes _______ No
2. If your answer to 1. is no, have you entered into a closing agreement
with the Internal Revenue Service to be subject to U.S. taxation with
respect to reinsurance income pursuant to Treasury Regulation Section
1.848-2(h)(2)(ii)(B)?
Answer: _____ Yes _______ No
(If your answer is yes, please provide a copy of the
closing agreement.)
Company Name:
Signed by:
Title:
Date:
