YEARLY RENEWABLE TERM
REINSURANCE AGREEMENT
Effective as of XXX XX, XXXX
between
PRINCIPAL LIFE INSURANCE COMPANY
of
Des Moines, Iowa,
referred to in this Agreement as "Principal Life," and
XYZ REINSURANCE COMPANY
of
Xxxxx, Xxxxxxxxxxx
referred to in this Agreement as "XYZ."
TABLE OF CONTENTS
Reinsurance Coverage 1
Automatic Reinsurance 1
Facultative Obligatory Reinsurance 3
Facultative Reinsurance 3
Continuations 4
Terms of Reinsurance 5
Payments by Principal Life 6
Payments by XYZ RE 7
Reinsurance Administration 7
Settlement of Claims 7
Reinstatements and Restorations 9
Reductions in Insurance 10
Increases in Policy Net Amount at Risk 10
Retention and Recapture 10
Special Recaptures 11
Assignment of Reinsurance 12
Material Changes 12
Errors 12
Audits of Records and Procedures 13
Arbitration 13
Insolvency of Principal Life 13
Offset 14
Parties to the Agreement 14
Commencement and Termination 14
Entire Agreement 15
Deferred Acquisition Cost Tax Election 15
Definitions 16
Execution 19
LIFE BENEFITS SCHEDULE 20
ADMINISTRATION SCHEDULE 22
PREMIUM SCHEDULE 26
ARBITRATION SCHEDULE 28
CONDITIONAL RECEIPT ADDENDUM 30
WAIVER OF MONTHLY DEDUCTIONS BENEFIT ADDENDUM 31
INCREASING POLICY ADDENDUM 33
GUARANTEED INSURABILITY OPTION ADDENDUM 35
THE BREAKER ADDENDUM 37
Reinsurance Coverage
A. Principal Life agrees to cede, and XYZ RE agrees to accept, reinsurance of
the Policies specified in the Life Benefits Schedule using the Underwriting
Programs in Schedules A and B. (The term "Policies" and certain other terms
used in this Agreement are defined in the "Definitions" article.)
B. The death benefits provided by the Policies are reinsured. Supplemental
benefits are reinsured if and as specified in applicable Addenda.
C. Principal Life agrees to either
(1) cede reinsurance of a Policy to XYZ RE as Automatic Reinsurance;
(2) submit the Policy to XYZ RE for consideration as Facultative
Reinsurance;
(3) cede reinsurance of a Policy as a Continuation; or
(4) submit the Policy to ABC Re as Lead Reinsurer for consideration on
behalf of XYZ RE as Facultative Reinsurance.
Automatic Reinsurance
A. Principal Life agrees to cede the Reinsurance Amount of a Policy as
Automatic Reinsurance if the following conditions are met:
(1) Principal Life retains its Retention on the insured life when the
Policy is issued;
(2) Principal Life underwrites and issues the Policy in accordance with
its normal individual life insurance underwriting guidelines and
practices previously disclosed to XYZ RE;
(3) The sum of (a) and (b) does not exceed the sum of Principal Life's
Retention and the Automatic Limit, where
(a) equals the amount of individual life insurance issued by
Principal Life then in force on the insured life, or in the case
of individual life insurance with increasing death benefits, the
Ultimate Amount of such Policies; and
(b) equals the amount of life insurance currently being applied for
from Principal Life, or in the case of individual life insurance
with increasing death benefits, the Ultimate Amount;
(4) The sum of (a) and (b) does not exceed the Jumbo Limit, where
(a) equals the face amount of individual life insurance then in force
on the insured life in all companies; and
(b) equals the amount currently applied for from other companies,
plus the face amount, or in the case of individual life insurance
with increasing death benefits, the Ultimate Amounts currently
applied for with Principal Life; and
(5) The Policy is not a Continuation.
B. Policies of ten million dollars ($10,000,000) or less, issued pursuant
to a Non-Capacity Facultative underwriting program when the most
favorable facultative underwriting offer from any reinsurer is equal
to or less favorable than the initial underwriting mortality
classification as assessed by Principal Life, may be reinsured under
this Agreement on an Automatic Reinsurance basis, provided at least
one reinsurer makes a facultative offer to reinsure. For purposes of
this article, declinations from all reinsurers shall not be considered
a facultative offer to reinsure.
Facultative Obligatory Reinsurance
A. Not withstanding the "Automatic Reinsurance" article, if the requirements
set forth therein can be satisfied with the exception of paragraph A(4)
above, and the amount applied for on the current application is equal to or
less than ten million dollars ($10,000,000), Principal Life may submit the
Policy as Facultative Obligatory Reinsurance. XYZ RE agrees to reinsure the
Policy as applied for unless XYZ RE notifies Principal Life within the
period specified in the Administration Schedule that XYZ RE lacks the
capacity to provide the amount of reinsurance applied for because of prior
or pending reinsurance XYZ RE and XYZ RE's retrocessionaires have on the
life. XYZ RE's notice shall specify how much reinsurance, if any, XYZ RE
has the capacity to provide. Principal Life agrees to cede such amount to
XYZ RE. XYZ RE assumes no liability for reinsurance for a Policy submitted
as Facultative Obligatory Reinsurance until the earlier of
(1) the end of the period specified in the Administration Schedule; and
(2) the date of XYZ RE's written response to the facultative obligatory
application submitted by Principal Life.
B. Unless explicitly stated otherwise, Facultative Obligatory Reinsurance
mentioned in the Agreement shall be Considered as Automatic Reinsurance as
opposed to Facultative Reinsurance
Facultative Reinsurance
A. Principal Life may submit Policies not satisfying the conditions for
Automatic Reinsurance, and Policies which it does not wish to cede as
Automatic Reinsurance, for consideration by XYZ RE as Facultative
Reinsurance. Principal Life may also submit for consideration as
Facultative Reinsurance any individual life insurance issued on a Policy
Form that is not specified in the Life Benefits Schedule provided
reinsurance terms and conditions are established and agreed upon by means
of the Facultative Reinsurance application process.
B. An application for Facultative Reinsurance shall be made in the manner set
forth in the Administration Schedule. Copies of all information which
Principal Life has pertaining to the insurability of the proposed insured,
including written summaries of any such information which cannot be copied,
shall accompany the application.
C. Upon receipt of an application, XYZ RE agrees to promptly examine the
underwriting information and communicate
(1) an offer to reinsure the Policy as applied for;
(2) an offer to reinsure the Policy other than as applied for;
(3) an offer to reinsure the Policy subject to the satisfaction of
additional underwriting requirements;
(4) a request for additional underwriting information; or
(5) XYZ RE's unwillingness to make an offer to reinsure the Policy.
D. To accept an offer to reinsure made by XYZ RE, Principal Life agrees to
(1) satisfy any conditions stated in the offer to reinsure;
(2) secure a delivery receipt and any requirements to satisfy a
conditional offer, dated within Principal Life's delivery period; and
(3) follow the procedure for placing reinsurance into effect as specified
in the Administration Schedule.
E. Principal Life agrees to inform XYZ RE immediately of any additional
information pertaining to the insurability of a proposed insured which is
brought to Principal Life's attention before the satisfactory completion of
Principal Life's delivery requirements within the delivery period. Upon its
receipt of such information, XYZ RE may withdraw or modify its earlier
offer to reinsure.
F. The terms of an offer to reinsure shall supercede the terms of this
Agreement to the extent of any conflicts between the parties. Otherwise,
reinsurance of a Policy ceded as Facultative Reinsurance shall be in
accordance with the terms of this Agreement.
G. ABC Re, as Lead Reinsurer, may accept facultative reinsurance on behalf of
XYZ RE up to its quota share percentage in the LIFE BENEFITS SCHEDULE for
business underwriting programs according to the limits set forth in
Schedule B. ABC Re may also accept facultative reinsurance up to the
AUTOMATIC LIMITS in the LIFE BENEFITS SCHEDULE for policies on which
Principal Life's normal individual life insurance underwriting guidelines
and practices are not being followed.
Continuations
A. If Principal Life issues a Continuation of a Policy within its normal
continuation rules and practices, Principal Life agrees to reinsure the
Continuation with XYZ RE. Reinsurance shall continue
(1) under the reinsurance agreement between Principal Life and XYZ RE
which provides reinsurance of the Policy form of the Continuation; or
(2) under this Agreement if there is no such agreement.
B. A Policy which is a Continuation of a Policy that was not previously
reinsured with XYZ RE may only be reinsured under this Agreement with the
written consent of XYZ RE and the original reinsurer.
C. If the original Policy was ceded to XYZ RE as Facultative Reinsurance and
Principal Life approves an increase in the face amount of the Continuation
based upon receipt of any new information pertaining to the insurability of
the proposed insured, Principal Life may submit the Continuation to XYZ RE
for consideration as Facultative Reinsurance. In such case, XYZ RE shall
only be bound to reinsure the Continuation in accordance with XYZ RE's
offer to reinsure the Continuation.
D. Reinsurance at issue of the Continuation shall not exceed the Reinsured Net
Amount at Risk of the original Policy immediately prior to the issuance of
the Continuation.
E. Premiums payable for reinsurance of a Continuation shall be calculated
using the rate schedule applicable to the Policy form of the Continuation
as specified in the Premium Schedule. If there is no rate schedule
applicable to the Policy form of the Continuation, reinsurance premiums
shall be payable using the rate schedule applicable to the original Policy.
F. If the Continuation results in a change in the life status of the insured
risk from a single-insured plan to a joint- or multiple-insured plan, XYZ
RE must consent to the Continuation for reinsurance to continue.
Terms of Reinsurance
A. The plan of reinsurance shall be yearly renewable term reinsurance of the
Reinsured Net Amount at Risk of a Policy.
B. Reinsurance of a Policy shall commence on the Policy date, except
(1) in the case of Facultative Reinsurance, reinsurance shall commence on
the Policy date only if XYZ RE's offer to reinsure is the best offer
of reinsurance received by Principal Life as determined by Principal
Life's published reinsurance placement rules in effect as of such
date; and
(2) if a conditional receipt is issued by Principal Life in connection
with an application for the Policy, reinsurance shall commence prior
to the Policy date only if and as specified in a Conditional Receipt
Addendum.
C. Principal Life agrees not to use XYZ RE's name in connection with the sale
of the Policies.
D. In no event shall reinsurance under this Agreement be in force with respect
to a Policy unless the issuance and delivery of the Policy is in compliance
with the laws of all applicable jurisdictions and Principal Life's current
corporate charter.
E. Principal Life agrees to maintain reinsurance of a Policy in force in
accordance with the terms of this Agreement for as long as its Policy
remains in force.
Payments by Principal Life
A. Principal Life agrees to pay XYZ RE premiums for reinsurance of a Policy
equal to the appropriate rate specified in the Premium Schedule times the
Reinsured Net Amount at Risk of the Policy.
B. The Premium Schedule specifies other monetary amounts which Principal Life
agrees to take into account when calculating the amount due XYZ RE.
C. Reinsurance premiums shall be due and payable as specified in the
Administration Schedule.
D. The payment of reinsurance premiums shall be a condition precedent to the
liability of XYZ RE under this Agreement. If reinsurance premiums are not
paid when due, XYZ RE may give Principal Life thirty (30) days' written
notice of XYZ RE's intent to terminate reinsurance because of Principal
Life's failure to pay reinsurance premiums. Reinsurance of all Policies
having reinsurance premiums in arrears shall terminate as of the date to
which reinsurance premiums had previously been paid unless all premiums in
arrears are paid before the end of the thirty (30) day notice period. If
reinsurance on any Policy terminates because of Principal Life's failure to
pay reinsurance premiums, reinsurance of Policies with premiums
subsequently becoming due shall automatically terminate as of the date on
which new reinsurance premiums become due. Principal Life agrees that it
will not force termination under the provisions of this paragraph solely to
avoid the recapture requirements or to transfer the block of business
reinsured to another reinsurer.
E. So that XYZ RE need not maintain deficiency reserves in connection with
reinsurance premiums payable pursuant to this Agreement, the premium rates
specified in the Premium Schedule shall only be guaranteed for one (1)
Policy year. Nevertheless, XYZ RE shall anticipate continuing to accept
reinsurance on the basis of such rates for all Policies originally ceded
pursuant to such rates. If XYZ RE should raise reinsurance premium rates
pursuant to this Agreement that does not align with a similar increase in
the direct premium rates by Principal Life, Principal Life, at Principal
Life's option, may recapture reinsured amounts in force.
Payments by XYZ RE
A. XYZ RE agrees to pay Principal Life the Reinsured Net Amount at Risk of any
claim paid by Principal Life pursuant to a Policy in accordance with the
"Settlement of Claims" article.
B. XYZ RE agrees to pay the Claims Ratio of any expenses incurred in
connection with Policy claims except as set forth in the "Settlement of
Claims" article.
C. The Premium Schedule specifies other monetary amounts that XYZ RE agrees to
pay Principal Life pursuant to this Agreement.
Reinsurance Administration
The methods for placing reinsurance into effect, for paying reinsurance
premiums, and for notifying XYZ RE of Policy lapses, reinstatements, reductions,
Continuations, increases in the Reinsured Net Amount at Risk; and of other
changes affecting reinsurance shall be specified in the Administration Schedule.
Settlement of Claims
A. Principal Life agrees to give XYZ RE prompt written notice of its receipt
of any claim on a Policy and to keep XYZ RE informed of any legal
proceedings or settlement negotiations in connection with a claim. Copies
of written materials relating to such claim, legal proceedings or
negotiation shall be furnished to XYZ RE upon request so long as it does
not endanger the attorney/client privilege. If XYZ RE declines to be a
party to the contest, compromise or litigation of a claim, XYZ RE will pay
its full share of the amount reinsured, as if there had been no contest,
compromise or litigation, and its proportionate share of covered expenses
incurred to the date, from the date XYZ RE notifies Principal Life XYZ RE
declines to be a party.
B. Principal Life's obligation to provide notice of a claim on a Policy shall
not be construed as a condition precedent to XYZ RE's obligation to pay the
claim. Principal Life's failure to provide notice shall be considered a
breach of a promise which may entitle XYZ RE to damages.
C. Principal Life agrees to act in accord with Principal Life's standard
practices applicable to all claims in enforcing the terms and conditions of
the Policies and with respect to the administration, negotiation, payment,
denial or settlement of any claim or legal proceeding.
D. XYZ RE agrees to accept the good faith decision of Principal Life in
payment or settlement of any claim for which XYZ RE has received the
required notice. XYZ RE agrees to pay Principal Life the Reinsured Net
Amount at Risk on which reinsurance premiums have been computed upon
receiving proper evidence that Principal Life has paid a Policy claim.
Payment of the Reinsured Net Amount at Risk on account of death shall be
made in one (1) lump sum.
E. Unless XYZ RE declines to be a party to such action, XYZ RE will pay its
share of any claims dispute arising from a policy up to the maximum that
would have been payable under the specific policy had there been no
controversy, plus XYZ RE's share of specific expenses, with the exception
of:
(1) salaries of employees or other internal expenses of Principal Life;
(2) routine investigative or administrative expenses;
(3) expenses incurred in connection with a dispute arising out of
conflicting claims of entitlement to proceeds of a Policy that
Principal Life admits are payable;
(4) any gratuitous payments made by Principal Life; and
(5) any punitive damages awarded against Principal Life, and expense
incurred in connection with such damages, that are based on the acts
or omissions of Principal Life or Principal Life's agents.
F. XYZ RE agrees to hold Principal Life harmless from certain expenses and
liabilities that result from XYZ RE's own acts or omissions as provided in
this article. For this purpose, XYZ RE agrees to indemnify Principal Life
for XYZ RE's equitable share of those punitive and exemplary damages
awarded against Principal Life, and expenses incurred in connection with a
claim for such damages, if
(1) XYZ RE actively participated in the acts or omissions, including the
decision to deny a claim for Policy benefits, and
(2) those acts or omissions serve as a material basis for the punitive or
exemplary damages. XYZ RE's equitable share shall be determined by an
assessment of XYZ RE's participation in the particular case.
G. If Principal Life should contest or compromise any claim and the amount of
Principal Life's liability is thereby reduced, XYZ RE's liability shall be
reduced by the Claims Ratio of the reduction.
H. If Principal Life should recover monies from any third party in connection
with or arising out of any Policy, Principal Life agrees to pay XYZ RE the
Claims Ratio of the recovery.
I. If the amount of insurance provided by a Policy is increased or reduced
because of a misstatement of age or sex, XYZ RE's liability shall be
increased or reduced by the Claims Ratio of the amount of the increase or
reduction.
J. If Principal Life pays interest on a claim, XYZ RE agrees to pay the
interest on the Reinsured Net Amount at Risk computed at the same rate and
for the same period as that paid by Principal Life, but in no event later
than the date the claim is finally adjudicated by Principal Life.
K. If Principal Life is required to pay penalties and interest imposed
automatically by statute, XYZ RE shall indemnify Principal Life for the
Claims Ratio of such penalties and interest.
Reinstatements and Restorations
A. If Principal Life reinstates a lapsed Policy in accordance with the terms
of the Policy and Principal Life's underwriting guidelines and practices,
XYZ RE agrees to reinstate reinsurance of the Policy automatically, unless
XYZ RE's offer to reinsure the Policy specifies that reinsurance of the
Policy may only be reinstated as Facultative Reinsurance.
B. If Principal Life reinstates or restores a Policy pursuant to any state law
or regulations that require such reinstatements or restorations of the
Policy following a "free look" period of a proposed replacement policy that
is rejected by the insured, XYZ RE agrees to restore reinsurance of the
Policy under its original terms and conditions as set forth herein.
Principal Life shall follow its reinstatement procedures and guidelines to
the extent that such procedures and guidelines do not conflict with the
applicable state law or regulations requiring reinstatement or restoration.
All of the foregoing shall apply to Automatic Reinsurance or Facultative
Reinsurance, as applicable.
C. If Principal Life collects premiums in arrears from the policyholder of a
reinstated or restored Policy, Principal Life agrees to pay XYZ RE all
corresponding reinsurance premiums in arrears in connection with the
reinstatement, plus XYZ RE's Proportionate Share of any interest received
by Principal Life in connection with the reinstatement or restoration.
Reductions in Insurance
If individual life insurance on a life reinsured under this Insurance Agreement
terminates, the Reinsurance Amount shall be reduced as specified in the
Administration Schedule.
Increases in Policy Net Amount at Risk
XYZ RE agrees to accept a portion of such increases as specified in an
Increasing Policy Addendum.
Retention and Recapture
A. If Principal Life increases its Retention on new Policies, it agrees to
notify XYZ RE in writing within sixty (60) days of such increase. The
notice shall specify the new Retention and the effective date thereof.
B. Whenever Principal Life increases its Retention on new Policies, Principal
Life may indicate at any time thereafter that Principal Life wishes to
increase its Retention on in force Policies and recapture reinsurance on
those in force policies. The indication date becomes the date on which
Principal Life's first Policy becomes eligible for recapture. If Principal
Life so elects to recapture reinsurance following the effective date of the
increase, Principal Life shall begin by recapturing the oldest reinsurance
first (often denoted as first in, first out). Principal Life's new
Retention on an in force Policy shall be calculated using the insured's
original age and mortality class.
C. No recapture will be made unless reinsurance has been in force for a
minimum of 10 years unless the recapture is done under the Special
Recapture provision of this Agreement.
D. If Principal Life elects to increase its Retention on in force Policies,
the new Retention for such Policies shall become effective on the later of
(1) the reinsurance renewal date of the Policy first following the
election to recapture reinsurance; and
(2) the Policy anniversary date specified in the Administration Schedule.
If Principal Life fails to initiate recapture of reinsurance within
one hundred eighty (180) days of when the first of Principal Life's
Policies becomes eligible for recapture, Principal Life's election to
recapture reinsurance shall be considered waived.
E. If an in force Policy is subject to a waiver of premium claim on the date
the Policy qualifies for a new Retention, the new Retention shall
nonetheless become effective on such date for purposes of life reinsurance.
F. Principal Life may only elect to increase Retention on in force Policies if
(1) Principal Life maintained a Retention greater than zero dollars ($0)
at the time the Policy was issued and retained its Retention at such
time;
(2) Principal Life increases Retention on all eligible in force Policies;
and
(3) Principal Life retains the insurance recaptured from XYZ RE at its own
risk without benefit of any proportional or non-proportional
reinsurance other than catastrophe accident reinsurance.
G. For purposes of this article, Continuations shall be considered issued on
the issue date of the original Policy.
Special Recaptures
When Principal Life has reinsurance in force with XYZ RE and a subsequent new
application for a policy or adjustment to a policy is submitted, XYZ RE agrees
to allow recapture of the existing reinsurance provided
(1) the risk has been classified at a lower mortality classification by another
reinsurer or Principal Life; and
(2) XYZ RE declines to accept such a risk at a mortality classification equal
to the lowest mortality classification. No recapture fee will be charged.
Assignment of Reinsurance
If Principal Life sells, assumption reinsures or otherwise transfers the
Policies to another insurer, Principal Life agrees to require that the other
insurer assume all rights and obligations of Principal Life under this
Agreement. XYZ RE may object to any such transfer that would result in a
material adverse economic impact to XYZ RE. If XYZ RE so objects, Principal Life
and XYZ RE agree to mutually calculate a termination charge that shall be paid
by Principal Life to XYZ RE upon the transfer and this Agreement shall be
terminated with respect to all Policies transferred by Principal Life.
Material Changes
A. Principal Life agrees to notify XYZ RE in writing of any anticipated
Material Change in any terms or conditions of the Policies, in Principal
Life's underwriting guidelines and practices applicable to the Policies or
in Principal Life's claims practices and procedures.
B. In the event of a Material Change to the Policies, to Principal Life's
underwriting guidelines and practices or to its claims practices and
procedures, XYZ RE may at its option
(1) continue to reinsure the Policies under current terms;
(2) reinsure Policies under modified terms to reflect the Material Change;
or
(3) consider future Policies as issued in a policy form that is not
reinsured under this Agreement.
Errors
A. Any Error by either Principal Life or XYZ RE in the administration of
reinsurance under this Agreement shall be corrected by restoring both
Principal Life and XYZ RE to the positions they would have occupied had no
Error occurred. Any monetary adjustments made between Principal Life and
XYZ RE to correct an Error shall be without interest.
B. When a party claims that an Error should be corrected pursuant to paragraph
A, that party agrees to investigate whether other instances of the Error
have also occurred and agrees to report its findings to the other party.
C. Notwithstanding paragraph A above, Errors by Principal Life relating to the
proper submission of a facultative obligatory application shall be
corrected by taking into account any Facultative Reinsurance application of
in force reinsurance placed with XYZ RE prior to the date XYZ RE receives
notice of such Error.
Audits of Records and Procedures
A. XYZ RE or Principal Life may audit, at any reasonable time and at its own
expense, all records and procedures relating to reinsurance under this
Agreement. The party being audited agrees to cooperate in the audit,
including providing any information, except for documents protected by the
attorney/client privilege, requested by the other in advance of the audit.
B. Upon request, Principal Life agrees to furnish XYZ RE with copies of any
underwriting information in Principal Life's files pertaining to a Policy.
Arbitration
A. If Principal Life and XYZ RE cannot mutually resolve a dispute that arises
out of or relates to this Agreement, the dispute shall be decided through
arbitration as specified in the Arbitration Schedule. The arbitrators shall
base their decision on the terms and conditions of this Agreement plus, as
necessary, on the customs and practices of the insurance and reinsurance
industry rather than solely on a strict interpretation of applicable law.
There shall be no appeal from their decision, except that either party may
petition a court having jurisdiction over the parties and the subject
matter to reduce the arbitrators' decision to judgment.
B. The parties intend this article to be enforceable in accordance with the
Federal Arbitration Act (9 U.S.C.ss.ss.1 et seq.), including any amendments
to that Act which are subsequently adopted. If either party refuses to
submit to arbitration as required by paragraph A, 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 article and to confirm and
enforce the performance of any award of the arbitrators.
Insolvency of Principal Life
A. In the event of the insolvency of Principal Life and the appointment of a
conservator, liquidator or statutory successor of Principal Life,
reinsurance shall be payable to such conservator, liquidator or statutory
successor on the basis of claims allowed against Principal Life by any
court of competent jurisdiction or by the conservator, liquidator or
statutory successor of Principal Life without diminution because of the
insolvency of Principal Life or because such conservator, liquidator or
statutory successor has failed to pay all or a portion of any claims.
B. In the event of the insolvency of Principal Life, the conservator,
liquidator or other statutory successor of Principal Life agrees to give
XYZ RE written notice of the pendency of a claim on a Policy within a
reasonable time after such claim is filed in the insolvency proceeding.
During the pendency of any such claim, XYZ RE may investigate the claim and
interpose in the proceeding where such claim is to be adjudicated in the
name of Principal Life (its conservator, liquidator or statutory
successor), but at its own expense, any defense or defenses which XYZ RE
may deem available to Principal Life or its conservator, liquidator or
statutory successor.
C. A percentage (calculated as one (1) minus the Claims Ratio) of the expense
thus incurred by XYZ RE shall be charged, subject to court approval,
against Principal Life as part of the expense of liquidation.
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
Principal Life or XYZ RE with respect to this Agreement shall be offset and only
the balance allowed or paid. If either Principal Life or XYZ RE is then under
formal insolvency proceedings, this right of offset shall be subject to the laws
of the state exercising primary jurisdiction over such proceedings.
Parties to the Agreement
This is an Agreement for indemnity reinsurance solely between Principal Life and
XYZ RE. The acceptance of reinsurance under this Agreement shall not create any
right or legal relation whatever between XYZ RE and an insured, Policyholder,
beneficiary or any other party to or under any Policy.
Commencement and Termination
A. This Agreement shall be effective as of the date set forth on the cover
page, except that Principal Life may issue a Policy dated as much as six
(6) months prior to the Effective Date in order to save age of the
applicant.
B. Either Principal Life or XYZ RE may terminate this Agreement for new
reinsurance by giving ninety (90) days' written notice to the other party.
In such case, Principal Life agrees to continue to cede, and XYZ RE agrees
to continue to accept, reinsurance in accordance with this Agreement of
Policies issued prior to the expiration of the ninety (90) day period. All
reinsurance that has been placed in effect prior to such date shall remain
in effect in accordance with the terms of this Agreement, until the earlier
of
(1) the termination or expiration of the Policy; and
(2) the termination of this Agreement pursuant to paragraphs C or D below.
C. Reinsurance of a Policy shall terminate as of the reinsurance premium
renewal date on which the Reinsured Net Amount at Risk for such Policy is
less than the automatic termination amount specified in the Administration
Schedule, provided the reinsurance has been in force for the period
specified in the Administration Schedule.
D. XYZ RE may terminate all reinsurance under this Agreement in accordance
with paragraph D of the "Payments by Principal Life" article if Principal
Life fails to pay reinsurance premiums when due.
Entire Agreement
A. This Agreement represents the entire agreement between Principal Life and
XYZ RE and supercedes any prior oral or written agreements between the
parties regarding its subject matter.
B. No modification of this Agreement shall be effective unless set forth in a
written amendment executed by both parties.
C. A waiver of a right created by this Agreement shall constitute a waiver
only with respect to the particular circumstance for which it is given and
not a waiver in any future circumstance.
Deferred Acquisition Cost Tax Election
A. XYZ RE and Principal Life each acknowledge that it is subject to taxation
under Subchapter "L" of the Internal Revenue Code of 1986 (the "Code").
B. With respect to this Agreement, XYZ RE and Principal Life agree to the
following pursuant to Section 1.848-2(g)(8) of the Income Tax Regulations
issued December 1992, whereby:
(1) Each party agrees to attach a schedule to its federal income tax
return which identifies this Agreement for which the joint election
under the Regulation has been made;
(2) The party with net positive consideration, as defined in the
Regulation promulgated under Code Section 848, for this Agreement for
each taxable year, agrees to capitalize specified Policy acquisition
expenses with respect to this Agreement without regard to the general
deductions limitation of Section 848(c)(1);
(3) Each party agrees to exchange information pertaining to the amount of
net consideration under this Agreement each year to ensure
consistency; and
(4) This election shall be effective for the year that this Agreement was
entered into and for all subsequent years that this Agreement remains
in effect.
Definitions
A. Automatic Limit - the amount specified in the Life Benefits Schedule used
to calculate the maximum Reinsurance Amount that may be ceded as Automatic
Reinsurance.
B. Automatic Reinsurance - reinsurance satisfying certain
conditions relating to the reinsurance as specified in the Agreement that
is ceded to XYZ RE without obtaining a specific offer to reinsure from XYZ
RE.
C. Claims Ratio - the Reinsured Net Amount at Risk on which reinsurance
premiums have been computed divided by the Policy Net Amount at Risk
calculated as of the date of the last premium payment.
D. Continuation - a new Policy replacing a Policy or a change in an existing
Policy issued or made either
(1) in compliance with the terms of the Policy; or
(2) without
(a) the same new underwriting information Principal Life would obtain
in the absence of the Policy;
(b) a suicide exclusion or contestable period as long as those are
contained in other new issues of Policies; or
(c) the payment of the same commissions in the first year that
Principal Life would have paid in the absence of the original
Policy.
E. Effective Date - the date specified on the cover page on which this
Agreement becomes binding on Principal Life and XYZ RE.
F. Error - any isolated deviation from the terms of this Agreement resulting
from the act or omission of an employee of either Principal Life or XYZ RE
whether such deviation results from inadvertence or a mistake in judgment.
"Error" shall not include any failure to comply with the terms of an offer
of Facultative Reinsurance or any negligent or deliberate deviation from
the terms of this Agreement.
G. Facultative Reinsurance - reinsurance that is ceded to XYZ RE only after
Principal Life has obtained and accepted a specific offer to reinsure made
by XYZ RE. Such reinsurance may be ceded to XYZ RE only upon the terms
specified by XYZ RE in its offer to reinsure and the terms of this
Agreement that do not conflict with the specific offer to reinsure.
H. Jumbo Limit- the amount specified in the Life Benefits Schedule used as a
condition for ceding Automatic Reinsurance.
I. Lead Reinsurer - a reinsurer from the pool of automatic reinsurers for this
agreement who makes facultative underwriting decisions on behalf of all
automatic reinsurers in the pool.
J. XYZ RE's Proportionate Share - the Reinsurance Amount divided by the death
benefit of a Policy as of the date of issue or as of the date of a
subsequent change to the Policy that affects the Reinsurance Amount.
K. Material Change - a change that a prudent insurance or reinsurance
executive would consider as likely to impact upon a party's financial
experience under this Agreement.
L. Non-Capacity Facultative Reinsurance - Facultative Reinsurance for which
Principal Life made application to reinsurers other than the automatic
reinsurers of the plans set forth in the Life Benefits Schedule or on which
Principal Life retained less than its full Retention on the Policy.
M. Policy(ies) - an individual life insurance contract issued by Principal
Life on any of the Policy forms specified in the Life Benefits Schedule. A
"Policy" shall include any attached riders and endorsements specified in
the Life Benefits Schedule or any Addendum to this Agreement.
N. Policy Net Amount at Risk - on the reinsurance premium renewal date, the
death benefit of a Policy less the accumulation account or cash value on
the Policy, such difference taken to the nearest dollar. Details of
calculation methods are set forth in the Administration Schedule. The basis
for determining the Policy Net Amount at Risk may be modified with the
consent of both Principal Life and XYZ RE without the need for a formal
amendment of this Agreement.
O. Reinsurance Amount - the Policy death benefit at issue less any
accumulative value, if applicable, times the percentage of Automatic
Reinsurance ceded to XYZ RE as specified in the Life Benefits Schedule. For
Facultative Reinsurance, the "Reinsurance Amount" is that percentage of the
Policy death benefit for which Principal Life accepts XYZ RE's offer to
reinsure.
P. Reinsured Net Amount at Risk - XYZ RE's Proportionate Share times the
Policy Net Amount at Risk.
Q. Retention - the amount specified in the Life Benefits Schedule that is held
by Principal Life at its own risk on a life without the benefit of
proportional reinsurance. In calculating the Retention, the sum retained by
Principal Life on the life and in force as of the date of issue of the
Policy shall be taken into account.
R. Ultimate Amount - the projected twentieth (20th) year Policy Net Amount at
Risk that a Policy could achieve based on reasonable assumptions made about
the operation of certain characteristics of the Policy form.
Execution
Principal Life and XYZ RE, by their respective officers, executed this Agreement
in duplicate on the dates shown below. As of the Effective Date, this Agreement
consists of
o this YRT Agreement;
o a Life Benefits Schedule;
o an Administration Schedule;
o a Premium Schedule;
o an Arbitration Schedule;
o a Conditional Receipt Addendum;
o a Waiver of Monthly Deductions Benefit Addendum;
o an Increasing Policy Addendum;
o a Guaranteed Insurability Option Addendum; and
o a Tie Breaker Addendum
PRINCIPAL LIFE INSURANCE COMPANY
Signed at Des Moines, Iowa
By________________________________________________
Title_______________________________________________
Date_______________________________________________
By________________________________________________
Title_______________________________________________
Date_______________________________________________
XYZ REINSURANCE COMPANY
Signed at xxx, xxxx
By________________________________________________
Title_______________________________________________
Date_______________________________________________
By________________________________________________
Title_______________________________________________
Date_______________________________________________
LIFE BENEFITS SCHEDULE
POLICIES REINSURED: Principal Life agrees to cede reinsurance in the listed
percentages of Policies issued on the following Policy forms with issue dates
from and until the dates listed below to insureds having surnames beginning with
the letters of the alphabet shown. Any Addenda referred to in the last column
shall also be applicable to reinsurance of the Policy.
Percent of Policy
Face Amount Issue Dates Alpha Applicable
Policy Form Ceded to XYZ RE From/Until Split Addenda
----------- --------------- ---------- ----- -------
Variable Universal Life xx% XX-XX-XX / -- A-Z CR,WD,IP,GI,TB
RETENTION: Principal Life agrees to hold ten percent (10%) of each Policy not to
exceed the Retention Limit below at its own risk on a life without the benefit
of proportional reinsurance. In calculating Principal Life's Retention, amounts
retained by Principal Life on other individual life insurance Policies in force
as of the issue date of the Policy shall be taken into account.
Ages Standard Classes A-B Classes C-D Classes E-F Classes G-H
---- -------- ----------- ----------- ----------- -----------
0-14 $6,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000
15-65 7,500,000 6,000,000 4,000,000 3,000,000 2,000,000
66-75 6,000,000 4,000,000 3,000,000 2,000,000 1,000,000
76-80 4,000,000 2,000,000 1,000,000 None None
81-85 4,000,000 1,000,000 None None None
AUTOMATIC LIMITS: To bind Automatic Reinsurance, the maximum amount of life
insurance in force with Principal Life on a single life, or in the case of
individual life insurance with increasing death benefits, the Ultimate Amounts,
plus all amounts applied for from Principal Life on that life, or in the case of
individual life insurance with increasing death benefits, the Ultimate Amounts,
may not exceed the sum of the Retention on the life plus the following amounts
or the limits shown in Schedule A, if part of a business underwriting program
and less than the following amounts.
Tables
Ages STD/PFD A,B-AA Tables C-D Tables E-F Tables G-H
---- ------- ------ ---------- ---------- ----------
0-14 $27,000,000 $27,000,000 $18,000,000 $9,000,000 $5,400,000
15-65 27,000,000 27,000,000 18,000,000 9,000,000 6,300,000
66-75 27,000,000 27,000,000 18,000,000 9,000,000 None
76-80 27,000,000 8,000,000 4,000,000 None None
81-85 13,500,000 4,000,000 None None None
Over 85 None None None None None
FACULTATIVE LIMITS FOR BUSINESS UNDERWRITTEN BY FACULTATIVE LEAD REINSURER: For
the Lead Reinsurer to bind Facultative Reinsurance, the maximum Policy Amount on
a single life, or in the case of individual life insurance with increasing death
benefits, the Ultimate Amounts, may not exceed the AUTOMATIC LIMITS or the
limits shown in Schedule B if part of a business underwriting program.
JUMBO LIMITS: To bind Automatic Reinsurance, the sum of (1) the maximum amount
of individual life insurance in force on the insured in all companies as of the
Policy Date of a Policy and (2) the face amount currently applied for from other
companies, plus the face amount, or in the case of individual life insurance
with increasing death benefits, the Ultimate Amounts currently applied for from
Principal Life, on the insured, may not exceed the following amounts.
Ages STD/PFD Tables Tables C-D Tables E-F Tables G-H Over Table H
---- ------- ------- ---------- ---------- ---------- ------------
A-B, AA
0-70 $50,000,000 $50,000,000 $50,000,000 $25,000,000 $15,000,000 None
71-75 35,000,000 35,000,000 35,000,000 25,000,000 15,000,000 None
76-80 35,000,000 35,000,000 35,000,000 None None None
81-85 15,000,000 10,000,000 None None None None
ADMINISTRATION SCHEDULE
TO PLACE REINSURANCE INTO EFFECT
(1) For Automatic Reinsurance: Principal Life agrees to cede Automatic
Reinsurance of a Policy by including all required information about the Policy
on the new business segment of the next self-administered statement submitted in
accordance with the Reports section below following issuance of the Policy.
(2) For Facultative Obligatory Reinsurance: If reinsurance is to be effective,
Principal Life agrees to send XYZ RE a facultative obligatory application in
substantial accord with the attached form pursuant to the "Facultative
Obligatory Reinsurance" article. XYZ RE agrees to notify Principal Life in
writing within three (3) business days of receipt of the facultative obligatory
application. This notification shall also inform Principal Life of any reduction
in the Reinsurance Amount, if applicable. If Principal Life's final underwriting
assessment differs from its initial assessment made at the time of the
facultative obligatory application, Principal Life agrees to submit an amended
facultative obligatory application allowing XYZ RE to provide another written
notification in accordance with the same process as described above. Principal
Life agrees to include all required information about the Policy on the new
business segment of the next self-administered statement submitted in accordance
with the Reports section below following issuance of the Policy.
(3) For Facultative Reinsurance: Principal Life agrees to submit an application
form for Facultative Reinsurance in substantial accord with the attached form.
It agrees to allocate reinsurance in accordance with its published facultative
placement rules among those reinsurers making facultative offers to reinsure a
Policy. If according to such rules XYZ RE's offer is the one Principal Life
intends to accept, Principal Life shall cede Facultative Reinsurance of the
Policy by including all required information about the Policy on the new
business segment of the next self-administered statement submitted in accordance
with the Reports section below within one hundred twenty (120) days from date of
XYZ RE's facultative offer or the date specified in XYZ RE's approval of a
written request from Principal Life to grant an extension to the facultative
offer.
MINIMUM CESSION REQUIREMENT
Principal Life agrees not to cede any Policy as Automatic Reinsurance if the
Reinsurance Amount of the Policy is less than twenty two thousand five hundred
dollars ($22,500) to all reinsurers.
REPORTS
Within thirty (30) days following the end of each month, Principal Life agrees
to send XYZ RE the following two (2) reports:
(1) A Billing Statement containing Policy level detail in a form mutually
acceptable to Principal Life and XYZ RE. At a minimum, it shall contain the
data elements specified in the attached Policy Detail Report. If the Policy
contains supplemental benefits that are also reinsured, each segment of the
Billing Statement shall include supplemental benefit detail.
The Billing Statement shall be segmented as follows:
o New Issues and first-year premiums due for new reinsurance.
o Policies with renewal reinsurance premiums due during the reporting
period.
o Policies that have undergone a change that affects reinsurance.
Separate segments may be submitted for any change affecting
reinsurance of a Policy, including
o reissues;
o reinstatements;
o terminations;
o reductions;
o changes in Retention;
o changes in mortality ratings;
o issuance of a Continuation; and
o increases or decreases in the Net Amount at Risk.
(2) A Summary Accounting Report that summarizes all financial transactions
during the reporting period. The report shall separately total life and
supplemental benefits for first year reinsurance premiums due, shall total
life and supplemental benefits for renewal reinsurance premiums due, and
shall identify all adjustments therefrom.
Within ten (10) days following the end of each quarter, Principal Life agrees to
send XYZ RE the following two reports:
(1) A Policy Exhibit Report in substantial accord with the attached form that
indicates in force reinsurance as of the beginning of the reporting period,
increases during the reporting period (new reinsurance, reinstatements,
recoveries or other increases) and all decreases during the reporting
period (terminations, reductions, surrenders, death claims or other
decreases); and the resulting in force reinsurance as of the end of the
reporting period.
(2) A Reserve Report in substantial accord with the attached form.
XYZ RE may request a change in the reporting requirements in order to obtain
data it reasonably needs to properly administer this Agreement or to prepare its
financial statements.
REINSURANCE PREMIUMS DUE
Reinsurance premiums are payable annually in advance and are due with the
reports submitted pursuant to the Reports section above.
INCREASE IN LIMIT OF RETENTION
If Principal Life elects to increase its Retention on in force Policies, the
increased Retention may not become effective for a Policy until the Policy's
tenth (10th) anniversary of the Policy's reinsurance effective date.
REDUCTIONS IN INSURANCE
(1) If life insurance issued by Principal Life on a Policy reduces because that
Policy lapses or reduces in accordance with the terms of the Policy, the
Reinsurance Amount on that Policy shall be reduced to restore as far as
possible the Retention on that Policy as of the effective date of the
reduction.
(2) Notwithstanding the preceding, the reduction of the Reinsurance Amount
shall be limited to XYZ RE's share of the total reinsurance on the lapsed
or reduced Policy prior to the reduction.
AUTOMATIC TERMINATION
Reinsurance of a Policy shall terminate as of the beginning of the Policy year
during which the Reinsured Net Amount at Risk shall be less than four thousand
five hundred dollars ($4,500).
CLAIMS ADMINISTRATION
Claims shall be individually reported, as incurred, using a form in substantial
accord with the attached.
Policy Detail Report
_______________, 19___
For each Policy show:
o Client Policy Number o Gross Flat EXTRA2 Allowance
o Effective Date of Tape or Statement o W.P. Allowance
o ADB Allowance
o Automatic/Facultative Indicator Additional Data Items (not required)
o Name
-- Last Name o Par/Nonpar Indicator
-- First Name o State of Residency
-- Middle Initial o Type of Evidence
o Gender o Underwriting Indicator
o Date of Birth o
o Smoker Indicator o Coverage Sequence Number
o Original Plan Code o Account Number
o Issue Age x XXX/MCX/RPR
o Table Rating o ER/NR
o Flat EXTRA1 Premium o Age Basis
o Length of Flat EXTRA1 (YR) o Gross Premium
o Flat EXTRA2 Premium o Allowance
o Length of Flat EXTRA2 (YR) o Tax Interest Rate
o Current Amount Reinsured o Status Code
o Issue Month/Day/Century/Year o Years From Issue to Conversion
o Termination Date o Reinsurance Premium Mode
o Reinstate Date o Retention Indicator
o Coverage Face o Retention Amount
o Direct Face Issued o Cash Value
o Life Standard Premium o First Year/Renewal Indicator
o Life Substandard Premium Special Products
(only required if applicable)
o Gross Flat EXTRA1 Premium
o Gross Flat EXTRA2 Premium o Joint Insured Name
o W.P. Premium -- Joint Last Name
o ADB Premium -- Joint First Name
o Policy Fee -- Joint Middle Initial
o Dividend o Term Additions Indicator
o Life Standard Allowance o Accelerated Benefit Indicator
o Life Substandard Allowance o Purchase Options
o Gross Flat EXTRA1 Allowance
PREMIUM SCHEDULE
STANDARD REINSURANCE PREMIUMS
Basic Reinsurance Premium Rates*: The annual reinsurance premium rates for
reinsurance ceded under this Agreement shall be Principal Life's attached rates
labeled "75-80 ANB," age nearest birthday, per thousand dollars of Reinsured Net
Amount At Risk times the following percentages:
Policy Year
Classification/Smoking Status 1 2+
----------------------------- - --
Preferred Nonsmoker 0% xx%
Standard Nonsmoker 0 xx
Preferred Smoker 0 xx
Standard Smoker 0 xx
Batch Underwriting Reinsurance Premium Rates*: The annual reinsurance premium
rates for reinsurance ceded under this Agreement shall be Principal Life's
attached rates labeled "75-80 ANB, age nearest birthday, per thousand dollars of
Reinsured Net Amount At Risk times the following percentages:
Policy Year
Classification/Smoking Status 1 2+
----------------------------- - --
Standard Nonsmoker 0% x%
Standard Smoker 0% x%
Simplified Issue Reinsurance Premium Rates*: The annual reinsurance premium
rates for reinsurance ceded under this Agreement shall be Principal Life's
attached rates labeled "75-80 ANB, age nearest birthday, per thousand dollars of
Reinsured Net Amount At Risk times the following percentages:
Policy Year
Classification/Smoking Status 1 2+
----------------------------- -- --
Standard Nonsmoker 0% x%
Standard Smoker 0% x%
Guaranteed Issue Reinsurance Premium Rates*: The annual reinsurance premium
rates for reinsurance ceded under this Agreement shall be Principal Life's
attached rates labeled "75-80 ANB Ultimate Only", age nearest birthday, per
thousand dollars of Reinsured Net Amount At Risk times the following
percentages:
Policy Year
Classification/Smoking Status 1 2+
------------------------------ - --
Standard Nonsmoker 0% x%
Standard Smoker 0% x%
* No reinsurance premiums are due or payable beyond the insured's attained age
of one-hundred (100) even though reinsurance may be extended beyond age
one-hundred (100).
Note: For Policies issued on a unisex basis, the reinsurance premium shall be
calculated on a blended basis, using eighty percent (80%) of the male rates plus
twenty percent (20%) of the female rates for the age, duration and underwriting
class of the insured.
ADDITIONAL AMOUNTS PAID BY PRINCIPAL LIFE:
(1) Substandard Premiums: The substandard table extra premiums shall be the
number of tables assessed the risk times twenty-five percent (25%) of the
attached appropriate rates times the above percentages in renewal years only.
(2) Temporary Flat Extra Premiums: Principal Life shall pay XYZ RE their share
of the premium charged the insured with an allowance of ten percent (10%) in all
years.
(3) Permanent Flat Extra Premiums: Principal Life shall pay XYZ RE their share
of the premium charged the insured with allowances of seventy-five percent (75%)
in the first year and ten percent (10%) thereafter.
(4) Continuations: Premiums payable for reinsurance of a Continuation shall be
based on the age at issue and duration from issue of the original Policy.
ADDITIONAL AMOUNTS PAID BY XYZ RE:
(1) Premium Taxes: XYZ RE shall not reimburse Principal Life for state premium
taxes.
(2) Experience Refunds: XYZ RE shall not pay an experience refund to Principal
Life.
(3) Unearned Premiums: XYZ RE agrees to refund, without interest, any
reinsurance premiums unearned as of the date of death of an insured person or as
of the date of a reduction of reinsurance pursuant to the "Reductions" article.
ARBITRATION SCHEDULE
To initiate arbitration, either Principal Life or XYZ RE agrees to 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 agrees to
respond in writing to the notification within ten (10) days of its receipt.
The arbitration hearing shall be held before a panel of three (3) 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
Principal Life or XYZ RE, or either's affiliates.
Principal Life and XYZ RE agree to each name five (5) candidates to serve as an
arbitrator. Each agree to choose one (1) candidate from the other's list, and
these two (2) candidates shall serve as the first two (2) arbitrators. If one
(1) or more candidates so chosen decline to serve as an arbitrator, the party
that named the candidate shall add an additional candidate to its list, and the
other party agrees to again choose one (1) candidate from the list. This process
shall continue until two (2) arbitrators have been chosen and have accepted.
Principal Life and XYZ RE agree to 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 who has been chosen declines to serve.
The two (2) arbitrators shall select the third arbitrator from the eight (8)
candidates remaining on the lists of Principal Life and XYZ RE within fourteen
(14) days of the acceptance of their positions as arbitrators. If the two (2)
arbitrators cannot agree on the choice of a third, then this choice shall be
referred back to Principal Life and XYZ RE. Principal Life and XYZ RE agree to
take turns striking the names of the remaining candidates from the initial eight
(8) candidates until only one (1) 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 third arbitrator. This process shall
continue until a candidate has been chosen and 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 arbitration. Once chosen, the arbitrators are empowered to decide
all substantive and procedural issues by a majority of votes.
It is agreed that each of the three (3) arbitrators should be impartial
regarding the dispute and should resolve the dispute on the basis described in
the "Arbitration" article. At no time shall either Principal Life or XYZ RE
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 provided by both
Principal Life and XYZ RE 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 and shall be provided simultaneously to the
other party or shall take place in the presence of the other party. Further, at
no time shall any arbitrator be informed that he or she has been named or chosen
by one party or the other.
The arbitration hearing shall be held on the date and in the location set by the
arbitrators. In no event shall this date be later than six (6) months after the
appointment of the third arbitrator. 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 agrees to 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 and agree to give the
evidence such weight as they deem appropriate 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 after the end of the arbitration hearing, the arbitrators shall issue
a written decision that sets forth their findings and any award to be paid as a
result of the arbitration, except that the arbitrators may not award punitive or
exemplary damages. In their decision, the arbitrators shall apportion the costs
of arbitration, which shall include, but not be limited to, their own fees and
expenses.
CONDITIONAL RECEIPT ADDENDUM
The provisions of the Agreement shall apply in all respects to reinsurance of
Principal Life's Conditional Receipt except as otherwise set forth in this
Addendum.
This Addendum is referred to as "CR" in the "Applicable Addendum" column of the
Policies Reinsured section of the Life Benefits Schedule.
Provided the conditions specified below are fulfilled, XYZ RE agrees to pay
Principal Life the Reinsured Net Amount at Risk on any claim paid by Principal
Life pursuant to a Conditional Receipt, except that XYZ RE's liability pursuant
to this Addendum shall not exceed XYZ RE's Proportionate Share of one million
dollars ($1,000,000).
The following conditions must be satisfied in order for reinsurance of a
Conditional Receipt to be effective:
1. Principal Life must become liable for a claim pursuant to a
Conditional Receipt issued in a form agreed upon by the parties to
this Agreement;
2. The Conditional Receipt must be given, in return for cash received
with an application for a Policy; and
3. Either the Policy being applied for must qualify for Automatic
Reinsurance or Principal Life has not received a facultative offer of
reinsurance on the application from another reinsurer which is a
better offer than any facultative offer made by XYZ RE as determined
by Principal Life's published reinsurance placement rules in force on
the date of death.
Reinsurance provided pursuant to this Addendum shall terminate with respect to a
Policy, and reinsurance provided pursuant to the Agreement shall commence, on
the date during the lifetime of the proposed insured that Principal Life
approves insurance pursuant to the application.
WAIVER OF MONTHLY DEDUCTIONS
BENEFIT ADDENDUM
The provisions of the Agreement shall apply in all respects to facultative
reinsurance of the Waiver of Monthly Deductions Benefit provided by the Policies
except as otherwise set forth in this Addendum.
This Addendum is referred to as "WD" in the "Applicable Addendum" column of the
Policies Reinsured section of the Life Benefits Schedule.
1. Definitions
1.1. XYZ RE's Proportionate Share - the face amount of the Waiver of
Monthly Deductions Benefit less Principal Life's Waiver of Monthly Deductions
Benefit Retention divided by the face amount of the Waiver of Monthly Deductions
Benefit.
1.2. Policy Premiums - the insurance premiums, cost of insurance rates or
other specified amounts due for the life insurance benefit of a Policy.
1.3. Waiver of Monthly Deductions Benefit - a benefit provided pursuant to
a Policy wherein Principal Life agrees to relinquish its right to Policy
Premiums in the event of the Policyowner's disability until such disability is
ended.
2. Reinsurance Terms
2.1. Principal Life may submit to XYZ RE for facultative consideration, XYZ
RE's Proportionate Share of the Waiver of Monthly Deductions Benefit.
2.2. Following XYZ RE's facultative offer to reinsure and Principal Life
accepting such offer, Principal Life agrees to place Waiver of Monthly
Deductions Benefit reinsurance into effect by following the procedures for
placing life reinsurance into effect as set forth in the Administrative Schedule
of the Agreement.
2.3. Waiver of Monthly Deductions Benefits shall be coinsured with XYZ RE.
Reinsurance shall follow the forms of Principal Life. Principal Life agrees to
pay XYZ RE reinsurance premiums for Waiver of Monthly Deductions Benefit
reinsurance equal to XYZ RE's Proportionate Share of the appropriate premium
rates as specified in the Premium Schedule less an allowance of
One hundred percent (100%) of such premium in the first year and ten
percent (10%) in renewal years.
Waiver of Monthly Deductions Benefit reinsurance premiums are payable with the
same frequency as, and due with, the associated life reinsurance premium. Waiver
of Monthly Deductions Benefit reinsurance premiums shall not be due while a
Waiver of Monthly Deductions Benefit is being paid. However, while a Waiver of
Monthly Deductions Benefit is being paid, Principal Life agrees to continue to
pay XYZ RE premiums for reinsurance of other benefits provided by the Policy in
accordance with the Agreement or applicable addenda.
2.4. Principal Life agrees to give XYZ RE prompt notice of any Waiver of
Monthly Deductions Benefit claim, and upon request, agrees to provide proof of
the insured person's continuing disability. XYZ RE's reinsurance liability for
Waiver of Monthly Deductions Benefit claims shall equal XYZ RE's Proportionate
Share of Policy Premiums waived by Principal Life under the Policy. Principal
Life agrees to notify XYZ RE upon the termination of a Waiver of Monthly
Deductions Benefit claim and agrees to resume paying Waiver of Monthly
Deductions Benefit reinsurance premiums starting with the beginning of the first
month following the date the person is no longer eligible for such Waiver of
Monthly Deductions Benefit.
2.5. Principal Life may elect to recapture reinsurance of in force Waiver
of Monthly Deductions Benefit reinsurance in accordance with the procedures set
forth in the Agreement. If Principal Life elects to recapture such reinsurance
but an insured person is subject to a Waiver of Monthly Deductions Benefit claim
when an increase of its Waiver of Monthly Deductions Benefit Retention would
otherwise become effective, Waiver of Monthly Deductions Benefit reinsurance
shall remain at the current Retention until the Policy returns to a
premium-paying status. After such time, the intended recapture shall occur.
INCREASING POLICY ADDENDUM
The provisions of the Agreement shall apply in all respects to reinsurance of an
Increasing Policy except as otherwise set forth in this Addendum.
This Addendum is referred to as "IP" in the "Applicable Addendum" column of the
Policies Reinsured section of the Life Benefits Schedule.
1. Definitions
Increasing Policy - a Policy, including any attached riders or
endorsements, that provides an increasing death benefit where the increases may
or may not be subject to Principal Life's underwriting approval.
2. Terms of Reinsurance
2.1. Principal Life's Retention for Increasing Policies shall be set forth
in the Life Benefits Schedule.
2.2. XYZ RE agrees to automatically accept XYZ RE's Proportionate Share of
all non-underwritten increases on the Increasing Policy. Underwritten increases
shall be subject to the terms and conditions as set forth in the Automatic
Reinsurance and Facultative Reinsurance articles of the Agreement.
2.3. For purposes of changes in Retention, increases in an Increasing
Policy's Net Amount at Risk shall be considered issued on the issue date of the
original Policy.
2.4. For any non-underwritten increase, the amount of increase shall be
split on a pro-rata basis among the original policy and any underwritten
increases that occurred more than 12 months prior, and the following reinsurance
premiums shall apply:
2.4.1. If the increase occurs within six (6) months following the
Policy's anniversary date, there shall be no reinsurance premium
paid to XYZ RE until the Policy's next anniversary date at which
time the renewal reinsurance premium as described in 2.5 below
shall be payable.
2.4.2. If the increase occurs within six (6) months following an
underwritten increase's anniversary date, there shall be no
reinsurance premium paid to XYZ RE until the underwritten
increase's next anniversary date at which time the renewal
reinsurance premium as described in 2.5 below shall be payable.
2.4.3. If the increase occurs on or after six (6) months following the
Policy's anniversary date, there shall be no reinsurance premium
paid to XYZ RE for the first pro-rata year plus one (1) full
Policy year at which time the renewal reinsurance premium as
described in 2.5 below shall be payable.
2.4.4. If the increase occurs on or after six (6) months following an
underwritten increase's anniversary date, there shall be no
reinsurance premium paid to XYZ RE for the first pro-rata year
plus one (1) full year from the underwritten increase's
anniversary date at which time the renewal reinsurance premium as
described in 2.5 below shall be payable.
2.5. If an increase is not underwritten, the reinsurance premium following
the zero (0) reinsurance premium period described in 2.4 above shall be based on
the same age, duration and rate as the reinsurance coverage for each reinsurance
cession which includes the original policy and underwritten increases.
2.6. If an increase is underwritten, the increased portion shall be
reinsured on a separate session. The reinsurance premium shall be based on the
"75-80" rates and attained age as of the last Policy anniversary prior to the
increase.
GUARANTEED INSURABILITY OPTION ADDENDUM
The provisions of the Agreement shall apply in all respects to reinsurance of
Guaranteed Insurability Options and Opted Policies issued in connection with
Guaranteed Insurability Options.
This Addendum is referred to as "GI" in the "Applicable Addendum" column of the
Policies Reinsured section of the Life Benefits Schedule.
1. Definitions
1.1. Base Policy - a Policy which provides a Guaranteed Insurability Option
for an Opted Policy.
1.2. Guaranteed Insurability Option (GIO) - an option to purchase
additional insurance triggered by the insured reaching pre-defined ages or a
specified event without providing evidence of insurability.
1.3. Maximum Face Amount - the sum of the Base Policy and the Maximum Face
Amount on the insured life which may be purchased without evidence of
insurability under the Guaranteed Insurability Options, if all options are
elected.
1.4. Opted Policy - an individual life insurance Policy, or an increase to
the face amount of an existing Policy, issued as the result of a Guaranteed
Insurability Option triggered by the insured reaching pre-defined ages or a
specified event.
2. Reinsurance Premium for the GIO Benefit
The coinsurance reinsurance premium for this benefit shall equal XYZ RE's
Proportionate Share of the direct premium Principal Life charges its insured's
account value for this benefit less an allowance of one hundred percent (100%)
in the first year following issuance of the benefit and ten percent (10%)
thereafter.
3. Reinsurance of Opted Policies
3.1. XYZ RE agrees to accept reinsurance of an Opted Policy only
3.1.1. when such reinsurance would otherwise fall within the automatic
provisions of the Agreement in effect between Principal Life and
XYZ RE on the effective date of the Opted Policy that gives rise
for such reinsurance;
3.1.2. when the Base Policy to which the Guaranteed Insurability
Option rider is attached was issued on a standard basis with no
extra premiums or exclusion riders of any kind;
3.1.3. when, in the underwriting opinion given on a facultative
submission at the time of issue of the Guaranteed Insurability
Option rider, XYZ RE has not stated that the risk is not eligible
for such a rider or had not stated that the case should be rated
or issued with an exclusion rider of any kind; and
3.1.4. when the Maximum Face Amount does not exceed the sum of
Principal Life's Retention and the Automatic Limits specified in
the Life Benefits Schedule of the Agreement.
3.2. Principal Life agrees to place reinsurance into effect on the Opted
Policy by following the procedures for placing reinsurance into effect as set
forth in the Administrative Schedule of the Agreement.
3.3. From the issue date of the Opted Policy and annually thereafter,
Principal Life agrees to pay XYZ RE a reinsurance premium equal to the Reinsured
Net Amount at Risk times the appropriate select rate set forth in the Premium
Schedule based on the attained issue age of the insured and the first duration
of the Opted Policy; however, there shall be no first year reinsurance premium
paid. Any reinsurance premium adjustments payable on the Base Policy shall be
payable under the Opted Policy.
3.4. XYZ RE shall reimburse Principal Life for Principal Life's Net Amount
at Risk of benefits paid pursuant to Opted Policies.
3.5. Principal Life may increase its Retention, and elect to recapture
reinsurance of Opted Policies, in accordance with the procedures set forth in
the Agreement.
TIE BREAKER ADDENDUM
The provisions of the Agreement shall apply in all respects to reinsurance of a
Tie Breaker except as otherwise set forth in this Addendum.
This Addendum is referred to as "TB" in the "Applicable Addendum" column of the
Policies Reinsured section of the Life Benefits Schedule.
The following method will be used to determine which reinsurance company will
receive the case (cession) in the event more than one reinsurer comes in with
the low quote:
1. The reinsurers are listed in alphabetical order:
2. When two or more reinsurers provide the low quote, they are listed in the
order in 1. above.
3. The last name of the insured determines the company to receive the case
(cession). When two companies tie, the alphabetic split is: A-K, L-Z. Three
companies: A-G, H-0, P-Z. Four companies: A-D, E-K, L-R, S-Z.
