Exhibit (g)(5)
AUTOMATIC YRT
REINSURANCE AGREEMENT
between
IDS LIFE INSURANCE COMPANY OF NEW YORK
ALBANY, NEW YORK
(hereinafter referred to as the "Ceding Company")
and
[NAME OF REINSURANCE COMPANY]
[CITY AND STATE OF REINSURANCE COMPANY]
(hereinafter referred to as the "Reinsurer")
Effective August 18, 2003
Treaty # 0322-6606
2
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 - PREAMBLE...................................................... 5
1.1 Parties to the Agreement
1.2 Construction
1.3 Entire Agreement
ARTICLE 2 - AUTOMATIC REINSURANCE......................................... 6
ARTICLE 3 - FACULTATIVE REINSURANCE....................................... 7
ARTICLE 4 - COMMENCEMENT OF LIABILITY..................................... 8
4.1 Automatic Reinsurance
4.2 Facultative Reinsurance
4.3 Conditional Receipt or Temporary Insurance
ARTICLE 5 - REINSURED RISK AMOUNT......................................... 9
ARTICLE 6 - PREMIUM ACCOUNTING............................................ 10
6.1 Premiums
6.2 Payment of Premiums
6.3 Overpayment of Premiums
6.4 Delayed Payment
6.5 Underpayment of Premiums
6.6 Failure to Pay Premiums
6.7 Premium Rate Guarantee
ARTICLE 7 - REDUCTIONS, TERMINATIONS AND CHANGES.......................... 13
7.1 Reductions and Terminations
7.2 Increases
7.3 Risk Classification Changes
7.4 Reinstatement
7.5 Nonforfeiture Benefits
ARTICLE 8 - CONVERSIONS AND REPLACEMENTS.................................. 15
8.1 Conversions
8.2 Exchanges and Replacements
8.3 Policy Split Option
ARTICLE 9 - CLAIMS........................................................ 16
9.1 Notice
9.2 Proofs
9.3 Amount and Payment of Reinsurance Benefits
9.4 Contestable Claims
9.5 Claim Expenses
9.6 Misrepresentation or Suicide
9.7 Misstatement of Age or Sex
9.8 Extra-Contractual Damages
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ARTICLE 10 - CREDIT FOR RESERVES.......................................... 19
10.1 Reserve Methodology and Reporting
ARTICLE 11 - RETENTION LIMIT CHANGES...................................... 20
ARTICLE 12 - RECAPTURE.................................................... 21
ARTICLE 13 - GENERAL PROVISIONS........................................... 23
13.1 Currency
13.2 Premium Tax
13.3 Minimum Cession
13.4 Inspection of Records
13.5 Interest Rate
13.6 Good Faith; Financial Solvency
ARTICLE 14 - DAC TAX...................................................... 24
ARTICLE 15 - OFFSET....................................................... 25
ARTICLE 16 - INSOLVENCY................................................... 26
16.1 Insolvency of a Party to this Agreement
16.2 Insolvency of the Ceding Company
16.3 Insolvency of the Reinsurer
ARTICLE 17 - ERRORS AND OMISSIONS......................................... 28
ARTICLE 18 - DISPUTE RESOLUTION........................................... 29
ARTICLE 19 - ARBITRATION.................................................. 30
ARTICLE 20 - CONFIDENTIALITY.............................................. 32
ARTICLE 21 - SEVERABILITY................................................. 33
ARTICLE 22 - DURATION OF AGREEMENT........................................ 34
ARTICLE 23 - EXECUTION.................................................... 35
IDSL-NY Succession Select Treaty
EXHIBITS
A - RETENTION LIMITS OF THE CEDING COMPANY
B - PLANS COVERED AND BINDING LIMITS
C - FORMS, MANUALS, AND ISSUE RULES
D - REINSURANCE PREMIUMS
E - SELF-ADMINISTERED REPORTING
F - APPLICATION FOR FACULTATIVE REINSURANCE FORM
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ARTICLE 1
PREAMBLE
1.1 PARTIES TO THE AGREEMENT
This is a YRT agreement for indemnity reinsurance (the "Agreement")
solely between IDS Life Insurance Company of New York (the "Ceding
Company"), and [name of reinsurance company] of [city and state of
reinsurance company] (the "Reinsurer"), collectively referred to as
the "parties".
The acceptance of risks under this Agreement will create no right or
legal relationship between the Reinsurer and the insured, owner or
beneficiary of any insurance policy or other contract of the Ceding
Company. The Ceding Company agrees that it will not make the
Reinsurer a party to any litigation between any third party and the
Ceding Company. The Ceding Company and the Reinsurer will not
disclose the other's name to these third parties with regard to the
agreements or transactions that are between the Ceding Company and
the Reinsurer, unless the Ceding Company or the Reinsurer gives prior
written approval for the use of its own name.
The terms of this Agreement are binding upon the parties, their
representatives and assigns. The parties to this Agreement are bound
by ongoing and continuing obligations and liabilities until this
Agreement terminates pursuant to Article 22. This Agreement shall not
be bifurcated, partially assigned or partially assumed.
1.2 CONSTRUCTION
This Agreement will be construed in accordance with the laws of the
state of New York.
1.3 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
with respect to the business reinsured hereunder. There are no
understandings between the parties other than as expressed in this
Agreement. Any change or modification to this Agreement will be null
and void unless made by amendment to this Agreement and signed by
both parties.
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ARTICLE 2
AUTOMATIC REINSURANCE
2.1 On and after the effective date of this Agreement, the Reinsurer will
automatically accept a portion of the life insurance policies,
supplementary benefits, and riders directly written by the Ceding
Company and listed in Exhibit B - Plans Covered and Binding Limits.
Any policies acquired through merger with another company,
reinsurance, or purchase of another company's policies are not
included under the terms of this Agreement. The Reinsurer will
automatically accept its share of the above-referenced policies
within the limits shown in Exhibit B, provided that:
(a) the Ceding Company keeps its retention, as shown in Exhibit A -
Retention Limits of the Ceding Company, and
(b) the Ceding Company applies its normal underwriting guidelines,
as stated in Exhibit C - Forms, Manuals and Issue Rules, and
(c) the sum of all amounts in force and applied for on the joint
lives with the Ceding Company, excluding amounts being
internally replaced, does not exceed the Automatic Binding
Limits set out in Exhibit B, and
(d) the amount of life insurance in force in all companies,
including any coverage to be replaced plus the amount currently
applied for on that life in all companies, does not exceed the
Jumbo Limit stated in Exhibit B, and
(e) the application is on a life that has not been submitted
facultatively to the Reinsurer or any other reinsurer within
the last 2 years, unless the reason for any prior facultative
submission was solely for capacity that may now be accommodated
within the terms of this Agreement.
The Ceding Company may cede reinsurance automatically on
international clients underwritten in accordance with the agreed upon
guidelines in Exhibit B. This Agreement applies only to the issuance
of insurance by the Ceding Company in a jurisdiction in which it is
properly licensed.
If the Ceding Company already holds its full retention on a life
under previously issued policies, the Reinsurer will automatically
accept reinsurance up to the limits shown in Exhibit B.
The Ceding Company may not reinsure the amount it has retained on the
business covered under this Agreement on any basis without the
Reinsurer's written consent.
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ARTICLE 3
FACULTATIVE REINSURANCE
3.1 The Ceding Company may submit any application on a plan or rider
identified in Exhibit B - Plans Covered and Binding Limits, to the
Reinsurer for its consideration on a facultative basis.
The Ceding Company will apply for reinsurance on a facultative basis
by sending to the Reinsurer an Application for Facultative
Reinsurance, providing information similar to the example outlined in
Exhibit F - Application for Facultative Reinsurance. Accompanying
this Application will be copies of all underwriting evidence that is
available for risk assessment including, but not limited to, copies
of the application for insurance, medical examiners' reports,
attending physicians' statements, inspection reports, and any other
information bearing on the insurability of the risk. The Ceding
Company also will notify the Reinsurer of any outstanding
underwriting requirements at the time of the facultative submission.
Any subsequent information received by the Ceding Company that is
pertinent to the risk assessment will be immediately transmitted to
the Reinsurer.
After consideration of the Application for Facultative Reinsurance
and related information, the Reinsurer will promptly inform the
Ceding Company of its underwriting decision. The Reinsurer's offer
will expire at the end of 120 days, unless otherwise specified by the
Reinsurer.
If the Ceding Company accepts the Reinsurer's offer, then the Ceding
Company will note its acceptance in its underwriting file and submit
all relevant individual policy information in its next statement to
the Reinsurer.
The relevant terms and conditions of the Agreement will apply to
those facultative offers made by the Reinsurer which are accepted by
the Ceding Company.
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ARTICLE 4
COMMENCEMENT OF LIABILITY
4.1 AUTOMATIC REINSURANCE
For automatic reinsurance, the Reinsurer's liability will commence at
the same time as the Ceding Company's liability.
4.2 FACULTATIVE REINSURANCE
For facultative reinsurance, the Reinsurer's liability will commence
once the Ceding Company has accepted the Reinsurer's offer and the
policy has been issued.
4.3 CONDITIONAL RECEIPT OR TEMPORARY INSURANCE
The Reinsurer will not be liable for benefits under the Ceding
Company's conditional receipt or temporary insurance agreement unless
all the conditions for automatic reinsurance coverage under Article 2
of this Agreement are met. The Reinsurer's liability under the Ceding
Company's conditional receipt or temporary insurance agreement is
limited to the least of i., ii. or iii., below:
i. The Automatic Binding Limits with the Reinsurer shown in
Section B.3 of Exhibit B.
ii. The amount for which the Ceding Company is liable, less the
amount retained, as set forth in Exhibit A, less any amount of
reinsurance with other reinsurers.
iii. The Reinsurer's proportionate share of [dollar amount], or the
Reinsurer's proportionate share of [dollar amount], if the
Ceding Company is ordered to pay such higher amount by a court
of competent jurisdiction.
The pre-issue liability applies only once on any given life
regardless of how many receipts were issued or initial premiums were
accepted by the Ceding Company. After a policy has been issued, no
reinsurance benefits are payable under this pre-issue coverage
provision.
In the event that the Ceding Company's rules with respect to cash
handling and the issuance of conditional receipt or temporary
insurance are not followed, the Reinsurer will participate in the
liability if the conditions for automatic reinsurance are met and the
Ceding Company does not knowingly allow such rules to be violated or
condone such a practice.
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ARTICLE 5
REINSURED RISK AMOUNT
5.1 Reinsured risk amounts will be calculated on each policy anniversary;
during a policy year, reinsured risk amounts are adjusted if and only
if there is an increase or decrease in policy specified amount.
If the net amount at risk on a reinsured policy drops below the
Ceding Company's limit of retention as defined in Exhibit A -
Retention Limits of the Ceding Company, then the Ceding Company will
terminate the reinsurance on the policy. If the net amount at risk
subsequently increases above the Ceding Company's retention, then the
excess amounts over the retention limit will continue to be retained
by the Ceding Company, unless the increase is due to an underwritten,
non-contractual increase. In the event of such a non-contractual
increase, the Ceding Company may reinsure the total net amount at
risk in excess of the retention limit.
Option 1, Base Policy: The Net Amount at Risk is equal to the Death
----------------------
Benefit minus the Policy Value, where the Death Benefit is the
greater of the Specified Amount or the Policy Value multiplied by the
tax corridor. The Reinsured Net Amount at Risk is defined as the net
amount at risk at the most recent policy anniversary, or subsequent
policy change date if applicable, less the Ceding Company's retention
on the policy, and for automatic policies, multiplied by the
Reinsurer's percentage share as shown in Exhibit B - Plans Covered
and Binding Limits.
Option 2, Base Policy: The Net Amount at Risk is equal to the Death
----------------------
Benefit minus the Policy Value, where the Death Benefit is the
greater of the Specified Amount plus the Policy Value or the Policy
Value multiplied by the tax corridor. The Reinsured Net Amount at
Risk is defined as the net amount at the most recent policy
anniversary, or subsequent policy change date if applicable, less the
Ceding Company's retention on the policy, and for automatic policies,
multiplied by the Reinsurer's percentage share as shown in Exhibit B.
Other Insured Riders: For Survivor Term Rider and Four-Year Term
---------------------
Rider, the Net Amount at Risk is the Specified Amount of the Rider.
The Policy Split Option rider does not contribute to total risk
amount. The Reinsured Net Amount at Risk is defined as the Specified
Amount of the Rider at the most recent policy anniversary, or
subsequent policy change date if applicable, less the Ceding
Company's retention, and for automatic policies, multiplied by the
Reinsurer's percentage share as shown in Exhibit B.
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ARTICLE 6
PREMIUM ACCOUNTING
6.1 PREMIUMS
Reinsurance premium rates for life insurance and other benefits
reinsured under this Agreement are shown in Exhibit D - Reinsurance
Premiums. The rates will be applied to the reinsured net amount at
risk.
The Reinsurer will pay to the Ceding Company the allowances shown in
Exhibit D.
Premium adjustments due either party will be calculated and paid in
the event of mid-year policy increases, terminations, death claims,
and other changes as appropriate.
6.2 PAYMENT OF PREMIUMS
Reinsurance premiums are payable annually in advance. The Ceding
Company will calculate the amount of reinsurance premium due and,
within 30 days after the end of the month, will send the Reinsurer a
statement that contains the information shown in Exhibit E -
Self-Administered Reporting, showing reinsurance premiums due for
that period. If an amount is due the Reinsurer, the Ceding Company
will remit that amount together with the statement. If an amount is
due the Ceding Company, the Reinsurer will remit such amount within
15 days of receipt of the statement.
6.3 OVERPAYMENT OF PREMIUMS
If the Ceding Company overpays a reinsurance premium and the
Reinsurer accepts the overpayment, the Reinsurer's acceptance will
not constitute nor create a reinsurance liability nor result in any
additional reinsurance. Instead, the Reinsurer will be liable to the
Ceding Company for a credit in the amount of the overpayment, without
interest.
6.4 DELAYED PAYMENT
Premium balances that remain unpaid for more than 30 days after the
Remittance Date will incur interest from the end of the reporting
period. The Remittance Date is defined as 30 days after the end of
the reporting period. Interest will be calculated using the index
specified in Article 13.5 - Interest Rate.
6.5 UNDERPAYMENT OF PREMIUMS
If the Ceding Company fails to make a full premium payment for a
policy or policies reinsured hereunder, due to an error or omission
as described in Article 17, the amount of reinsurance coverage
provided by the Reinsurer shall not be reduced. However, once the
underpayment is discovered, the Ceding Company will be required to
pay to the Reinsurer the difference between the full premium amount
and the amount actually paid, without
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interest. If payment of the full premium is not made within 60 days
after the discovery of the underpayment, the underpayment shall be
treated as a failure to pay premiums and will be subject to Article
6.6, below.
6.6 FAILURE TO PAY PREMIUMS
The payment of reinsurance premiums is a condition precedent to the
liability of the Reinsurer for reinsurance covered by this Agreement.
In the event that reinsurance premiums are not paid within sixty (60)
days of the Remittance Date, the Reinsurer will have the right to
terminate the reinsurance under this Agreement. If the Reinsurer
elects to exercise its right of termination, it will give the Ceding
Company 30 day written notice of its intention. Such notice will be
sent by certified mail.
If all reinsurance premiums in arrears, including any that become in
arrears during the 30-day notice period, are not paid before the
expiration of the notice period, the Reinsurer will be relieved of
all liability under those policies as of the last date of the 30-day
notice period.
Terminated reinsurance may be reinstated, subject to written approval
by the Reinsurer, and upon payment of all reinsurance premiums in
arrears including any interest accrued thereon. The Reinsurer will
have no liability for any claims incurred between the date of
termination and the date of the reinstatement of the reinsurance. The
right to terminate reinsurance will not prejudice the Reinsurer's
right to collect premiums for the period during which reinsurance was
in force prior to the expiration of the 30 days notice. It is further
understood that, if this Agreement terminates under the terms of this
Article, the Reinsurer will return to the Ceding Company any unearned
premiums due. The refund will be on a prorated basis without interest
from the date of the termination of the policy to the date through
which a reinsurance premium had been paid.
The Ceding Company will not force termination under the provisions of
this Article solely to avoid the provisions of Article 12 -
Recapture, or to transfer the reinsured policies to another
reinsurer.
6.7 PREMIUM RATE GUARANTEE
The Ceding Company agrees to notify the Reinsurer of any intent to
increase current cost of insurance rates charged for new or existing
business.
For the reinsurance of new business, the Reinsurer reserves the right
to change reinsurance rates after 90 days written notice.
For the ongoing reinsurance of existing in force business, the
Reinsurer will accept YRT reinsurance at the current reinsurance
premium rates, as shown in Exhibit D, unless the Ceding Company
increases the current cost of insurance rates charged to the
policyholder. The Reinsurer reserves the right to increase the
current reinsurance premium rates in the event the Ceding Company
increases the current cost of insurance rates charged on the
underlying policies.
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The maximum reinsurance premiums are equal to the statutory valuation
premiums for yearly renewable term insurance at the maximum interest
rates and minimum mortality rates for each year of issue. Any
increases in current reinsurance premium rates will apply as of the
date that the Ceding Company's increase in policyholder current cost
of insurance rates becomes effective. [terms of rate guarantee
redacted]
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ARTICLE 7
REDUCTIONS, TERMINATIONS AND CHANGES
[terms of rate guarantee redacted]
7.1 REDUCTIONS AND TERMINATIONS
In the event of the reduction, lapse, or termination of a policy or
policies reinsured under this Agreement or any other agreement, the
Ceding Company will, in order to maintain its full retention, reduce
or terminate reinsurance on that life. The reinsured amount will be
reduced, effective on the same date, by the full amount of the
reduction of the affected policies. The reinsurance reduction will
apply first to the policy or policies being reduced and then, on a
chronological basis, to other reinsured policies on the life,
beginning with the most recent policy. If the amount of reduction
exceeds the risk amount reinsured, the reinsurance on the policy or
policies will be terminated.
If the reinsurance for a policy has been placed with more than one
reinsurer, the reduction will be applied to all reinsurers pro rata
to the amounts originally reinsured.
If a fully retained policy on a life that is reinsured under this
Agreement is terminated or reduced, the Ceding Company will reduce
the existing reinsurance on that life by a corresponding amount, with
the reinsurance on the most recent policy being reduced first.
7.2 INCREASES
Noncontractual Increases
------------------------
If the amount of insurance is increased as a result of a
noncontractual change, the increase will be underwritten by the
Ceding Company in accordance with its customary standards and
procedures. The policy will be reinsured under this Agreement using
the adjusted risk amount. For the purposes of reinsurance, the
original age and duration of the policy will be used for the new
adjusted risk amount. The underwriting class, however, will be based
on the most recent assessment and may differ for the original amount
and any subsequent increases. The Reinsurer's approval is required if
the original policy was reinsured on a facultative basis or if the
new amount will cause the total amount on the lives to exceed either
the Automatic Binding Limits or the Jumbo Limits shown in Exhibit B -
Plans Covered and Binding Limits.
Contractual Increases
---------------------
There are no contractual increases applicable to the policies covered
under this Agreement.
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7.3 RISK CLASSIFICATION CHANGES
If the policyholder requests a Table Rating reduction or removal of a
Flat Extra, such change will be underwritten according to the Ceding
Company's normal underwriting practices. Risk classification changes
on facultative policies will be subject to the Reinsurer's approval.
7.4 REINSTATEMENT
If a policy is reinstated in accordance with its terms and in
accordance with Ceding Company rules and procedures, the Reinsurer
will, upon notification of reinstatement, reinstate the reinsurance
coverage. If the policy was facultatively reinsured, approval by the
Reinsurer will only be required prior to the reinstatement of the
reinsurance if the Ceding Company's regular reinstatement rules
indicate that more evidence than a Statement of Good Health is
required or if the policy has been lapsed for more than 90 days. Upon
reinstatement of the reinsurance coverage, the Ceding Company will
pay the reinsurance premiums that would have accrued had the policy
not lapsed, together with interest at the same rate as the Ceding
Company receives under its policy, and for the period for which the
Ceding Company received premiums in arrears and interest.
7.5 NONFORFEITURE BENEFITS
Nonforfeiture benefits are not applicable to policies reinsured under
this Agreement.
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ARTICLE 8
CONVERSIONS AND REPLACEMENTS
If a policy reinsured under this Agreement is exchanged or replaced, the
Ceding Company will promptly notify the Reinsurer. Unless mutually agreed
otherwise, policies that are not reinsured with the Reinsurer and that
exchange or convert to a plan covered under this Agreement will not be
reinsured hereunder.
8.1 CONVERSIONS
Conversions are not applicable to policies reinsured under this
Agreement.
8.2 EXCHANGES AND REPLACEMENTS
A policy resulting from an internal exchange or replacement will be
underwritten by the Ceding Company in accordance with its
underwriting guidelines, standards and procedures for exchanges and
replacements. All internal exchanges to Succession Select from the
current joint life last survivor product that are over 120 days old
will be fully underwritten and will be treated as new business under
this Agreement. Additionally, policies that are 120 days old or less
may be exchanged without penalty to Succession Select within 120 days
of the product's introduction in the state in which the original
policy was signed. All such exchanges will be treated as new business
for reinsurance purposes.
8.3 POLICY SPLIT OPTION
The Reinsurer will continue to reinsure the two policies ("Opted
Policies") resulting from exercise of any policy split option rider
reinsured under this Agreement. If the original policy was ceded
automatically, Ceding Company will continue reinsurance (using the
original proportionate share under this Agreement) on the Opted
policy as necessary to bring retained risk on the life, whether on
the Opted policy or another policy, to 50% of the retention limit
shown in Exhibit A for the original policy. If the original policy
was ceded facultatively, on each Opted Policy Ceding Company will
continue reinsurance consistent with the original cession. If the
plan of the Opted Policy is reinsured by the Reinsurer, either under
this Agreement or under a different Agreement, reinsurance premium
rates for the Opted Policy will be those contained in the Agreement
that covers the new plan. However, if the new plan is not reinsured
by the Reinsurer, reinsurance premiums for the Opted Policy will be
agreed between the parties. Reinsurance premiums and any allowances
for Opted Policies will be on a point-in-scale basis from the
original issue age of the policy.
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ARTICLE 9
CLAIMS
Claims covered under this Agreement include only death claims, which are
those due to the death of the insured on a policy reinsured under this
Agreement, and any additional benefits specified in Exhibit B - Plans
Covered and Binding Limits, which are provided by the underlying policy and
are reinsured under this Agreement.
9.1 NOTICE
The Ceding Company will notify the Reinsurer, as soon as reasonably
possible, after it receives a claim on a policy reinsured under this
Agreement. The Ceding Company, if notified, will also notify the
Reinsurer at time of the first death.
9.2 PROOFS
The Ceding Company will promptly provide the Reinsurer with proper
claim proofs, including a copy of the proof of payment by the Ceding
Company, and a copy of the insured's death certificate. In addition,
for contestable claims, the Ceding Company will send to the Reinsurer
a copy of all papers in connection with the claim.
9.3 AMOUNT AND PAYMENT OF REINSURANCE BENEFITS
As soon as the Reinsurer receives proper claim notice and proof of
the claim, the Reinsurer will promptly pay the Reinsurer's share of
the reinsurance benefits due the Ceding Company. The Ceding Company's
contractual liability for policies reinsured under this Agreement is
binding on the Reinsurer, provided that generally accepted industry
practices are followed in the adjudication of the claim. When a death
occurs within the contestable period and reinsurance was ceded
facultatively, then all papers connected with the claim furnished to
the Ceding Company by the Beneficiary/Owner will be submitted to the
Reinsurer for comment before the Ceding Company admits liability or
makes any settlement with its claimant. The Reinsurer will review all
the claim papers and respond within 5 working days after the receipt
of all necessary papers. However, such consultation will not impair
the Ceding Company's freedom to determine the proper action on the
claim and the settlement made by the Ceding Company will still be
unconditionally binding on the Reinsurer.
The total reinsurance recoverable from all companies will not exceed
the Ceding Company's total contractual liability on the policy, less
the amount retained. The maximum reinsurance death benefit payable to
the Ceding Company under this Agreement is the risk amount
specifically reinsured with the Reinsurer. The Reinsurer will also
pay its proportionate share of interest that the Ceding Company pays
on the death proceeds until the date of settlement.
Death benefit payments will be made in a single sum, regardless of
the Ceding Company's settlement options.
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9.4 CONTESTABLE CLAIMS
The Ceding Company will promptly notify the Reinsurer of its
intention to contest, compromise, or litigate a claim involving a
reinsured policy. The Ceding Company will also promptly and fully
disclose all information relative to the claim. If the Reinsurer
accepts participation, the Reinsurer will promptly notify the Ceding
Company in writing. The Ceding Company will then promptly advise the
Reinsurer of all significant developments in the claim investigation,
including notification of any legal proceedings against it in
response to a denial of a claim.
If the Reinsurer does not accept participation, the Reinsurer will
then fulfill its obligation by paying the Ceding Company its full
share of reinsurance and will not share in any subsequent reduction
or increase in liability.
If the Reinsurer accepts participation and the Ceding Company's
contest, compromise, or litigation results in a reduction or increase
in liability, the Reinsurer will share proportionately in any such
reduction or increase, subject to the terms of Article 9.8.
9.5 CLAIM EXPENSES
The Reinsurer will pay its share of reasonable claim investigation
and legal expenses connected with the litigation of contractual
liability claims unless the Reinsurer has discharged its liability
pursuant to Section 9.4 above. If the Reinsurer has so discharged its
liability, the Reinsurer will not participate in any expenses
incurred thereafter.
The Reinsurer will not reimburse the Ceding Company for routine claim
and administration expenses, including the Ceding Company's home
office expenses and any legal expenses other than third party
expenses incurred by the Ceding Company. Claim investigation expenses
do not include expenses incurred by the Ceding Company as a result of
a dispute or contest arising out of conflicting claims of entitlement
to policy proceeds or benefits.
9.6 MISREPRESENTATION OR SUICIDE
If the Ceding Company returns premium to the policyowner or
beneficiary as a result of misrepresentation or suicide of the
insured, the Reinsurer will refund all reinsurance premiums received
on that policy without interest to the Ceding Company in lieu of any
other form of reinsurance benefit payable under this Agreement.
9.7 MISSTATEMENT OF AGE OR SEX
In the event of a change in the amount of the Ceding Company's
liability on a reinsured policy due to a misstatement of age or sex,
the Reinsurer's liability will change proportionately. Reinsurance
premiums will be adjusted from the inception of the policy, and any
difference will be settled without interest.
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9.8 EXTRA-CONTRACTUAL DAMAGES
The Reinsurer will not participate in and shall not be liable to pay
the Ceding Company or others for any amounts in excess of the
Reinsurer's share of the net amount at risk on the mortality risk
reinsured hereunder. Extracontractual damages or liabilities and
related expenses and fees are specifically excluded from the
reinsurance coverage provided under this Agreement. [terms of
extra-contractual damages redacted]
The excluded extracontractual damages shall include, by way of
example and not limitation:
i Actual and consequential damages;
ii. Damages for emotional distress or oppression;
iii. Punitive, exemplary or compensatory damages;
iv. Damages or fines;
v. Amounts in excess of the risk reinsured hereunder that the
Ceding Company pays to settle a dispute or claim;
vi. Third-party attorney fees, costs, and expenses.
However, for claim denials and rescissions, the Reinsurer will
reimburse the Ceding Company for the Ceding Company's
extracontractual damages that result from the Reinsurer's actions
that directly and proximately cause such extracontractual damages.
Any such reimbursement will be in direct proportion to the
Reinsurer's direct and proximate participation in the actions that
lead to the extracontractual damages.
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ARTICLE 10
CREDIT FOR RESERVES
10.1 RESERVE METHODOLOGY AND REPORTING
The Parties intend that the Ceding Company will receive statutory
reserve credit in its state of domicile for the insurance risks ceded
to the Reinsurer. The Parties agree to make all reasonable efforts to
ensure that this is accomplished.
Deficiency reserves are not applicable to the plans reinsured under
this Agreement.
IDSL-NY Succession Select Treaty
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ARTICLE 11
RETENTION LIMIT CHANGES
11.1 If the Ceding Company changes its retention limits as shown in
Exhibit A - Retention Limits of the Ceding Company, it will provide
the Reinsurer with written notice of the intended changes thirty (30)
days in advance of their effective date.
A change to the Ceding Company's retention limits will not affect the
reinsured policies in force except as specifically provided elsewhere
in this Agreement. Furthermore, unless agreed between the parties, an
increase in the Ceding Company's retention schedule will not effect
an increase in the total risk amount that it may automatically cede
to the Reinsurer.
IDSL-NY Succession Select Treaty
21
ARTICLE 12
RECAPTURE
12.1 Whenever the Ceding Company increases its maximum retention limits
over the maximum retention limits set forth in Exhibit A - Retention
Limits of the Ceding Company, the Ceding Company has the option to
recapture certain risk amounts. If the Ceding Company has maintained
its maximum stated retention (not a special retention limit) for the
plan and the insured's age, sex, and mortality classification, it may
apply its increased retention limits to reduce the amount of
reinsurance in force as follows:
(a) The Ceding Company must give the Reinsurer 90 days written
notice prior to its intended date of recapture.
(b) The reduction of reinsurance on affected policies will become
effective on the policy anniversary date immediately following
the notice of election to recapture; however, no reduction will
be made until a policy has been in force for at least 10 years.
(c) If any reinsured policy is recaptured, all reinsured policies
eligible for recapture under the provisions of this Article
must be recaptured up to the Ceding Company's new maximum
retention limits in a consistent manner and the Ceding Company
must increase its total amount of insurance on each reinsured
life. The Ceding Company may not revoke its election to
recapture for policies becoming eligible at future
anniversaries.
If portions of the reinsured policy have been ceded to more than one
reinsurer, the Ceding Company must allocate the reduction in
reinsurance among all the reinsurers so that the relationship of the
total reinsurance among the reinsurers in any given layer does not
change due to the recapture.
The amount of reinsurance eligible for recapture is based on the net
amount at risk as of the date of recapture. For a policy issued as a
result of a fully-underwritten exchange, the policy date and the
current duration of the new policy and the recapture provisions under
this Agreement will be used.
After the effective date of recapture, the Reinsurer will not be
liable for any reinsured policies or portions of such reinsured
policies eligible for recapture that the Ceding Company has
overlooked.
If the Ceding Company transfers business that is reinsured under this
Agreement to a successor ceding company, then the successor ceding
company has the option to recapture the reinsurance in accordance
with the recapture criteria outlined in this Article, but only if the
successor ceding company has or adopts a higher retention limit than
that applicable to the block of business subject to recapture.
IDSL-NY Succession Select Treaty
22
The terms and conditions for the Ceding Company to recapture
reinsured policies, as made necessary by the insolvency of the
Reinsurer, are set forth in Article 16.3 Insolvency of the Reinsurer.
No recapture will be permitted if the Ceding Company has either
obtained or increased stop loss reinsurance coverage as justification
for the increase in retention limits.
IDSL-NY Succession Select Treaty
23
ARTICLE 13
GENERAL PROVISIONS
13.1 CURRENCY
All payments and reporting by both parties under this Agreement will
be made in United States dollars.
13.2 PREMIUM TAX
The Reinsurer will not reimburse the Ceding Company for premium
taxes.
13.3 MINIMUM CESSION
There are no minimum initial cession limits under this Agreement. The
Ceding Company will retain up to an additional 10% over its maximum
retention in order to avoid trivial amounts of reinsurance.
13.4 INSPECTION OF RECORDS
The Reinsurer and the Ceding Company, or their duly authorized
representatives, will have the right to inspect original papers,
records, and documents relating to the business reinsured under this
Agreement. Such access will be provided during regular business hours
at the office of the inspected party.
13.5 INTEREST RATE
If, under the terms of this Agreement, interest is accrued on amounts
due either party, such interest will be calculated using the 90 Day
Federal Government Treasury Xxxx rate as reported in the Wall Street
Journal in the month following the end of the billing period plus 50
basis points. The method of calculation will be simple interest
"Bankers' Rule" (or 360 day year).
13.6 GOOD FAITH; FINANCIAL SOLVENCY
This Agreement is entered into in reliance on the utmost good faith
of the parties including, for example, their warranties,
representations and disclosures. It requires the continuing utmost
good faith of the parties, their representatives, successors, and
assigns. This includes a duty of full and fair disclosure of all
information respecting the formation and continuation of this
contract and the business reinsured hereunder. Each party represents
and warrants to the other party that it is solvent on a statutory
basis in all states in which it does business or is licensed. Each
party agrees to promptly notify the other if it is subsequently
financially impaired.
In addition, the Ceding Company affirms that it has disclosed and
will continue to disclose to the Reinsurer all matters material to
this Agreement, such as its underwriting and policy issues (rules,
philosophies, practices, and management personnel), its financial
condition, studies and reports on the business reinsured, and any
change in its ownership or control.
IDSL-NY Succession Select Treaty
24
ARTICLE 14
DAC TAX
14.1 The parties to this Agreement agree to the following provisions
pursuant to Section 1.848-2(g)(8) of the Income Tax Regulations
effective December 29, 1992, under Section 848 of the Internal
Revenue Code of 1986, as amended:
(a) The term `party' refers to either the Ceding Company or the
Reinsurer, as appropriate.
(b) The terms used in this Article are defined by reference to
Regulation Section 1.848-2, effective December 29, 1992.
(c) 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).
(d) Both parties agree to exchange information pertaining to the
amount of net consideration under this Agreement each year to
ensure consistency, or as otherwise required by the Internal
Revenue Service.
(e) The Ceding Company will submit a schedule to the Reinsurer by
April 1 of each year with its calculation of the net
consideration for the preceding calendar year. This schedule of
calculations will be accompanied by a statement signed by an
officer of the Ceding Company stating that the Ceding Company
will report such net consideration in its tax return for the
preceding calendar year. The Reinsurer may contest such
calculation by providing an alternative calculation to the
Ceding Company in writing within thirty (30) days of the
Reinsurer's receipt of the Ceding Company's calculation. If the
Reinsurer does not so notify the Ceding Company within the
required timeframe, the Reinsurer will report the net
consideration as determined by the Ceding Company in the
Reinsurer's tax return for the previous calendar year.
(f) If the Reinsurer contests the Ceding Company's calculation of
the net consideration, the parties will act in good faith to
reach an agreement as to the correct amount within thirty (30)
days of the date the Reinsurer submits its alternative
calculation. If the Ceding Company and the Reinsurer reach an
agreement on an amount of net consideration, each party will
report the agreed upon amount in its tax return for the
previous calendar year.
(g) Both the Ceding Company and the Reinsurer represent and warrant
that they are subject to United States taxation under either
Subchapter L or Subpart F of Part III of Subchapter N of the
Internal Revenue Code of 1986, as amended.
IDSL-NY Succession Select Treaty
25
ARTICLE 15
OFFSET
15.1 Any debts or credits, in favor of or against either the Reinsurer or
the Ceding Company with respect to this Agreement or any other
reinsurance agreement between the parties, are deemed mutual debts or
credits and will be offset and only the balance will be allowed or
paid.
The right of offset will not be affected or diminished because of the
insolvency of either party.
IDSL-NY Succession Select Treaty
26
ARTICLE 16
INSOLVENCY
16.1 INSOLVENCY OF A PARTY TO THIS AGREEMENT
A party to this Agreement will be deemed insolvent when it:
(a) applies for or consents to the appointment of a receiver,
rehabilitator, conservator, liquidator or statutory successor
of its properties or assets; or
(b) is adjudicated as bankrupt or insolvent; or
(c) files or consents to the filing of a petition in bankruptcy,
seeks reorganization or an arrangement with creditors or takes
advantage of any bankruptcy, dissolution, liquidation or
similar law or statute; or
(d) becomes the subject of an order to rehabilitate or an order to
liquidate as defined by the insurance code of the jurisdiction
of the party's domicile.
16.2 INSOLVENCY OF THE CEDING COMPANY
In the event of the insolvency of the Ceding Company, all reinsurance
payments will be payable directly to the liquidator, rehabilitator,
receiver, or statutory successor of the Ceding Company, without
diminution because of the insolvency, for those claims allowed
against the Ceding Company by any court of competent jurisdiction or
by the liquidator, rehabilitator, receiver or statutory successor
having authority to allow such claims.
In the event of insolvency of the Ceding Company, the liquidator,
rehabilitator, receiver, or statutory successor will give written
notice to the Reinsurer of all pending claims against the Ceding
Company on any policies reinsured within a reasonable time after such
claim is filed in the insolvency proceeding. While a claim is
pending, the Reinsurer may investigate and interpose, at its own
expense, in the proceeding where the claim is adjudicated, any
defense or defenses that it may deem available to the Ceding Company
or its liquidator, rehabilitator, receiver, or statutory successor.
The expense incurred by the Reinsurer will be chargeable, subject to
court approval, against the Ceding Company as part of the expense of
liquidation to the extent of a proportionate share of the benefit
that may accrue to the Ceding Company 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 a defense or defenses to any such claim, the expense will
be apportioned in accordance with the terms of this Agreement as
though such expense had been incurred by the Ceding Company.
The Reinsurer will be liable only for its proportionate share of the
amounts reinsured and will not be or become liable for any amounts or
reserves to be held by the Ceding Company on policies reinsured under
this Agreement.
IDSL-NY Succession Select Treaty
27
16.3 INSOLVENCY OF THE REINSURER
In the event of the Reinsurer's insolvency and upon giving written
notice to the Reinsurer, the Ceding Company may recapture all of the
business reinsured by the Reinsurer under this Agreement.
Any Recapture Fee applicable will be mutually agreed upon by the
Company and the Reinsurer, its rehabilitator, conservator, liquidator
or statutory successor.
IDSL-NY Succession Select Treaty
28
ARTICLE 17
ERRORS AND OMISSIONS
17.1 If through unintentional error, oversight, omission, or
misunderstanding (collectively referred to as "errors"), the
Reinsurer or the Ceding Company fails to comply with the terms of
this Agreement and if, upon discovery of the error by either party,
the other is promptly notified, each thereupon will be restored to
the position it would have occupied if the error had not occurred,
including interest. It is understood, however, that interest will not
be included when routine underpayments or overpayments of reinsurance
premiums are discovered and promptly corrected according to the terms
of this Agreement.
If it is not possible to restore each party to the position it would
have occupied but for the error, the parties will endeavor in good
faith to promptly resolve the situation in a manner that is fair and
reasonable, and most closely approximates the intent of the parties
as evidenced by this Agreement.
However, the Reinsurer will not provide reinsurance for policies that
do not satisfy the parameters of this Agreement, nor will the
Reinsurer be responsible for negligent or deliberate acts or for
repetitive errors in administration by the Ceding Company. If either
party discovers that the Ceding Company has failed to cede
reinsurance as provided in this Agreement, or failed to comply with
its reporting requirements, the Reinsurer may require the Ceding
Company to audit its records for similar errors and to take the
actions necessary to rectify the situation and avoid similar errors
in the future.
IDSL-NY Succession Select Treaty
29
ARTICLE 18
DISPUTE RESOLUTION
18.1 In the event of a dispute, the parties agree to the following process
of dispute resolution. Within fifteen (15) days after the Reinsurer
or the Ceding Company has first given the other party written
notification of a specific dispute, each party will appoint a
designated company officer to attempt to resolve the dispute. The
officers will meet at a mutually agreeable location as soon as
possible and as often as necessary, in order to gather and furnish
the other with all appropriate and relevant information concerning
the dispute. The officers will discuss the problem and will negotiate
in good faith without the necessity of any formal arbitration
proceedings. During the negotiation process, all reasonable requests
made by one officer to the other for information will be honored. The
designated officers will decide the specific format for such
discussions.
If the officers cannot resolve the dispute within sixty (60) days of
their first meeting, the dispute will be submitted to formal
arbitration, unless the parties agree in writing to extend the
negotiation period for an additional sixty (60) days.
IDSL-NY Succession Select Treaty
30
ARTICLE 19
ARBITRATION
19.1 It is the intention of the Reinsurer and the Ceding Company that the
customs and practices of the life insurance and reinsurance industry
will be given full effect in the operation and interpretation of this
Agreement. The parties agree to act in all matters with the highest
good faith. However, if the Reinsurer and the Ceding Company cannot
mutually resolve a dispute that arises out of or relates to this
Agreement, and the dispute cannot be resolved through the dispute
resolution process described in Article 18 - Dispute Resolution, the
dispute will be decided through arbitration as a precedent to any
right of action hereunder.
To initiate arbitration, either the Ceding Company or the Reinsurer
will 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 will respond to the notification in writing
within fifteen (15) days of its receipt.
There will be three arbitrators who will be current or former
officers of life insurance or life reinsurance companies other than
the parties to this Agreement, their affiliates or subsidiaries. Each
of the parties will appoint one of the arbitrators and these two
arbitrators will select the third. If either party refuses or
neglects to appoint an arbitrator within sixty (60) days of the
initiation of the arbitration, the other party may appoint the second
arbitrator. If the two arbitrators are unable to agree upon the
selection of a third arbitrator within 30 days following their
appointment, each arbitrator shall nominate three candidates within
10 days thereafter, two of whom the other shall decline and the
decision shall be made by drawing lots.
Once chosen, the arbitrators are empowered to select the site of the
arbitration and decide all substantive and procedural issues by a
majority of votes. As soon as possible, the arbitrators will
establish arbitration procedures as warranted by the facts and issues
of the particular case. The arbitrators will have the power to
determine all procedural rules of the arbitration including but not
limited to inspection of documents, examination of witnesses and any
other matter relating to the conduct of the arbitration. The
arbitrators may consider any relevant evidence; they will weigh the
evidence and consider any objections. Each party may examine any
witnesses who testify at the arbitration hearing.
The arbitrators will base their decision on the terms and conditions
of this Agreement and the customs and practices of the life insurance
and reinsurance industries rather than on strict interpretation of
the law. The decision of the arbitrators will be made by majority
rule and will be submitted in writing. The decision will be final and
binding on both parties and there will be no appeal from the
decision. Either party to the arbitration may petition any court
having jurisdiction over the parties to reduce the decision to
judgment.
IDSL-NY Succession Select Treaty
31
Unless the arbitrators decide otherwise, each party will bear the
expense of its own arbitration activities, including its appointed
arbitrator and any outside attorney and witness fees. The parties
will jointly and equally bear the expense of the third arbitrator and
other costs of the arbitration.
IDSL-NY Succession Select Treaty
32
ARTICLE 20
CONFIDENTIALITY
20.1 The Ceding Company and the Reinsurer agree that Customer and
Proprietary Information will be treated as confidential. Customer
Information includes, but is not limited to, medical, financial, and
other personal information about proposed, current, and former
policyowners, insureds, applicants, and beneficiaries of policies
issued by the Ceding Company. Proprietary Information includes, but
is not limited to, business plans and trade secrets, mortality and
lapse studies, underwriting manuals and guidelines, applications and
contract forms, and the specific terms and conditions of this
Agreement.
Customer and Proprietary Information will not include information
that:
(a) is or becomes available to the general public through no fault of
the party receiving the Customer or Proprietary Information (the
"Recipient");
(b) is independently developed by the Recipient;
(c) is acquired by the Recipient from a third party not covered by a
confidentiality agreement; or
(d) is disclosed under a court order, law or regulation.
The parties will not disclose such information to any other parties
unless agreed to in writing, except as in accordance with the
fulfillment of the terms of this Agreement, including but not limited
to the Reinsurer's retrocessionaires and the Reinsurer's affiliates,
or as requested by external auditors, as required by court order, or
as required or allowed by law or regulation.
The Ceding Company acknowledges that the Reinsurer can aggregate data
with other companies reinsured with the Reinsurer as long as the data
cannot be identified as belonging to the Ceding Company.
IDSL-NY Succession Select Treaty
33
ARTICLE 21
SEVERABILITY
21.1 If any provision of this Agreement is determined to be invalid or
unenforceable, such determination will not impair or affect the
validity or the enforceability of the remaining provisions of this
Agreement. In addition, if any provision or term is held invalid,
illegal or unenforceable, the parties will attempt in good faith to
renegotiate this Agreement to carry out the original intent of the
parties.
IDSL-NY Succession Select Treaty
34
ARTICLE 22
DURATION OF AGREEMENT
22.1 This Agreement is unlimited as to its duration. The Ceding Company or
the Reinsurer may terminate this Agreement with respect to the
reinsurance of new business by giving 90 days written notice of
termination to the other party, sent by certified mail. The first day
of the notice period is deemed to be the date the document is
postmarked.
During the notification period, the Ceding Company will continue to
cede and the Reinsurer will continue to accept policies covered under
the terms of this Agreement. Reinsurance coverage on all reinsured
policies will remain in force until the termination or expiry of the
policies or until the contractual termination of reinsurance under
the terms of this Agreement. The Reinsurer's acceptance will be
subject to both the terms of this Agreement and the Ceding Company's
payment of applicable reinsurance premiums.
In addition, this Agreement may be terminated immediately for the
acceptance of new reinsurance by either party if one of the parties
materially breaches this Agreement, or becomes insolvent or
financially impaired.
IDSL-NY Succession Select Treaty
35
ARTICLE 23
EXECUTION
23.1 This Agreement is effective as of August 18, 2003, and applies to all
eligible policies with issue dates on or after such date, and to
eligible policies applied for on or after such date that were
backdated for up to six (6) months. This Agreement has been made in
duplicate and is hereby executed by both parties.
IDS LIFE INSURANCE COMPANY OF NEW YORK [NAME OF REINSURANCE COMPANY]
By: /s/ Xxxxxxx X. Xxxxxxxx By: [signature]
--------------------------------------------- ------------------------------------------------
(signature) (signature)
Xxxxxxx X. Xxxxxxxx Title: [name]
--------------------------------------------- ------------------------------------------------
(print or type name) (print or type name)
Title: VP - Insurance Title: [title]
--------------------------------------------- ------------------------------------------------
Date: 12/19/03 Date: 12/23/03
--------------------------------------------- ------------------------------------------------
Location: Minneapolis, MN Location: [city and state of reinsurance company]
--------------------------------------------- ------------------------------------------------
Attest: /s/ Xxxxx X. Xxxxxx Attest: [city and state of reinsurance company]
--------------------------------------------- ------------------------------------------------
(signature) (signature)
Title: Reinsurance Officer Title: [title]
--------------------------------------------- ------------------------------------------------
IDSL-NY Succession Select Treaty
A-1
EXHIBIT A
RETENTION LIMITS OF THE CEDING COMPANY
A. 1 LIFE INSURANCE
--------------------------------------------------
Issue Age* Retention Limit
(All Ratings)
--------------------------------------------------
[ages] [dollar amount]
--------------------------------------------------
[ages] [dollar amount]
--------------------------------------------------
[ages] [dollar amount]
--------------------------------------------------
[ages] [dollar amount]
--------------------------------------------------
* Issue Age of the Oldest of the two joint lives will be used in the
determination of the Ceding Company's retention.
The Ceding Company will maintain its full available retention on the
policies issued automatically under this Agreement, to the maximums
shown in the table above. Prior retained amounts on all inforce
single life and joint life coverages issued by the Ceding Company
other than on the VUL III plan will be added together to determine
the Ceding Company's available retention for new Succession Select
policies. The Ceding Company's retention will be filled in the
following order: existing inforce policies other than VUL III, Base
Succession Select policy, Survivor Term Rider, Four-Year Term Rider.
It is understood that the Ceding Company's retention on facultative
policies will be determined on a case-by-case basis.
IDSL-NY Succession Select Treaty
B-1
EXHIBIT B
PLANS COVERED AND BINDING LIMITS
The business reinsured under this Agreement is defined as follows:
B.1 PLANS, RIDERS AND BENEFITS
Policies issued on plans with effective dates within the applicable
period shown below may qualify for reinsurance under the terms of
this Agreement. It is understood that policies may be backdated by up
to six months from the date shown below.
COMMENCEMENT TERMINATION
PLAN IDENTIFICATION DATE DATE
---------------------------------------------------------------------
Succession Select
(Variable JLLS UL)
Form 39090 August 18, 2003
Benefit & Riders:
-Survivor Term Rider August 18, 2003
-Policy Split Option Rider August 18, 2003
-Four-Year Term Rider August 18, 2003
B.2 BASIS
The Ceding Company will reinsure 100% of the excess over its
retention stated in Exhibit A. Only mortality risk will be reinsured.
Cessions may be automatic, capacity facultative or non-capacity
facultative.
IDSL-NY Succession Select Treaty
B-2
B.3 AUTOMATIC BINDING LIMITS
Life
----
---------------------------------------------------
Oldest Issue Maximum Pool Autobind
Age
---------------------------------------------------
[ages] [dollar amount]
---------------------------------------------------
[ages] [dollar amount]
---------------------------------------------------
[ages] [dollar amount]
---------------------------------------------------
[ages] [dollar amount]
---------------------------------------------------
The Ceding Company may not cede reinsurance automatically if the sum
of all amounts in force and applied for on the joint lives with the
Ceding Company, excluding amounts being internally replaced, exceed
the above Automatic Binding Limits.
The above automatic binding limits are also subject to the Ceding
Company's age and insurability procedures for the Succession Select
product, as outlined in subsection B.6 of this Exhibit.
B.4 JUMBO LIMITS
The Ceding Company will not cede any risk automatically if, according
to information available to the Ceding Company, the total amount in
force and applied for on the joint lives with all insurance
companies, including any amount to be replaced, exceeds the
applicable amounts shown below.
Life
----
------------------------------------------------
Oldest Issue Jumbo Limit
Age
------------------------------------------------
[ages] [dollar amount]
------------------------------------------------
[ages] [dollar amount]
------------------------------------------------
[ages] [dollar amount]
------------------------------------------------
[ages] [dollar amount]
------------------------------------------------
B.5 CESSION LIMITS
Minimum Initial Cession: None. The Ceding Company will retain up to an
-----------------------
additional 10% over its maximum retention in order to avoid trivial
amounts of reinsurance.
IDSL-NY Succession Select Treaty
B-3
B.6 AUTOMATIC CESSIONS
a) Issue age and rating restrictions are shown in the following
table. The youngest insured must be between the ages of 15 -
85. The minimum life expectancy for each of the two lives is
one year.
--------------------------------------------------------------------------------------------------
MAXIMUM TABLE RATING AVAILABLE TO
THE YOUNGEST APPLICANT IF
THE OLDEST APPLICANT'S CLASSIFICATION IS:
--------------------------------------------------------------------------------------------------
YOUNGEST APPLICANT'S
AGE GROUP* STANDARD SUBSTANDARD UNINSURABLE
---------- -------- ----------- -----------
--------------------------------------------------------------------------------------------------
[ages]
--------------------------------------------------------------------------------------------------
[ages]
--------------------------------------------------------------------------------------------------
[ages]
--------------------------------------------------------------------------------------------------
[ages]
--------------------------------------------------------------------------------------------------
[ages]
--------------------------------------------------------------------------------------------------
* If both applicants are in the same age group, use the lower
rated applicant as the youngest applicant. For example, if both
applicants are ages 81 - 85, the Ceding Company can issue up to
D/D or Standard/Uninsurable.
b) Definition of substandard (as opposed to uninsurable):
-------------------------------------------------------------------
[ages]
-------------------------------------------------------------------
[ages]
-------------------------------------------------------------------
[ages]
-------------------------------------------------------------------
[ages]
-------------------------------------------------------------------
c) Definition of (acceptable) uninsurable:
For the purposes of this Agreement, a risk will be classed as
uninsurable if it is assessed at a table rating higher than the
substandard limits above and if the life expectancy is at least
one year.
d) The Reinsurer's share of the total automatic pool will be
[PERCENTAGE].
IDSL-NY Succession Select Treaty
B-4
B.7 FACULTATIVE CESSIONS
For facultative policies, the Reinsurer's share will be determined on
a case-by-case basis, subject to the terms of the Reinsurer's
facultative offer.
B.8 INTERNATIONAL CLIENTS
The Ceding Company may cede reinsurance automatically on
international clients who meet the financial and medical criteria
listed in the Ceding Company's "Guidelines for Underwriting
International Clients" and are standard or preferred based on [name
of reinsurance company]'s Foreign Risk Guidelines for individual
countries.
If an international client meets the Ceding Company's financial and
medical criteria, but requires a flat extra based on [name of
reinsurance company]'s Foreign Risk Guidelines, the Ceding Company
may cede reinsurance automatically only after consultation with an
[name of reinsurance company] International Team underwriter. The
consultation must be documented in the underwriting file.
If an international client does not meet the Ceding Company's
financial or medical criteria or requires individual consideration
under [name of reinsurance company]'s Foreign Risk Guidelines,
reinsurance may not be ceded automatically.
IDSL-NY Succession Select Treaty
C-1
EXHIBIT C
FORMS, MANUALS, AND ISSUE RULES
C.1 The Ceding Company affirms that its retention schedule, underwriting
guidelines, issue rules, premium rates and policy forms applicable to
the Reinsured Policies and in use as of the effective date, have been
supplied to the Reinsurer.
Some examples of non-customary underwriting practices that are not
accepted for automatic reinsurance under this Agreement are
table-shaving programs, guaranteed issue, any form of simplified
underwriting, short-form applications, any form of non-customary
non-medical underwriting limits, or internal or external policy
exchanges, other than as described in Article 8.2 of this Agreement.
An example of an unacceptable issue practice that is not accepted for
automatic reinsurance under this Agreement is the issuance of a
policy that has contestability or suicide clauses with time
limitations that are shorter than the maximum allowed by state law.
The Ceding Company will promptly notify the Reinsurer of any proposed
material changes in its underwriting guidelines. This Agreement will
not extend to policies issued pursuant to such changes unless the
Reinsurer has consented in writing to accept policies subject to such
changes.
It is the Ceding Company's responsibility to ensure that its practice
and applicable forms are in compliance with current Medical
Information Bureau (MIB) guidelines.
IDSL-NY Succession Select Treaty
D-1
EXHIBIT D
REINSURANCE PREMIUMS
D.1 LIFE
a) Plans covered under this Agreement will be reinsured on a YRT
basis. YRT reinsurance premiums for the Base Plan, Survivor
Term Rider, and Four-Year Term Rider will be frasierized joint
premiums based on the individual ALB Annual Cost of Insurance
(COI) rates, attached to this Exhibit D, less allowances. After
allowances are applied, YRT reinsurance premiums are subject to
a minimum rate of [dollar amount] per [dollar amount] of
reinsured risk amount in years 2 +.
SUCCESSION SELECT REINSURANCE ALLOWANCES FOR BASE PLAN
AND SURVIVOR TERM RIDER
(YEAR 1 ALLOWANCE IS ALWAYS 100%)
Year 2 +
------------------------------------------------------
2 Preferred [percentage]
------------------------------------------------------
Preferred, Standard Non-Tobacco [percentage]
------------------------------------------------------
Preferred, Tobacco [percentage]
------------------------------------------------------
2 Standard Non-Tobacco [percentage]
------------------------------------------------------
Standard Non-Tobacco, Tobacco [percentage]
------------------------------------------------------
2 Tobacco [percentage]
------------------------------------------------------
SUCCESSION REINSURANCE ALLOWANCES FOR FOUR-YEAR TERM RIDER
(YEAR 1 ALLOWANCE IS ALWAYS 100%)
Year 2 +
------------------------------------------------------
2 Preferred [percentage]
------------------------------------------------------
Preferred, Standard Non-Tobacco [percentage]
------------------------------------------------------
Preferred, Tobacco [percentage]
------------------------------------------------------
2 Standard Non-Tobacco [percentage]
------------------------------------------------------
Standard Non-Tobacco, Tobacco [percentage]
------------------------------------------------------
2 Tobacco [percentage]
------------------------------------------------------
D.2 AGE BASIS
Age Last Birthday
IDSL-NY Succession Select Treaty
D-2
D.3 POLICY FEES
The Reinsurer will not participate in any policy fees.
D.4 SUBSTANDARD RATINGS
Where a substandard table rating is applied, or on an uninsurable
life, the underlying COI rates will be multiplied by the amount shown
in the following table, and then reinsurance allowances applied after
frasierizing.
-----------------------------------------------------------------------
RATING MULTIPLIER RATING MULTIPLIER
-----------------------------------------------------------------------
A [percentage] N [percentage]
-----------------------------------------------------------------------
B [percentage] O [percentage]
-----------------------------------------------------------------------
C [percentage] P [percentage]
-----------------------------------------------------------------------
D [percentage] Q [percentage]
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E [percentage] R [percentage]
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F [percentage] T [percentage]
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G [percentage] U [percentage]
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H [percentage] V [percentage]
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I [percentage] W [percentage]
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J [percentage] X [percentage]
-----------------------------------------------------------------------
K [percentage] Y [percentage]
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L [percentage] Z [percentage]
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M [percentage]
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Premium rates for facultative cessions will be the same as for
automatic cessions.
D.5 FLAT EXTRAS
Temporary and permanent flat extras are not used directly for joint
coverages; rather, they are converted using an internal table to a
substandard table rating.
D.6 RIDERS AND BENEFITS
Premium for the Policy Split Option Rider is [dollar amount] per
[dollar amount] of the sum of the ceded specified amount of the Base
Plan and Survivor Term Rider. Allowances for the Policy Split Option
Rider are 100% in the first year and 0% in subsequent years.
IDSL-NY Succession Select Treaty
D-3
SUCCESSION SELECT CURRENT INDIVIDUAL COI--FOR FRASIERIZED JOINT COI CALCULATION
Male Male Male Female Female Female
Attained Preferred Standard Standard Preferred Standard Standard
age Nonsmoker Nonsmoker Smoker Nonsmoker Nonsmoker Smoker
--- --------- --------- ------ --------- --------- ------
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
IDSL-NY Succession Select Treaty
D-4
SUCCESSION SELECT CURRENT INDIVIDUAL COI--FOR FRASIERIZED JOINT COI CALCULATION
Male Male Male Female Female Female
Attained Preferred Standard Standard Preferred Standard Standard
age Nonsmoker Nonsmoker Smoker Nonsmoker Nonsmoker Smoker
--- --------- --------- ------ --------- --------- ------
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
IDSL-NY Succession Select Treaty
D-5
SUCCESSION SELECT CURRENT INDIVIDUAL COI--FOR FRASIERIZED JOINT COI CALCULATION
Male Male Male Female Female Female
Attained Preferred Standard Standard Preferred Standard Standard
age Nonsmoker Nonsmoker Smoker Nonsmoker Nonsmoker Smoker
--- --------- --------- ------ --------- --------- ------
86
87
88
89
90
91
92
93
94
95
96
97
98
99
IDSL-NY Succession Select Treaty
E-1
EXHIBIT E
SELF-ADMINISTERED REPORTING
E.1 The Ceding Company will self-administer all reinsurance reporting.
The Ceding Company will send the Reinsurer the reports listed below
at the frequency specified.
MONTHLY TRANSACTION REPORTS
1. New Business
2. First Year - Other than New Business
3. Renewal Year
4. Changes and Terminations
5. Accounting Information
QUARTERLY PERIODIC REPORTS
6. Statutory Reserve Information
7. Policy Exhibit Information
8. Inforce
A brief description of the data requirements follows below.
TRANSACTION REPORTS
The Ceding Company will report policy data using the Quasar (R2)
system.
1. NEW BUSINESS
------------
This report will include new issues only, the first time the
policy is reported to the Reinsurer. Automatic and Facultative
business will be identified separately.
2. FIRST YEAR - OTHER THAN NEW BUSINESS
------------------------------------
This report will include policies previously reported on the
new business detail and still in their first duration, or
policies involved in first year premium adjustments.
3. RENEWAL YEAR
------------
All policies with renewal dates within the Accounting Period
will be listed.
4. CHANGES AND TERMINATIONS
------------------------
Policies affected by a change during the current reporting
period will be included in this report. Type of change or
termination activity must be clearly identified for each
policy.
The Ceding Company will identify the following transactions
either by separate listing or unique transaction codes:
Terminations, Reinstatements, Changes,
IDSL-NY Succession Select Treaty
E-2
Conversions, and Replacements. For Conversions and
Replacements, the Ceding Company will report the original
policy date, as well as the current policy date.
5. ACCOUNTING INFORMATION
----------------------
Premiums and allowances will be summarized for Life coverages,
Benefits, and Riders by the following categories: Automatic and
Facultative, First Year and Renewals.
PERIODIC REPORTS
6. STATUTORY RESERVE INFORMATION
-----------------------------
Statutory reserves will be summarized for Life coverages,
Benefits and Riders. The Ceding Company will specify the
reserve basis used.
7. POLICY EXHIBIT INFORMATION
--------------------------
This is a summary of transactions during the current period and
on a year-to-date basis, reporting the number of policies and
reinsured amount.
8. INFORCE
-------
This is a detailed report of each policy in force.
IDSL-NY Succession Select Treaty
F-1
EXHIBIT F
APPLICATION FOR FACULTATIVE REINSURANCE
SUBMITTED TO: _______________________ _______________________ _______________________ ______________________
(Reinsurers)
FROM: ____________________________________________________ DATE: _____________________________________________
(Ceding Company)
POLICY NUMBER: _________________________ INCREASING AMOUNT: YES _____________ NO _____________
PLAN NAME: _________________________ IF INCREASING, ULTIMATE AMOUNT: ______________________________
BIRTH DATE TOBACCO PREF
LAST NAME FIRST MIDDLE M/D/Y SEX USE CLASS
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
JOINT INSURED
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
LIFE SPECIFY OTHERS, E.G. SECOND LIFE, WAIVER, ADB, ETC.
------------------------------------------------------------------------------------------------------------------
PREVIOUS INFORCE WITH CO.:
------------------------------------------------------------------------------------------------------------------
OF WHICH WE RETAIN:
------------------------------------------------------------------------------------------------------------------
NOW APPLYING FOR:
------------------------------------------------------------------------------------------------------------------
OF WHICH WE WILL RETAIN:
------------------------------------------------------------------------------------------------------------------
REINS. AMOUNT APPLIED FOR:
------------------------------------------------------------------------------------------------------------------
IN EXCESS OF JUMBO: YES _________ NO _________ IF REPLACEMENT: INTERNAL _________ EXTERNAL _________
OUR MORTALITY ASSESSMENT: _______________________ SPECIAL RISK FEATURES: __________ AVIATION
(TABLE &/OR FLAT EXTRA) __________ FOREIGN/TRAVEL
__________ OCCUPATION/AVOCATION
------------------------------------------------------- ---------------------------------------------------------
ENCLOSED REQUIREMENTS REQUIREMENTS TO FOLLOW
------------------------------------------------------- ---------------------------------------------------------
------------------------------------------------------- ---------------------------------------------------------
------------------------------------------------------- ---------------------------------------------------------
------------------------------------------------------- ---------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
REMARKS
------------------------------------------------------------------------------------------------------------------
UNDERWRITING CONTACT: _____________________________________ TEL #: _____________________________________
E-MAIL: _____________________________________
[logo]
UNITED STATES OF AMERICA
[name]
[title]
November 20, 2003
[name]
Appointed Actuary
IDS Life Insurance Company of New York
50814 AXP Financial Center
Xxxxxxxxxxx, XX 00000
Re: Compliance with Applicable Law and Regulations
Dear Xx. Xxxxxxx:
As you are aware, there are a number of laws and regulations applicable to
the business you issue and we reinsure. For example, the U.S. Treasury
Department's Office of Foreign Assets Control ("OFAC") administers and
enforces economic sanctions against countries, entities and groups of
individuals, such as terrorists and narcotics traffickers that may threaten
the security of our country. These sanctions allow for the blocking of
assets and install trade restrictions to accomplish foreign policy and
national security goals. Additionally, U.S. persons, including institutions,
are restricted from transacting business and distributing assets to
individuals and companies reflected on a list as published periodically by
OFAC. Collectively, such individuals and companies are called "Specially
Designated Nationals and Blocked Persons" or "SDNs." Any property in which
an SDN has an interest (such as a life insurance policy) shall be blocked.
Our reinsurance agreements are affected as OFAC takes the position that (a)
reinsurance of a risk that cannot be insured under OFAC regulations is also
a violation of OFAC regulations, since it represents "indirect"
participation in a transaction that is prohibited; and (b) reinsurance
treaties should exclude such a risk. In addition, a reinsurer is directly
prohibited from participating in a transaction that would, on its own,
violate any OFAC regulations.
[address, city and state of reinsurance company]
While we have installed processes designed to comply with U.S. laws and
regulations, we rely on your company to comply with OFAC sanctions laws and
serve as the first line defense against OFAC violations. In view of OFAC's
position, we believe we are not permitted to do business with any companies
on the SDN list or with ties to prohibited countries, nor are we permitted
to reinsure a risk on the SDN list or with ties to a prohibited country or
provide payment of a death benefit that would provide a monetary benefit to
a SDN or a prohibited country, including its citizens.
We also believe that ceding companies insuring non-U.S. lives present a
slightly higher risk since the non-U.S. lives may be more prone to appear on
the SDN list or be associated with a prohibited country. If our reinsurance
agreements with you include coverage for non-U.S. lives, we have the
following expectations to assist with our compliance with U.S. law:
o A policy shall not be reinsured if its issuance, maintenance or
performance would be in violation of any sanctions laws
administered by OFAC, as such laws may be amended from time to
time.
o The ceding company shall have reasonable procedures in place such
that it shall not knowingly accept money or issue insurance for
illegal tax avoidance.
o A reinsured death claim shall not be payable if such a payment
would cause us to be in violation of any laws, regulations,
judicial and administrative orders including but not limited to
OFAC regulations.
We suggest you file a copy of this letter with each of your reinsurance
agreements with us. Future agreements will include specific language to
assure we are making best efforts to be in compliance with applicable laws
and regulations. If you have questions with respect to OFAC or other related
matters, please do not hesitate to contact [name] at [phone number].
Sincerely,
[signature]
[name]
[title]
[address, city and state of reinsurance company]
