1
EXHIBIT (A)(8)(a)
REINSURANCE
AGREEMENT
Between
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
of
Rye, New York
and
THE MANUFACTURERS LIFE INSURANCE COMPANY (USA)
of
Bloomfield Hills, Michigan
YRT of VUL
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TABLE OF CONTENTS
Page
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A. REINSURANCE COVERAGE 1
B. PAYMENTS BY CEDING COMPANY 2
C. PAYMENTS BY REINSURER 2
D. REPORTS AND ACCOUNTING FOR REINSURANCE 2
E. TERMS OF REINSURANCE 3
F. MATERIAL CHANGES 5
G. ARBITRATION 5
H. INSOLVENCY 6
I. REPRESENTATIONS 7
J. TERMINATION 7
K. PAYMENTS AND ACCOUNTING UPON 7
TERMINATION OF AGREEMENT
L. OFFSET 8
M. MISCELLANEOUS 8
N. EXECUTION 10
DEFINITION OF TERMS 11
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TABLE OF CONTENTS (CONTINUED)
Page
SCHEDULE I
QUOTA SHARE AND POLICIES SUBJECT 13
TO REINSURANCE
SCHEDULE II, PART A
SUMMARY OF MONETARY TRANSACTIONS 14
SCHEDULE II, PART B
SUMMARY OF MONETARY TRANSACTIONS 15
SCHEDULE III
ANNUAL REPORT 16
SCHEDULE IV
ALLOWANCES 17
SCHEDULE V
ARBITRATION SCHEDULE 18
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YEARLY RENEWABLE TERM REINSURANCE AGREEMENT
between
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
of
Rye, New York
referred to as the "CEDING COMPANY"
and
THE MANUFACTURERS LIFE INSURANCE COMPANY (USA)
of
Bloomfield Hills, Michigan
referred to as the "REINSURER."
A. REINSURANCE COVERAGE
1. The CEDING COMPANY shall cede, and the REINSURER shall accept, reinsurance
of a Quota Share (as defined in the Definition of Terms) of the net amount
at risk on each Policy (as defined in the Definition of Terms) on a yearly
renewable term (YRT) basis. The Quota Share for a Policy is determined as
defined in Schedule I.
2. The liability of the REINSURER shall begin simultaneously with that of the
CEDING COMPANY, but in no event prior to the Effective Date or until this
Agreement has been executed by both the CEDING COMPANY and the REINSURER.
3. The Effective Date of this Agreement is __________, 1998.
4. Reinsurance of a Policy shall be maintained in force without reduction so
long as the liability of the CEDING COMPANY under such Policy remains in
force without reduction, unless reinsurance is terminated or reduced as
provided herein.
5. In no event shall reinsurance be in force under this Agreement for a Policy
unless the Policy's issue and delivery complies with the laws of all
applicable jurisdictions and the CEDING COMPANY's corporate charter.
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6. As provided in section E. paragraph 5. below, the REINSURER shall
maintain a letter of credit in favor of the CEDING COMPANY in accordance
with the terms of New York State Insurance Department Regulation 133 to
allow the CEDING COMPANY to take credit for the reserves ceded.
B. PAYMENTS BY CEDING COMPANY
1. The CEDING COMPANY shall pay the REINSURER ongoing reinsurance premiums
according to Schedule IV.
C. PAYMENTS BY REINSURER
1. The REINSURER shall reimburse the CEDING COMPANY for its Quota Shares of
the following amounts on the Policies incurred by the CEDING COMPANY during
the Accounting Period:
a) Death Benefits
b) Unusual Expenses
2. The REINSURER shall pay commission allowances as specified in Schedule IV.
D. REPORTS AND ACCOUNTING FOR REINSURANCE
1. The CEDING COMPANY shall summarize all monetary transactions under this
Agreement by submitting a written report within forty (40) days following
the end of each month. The report shall be formatted as set forth in
Schedule II, parts A and B. Any net amounts shown in such reports as due
from the CEDING COMPANY shall be due and payable by the CEDING COMPANY when
submitting the reports to the REINSURER. If a report shows a net amount due
from the REINSURER, the net amount shall be due and payable by the
REINSURER within thirty (30) days of its receipt of such report. Payments
made after that time frame shall be subject to interest charges for the
late period using the 90 day Treasury rate of the Wall Street Journal on
the date payment was due as an annual interest rate.
2. The CEDING COMPANY shall provide the REINSURER with information which the
REINSURER may need to prepare its tax, statutory and GAAP financial
statements with respect to the Policies reinsured under this Agreement,
including but not limited to information described in Schedule II and III.
Such information shall be
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submitted at the end of each calendar year. A preliminary report shall be
provided within twenty-five (25) days following the end of each calendar
year and a final report shall be provided within forty (40) days following
the end of the calendar year.
3. If the parties determine the summary of monetary transactions for an
Accounting Period as required in this section did not accurately reflect
the actual experience of the Policies during the Accounting Period, the
CEDING COMPANY shall promptly submit a revised summary to the REINSURER.
Any amount shown by the revised summary as owed by either the CEDING
COMPANY or the REINSURER to the other shall be paid within 30 days.
4. The REINSURER may change the information required in Schedule II and III in
order to obtain the data it reasonably needs to properly administer this
Agreement or to prepare its financial statements. Such schedule change
shall become effective only upon sixty (60) days prior written notice to
the CEDING COMPANY.
E. TERMS OF REINSURANCE
1. All monetary amounts expressed in this Agreement are expressed in United
States dollars and all amounts payable pursuant to this Agreement are
payable in United States dollars.
2. This is an Agreement for indemnity reinsurance solely between the CEDING
COMPANY and the REINSURER. The acceptance of reinsurance hereunder shall
not create any right or legal relation whatever between the REINSURER and
any person other than the CEDING COMPANY.
3. The REINSURER shall not participate in capital gains and losses of the
CEDING COMPANY.
4. The REINSURER shall provide a Letter of Credit (as defined in section A.
paragraph 6) to the CEDING COMPANY until the REINSURER becomes properly
licensed to conduct business in the state of domicile of the CEDING
COMPANY or becomes an accredited reinsurer therein.
(a) Such Letter of Credit will be issued in conformity with
Regulation 133 of the New York State Insurance Department and may be drawn
upon at any time, notwithstanding any other provisions herein, and be
utilized by the CEDING COMPANY or any successor by operation of law of the
CEDING COMPANY, including, without limitation, any liquidator,
rehabilitator, receiver or conservator of such insurer for the following
purposes: (i) to reimburse the CEDING COMPANY for
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the REINSURER'S share of premiums returned to the owners of Policies
reinsured under this Agreement on account of cancellations of such
policies; (ii) to reimburse the CEDING COMPANY for the REINSURER'S share
of surrenders and benefits or losses paid by the CEDING COMPANY under the
terms and provisions of the Policies reinsured hereunder; (iii) to fund an
account with the CEDING COMPANY in an amount at least equal to the
deduction, for reinsurance ceded, from the CEDING COMPANY'S liabilities
for Policies ceded under this Agreement. Such amount shall include, but
not be limited to, amounts for Policy reserves, reserves for claims and
losses incurred, (including losses incurred but not reported), loss
adjustment expenses and unearned premiums; and (iv) to pay any other
amounts the CEDING COMPANY claims are due under this Agreement.
(b) All of the foregoing shall be applied without diminution
because of insolvency on the part of the CEDING COMPANY or the REINSURER.
(c) Notwithstanding the above, the CEDING COMPANY shall be
required to return any amounts drawn on the Letter of Credit in excess of
the amounts required for subparagraphs (a)(i), (ii) and (iii) of this
section, or in the case of subparagraph (a)(iv), any amounts that are
subsequently determined not to be due.
5. The CEDING COMPANY may, at its sole option, recapture some or all of the
business ceded under this Agreement from the REINSURER if the CEDING
COMPANY increases its retention limit. The amount recaptured shall be that
which causes the CEDING COMPANY to hold its full retention limit. The
CEDING COMPANY shall pay to the REINSURER a fair price for the present
value of future profits on the business recaptured, as the two companies
shall reasonably agree. The terms and conditions of any such recapture
shall be subject to review by the New York Insurance Department pursuant
to Section 1505 of the New York Insurance Law.
6. If a policy lapses for nonpayment of premiums or other reason and is
reinstated under the CEDING COMPANY'S terms and rules, the reinsurance
will be reinstated by the REINSURER.
THE CEDING COMPANY SHALL PAY THE BALANCE OF ARREARS OF PREMIUMS DUE UNDER
A REINSTATED CESSION.
7. The CEDING COMPANY and the REINSURER agree to the DAC Tax Election
pursuant to Section 1.848-2(g)(8) of the Income Tax Regulation under
Section 848 of the Internal Revenue code of 1986, as amended, whereby:
(a) the party with the net positive consideration for this Agreement for
each taxable year will capitalize specified policy acquisition
expenses with respect to this Agreement without regard to the
general deductions limitation of Section 848(c)(1); and
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(b) both parties agree to exchange information pertaining to the amount
of net consideration under this Agreement each year to ensure
consistency.
The term "net consideration" will refer to either net consideration as
defined in Regulation Section 1.848-2(f) or gross amount of premiums and
other consideration as defined in Regulation Section 1.848-3(b), as
appropriate.
This DAC Tax Election shall be effective for all years for which this
Agreement remains in effect.
The CEDING COMPANY and the REINSURER represent and warrant that they are
subject to U.S. taxation under either the provisions of subchapter L of
Chapter 1 or the provisions of subpart F of subchapter N of Chapter 1 of
the Internal Revenue Code of 1986, as amended.
F. MATERIAL CHANGES
1. The CEDING COMPANY shall promptly notify the REINSURER of any proposed
Material Change in the terms of the Policies.
2. Following a Material Change, other than that which is required by statute,
regulation or insurance department action, the REINSURER may in its sole
discretion (a) continue to reinsure the Policies under current terms, or
(b) renegotiate the agreement. Any amendment to this Agreement which
results from such negotiation shall be subject to review by the New York
Insurance Department pursuant to Section 1505 of the New York Insurance
Law.
G. ARBITRATION
1. If the CEDING COMPANY and the REINSURER cannot mutually resolve a dispute
regarding the interpretation or operation of this Agreement, the dispute
shall be decided through arbitration as set forth in Schedule V. The
arbitrators shall base their decision on the terms and conditions of this
Agreement. However, if the terms and conditions of this Agreement do not
explicitly dispose of an issue in dispute between the parties, the
arbitrators may base their decision on the customs and practices of the
insurance and reinsurance industry rather than solely on an interpretation
of applicable law. The arbitrators' decision shall take into account the
right to offset mutual debts and credits as provided in this Agreement.
There shall be no appeal from the arbitrators' decision. Any court having
jurisdiction over the subject matter and over the parties may reduce the
arbitrators' decision to judgment.
2. The parties intend this section to be enforceable in accordance with the
Federal Arbitration Act (9 U.S.C., Section 1) including any amendments to
that Act which are
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subsequently adopted. In the event that either party refuses to submit to
arbitration as required by paragraph 1, the other party may request a
United States Federal District Court to compel arbitration in accordance
with the Federal Arbitration Act. Both parties consent to the jurisdiction
of such court to enforce this section and to confirm and enforce the
performance of any award of the arbitrators.
H. INSOLVENCY
1. For the purpose of this Agreement, the CEDING COMPANY or the REINSURER
shall be deemed "insolvent" as determined by laws of its domiciliary state.
2. In the event of the insolvency of the CEDING COMPANY, all reinsurance made,
ceded, renewed or otherwise becoming effective under this Agreement shall
be payable by the REINSURER directly to the CEDING COMPANY or to its
liquidator, receiver or statutory successor on the basis of the liability
of the CEDING COMPANY under the Policies reinsured without diminution
because of the insolvency of the CEDING COMPANY.
3. The CEDING COMPANY'S receiver, liquidator, or statutory successor shall
give the REINSURER written notice of the pendency of a claim against the
CEDING COMPANY on the Policy reinsured within a reasonable time after such
claim is filed in the insolvency proceeding. During the pendency of such
claim, the REINSURER may interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses which the
REINSURER may deem available to the CEDING COMPANY, or its receiver,
liquidator or statutory successor.
4. Any expense incurred by the REINSURER pursuant to Section H paragraph 3,
above, shall be payable subject to court approval out of the estate of the
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
in liquidation, solely as a result of the defense undertaken by the
REINSURER. Where two or more reinsurers are participating in the same claim
and a majority in interest elect to interpose defense to such claim, the
expense shall be apportioned in accordance with the terms of this Agreement
as though such expense had been incurred by the CEDING COMPANY.
5. In the event of the insolvency of the REINSURER, the CEDING COMPANY may, at
its option, recapture all reinsurance in force under this Agreement
pursuant to section E paragraph 7, or may cancel this Agreement with
respect to new business by promptly providing the REINSURER, its
rehabilitator, receiver, liquidator or statutory successor with written
notice of the cancellation effective the date on which the REINSURER'S
insolvency is established by the authority responsible for such
determination. Any requirement for a notification period prior to the
cancellation of the Agreement would not apply under such circumstances.
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I. REPRESENTATIONS
1. The CEDING COMPANY and the REINSURER each acknowledges its responsibility
for independently forming its own conclusions regarding:
(a) the compliance of this Agreement with the laws and regulations of
any particular state or jurisdiction;
(b) the statutory or other accounting impact of this Agreement on the
CEDING COMPANY'S and the REINSURER'S financial statements, and
(c) the tax impact of this Agreement on the CEDING COMPANY and the
REINSURER.
2. Unless otherwise explicitly provided for herein, the CEDING COMPANY and
the REINSURER shall each be solely responsible for determining and
discharging any state or federal income tax liability resulting from this
Agreement, including any tax liability resulting from the initial monetary
transactions.
J. TERMINATION
1. Except as otherwise provided in this section, this Agreement shall be
unlimited in duration.
2. Upon 90 days' notice, either party may terminate this Agreement with
respect to new business not yet issued at the end of the 90 day
notification period.
3. If none of the Policies are in force as of the end of the any Accounting
Period, this Agreement shall automatically terminate as of the day the
last Policy terminated.
4. The termination of this Agreement or of any reinsurance hereunder shall
not affect any rights or obligations or either party applicable to the
period prior to the effective date of termination.
K. PAYMENTS AND ACCOUNTING UPON TERMINATION OF AGREEMENT
1. If this Agreement is terminated, the CEDING COMPANY shall summarize all
monetary transactions for the Terminal Accounting Period and report its
summary to the REINSURER within forty (40) days of the later of the
effective date of
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termination or of notice of termination. The report shall be in the form
of Schedule II, Parts A and B.
2. The CEDING COMPANY shall provide the REINSURER with information the
REINSURER may need to prepare its tax, statutory and GAAP financial
statements for the Terminal Accounting Period as required by section D.
3. If the CEDING COMPANY ever becomes aware that its summary of monetary
transactions for the Terminal Accounting Period as required in this
section did not accurately reflect the actual experience of the Policies
during the Terminal Accounting Period, it shall promptly submit a revised
summary to the REINSURER, and the terminal payment shall be recalculated.
Any amount shown by the revised summary as owed by either the CEDING
COMPANY or the REINSURER to the other shall be paid promptly.
L. OFFSET
Any debts or credits, matured or unmatured, liquidated or unliquidated,
regardless of when they arose or were incurred, in favor of or against either
the CEDING COMPANY or the REINSURER with respect to this Agreement are deemed to
be mutual debts and credits and shall be set off, and only the balance shall be
allowed or paid.
M. MISCELLANEOUS
1. Certain terms used in this Agreement are defined in the Definitions of
Terms schedule and are to be interpreted in accordance with such
definitions. In the absence of a specific definition, a term used in this
Agreement is to be interpreted in accordance with customary insurance and
reinsurance industry practices.
2. Any Error made by either the CEDING COMPANY or the REINSURER in the
administration of reinsurance under this Agreement shall be corrected by
the submission of revised reports and restoring both the CEDING COMPANY
and the REINSURER to the positions they would have occupied had no Error
occurred.
3. The REINSURER may audit, at any reasonable time and at its own expense,
all records and procedures relating to reinsurance under this Agreement.
The CEDING COMPANY shall cooperate in the audit, including providing any
information requested by the REINSURER in advance of the audit. Further,
the CEDING COMPANY agrees to complete, at the request of the REINSURER and
in a manner acceptable to the REINSURER, a process which confirms the
existence of the Policies.
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4. Neither the CEDING COMPANY nor the REINSURER may assign any of the rights
and obligations under this Agreement, nor may either party sell,
assumption reinsure or transfer the Policies without the prior written
consent of the other party. Consent will not be withheld if the
assignment, sale, assumption reinsurance or transfer does not have a
material effect on the risks transferred or the expected economic results
to the party requested to consent. This provision shall not prohibit the
REINSURER from reinsuring the Policies on an indemnity basis.
5. This Agreement represents the entire agreement between the CEDING COMPANY
and the REINSURER and supersedes, with respect to its subject matter, any
prior oral or written agreements between the parties. Any amendments to
this Agreement shall be set forth in writing and signed by all required
parties.
6. No modification or waiver of any provision of this Agreement shall be
effective unless set forth in a written amendment to this Agreement which
is executed by both parties. A waiver shall constitute a waiver only with
respect to the particular circumstance for which it is given and not a
waiver of any future circumstance.
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N. EXECUTION
IN WITNESS WHEREOF,
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
of Rye, New York
and
THE MANUFACTURERS LIFE INSURANCE COMPANY (USA)
of Bloomfield Hills, Michigan
have by their respective officers executed this Agreement in duplicate on the
dates shown below.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
Signed at __________________
By _________________________ By ________________________
Title _______________________ Title _____________________
Date ________________________ Date ______________________
THE MANUFACTURERS LIFE INSURANCE COMPANY (USA)
Signed at ______________________
By _________________________ By ________________________
Title _________________________ Title _____________________
Date _________________________ Date ______________________
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DEFINITION OF TERMS
ACCOUNTING PERIOD - for the month in which this Agreement becomes effective, the
period beginning on the Effective Date and ending on the Last Day of The Current
Accounting Period. Thereafter, the period beginning on the day following the
Last Day Of The Preceding Accounting Period and ending on the Last Day Of The
Current Accounting Period.
AGREEMENT - this document and all schedules and amendments to it.
BENEFITS - the death benefits provided by the CEDING COMPANY pursuant to the
Policies.
CONTINUATION POLICY - a new Policy changing or replacing a Policy made or issued
both (1) not in compliance with the terms of the Policy and (2) without the same
new underwriting information that the CEDING COMPANY would obtain in the absence
of the Policy, without a suicide exclusion period or contestable period as long
as those contained in new issues of the CEDING COMPANY, or without the payment
of the same commissions in the first year that the CEDING COMPANY would have
paid in the absence of the Policy. For purposes of Section F, "MATERIAL
CHANGES," a creation of a continuation policy shall constitute a material
change.
EFFECTIVE DATE - the date set forth in Section A, paragraph 3.
ERROR - any isolated, inadvertent deviation from the terms of this Agreement
resulting from the act or omission of an employee of either the CEDING COMPANY
or the REINSURER whose principal function is administrative in nature.
EXECUTION DATE - the date this Agreement is signed by the last of the parties to
sign it.
LAST DAY OF THE CURRENT ACCOUNTING PERIOD - shall refer to the last day of the
month for which the calculation is being made.
LAST DAY OF THE PRECEDING ACCOUNTING PERIOD - shall refer to the last day of the
preceding month.
MATERIAL CHANGE - a change that a prudent insurance executive would consider as
likely to have a material impact on the REINSURER'S experience under this
Agreement.
NET AMOUNT AT RISK - the excess of the Death Benefit over the Account Value on
the Policy.
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DEFINITION OF TERMS (CONTINUED)
POLICY(IES) - the insurance policy(ies) identified in Schedule I which are
reinsured pursuant to this Agreement.
QUOTA SHARE - the percentage of the Net Amount at Risk (as determined according
to Schedule I) which is ceded by the CEDING COMPANY to the REINSURER pursuant to
this Agreement.
TERMINAL ACCOUNTING PERIOD - the period commencing on the day following the Last
Day Of The Preceding Accounting Period and ending on the effective date of
termination pursuant to any notice of termination given under this Agreement or
such other date as shall be mutually agreed to in writing.
UNUSUAL EXPENSES - non-routine charges incurred by the CEDING COMPANY in
defending or investigating a claim for policyholder benefits or in rescinding a
Policy, including penalties, attorney's fees, and interest imposed automatically
by statute against the CEDING COMPANY and arising solely out of a judgment
rendered against the CEDING COMPANY in a suit for policyholder benefits,
provided that the following categories of expenses or liabilities shall not be
considered "Unusual Expenses:"
(a) routine investigative or administrative expenses;
(b) expenses incurred in connection with a dispute or contest arising
out of conflicting claims of entitlement to policyholder benefits
which the CEDING COMPANY admits are payable;
(c) expenses, fees, settlements, or judgments arising out of or in
connection with claims against the CEDING COMPANY for punitive or
exemplary damages; and
(d) expenses, fees, settlements, or judgments arising out of or in
connection with claims made against the CEDING COMPANY and based on
alleged or actual bad faith, failure to exercise good faith, or
tortious conduct.
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SCHEDULE I
QUOTA SHARE AND POLICIES SUBJECT TO REINSURANCE
The Quota Share of a Policy issued by the CEDING COMPANY that is reinsured is
the ratio of the Policy's Face Amount at issue in excess of $100,000 (or the
CEDING COMPANY'S retention on the Policy if less than $100,000 because other
insurance is already in force on the insured), if any, divided by the Policy's
Face Amount at issue.
ACCIDENTAL DEATH BENEFIT RIDERS SHALL BE QUOTA SHARE REINSURED.
The Policies to be ceded are those issued after the effective date on the
following policy forms:
Policy Form Number
N.0644.ny
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SCHEDULE II, PART A
SUMMARY OF MONETARY TRANSACTIONS
for the period from ________________ to __________________
with respect to the Quota Shares of the Policies
1. Reinsurance premiums at the Quota Shares
2. Death Benefits at the Quota Shares
3. Other Reimbursements at the Quota Shares
(a) unusual expenses
(b) commission allowances specified in Schedule IV
4. Number of, and Face Amount of, Policies in Force at End of Period at the
Quota Shares
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SCHEDULE II, PART B
SUMMARY OF MONETARY TRANSACTIONS
for the period from _____________ to _____________
A. Due REINSURER at Quota Shares
1. Reinsurance premiums at the Quota Shares
2. Total due REINSURER
B. Due CEDING COMPANY
1. Death Benefits at Quota Shares
2. Other Reimbursements at Quota Shares
Unusual Expenses
Commission allowances
3. Total Due CEDING COMPANY
C. Amount Due REINSURER (if positive) or Due CEDING COMPANY (if negative) (A
less B)
D. Amounts Previously Paid for Accounting Period
E. Net Amount Due (C less D)
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SCHEDULE III
ANNUAL REPORT
The annual report shall provide the following information for both General and
Separate Accounts:
- Exhibits 1, 8 and 11 from the NAIC - prescribed annual statement
- "Analysis of Increase in Reserves" from the NAIC - prescribed annual
statement
- "Exhibit of Life Insurance" from the NAIC - prescribed annual statement
- documentation of the calculation of the reported reserves
- tax reserves and required interest
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SCHEDULE IV
ALLOWANCES
Commission Allowances
On the Net Amount at Risk corresponding to the first $100,000 Face Amount
ceded at issue on a Policy ("Basic Quota Share"), 100% of the reinsurance
premium ceded in the first policy year, plus 6.25% of the reinsurance
premium ceded in the second and later policy years.
On the Net Amount at Risk corresponding to the excess of the full Quota
Share over the Basic Quota Share, (that is to ceded amounts beyond the
first $100,000 Face Amount ceded at issue on a Policy), 50% of the
reinsurance premium ceded in the first policy year, plus 3.125% of the
reinsurance premium ceded in the second and later policy years.
For cases with aggregate coverage in excess of $30 million, these allowances are
subject to individual facultative underwriting adjustment.
Premium Rates
1. For the Net Amount at Risk reinsured in a year (that is, the Quota Share of
the Net Amount at Risk), the reinsurance premium (before commission
allowances) is 96% of Table III, subject to any necessary rate increase.
Premiums are to be paid annually.
2. The reinsurance premium rates are not guaranteed for more than one year at
a time. If actual death claims are expected to exceed the reinsurance
premiums, the REINSURER may increase the reinsurance premium rates, but not
beyond the appropriate one year term premiums calculated on the 1980 C.S.O.
smoker/non-smoker mortality table at 4.5% interest.
3. Each month the new amount at risk will be calculated on the current fund
and will be compared to the net amount at risk used to calculate the
premium. Whenever there is a fluctuation that is greater than $50,000, the
system will recalculate the reinsurance net amount at risk from that month
forward to the next policy anniversary and will adjust the premiums
accordingly.
4. REINSURANCE PREMIUM RATES FOR THE ACCIDENTAL DEATH BENEFIT RIDER SHALL BE
THE SAME AS THE RATES CHARGED BY THE CEDING COMPANY.
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SCHEDULE V
ARBITRATION SCHEDULE
To initiate arbitration, either the CEDING COMPANY or the REINSURER shall notify
the other party in writing of its desire to arbitrate, stating the nature of its
dispute and the remedy sought. The party to which the notice is sent shall
respond to the notification in writing within ten (10) days of its receipt.
The arbitration hearing shall be before a panel of three arbitrators, each of
whom must be a present or former officer of a life insurance company. An
arbitrator may not be a present or former officer, attorney, or consultant of
the CEDING COMPANY or the REINSURER or either's affiliates.
The CEDING COMPANY and the REINSURER shall each name five (5) candidates to
serve as an arbitrator. The CEDING COMPANY and the REINSURER shall each choose
one candidate from the other party's list, and these two candidates shall serve
as the first two arbitrators. If one or more candidates so chosen shall decline
to serve as an arbitrator, the party which named such candidate shall add an
additional candidate to its list, and the other party shall again choose one
candidate from the list. This process shall continue until two arbitrators have
been chosen and have accepted. The CEDING COMPANY and the REINSURER shall each
present their initial lists of five (5) candidates by written notification to
the other party within twenty-five (25) days of the date of the mailing of the
notification initiating the arbitration. Any subsequent additions to the list
which are required shall be presented within ten (10) days of the date the
naming party receives notice that a candidate that has been chosen declines to
serve.
The two arbitrators shall then select the third arbitrator from the eight (8)
candidates remaining on the lists of the CEDING COMPANY and the REINSURER within
fourteen (14) days of the acceptance of their positions as arbitrators. If the
two arbitrators cannot agree on the choice of a third, then this choice shall be
referred back to the CEDING COMPANY and the REINSURER. The CEDING COMPANY and
the REINSURER shall take turns striking the name of one of the remaining
candidates from the initial eight (8) candidates until only one candidate
remains. If the candidate so chosen shall decline to serve as the third
arbitrator, the candidate whose name was stricken last shall be nominated as the
third arbitrator. This process shall continue until a candidate has been chosen
and has accepted. This candidate shall serve as the third arbitrator. The first
turn at striking the name of a candidate shall belong to the party that is
responding to the other party's initiation of the arbitration. Once chosen, the
arbitrators are empowered to decide all substantive and procedural issues by a
majority of votes.
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SCHEDULE V (CONTINUED)
It is agreed that each of the three arbitrators should be impartial regarding
the dispute and should resolve the dispute on the basis described in the
"ARBITRATION" section. Therefore, at no time will either the CEDING COMPANY or
the REINSURER contact or otherwise communicate with any person who is to be or
has been designated as a candidate to serve as an arbitrator concerning the
dispute, except upon the basis of jointly drafted communications (which may
include independently prepared statements) provided by both the CEDING COMPANY
and the REINSURER to inform those candidates actually chosen as arbitrators of
the nature and facts of the dispute. Likewise, any written or oral arguments
provided to the arbitrators concerning the dispute shall be coordinated with the
other party or shall take place in the presence of the other party. Further, at
no time shall any arbitrator be informed that the arbitrator has been named or
chosen by one party or the other.
The arbitration hearing shall be held on the date fixed by the arbitrators. In
no event shall this date be later than six (6) months after the appointment of
the third arbitrator. The arbitration hearing shall be held in the city where
the administrative home office of the party responding to the arbitration is
located. IN ANY EVENT, THE ARBITRATION SHALL TAKE PLACE IN THE STATE OF NEW
YORK. As soon as possible, the arbitrators shall establish prearbitration
procedures as warranted by the facts and issues of the particular case. At least
ten (10) days prior to the arbitration hearing, each party shall provide the
other party and the arbitrators with a detailed statement of the facts and
arguments it will present at the arbitration hearing. The arbitrators may
consider any relevant evidence; they shall give the evidence such weight as they
deem it entitled to after consideration of any objections raised concerning it.
The party initiating the arbitration shall have the burden of proving its case
by a preponderance of the evidence. Each party may examine any witnesses who
testify at the arbitration hearing. Within twenty (20) days following the end of
the arbitration hearing, the arbitrators shall issue a written decision which
shall set forth their decision and the factual basis for their decision. In
their written decision the arbitrators shall demonstrate that they have offset
mutual debts and credits as provided in this Agreement. In no event, however,
may the arbitrators award punitive or exemplary damages. In their decision, the
arbitrators shall also apportion the costs of arbitration, which shall include,
but not be limited to, their own fees and expenses.
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