1Texas Imperial Assumption Agreement - Exhibit 4.1-B to the Liq
uidation Plan
AGREEMENT
for
ASSUMPTION REINSURANCE
by and among
the NATIONAL ORGANIZATION OF LIFE AND HEALTH
INSURANCE GUARANTY ASSOCIATIONS
and its Participating Life and Health Insurance Guaranty Associations
and the
TEXAS IMPERIAL LIFE INSURANCE COMPANY
Concerning
THE STATESMAN NATIONAL LIFE INSURANCE COMPANY IN LIQUIDATION
TABLE OF CONTENTS
Page
I. RECITALS 1
II. DEFINITIONS 1
III. ASSUMPTION OF MEDICARE SUPPLEMENT ISSUE AGE POLICIES 1
A. Medicare Supplement Issue Age Policies 1
1. Participating Guaranty Associations 1
2. Assuming Insurer 2
3. Assumption Certificate 2
B. Same Terms and Conditions 2
C. Assignment of Rights 2
D. Reinstatement 3
E. Errors and Omissions 3
F. Third Party Reinsurance 4
IV. POLICY CALCULATIONS AND PAYMENT OBLIGATIONS 4
A. Association Liability 4
B. Texas Imperial Enhancement 4
V. CLOSING 4
VI. ACCOUNTING AND AUDIT PROCESS 5
A. Accounting 5
B. Audit 5
C. Accounting Date 6
D. Disputes 6
VII. PREMIUMS AND OTHER RECEIPTS 6
VIII.RECORDS 7
IX. LIABILITIES AND INDEMNITIES 7
X. REPRESENTATIONS 7
XI. RESERVES 8
XII. JURISDICTION AND ACCOUNTING PROCEDURE 8
XIII.NOTICE 8
XIV. INSOLVENCY OF TEXAS IMPERIAL 8
XV. GENERAL PROVISIONS 9
I. RECITALS
A. This agreement for assumption reinsurance ("Texas
Imperial Assumption Agreement") regarding the insolvency and
liquidation of The Statesman National Life Insurance Company
("Statesman") is entered into this 10th day of June, 1999
by and among the National Organization of Life and Health
Insurance Guaranty Associations ("NOLHGA"), and the life and
health insurance guaranty associations affected by the
insolvency and liquidation of Statesman that elect to
participate in this Liquidation Plan ("Participating
Guaranty Associations"), and Texas Imperial Life Insurance
Company ("Texas Imperial" and "Assuming Insurer").
B. This Texas Imperial Assumption Agreement is entered into
contemporaneously with the Liquidation Plan and the recitals from
the Liquidation Plan are incorporated herein.
NOW, THEREFORE, in consideration of the foregoing premises, and
the covenants, promises and agreements set forth in this Texas
Imperial Assumption Agreement and the Liquidation Plan, the
Parties agree as follows:
II. DEFINITIONS
Unless otherwise specifically provided or the context so
requires, the capitalized terms set forth in this Texas Imperial
Assumption Agreement shall have the same meaning as set forth in
Exhibit 2.1 to the Liquidation Plan and such definitions are
incorporated by reference as if fully set forth herein.
III. ASSUMPTION OF MEDICARE SUPPLEMENT ISSUE AGE POLICIES
A. Medicare Supplement Issue Age Policies.
1. Participating Guaranty Associations. Subject to the terms
and conditions of this Texas Imperial Assumption Agreement, by
virtue of the Permanent Injunction and the Liquidation Plan and
pursuant to their statutory authority, the Participating Guaranty
Associations transfer, cede and assign to Assuming Insurer as of
the Closing Date the Medicare Supplement Issue Age policies and
all rights, privileges and prerogatives thereunder. The Medicare
Supplement Issue Age policies are reflected in Exhibit III.A.1.
Texas Imperial shall have no liability for any obligations of
Statesman, other than the Medicare Supplement Issue Age policies
and as otherwise provided in the Liquidation Plan.
2. Assuming Insurer. Subject to the terms and conditions of
this Texas Imperial Assumption Agreement and the Liquidation
Plan, Texas Imperial assumes effective as of 12:01 a.m. on June 1,
1999, the Medicare Supplement Issue Age policies, to the same
extent and with the same effect as if Texas Imperial had issued
the Medicare Supplement Issue Age policies directly.
3. Assumption Certificate. As soon as possible after Closing
Date, Texas Imperial shall deliver an assumption certificate to
policyholders of the Medicare Supplement Issue Age policies
substantially in the form of Exhibit III.A.3. and subject to the
approval of the Commissioner and NOLHGA.
B. Same Terms and Conditions. All Medicare Supplement Issue
Age policies assumed by Texas Imperial shall be subject in all
respects to the same terms and conditions of the policies and
contracts as issued by Statesman. Notwithstanding anything to
the contrary contained herein, Texas Imperial does not assume and
shall not be liable for, any liabilities that are not (a) Covered
Obligations, (b) claims based on policy terms and provisions, or
(c) liabilities expressly provided in the Liquidation Plan.
Texas Imperial shall accept and assume the Medicare Supplement
Issue Age policies subject to all defenses, set-offs and
counterclaims to which the Participating Guaranty Associations
would be entitled with respect to such Medicare Supplement Issue
Age policies. It is expressly understood and agreed by the
parties that no such defenses, set-offs or counterclaims are
waived by the execution of this Texas Imperial Assumption
Agreement, the Liquidation Plan or by the consummation of any
related transactions, and that on the Closing Date, Texas
Imperial shall be fully subrogated to all such defenses, set-offs
and counterclaims (all of which defenses, set-offs and
counterclaims may also be asserted by Statesman or any
Participating Guaranty Association, as the case may be, with
respect to any claims that may be asserted against them).
C. Assignment of Rights. Each Participating Guaranty
Association, severally, hereby assign to Texas Imperial all of
their respective privileges and prerogatives and the privileges
and prerogatives of Statesman, if any, contained within or
related to the Medicare Supplement Issue Age policies, including,
but not limited to, all defenses, including contestability based
upon material misstatements in the applications for such Medicare
Supplement Issue Age policies, set-offs and counterclaims to
which Statesman or the Participating Guaranty Association would
be entitled with respect to such Medicare Supplement Issue Age
policies; provided that: (a) each Participating Guaranty
Association retains all rights and interests of policyholders
against the Statesman Estate to which the Participating Guaranty
Association is entitled pursuant to its enabling act and the
Priority Statute and all rights and interests of policyholders,
in equity or at law based on violations of common law, tort law,
contract law, statutory law or other law, to which the
Participating Guaranty Association is subrogated pursuant to its
enabling act; (b) Texas Imperial shall have no claim under the
Medicare Supplement Issue Age policies against the Statesman
Estate or any Participating Guaranty Association except as
otherwise set forth in this Texas Imperial Assumption Agreement;
and (c) Texas Imperial shall have no privileges, prerogatives,
defenses, set-offs and counterclaims relating to reinsurance
treaties in force, except for Included Treaties.
D. Reinstatement. Texas Imperial agrees to reinstate any
Medicare Supplement Issue Age policy which on the Closing Date by
its terms was entitled to reinstatement, provided that all
requirements necessary to procure reinstatement of such a policy
under its terms are fulfilled to the satisfaction of Texas
Imperial. Upon such reinstatement of any such lapsed policy, it
shall for all purposes be treated as if it has been in force from
the date on which it lapsed, except that it shall be subject to
all the terms and conditions of this Texas Imperial Assumption
Agreement as may be pertinent to the class of the policy in which
it was or should have been included. In the event of such
reinstatement, an appropriate adjustment shall be made to the
reserves or account values, as applicable, the Enhancement, or
the reinstated policy and any amounts due shall be paid pursuant
to this Texas Imperial Assumption Agreement; provided that no
such adjustment shall be made from and after the Plan Termination
Date.
E. Errors and Omissions. After the Plan Termination Date,
inadvertent errors or omissions shall not relieve any Party from
liability provided that the error or omission is rectified as
soon as practicable after discovery. Upon discovery of an error
or omission, the Party discovering the error or omission shall
notify any other parties affected by the error or omission. All
Parties agree to cooperate and work together, in good faith, to
resolve, consistent with the terms of the Liquidation Plan, any
problems or losses caused by any such error or omission. Such
good faith cooperation may include, but is not limited to,
assumption of Statesman policies, transfer of assets and complete
documentation of the error or omission.
F. Third Party Reinsurance. All of the Included Treaties which
pertain or apply to the Medicare Supplement Issue Age policies,
are identified on Exhibit III.F. hereto. All such Included
Treaties shall be transferred to Texas Imperial on the Closing
Date, subject to the reinsurer's acceptance of the transfer, and
may be terminated thereafter at the election of Texas Imperial.
The Parties hereto shall use commercially reasonable efforts to
ensure that all such Included Treaties shall be amended,
adjusted, assigned or novated on terms and conditions
satisfactory to Texas Imperial on or before the Closing Date.
IV. POLICY CALCULATIONS AND PAYMENT OBLIGATIONS
A. Association Liability.
1. The Association Liability for the Medicare Supplement Issue
Age policies shall be calculated by the following formula:
Medicare Supplement Issue Age Reserves PLUS Reserve Adjustment
EQUALS Association Liability. The Medicare Supplement Issue Age
reserves, the methodology for the reserve adjustment and the
detailed calculation for each Participating Guaranty
Association's Association Liability is set forth in Exhibit IV.A.
2. On the Closing Date, each Participating Guaranty Association
shall deliver to Texas Imperial its Association Liability in the
manner set forth in the Liquidation Plan.
B. Texas Imperial Enhancement. On or before September 1, 2002
and in accordance with the Liquidation Plan, Texas Imperial will
contribute an Enhancement to each Participating Guaranty
Association pursuant to the calculations set forth in Exhibit
IV.B.
V. CLOSING
Subject to the terms, conditions and limitations of the
Liquidation Plan, the Closing of this Texas Imperial Assumption
Agreement shall take place on the Closing Date contemporaneously
with the Closing of the Liquidation Plan.
VI. ACCOUNTING AND AUDIT PROCESS
A. Accounting.
1. On or before April 1, 2000, Texas Imperial shall prepare and
deliver to NOLHGA a one-year accounting and statement of policy
reserves, account values premiums and claims related to Medicare
Supplement Issue Age policies for the prior calendar year. That
accounting shall be presented substantially in the form of
Exhibit VI.A.
2. Along with the one-year accounting, Texas Imperial shall
make available to NOLHGA and each Participating Guaranty
Association sufficient detail and documentation to support an
audit at the contract level.
3. On or before April 1, 2001, Texas Imperial shall prepare and
deliver to NOLHGA a second-year accounting and statement of
reserves, account values, premiums and claims related to the
Medicare Supplement Issue Age policies in the same format as the
one-year report along with the contract level.
4. On or before April 1, 2002, Texas Imperial shall prepare and
deliver to NOLHGA a third-year accounting and statement of
reserves, account values, premiums and claims related to the
Medicare Supplement Issue Age policies in the same format as the
one-year report along with the contract level.
5. On or before September 1, 2002, Texas Imperial shall prepare
and deliver to NOLHGA and to each Participating Guaranty
Association (to the extent related to that Participating Guaranty
Association's Covered Obligations) a final accounting and
statement of reserves, account values, premiums and claims
related to the Medicare Supplement Issue Age policies for all
three years and any payment due.
B. Audit. On or before the first business day three (3)
months after receipt of each year's accounting, and statement of
reserves, account values, premiums and claims related to the
Medicare Supplement Issue Age policies, NOLHGA and each
Participating Guaranty Association, shall each, separately,
complete its audit and communicate any areas of dispute or
disagreement with Texas Imperial's accounting.
C. Accounting Date.
1. Subject to the accounting and audit process set forth in
this Article VI, all amounts and calculations, including the
Enhancement, shall be final, due and payable on the Plan
Termination Date.
2. The exhibits to this Texas Imperial Assumption Agreement and
the obligations of each Party under this Texas Imperial
Assumption Agreement, shall be adjusted in accordance with the
audited annual accountings and the terms and provisions of the
Liquidation Plan.
D. Disputes. To the extent that disputes or disagreements
exist regarding the final accounting and/or audits thereof, and
the parties are unable to resolve those disputes, the disputes
shall be resolved by means of the Accounting Procedure as
specified in the Liquidation Plan.
VII. PREMIUMS AND OTHER RECEIPTS
A. All policyholder payments related to the Medicare
Supplement Issue Age policies for periods after the Closing
Date shall be the sole property of Texas Imperial. All
policyholder payments related to the Medicare Supplement
Issue Age policies for periods before the Closing Date shall
be the sole property of Statesman.
B. All moneys, checks, drafts, money orders, postal notes, and
other instruments received after the Closing Date for premiums on
the Medicare Supplement Issue Age policies which are the sole
property of Texas Imperial shall be forthwith transferred and
delivered to Texas Imperial and any such instruments, when so
delivered, shall bear all endorsements required to effect the
transfer of same to Texas Imperial. As of and following the
Closing Date, Texas Imperial shall have all the rights of
Statesman under outstanding bank draft authorizations from
policyholders which authorized Statesman to draw on the
policyholder's account to automatically withhold from
policyholder's accounts and transmit to Statesman funds to apply
to premium on the Medicare Supplement Issue Age policies. So far
as permitted by the laws of the applicable states, Texas
Imperial, as part of this Texas Imperial Assumption Agreement,
assumes the guaranty obligations of Statesman, if any, with
respect to such bank drafts authorizations outstanding on the
Closing Date. Texas Imperial shall have the right and authority
to collect for the account of Texas Imperial all receivables and
other items which shall be transferred by Statesman to Texas
Imperial and to endorse without recourse and without warranties
of any kind the name of Statesman on any checks or the evidences
of indebtedness received by Texas Imperial on account of any such
receivables or other items.
VIII.RECORDS
A. Each Participating Guaranty Association agrees to
transfer, assign, deliver and convey to Texas Imperial,
subject to the terms set forth in this Agreement, all files
and records related to the Medicare Supplement Issue Age
policies in their possession or under their control. Texas
Imperial agrees that after such delivery, the Participating
Guaranty Associations and/or NOLHGA shall be entitled, at
any reasonable time and at their expense, to inspect, audit
and copy any and all such records and files of Texas
Imperial and all other records and files of Texas Imperial
relating to the Medicare Supplement Issue Age policies.
B. Neither NOLHGA nor any Participating Guaranty Association
makes any warranty or representation that the books and records
of Statesman which may be transferred to Texas Imperial may or
shall be either accurate or complete.
C. Any and all correspondence, premiums, records or documents
coming into the possession of a Participating Guaranty
Association after the Closing Date directly pertaining to any
Medicare Supplement Issue Age policy shall be promptly delivered
to Texas Imperial by the Participating Guaranty Association,
without charge to Texas Imperial.
IX. LIABILITIES AND INDEMNITIES
The Parties acknowledge that this Texas Imperial Assumption
Agreement is entered into as part of the Liquidation Plan and
that the liabilities and indemnities from the Liquidation Plan
apply to this Texas Imperial Assumption Agreement and are
incorporated herein by reference.
X. REPRESENTATIONS
The Parties acknowledge that this Texas Imperial Assumption
Agreement is entered into as part of the Liquidation Plan and
that the representations from the Liquidation Plan apply to this
Texas Imperial Assumption Agreement and are incorporated herein
by reference.
XI. RESERVES
The Parties acknowledge that this Texas Imperial Assumption
Agreement is entered into as part of the Liquidation Plan and
that the requirements related to Texas Imperial's reserve
maintenance from the Liquidation Plan apply to this Texas
Imperial Assumption Agreement and are incorporated herein by
reference.
XII. JURISDICTION AND ACCOUNTING PROCEDURE
The Parties acknowledge that this Texas Imperial Assumption
Agreement is entered into as part of the Liquidation Plan and
that the provisions and requirements related to jurisdiction and
the Accounting Procedure from the Liquidation Plan apply to this
Texas Imperial Assumption Agreement and are incorporated herein
by reference.
XIII. NOTICE
The Parties acknowledge that this Texas Imperial Assumption
Agreement is entered into as part of the Liquidation Plan and
that the notice provisions from the Liquidation Plan apply to
this Texas Imperial Assumption Agreement and are incorporated
herein by reference.
XIV. INSOLVENCY OF TEXAS IMPERIAL
In the event of the insolvency of Texas Imperial prior to the
Plan Termination Date, American Capitol shall guarantee and
assume all of Texas Imperial's policyholder liabilities with
respect to the Medicare Supplement Issue Age policies. In the
event of Texas Imperial's insolvency, any Association Notes
issued to Texas Imperial will become void and the applicable
Participating Guaranty Associations shall deliver equivalent
replacement Association Notes to American Capitol upon American
Capitol's assumption of the policies.
XV. GENERAL PROVISIONS
The Parties acknowledge that this Texas Imperial Assumption
Agreement is entered into as part of the Liquidation Plan and
that the general provisions from the Liquidation Plan apply to
this Texas Imperial Assumption Agreement and are incorporated
herein by reference. Regardless of any specific references, the
Parties acknowledge and agree that this Texas Imperial Assumption
Agreement is to be performed pursuant to, and interpreted
consistent with, the terms and provisions from the Liquidation
Plan.
IN WITNESS WHEREOF, this Texas Imperial Assumption Agreement
has been executed on the day and year subscribed.
TEXAS IMPERIAL LIFE INSURANCE COMPANY
By: /s/Xxxxxxx X. Guest Date: June 10, 1999
-----------------------
Name: Xxxxxxx X. Guest
Title: Chairman of the Board
NATIONAL ORGANIZATION OF LIFE AND HEALTH INSURANCE GUARANTY
ASSOCIATIONS
By: /s/Xxxxx X. Xxxxxxxx Date: June 10, 1999
--------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President
