Exhibit 7(F)
Automatic Coinsurance Agreement
Between
American Skandia Life Assurance Corporation
of Connecticut, U.S.A.
(Reinsured referred to as you, your or Reinsured)
and
Pruco Reinsurance Ltd.
of Xxxxxxxx XX00, Xxxxxxx
(referred to as the Reinsurer)
Execution Copy
TABLE OF CONTENTS
ARTICLE I.................................................................. 3
Automatic Reinsurance................................................... 3
ARTICLE II................................................................. 3
Liability............................................................... 3
ARTICLE III................................................................ 4
Plan and Amount of Insurance............................................ 4
ARTICLE IV................................................................. 4
Reinsurance Premiums.................................................... 4
ARTICLE V.................................................................. 4
Payments by Reinsurer................................................... 4
ARTICLE VI................................................................. 4
Reporting and Cash Settlement........................................... 4
ARTICLE VII................................................................ 5
Deposits on the Reserves................................................ 5
ARTICLE VIII............................................................... 6
Credit for Reinsurance.................................................. 6
ARTICLE IX................................................................. 11
General Provisions...................................................... 11
ARTICLE X.................................................................. 15
DAC Tax Agreement....................................................... 15
ARTICLE XI................................................................. 16
Recapture............................................................... 16
ARTICLE XII................................................................ 16
Arbitration............................................................. 16
ARTICLE XIII............................................................... 17
Duration of Agreement................................................... 17
ARTICLE XIV................................................................ 17
Entire Agreement........................................................ 17
ARTICLE XV................................................................. 18
Execution............................................................... 18
SCHEDULE A................................................................. 19
Business Reinsured...................................................... 19
SCHEDULE B................................................................. 20
Monthly Settlement Report............................................... 20
SCHEDULE C................................................................. 21
Monthly Business Management Report...................................... 21
SCHEDULE D................................................................. 22
Annual Report........................................................... 22
The Reinsured and the Reinsurer mutually agree to reinsure on the terms and
conditions set out below.
ARTICLE I
Automatic Reinsurance
1. Insurance. The Reinsured will cede and the Reinsurer will accept as
reinsurance the underlying benefit provided by the Highest Daily Life Time 5
Benefit (HDLT5) riders written by the Reinsured as shown in Schedule A or
any amendments thereto.
2. Coverages. The underlying HDLT5 riders may be attached to any deferred
annuity contract written by the Reinsured as specified in Schedule A.
Reinsurance under this Agreement will be provided for the HDLT5 riders while
such riders are in effect on the associated annuity contracts.
ARTICLE II
Liability
1. Liability. The liability of the Reinsurer on any reinsurance under this
Agreement begins upon the effective date of this Agreement as set forth in
Article XV, Execution, and ends after all underlying contracts associated
with the reinsured HDLT5 riders have terminated or the business reinsured is
otherwise recaptured or terminated. The liability of the Reinsurer to the
Reinsured under this Agreement will be the remaining HDLT5 obligation to any
covered contract holder after the associated contract's account value has
been reduced to zero.
2. The liability of the Reinsurer will be settled and paid to the Reinsured
monthly on the basis of the monthly reports prepared by the Reinsured in the
form of Schedule B. Payment of any amount due to be paid by the Reinsurer or
the Reinsured will be determined on a net basis and will be paid within 5
business days after receipt of the monthly report.
3. This is a contract solely between the Reinsured and the Reinsurer. The
obligations under this contract of the Reinsurer are solely to the Reinsured
and those of the Reinsured solely to the Reinsurer.
Page 3 of 22
ARTICLE III
Plan and Amount of Insurance
1. Plan. Reinsurance under this Agreement will be on the coinsurance basis in
accordance with the underlying HDLT5 riders issued by the Reinsured and
listed on Schedule A while such riders are in effect on the associated
insurance contracts.
2. Reduction and Terminations. If any HDLT5 rider is terminated or any of the
underlying contracts associated with the HDLT5 riders reinsured under this
Agreement are terminated by payment of a death benefit, surrender or
annuitization, the reinsurance with respect to that contract will be
terminated subject to any party's right to payment under this Agreement
with respect to such terminated rider.
ARTICLE IV
Reinsurance Premiums
1. After the effective date of this Agreement, the Monthly Premium due the
Reinsurer by the Reinsured with respect to each insurance contract
reinsured is specified in Schedule B or any amendments thereto.
ARTICLE V
Payments by Reinsurer
Benefits. As more fully described on Schedule B, the Reinsurer will pay the
Reinsured the remaining obligation under the HDLT5 rider after permitted
withdrawals have reduced the associated contract's account value to zero as
well as a monthly expense allowance.
ARTICLE VI
Reporting and Cash Settlement
1. The Reinsured will provide the Reinsurer with information necessary to
properly account for the business reinsured.
2. Not later than ten (10) business days after the end of each month, the
Reinsured will submit to the Reinsurer a report substantially in accordance
with Schedule B. The Reinsured agrees to provide or make available to the
Reinsurer such documentation as may be necessary to support the items
reported.
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3. Not later than ten (10) business days after the end of each month, the
Reinsured will submit to the Reinsurer a report substantially in accordance
with Schedule C.
4. Not later than ten (10) business days after the end of each calendar year,
the Reinsured will submit to the Reinsurer a report substantially in
accordance with Schedule D.
5. The Reinsurer and the Reinsured shall consider any balance due and unpaid,
whether on account of premiums, allowances, losses or claims expenses, to
be mutual debits or credits under this Agreement and will offset, if
permitted under the applicable law. Only the balance will be considered in
determining the liability of the Reinsurer.
6. Cash settlement of balances due between Reinsured and Reinsurer will be
made within five (5) business days of receipt of Schedule B each month.
7. The Reinsurer may contest any calculation contained in a report from the
Reinsured by providing an alternative calculation to the Reinsured in
writing within 30 days of the Reinsurer's receipt of the Reinsured's
calculation. If the Reinsurer does not so notify the Reinsured, the
Reinsured may consider the reports final.
If the Reinsurer contests the Reinsured's calculation, the parties will act
in good faith to reach an agreement as to the correct amount within 30 days
of the date the Reinsurer submits its alternative calculation. If the
Reinsured and the Reinsurer do not reach agreement on the calculation
within such 30-day period, then the calculation shall be determined by an
independent accounting firm or other independent third party acceptable to
both the Reinsured and the Reinsurer within 20 days after the expiration of
such 30-day period.
ARTICLE VII
Deposits on the Reserves
The Reinsurer will hold reserves that are at least as great as those required
by Bermuda laws and regulations.
Page 5 of 22
ARTICLE VIII
Credit for Reinsurance
1. Security for Payment of Reinsurer's Obligations. In order to enable the
Reinsured to take the maximum credit for the risks ceded under this
Agreement on its statutory financial statements (the "Credit Amount") the
Reinsurer will satisfy one of the following requirements:
a. Apply for, provide to the Reinsured, and maintain during the entire term
of this Agreement, one or more Letters of Credit that satisfy each of
the requirements for Letters of Credit set forth below.
b. Enter into a Trust Agreement to establish a trust account securing the
Credit
Amount that satisfies each of the requirements for Trust Agreements
set forth below.
c. Use a combination of Letters of Credit and Trust Agreement with respect
to the
Credit Amount.
The Reinsured agrees to allow the Reinsurer to substitute Trust funds for
Letter of Credit obligations or Letter of Credit obligations for Trust
funds under this Agreement, provided the Reinsured has given written
approval in advance to such substitution. The Reinsurer will seek approval
for the substitution of funds with at least 30 days prior notice. The
Reinsured shall negotiate any requested transfers in good faith and shall
not unreasonably or arbitrarily withhold such approval. Notwithstanding the
foregoing, the Reinsured may withhold approval, rescind any prior approval
or request the Reinsurer to substitute funds if the Reinsured is unable to
obtain credit for reinsurance with respect to the Trust funds or with
respect to any Letter of Credit obligations.
The Reinsurer agrees to:
a. Submit to the jurisdiction of an alternative dispute resolution panel or
court of competent jurisdiction with the United States;
b. Comply with all the requirements necessary to give such court or panel
jurisdiction;
c. Designate an agent upon whom service of process may be effected; and
d. Abide by the final decision of such court or panel.
2. Letters of Credit. Each Letter of Credit must individually satisfy
subsections a, b, c and d below and all of the Letters of Credit
collectively must satisfy the requirements of subsections e and f. In
addition, each Letter of Credit individually and all of the Letters of
Credit collectively must satisfy any other applicable legal or regulatory
requirements of Connecticut that must be complied with in order to enable
the Reinsured to take the maximum credit for the risks ceded under this
Agreement on its statutory financial statements, given that the Reinsurer
is neither a licensed nor an accredited reinsurer under the applicable laws
and regulations of Connecticut.
Page 6 of 22
a. Each Letter of Credit must: (I) be an original and signed by an
authorized official of the issuing bank or an authorized official of the
confirming bank (in the case of a confirmation meeting the requirements
of this Section); (II) contain an issuance date and contain an expiry
date that is no earlier than one calendar year from the issuance date;
(III) be issued or confirmed by a "Qualified Bank" (as defined in
subsection b below that is acceptable to the Reinsured); (IV) be issued
on behalf of the Reinsurer as the "Applicant" and include such
indication in a boxed area that states it is "For Internal
Identification Purposes Only" (or similar words to that effect) and that
does not affect the terms of the Letter of Credit or the bank's
obligations thereunder; (V) be issued to the Reinsured as "Beneficiary"
and expressly indicate in the body of the Letter of Credit that the
definition of the "Beneficiary" under the Letter of Credit includes any
successor by operation of law of the Reinsured, including, without
limitation, any liquidator, rehabilitator, receiver, or conservator for
the Reinsured; (VI) be issued, presentable and payable at an office of
the issuing or confirming bank within the United States; (VII) be "clean
and unconditional" (meaning that the Letter of Credit makes no reference
to any other agreement, document or entity and provides that the
Beneficiary need only draw a sight draft under the Letter of Credit or
confirmation and present it to promptly obtain funds and that no other
document need be presented); (VIII) contain a statement that it is not
subject to any agreement, condition or qualification outside the Letter
of Credit itself; (IX) contain a statement to the effect that the
obligation of the issuing bank under the Letter of Credit is an
individual obligation of such bank and is in no way contingent upon
reimbursement with respect thereto; (X) be irrevocable and contain an
"evergreen clause" (meaning that the letter of credit or confirmation
cannot be revoked prior to its expiry date and that it will
automatically renew prior to the occurrence of the expiry date unless
written notice sent by U.S. registered mail has been delivered to the
Reinsured as Beneficiary at the notice address stipulated in subsection
c not less than 30 days prior to the expiry date); (XI) state that it is
subject to and governed by the laws of the State of Connecticut and the
1993 Revision of the Uniform Customs and Practice for Documentary
Credits of the International Chamber of Commerce (Publication 500) and
that, in the event of any conflict, the laws of the State of Connecticut
will control; and (XII) contain a provision for an extension of time, of
not less than 30 days after resumption of business, to draw against the
Letter of Credit in the event that one or more of the occurrences
described in article 17 of Publication 500 occurs.
b. The term "Qualified Bank" as used herein shall mean a bank or trust
company that: (I) is organized and existing, or in the case of a branch
or agency office of a foreign banking organization is licensed, under
the laws of the United States or any state thereof; (II) is regulated,
supervised and examined by United States Federal or state authorities
having regulatory authority over banks and trust companies; (III) is
determined by the Securities Valuation Office of the National
Association of Insurance Commissioners to meet such standards of
financial condition and standing as are considered necessary and
appropriate to regulate the quality of banks and trust companies whose
letters of credit will be acceptable to insurance regulatory
authorities; (IV) is not a foreign branch office of a bank or trust
company organized and existing in the United States; and (V) is not a
parent, subsidiary or affiliate of the Reinsured or the Reinsurer.
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c. Each Letter of Credit must indicate that notices of non-renewal will be
sent to the following address, or such other address as may be indicated
in a notice sent by the Reinsured to the issuing or confirming bank:
Chief Actuary-Annuities
American Skandia Life Assurance Corporation
X.X. Xxx 000
Xxxxxxx, Xxxxxxxxxxx 00000
d. All of the Letters of Credit must, in the aggregate, provide for a
maximum amount that can be drawn thereunder of a sum that is at least as
great as the Reinsured has indicated will be required under this
Agreement and all other related reinsurance agreements between the
Reinsurer and the Reinsured or any affiliate of the Reinsurer.
Approximately one month before the end of each calendar quarter, the
Reinsured will determine and communicate to the Reinsurer the aggregate
Credit Amount needed under all of the Letters of Credit as well as any
other information necessary for the Reinsurer to provide the Reinsured
the required Letters of Credit prior to end of each calendar quarter.
The cost for all Letters of Credit furnished and maintained under this
Agreement will be borne solely by the Reinsurer.
e. The Reinsurer and the Reinsured agree that any or all of the Letters of
Credit provided by the Reinsurer pursuant to the provisions of this
Agreement may be drawn upon in full or in part at any time,
notwithstanding any other provisions in this Agreement, and may be
utilized by the Reinsured or any successor by operation of law of the
Reinsured including, without limitation, any liquidator, rehabilitator,
receiver or conservator of the Reinsured for any of the following
purposes:
i. to reimburse the Reinsured for the Reinsurer's share of premiums
returned to the owners of contracts associated with the HDLT5
riders reinsured under this Agreement on account of cancellations
of such contracts;
ii. to reimburse the Reinsured for the Reinsurer's share of benefits
or losses paid by the Reinsured under the terms and provisions of
the HDLT5 riders reinsured under this Agreement;
xxx.xx fund an account with the Reinsured in an amount at least equal
to the deduction, for reinsurance ceded, from the Reinsured's
liabilities for the HDLT5 riders ceded under this Agreement. Such
amount shall include, but not be limited to, amounts for policy
reserves, reserves for claims and losses incurred (including
losses incurred but not reported), loss adjustment expenses, and
unearned premiums; and
iv. to pay any other amounts the Reinsured claims are due under this
Agreement.
All of the foregoing will be applied without diminution because of
insolvency on the part of the Reinsured or the Reinsurer.
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f. The Reinsurer further acknowledges and agrees that the Reinsured or any
successor by operation of law of the Reinsured including, without
limitation, any liquidator, rehabilitator, receiver or conservator of
the Reinsured may draw upon any or all of the Letters of Credit in full
or in part in the event that: (I) a notice of cancellation or
non-renewal has been issued by the issuing or confirming bank under any
of the Letters of Credit and the Reinsurer has not obtained one or more
replacement letters of credit that satisfy all of the applicable
requirements by that date which is ten days prior to the earliest expiry
date of the Letter of Credit or Letters of Credit as to which notice of
cancellation or non-renewal has been sent; or (II) the maximum amount
that may be drawn under any of the Letters of Credit has been reduced
other than in accordance with the Reinsured's direction or the Reinsured
has determined and communicated to the Reinsurer in accordance with the
provisions of subsection d. above a need to increase the aggregate
amount available under all of the Letters of Credit and the Reinsurer
has not obtained one or more replacement Letters of Credit or one or
more additional Letters of Credit so that all issued and outstanding
Letters of Credit that will remain in effect provide for coverage in an
amount sufficient to meet the requirements d above.
3. Trust Agreement. Any Trust Agreement to establish a trust account securing
the Credit Amount must satisfy the requirements below.
a. Fifteen days prior to the end of each calendar quarter or at any other
time, the Reinsured will determine and communicate the Credit Amount
to the Reinsurer. The Credit Amount shall be an amount at least equal
to the deduction for reinsurance ceded from the Reinsured's
liabilities for HDLT5 riders ceded under this Agreement. Such amount
shall include, but not be limited to, amounts for policy reserves,
reserves for claims and losses incurred (including losses incurred but
not reported), loss adjustment expenses, and unearned premiums. The
Reinsured will determine and communicate this amount to the Reinsurer
in order to enable the Reinsurer to ensure that the Trust is
maintained with a sufficient balance. All costs and expenses of
maintaining the trust will be borne by the Reinsurer and will not be
paid by any of the Assets held in the Trust.
b. The Reinsurer will deposit into the trust on or before a date agreed
to by the parties Assets that cause the market value of the trust to
meet or exceed 102% of the most recently communicated Credit Amount
immediately prior to the date for the deposit of Assets into the Trust.
c. The assets deposited in the trust account shall be valued according to
their current fair market value, and shall consist of only those
instruments detailed within the Trust Agreement, provided that such
investments are issued by an institution that is not a parent,
subsidiary, or an affiliate of either the Reinsured or the Reinsurer.
Within 3 days of a request from the Reinsured, the Reinsurer shall
provide a report setting forth the current fair market value of the
trust assets.
d. The Reinsurer shall, prior to depositing assets with the Trustee,
execute assignments, endorsements in blank, or transfer legal title to
the Trustee of all
Page 9 of 22
shares, obligations or any other assets requiring assignments, in
order that the Reinsured, may, whenever necessary, negotiate any such
assets without consent or signature from the Reinsurer or any other
entity.
e. The Reinsurer and the Reinsured agree that the assets in the trust
account may be drawn upon at any time, notwithstanding any other
provisions in this Agreement, and be utilized and applied by the
Reinsured or any successor by operation of law of the Reinsured
including, without limitation, any liquidator, rehabilitator, receiver
or conservator of the Reinsured, for the following purposes:
i. To reimburse the Reinsured for the Reinsurer's share of premiums
returned to the owners of contracts associated with the HDLT5
riders reinsured under this Agreement on account of cancellation
of such contracts;
ii. To reimburse the Reinsured for the Reinsurer's share of benefits
or losses paid by the Reinsured under the terms and provisions of
the HDLT5 riders reinsured under this Agreement;
iii. To fund an account with the Reinsured in an amount at least equal
to the deduction for reinsurance ceded from the Reinsured's
liabilities for the HDLT5 riders ceded under this Agreement. Such
amount shall include, but not be limited to, amounts for policy
reserves, reserves for claims and losses incurred (including
losses incurred but not reported), loss adjustment expenses, and
unearned premiums;
iv. To pay any other amounts the Reinsured claims are due under this
Agreement.
All of the foregoing will be applied without diminution because of
insolvency on the part of the Reinsured or the Reinsurer or the inability
of the Reinsured to pay all or any part of a claim.
The Reinsured agrees to return to the Reinsurer any amounts withdrawn which
are in excess of the actual amounts required for i, ii and iii above, or in
the case of iv, such amounts that are in excess of the amounts ultimately
determined to be due under this Agreement. In addition, the Reinsured shall
make interest payments to the Reinsurer on amounts withdrawn pursuant to
item (iii) above, to the extent such interest is not needed to be retained
to maintain the account at the Credit Amount. The rate of interest charged
will be equal to XXXXX'x 30-Day AAA Rate, but no greater than the Prime
Rate of interest as published in Federal Reserve Bulletin. The XXXXX'x
30-Day AAA Rate and the Prime Rate shall be determined on the first
business day of each month in which interest is payable.
Following the receipt of a new Credit Amount, but prior to the start of the
new calendar quarter, the Reinsurer shall have the right to seek approval
from the Reinsured to withdraw from the trust account a portion of the
assets contained therein and to transfer such assets to the Reinsurer,
provided that after such withdrawal and transfer, the market value of the
trust account is no less than one hundred and two
Page 10 of 22
percent (102%) of the Credit Amount most recently determined and
communicated by the Reinsured to the Reinsurer. The Reinsured shall be the
sole judge of the application of this provision, but shall not unreasonably
nor arbitrarily withhold its approval.
f. The Trust shall remain in effect until the later of the termination of
this Reinsurance Agreement or the full satisfaction and discharge of
any and all liabilities and obligations owed by the Reinsurer to the
Reinsured, unless the Reinsurer and the Reinsured mutually agree in
writing to terminate the Trust at an earlier date. Notwithstanding any
provision contained in the Trust Agreement, the Reinsurer shall not
seek to terminate the trust unless it has written permission from the
Reinsured. The Reinsured shall not arbitrarily or unreasonably
withhold such permission if another form of collateral acceptable to
the Reinsured is provided by the Reinsurer for the Credit Amount.
g. Prior to the Reinsurer's establishing or funding the Trust, the
Reinsured shall submit a copy of the Trust Agreement to applicable
state regulatory authorities for approval, if such approval is
required by state insurance law or regulations. The Reinsured shall
promptly inform the Reinsurer of such approval or of any changes to
such documents required by regulatory authorities.
ARTICLE IX
General Provisions
1. Reinsurance Conditions. The reinsurance is subject to the same limitations
and conditions as the HDLT5 riders written by the Reinsured on which the
reinsurance is based.
2. Expenses. In no event will the Reinsurer have any liability for any
extra-contractual damages which are rendered against the Reinsured as a
result of administrative errors, acts, omissions or course of conduct
committed by the Reinsured in connection with the annuity contracts
associated with the HDLT5 riders reinsured under this Agreement. In no
event will the Reinsured have any liability for extra-contractual damages
against the Reinsurer as a result of acts, omissions, or course of conduct
committed by the Reinsurer in connection with the reinsurance of the HDLT5
riders under this Agreement.
3. Oversights. If failure to pay any premium due or to perform any other act
required by this Agreement is unintentional and is caused by
misunderstanding or oversight, the Reinsured and the Reinsurer will adjust
the situation to what it would have been had the misunderstanding or
oversight not occurred.
4. Inspection. At any reasonable time, the Reinsurer and the Reinsured may
inspect the original papers and any other books or documents at the Home
Office of the other relating to or affecting reinsurance under this
Agreement.
Page 11 of 22
It is mutually agreed by the Reinsured and the Reinsurer that any
information that is made available for inspection under this section of the
Agreement will be kept confidential and under no circumstances may this
information be disclosed to, or made available for inspection by, any third
party without the prior written consent of the other contracting party.
5. Assignment or transfer. In no event will either the Reinsured or the
Reinsurer assign any of its rights, duties and or obligations under this
Agreement without the prior written approval of the other party. Such
approval will not unreasonably be withheld.
In no event will either the Reinsured or the Reinsurer transfer either the
HDLT5 riders reinsured under this Agreement or the reinsurance without the
prior written approval of the other party. Such approval will not
unreasonably be withheld.
No assignment or transfer shall be effective unless such assignment or
transfer is (i) filed with the Reinsured's appropriate domicilary
regulator(s) at least 30 days prior to the proposed effective date,
(ii) not disapproved, (iii) made in writing, and (iv) signed by the parties
hereto.
6. If any provision of this Agreement will be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will
not be affected thereby. This Agreement will be construed in accordance
with the applicable federal law and the laws of the State of Connecticut.
7. Premium Taxes. The Reinsurer will reimburse the Reinsured for any
applicable premium taxes incurred that are directly attributable to the
reinsured HDLT5 riders.
8. Insolvency. In the event of the declared insolvency of the Reinsured, and
the appointment of a domiciliary liquidator, receiver, conservator or
statutory successor for the Reinsured, this reinsurance will be payable
immediately upon demand, with reasonable provision for verification,
directly to the Reinsured or its domiciliary liquidator, receiver, or
conservator or statutory successor, on the basis of the liability of the
Reinsured without diminution because of the insolvency of the Reinsured or
because the liquidator, receiver, conservator or statutory successor of the
Reinsured has failed to pay all or a portion of any claim.
Every liquidator, receiver, conservator or statutory successor of the
Reinsured or guaranty fund or association will give written notice to the
Reinsurer of the pendency of a claim involving the Reinsured indicating
which of the underlying insurance contracts would involve possible
liability on the part of the Reinsurer to the Reinsured or its domiciliary
liquidator, receiver, conservator or statutory successor, within a
reasonable amount of time after the claim is filed in the conservation,
liquidation, receivership or other proceeding. Failure to give such notice
shall not excuse the obligation of the Reinsurer unless it is substantially
prejudiced thereby.
During the pendency of any claim, the Reinsurer may investigate the same
and interpose, at its own expense, in the proceeding where that claim is to
be adjudicated, any defense or defenses that it may deem available to the
Reinsured, to its contract owner, or to any
Page 12 of 22
liquidator, receiver or statutory successor of the Reinsured or guaranty
fund or association. The expenses thus incurred by the Reinsurer will be
chargeable, subject to approval of the applicable court, against the
Reinsured as part of the expense of conservation or liquidation to the
extent of a pro rata share of the benefit which may accrue to the Reinsured
as a result of the defense undertaken by the Reinsurer.
This reinsurance will be payable directly to the Reinsured or to its
domiciliary liquidator, receiver, conservator or statutory successor,
except as expressly required otherwise by applicable insurance law.
9. Insolvency of the Reinsurer. In the event of the insolvency, bankruptcy,
receivership, rehabilitation or dissolution of the Reinsurer, the Reinsured
may retain all or any portion of any amount then due or which may become
due to the Reinsurer under this Agreement and use such amounts for the
purposes of paying any and all liabilities of the Reinsurer incurred under
this Agreement. When all such liability hereunder has been discharged, the
Reinsured will pay the Reinsurer, its successor or statutory receiver, the
balance of such amounts withheld as may remain.
10. Confidentiality. The Reinsurer agrees to regard and preserve as
confidential all information and material which is related to the
Reinsured's business and/or customers that may be obtained by the Reinsurer
from any source as a result of this Agreement. The Reinsurer will not,
without first obtaining the Reinsured's prior written consent disclose to
any person, firm or enterprise, or use for its own benefit or for the
benefit of any third party any information designated by the Reinsurer as
Confidential Information or Customer Information except as necessary for
retrocession purposes, external auditors, as required by court order, or as
required by law or regulation. "Confidential Information" includes, but is
not limited to any and all financial data, statistics, programs, research,
developments, information relating to the Reinsured's insurance and
financial products, planned or existing computer systems architecture and
software, data, and information of the Reinsured as well as third party
confidential information to which the Reinsured has access. "Customer
Information" includes all information provided by or at the direction of
the Reinsured about a customer of the Reinsured or any affiliates of the
Reinsured, including but not limited to name, address, telephone number,
email address, account or policy information, and any list or grouping of
customers.
Notwithstanding the foregoing, this provision shall not apply with respect
to disclosing of Confidential Information which is or becomes publicly
known through no wrongful act of the Reinsurer; or is received from a third
party without similar restriction and without breach of this Amendment; or
is independently developed by the Reinsurer; or is approved for release by
written authorization of the Reinsured; or is placed in or becomes party of
the public domain pursuant to or by reason of operation of law. The
foregoing exceptions do not apply to the disclosure of Customer
Information, which may not be disclosed without the Reinsured's prior
written consent.
These provisions regarding Confidential Information shall survive the
termination of the parties' obligations under this Agreement for a period
of two years, and the provisions
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regarding Customer Information shall survive the termination of the parties'
obligations under this Agreement indefinitely.
The Reinsurer certifies that it has implemented and will maintain an
effective information security program to protect the Reinsured's Customer
Information, which program includes administrative, technical, and physical
safeguards:
(a) to ensure the security and confidentiality of Customer Information;
(b) to protect against any anticipated threats or hazards to the security
or integrity of such Customer Information; and
(c) to protect against unauthorized access to or use of Customer
Information which could result in substantial harm or inconvenience
to the Reinsured or its affiliates, or to customers of any of them.
In the event that the Reinsurer is in material breach of any provisions of
these provisions, it shall immediately advise the Reinsured and take steps
to remedy such breach, including but not limited to protecting customers,
the Reinsured, and the Reinsured's affiliates against the consequences of
any disclosure or use of Customer Information in violation of these
provisions.
11. Notices. Notices regarding this Agreement shall be in writing and deemed
delivered if personally delivered, sent via facsimile or other agreed upon
electronic means, or dispatched by certified or registered mail, return
receipt requested, postage prepaid, addressed to the parties as follows:
Chief Actuary-Annuities
American Skandia Life Assurance Corporation
X.X. Xxx 000
Xxxxxxx, Xxxxxxxxxxx 00000
Copy to: Prudential Annuities-Actuarial
Fax No: 000-000-0000
Pruco Reinsurance Ltd.
c/x Xxxxx Management Services (Bermuda) Ltd.
Xxxxxxxx Xxxx
00 Xxxxxxxx Xxxxxx
Xxxxxxxx XX00, Xxxxxxx
Copy to: Pruco Reinsurance Ltd-Xxxxxxx Xxxxxx
Fax No: 000-000-0000
Notice shall be deemed given on the date it is deposited in the mail or
sent via facsimile or other electronic means in accordance with the
foregoing. Any party may change the address to which to send notices by
notifying the other party of such change of address in writing in
accordance with the foregoing.
Page 14 of 22
ARTICLE X
DAC Tax Agreement
1. The Reinsured and the Reinsurer, herein collectively called the "Parties",
or singularly the "Party", hereby enter into an election under Treasury
Regulations Section 1.848-2(g) (8) as promulgated under the Internal
Revenue Code, as found in Title 26 of the United States Code, hereinafter
referred to as the Regulations and the IRC. Both parties agree to make the
election contemplated by this Section 14 by timely attaching to their U.S.
tax returns the schedule contemplated by Section 1.848-2(g)(8)(ii) of the
Regulations. Furthermore, the parties agree to the following:
a. For each taxable year under this Agreement, the party with the net
positive consideration, as defined in the Regulations, will capitalize
specified policy acquisition expenses with respect to this Agreement
without regard to the general deductions limitation of Section 848
(c) (1);
b. The Reinsured and the Reinsurer agree to exchange information pertaining
to the net consideration under this Agreement each year to insure
consistency or as otherwise required by the U.S. Internal Revenue
Service;
c. The Reinsured will submit to the Reinsurer by May 1 of each year its
calculation of the net consideration for the preceding calendar year.
d. The Reinsurer may contest such calculation by providing an alternative
calculation to the Reinsured in writing within 30 days of the
Reinsurer's receipt of the Reinsured's calculation. If the Reinsurer
does not so notify the Reinsured, the Reinsurer will report the net
consideration as determined by the Reinsured in the Reinsurer's tax
return for the previous calendar year;
e. If the Reinsurer contests the Reinsured's calculation of the net
consideration, the parties will act in good faith to reach an agreement
as to the correct amount within 30 days of the date the Reinsurer
submits its alternative calculation. If the Reinsured and the Reinsurer
do not reach agreement on the net amount of consideration within such
30-day period, then the net amount of consideration for such year shall
be determined by an independent accounting firm acceptable to both the
Reinsured and the Reinsurer within 20 days after the expiration of such
30-day period.
f. The Reinsured and the Reinsurer agree that this election shall first
be effective for the 2006 calendar tax year and will be effective for
all subsequent taxable years for which this Agreement remains in
effect.
The Reinsured represents and warrants that it is subject to U.S. taxation under
either Subchapter L of Chapter 1, or Subpart F of Subchapter N of Chapter 1 of
the IRC of
Page 15 of 22
1986, as amended. The Reinsurer represents and warrants that it has duly
elected to be subject to U.S. taxation under Section 953(d) of the IRC of
1986, as amended.
ARTICLE XI
Recapture
The business reinsured under this Agreement will not be eligible for recapture,
except through mutual agreement of both parties.
ARTICLE XII
Arbitration
1. Any controversy or claim arising out of or relating to this Agreement will
be settled by arbitration.
2. There must be three arbitrators who will be active, prior or retired
officers of life insurance companies other than the contracting companies
or their subsidiaries or affiliates. Each of the contracting companies will
appoint one of the arbitrators and these two arbitrators will select the
third.
In the event either contracting company fails to choose an arbitrator
within thirty (30) days after the other contracting company has given
written notice of its arbitrator appointment, the contracting company which
has given written notice may choose two arbitrators who will in turn choose
a third arbitrator before entering arbitration. If the two arbitrators are
unable to agree upon the selection of a third arbitrator within thirty
(30) days following their appointment, each arbitrator will nominate three
candidates within ten (10) days thereafter, and the final selection will be
made by a court of competent jurisdiction from among the submitted names
(three each) or any other persons the court finds to be a qualified and
impartial arbitrator.
3. With regard to (2) above, arbitration must be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association
that will be in effect on the date of delivery of demand for arbitration.
4. Each contracting company will pay its arbitrator and its arbitration
expenses and the two companies will share equally the third arbitrator's
expenses.
5. The award agreed to by the arbitrators will be final and binding upon the
parties, and judgment may be entered upon it in any court having
jurisdiction.
Page 16 of 22
ARTICLE XIII
Duration of Agreement
1. This Agreement may be terminated with respect to new HDLT5 riders at any
time by either party giving ninety (90) days' written notice of
termination. The day the notice is deposited in the mail addressed to the
Home Office or to an Officer of either company will be the first day of the
ninety (90) day period. No termination shall be effective unless such
termination is (i) filed with the Reinsured's appropriate domicilary
regulator(s) at least 30 days prior to the proposed effective date,
(ii) not disapproved, (iii) made in writing, and (iv) signed by the parties
hereto.
2. During the ninety (90) day period, this Agreement will continue to remain
in force.
3. After termination, the Reinsurer and the Reinsured will remain liable for
all reinsurance that became effective prior to the termination of the
Agreement.
ARTICLE XIV
Entire Agreement
This Agreement including any Schedules and Amendments will constitute the
entire agreement between the parties with respect to the business being
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.
No change or modification to the Agreement shall be effective unless such
change or modification is (i) filed with the Reinsured's appropriate
domiciliary regulator(s) at least 30 days prior to the proposed effective date,
(ii) not disapproved, (iii) made in writing, and (iv) signed by the parties
hereto.
Page 17 of 22
ARTICLE XV
Execution
In witness of the above, this Agreement is signed in duplicate on the execution
date(s) and at the places indicated and will be effective as of the 11 day of
December 2006.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
At Newark, New Jersey
Executed On:
---------------------------
Signature:
---------------------------
By:
---------------------------
Title:
---------------------------
PRUCO REINSURANCE LTD.
At Hamilton, Bermuda
Executed On:
---------------------------
Signature:
---------------------------
By:
---------------------------
Title:
---------------------------
Page 18 of 22
SCHEDULE A
Business Reinsured
Form Name and Type First Available Issue Date Form Number
1. ----------------------- -------------------------- ---------------------
HDLT5 Riders November 20, 2006 RID-HDLT5(9/06)
SCH-HDLT5(9/06)
2. Claims arising under the HDLT5 rider are equal to the remaining HDLT5
rider benefits
under the contract after permitted withdrawals have reduced the contract's
account value
to zero, paid as due to the extent that the HDLT5 benefit is greater than
the benefit under
the base contract or other riders attached to the contract.
3. A prototype of the HDLT5 Rider Form is attached.
Page 19 of 22
SCHEDULE B
Monthly Settlement Report
A. Due Reinsurer
The Monthly Premium will be calculated as follows: after the end of each
month the monthly equivalent of the lesser of a 60 basis points annualized
fee for a Designated Life or the then current rider fee will be applied to
the sum of 1/2 of the Account balances for all contracts covered under
this Agreement as of the last business day of such month reported and 1/2
of the Account balances for all contracts covered under this Agreement as
of the last business day of the preceding month.
B. Due Reinsured
I. Any claim associated with the HDLT5 benefit as defined in the rider.
II. A monthly expense allowance calculated as follows: after the end of
each month the monthly equivalent of an annual 1 basis point charge
will be applied to the sum of 1/2 of the Account balances for all
contracts covered under this Agreement as of the last business day of
such month reported and 1/2 of the Account balances for all contracts
covered under this Agreement as of the last business day of the
preceding month.
III.An annual repayment of fees received by the Reinsurer in excess of
those collected by the Reinsured on the Benefit Fixed Rate Account as
indicated in the January report after the end of each calendar year.
This amount will be calculated as follows: after the end of each
calendar year if the annual average credited rate plus 60 basis points
for a Designated Life is in excess of the annual HDLT5 benefit
portfolio yield, that excess, up to 60 basis points, will be applied
to the average Benefit Fixed Rate Account balance for the calendar
year.
C. Balance During the Period = A - B
. If positive, the balance is due to be paid by the Reinsured.
. If negative, the absolute value of the balance is due to be paid by the
Reinsurer
The above information will be provided by the Reinsured on an aggregate
basis. The individual insurance contract data will be available to the
Reinsurer on a computer tape or diskette upon request.
Page 20 of 22
SCHEDULE C
Monthly Business Management Report
A. Informational Reports
1. Reserve Report showing the statutory reserves, Account Values and
Surrender Value.
2. Production report with premiums (split by initial and additional
premiums) and contract counts, including the number of insurance
contracts in force at the beginning and at the end of the month.
3. Annual report showing the average annual credited rate, the annual HDLT5
benefit portfolio yield and the average account value in the Benefit
Fixed Rate Account during the calendar year with the January report
following the end of each calendar year.
Page 21 of 22
SCHEDULE D
Annual Report
The annual report will provide the following information:
"Exhibit of Number of Policies, Contracts and Certificates for Annuities":
from the NAIC-prescribed annual statement
Page 22 of 22
