| 1.01 |
The
Company agrees to cede and the Reinsurer agrees to accept reinsurance
of
Policies as set forth in Schedule A and in accordance with the terms
of
this Agreement. The term Policy/Policies and other terms used in
this
Agreement are defined in Article 25, “Definitions.” Occasionally, certain
terms may be defined in the body of the Agreement as necessary to
promote
readability. In all cases, defined terms will be capitalized throughout
this Agreement. This excludes article headings and
subsections.
|
| 1.02 |
Policies
are reinsured in accordance with the terms contained herein. The
intent of
this Agreement is to pass all of the underlying risks assumed on
the
Policies, including the investment risk, to the Reinsurer without
necessitating the Company to transfer the assets or their cash equivalents
to the Reinsurer. In the event any additional benefits are reinsured,
a
specific addendum shall be attached hereto describing the terms of
reinsurance associated with such benefits.
|
| 1.03 |
The
parties anticipate and acknowledge that the Reinsurer will cede a
portion
of the Policies reinsured under this Agreement in excess of the
Reinsurer's Retention to one or more
retrocessionaires.
|
| 1.04 |
The
Company agrees to:
|
| a. |
cede
a Policy to the Reinsurer as Automatic Reinsurance in accordance
with
Article 3, “Automatic Reinsurance;”
or
|
| b. |
submit
a Policy to the Reinsurer or its facultative underwriting Designee
to
facilitate Facultative Reinsurance consideration in accordance with
Article 4, “Facultative Reinsurance;”
or
|
| c. |
cede
a Policy as a Continuation to the Reinsurer, in accordance with Article
12, “Policy Changes, Continuations, Reductions and
Increases.”
|
| 1.05 |
The
Reinsurer may designate one or more Designees, as per Article 25,
“Definitions”, to perform certain of its obligations and functions under
this Agreement, including, without limitation, claims payments on
the
Reinsurer’s behalf, performing facultative underwriting reviews and
extending facultative offers, and performing claims and underwriting
reviews or audits. The Reinsurer agrees to notify the Company of
each of
its Designees. All Designee functions are more fully described in
the body
of this Agreement.
|
| 2.01 |
Method
of Reinsurance.
The method of reinsurance shall be modified coinsurance and shall
be based
upon the Reinsured Amount of a
Policy.
|
| 2.02 |
Applicable
Policies.
Only those Policies issued by the Company and sold, fully or
partially, through a Member Firm at the time the policy application
is taken and after the effective date of this Agreement, are eligible
for
reinsurance hereunder.
|
| 2.03 |
License.
This Agreement applies only to the Policies issued and delivered
by the
Company in a jurisdiction in which the Company is properly
licensed.
|
| 2.04 |
Compliance.
The Company represents that it is, and shall use its best efforts
to
remain in compliance with all laws, regulations, judicial and
administrative orders applicable to the Policies, including, but
not
limited to, sanctions administered by the U.S. Treasury Department's
Office of Foreign Assets Control ("OFAC"), as such sanctions may
be
amended from time to time, and the maintenance of an effective anti-money
laundering policy (collectively “Laws”). Neither the Company nor
the Reinsurer
shall be required to take any action under this Agreement that would
result in it being in violation of said Laws, including making any
payments in violation of the Law. Should either party discover a
reinsurance payment has been made in violation of the Law, it shall
notify
the other party and the parties shall cooperate in order to take
all
necessary corrective actions, including the return of the payments
to the
other party, unless prohibited by
Law.
|
| 2.05 |
Currency.
All amounts expressed in this Agreement and all payments made pursuant
to
the terms of this Agreement shall be in United States of America
dollars.
|
| 3.01 |
Company
Retention.
The Company shall retain, and shall not otherwise reinsure, except
aggregate, catastrophic and stop loss coverage, an amount of insurance
on
each life equal to its Quota Share Percentage Retained up to its
Maximum
Dollar Retention on the basis as set forth in Schedule B. Amounts
retained
by the Company on other individual life insurance policies in force
shall
be taken into account when determining the Company’s retention for
purposes of this Agreement.
|
| 3.02 |
Underwriting
Guidelines.
The Company complies with its Underwriting Guidelines for fully
underwritten and guaranteed issue business, as specified in the attached
Exhibits A and B. Other policies issued pursuant to any modified
or
special underwriting programs, including, but not limited to, simplified
issues, table shaving, short form applications, internal and external
exchanges, or other non-customary non-medical underwriting shall
not
qualify for Automatic Reinsurance. In no event shall any exceptions
be
made to the above without prior written consent from the
Reinsurer.
|
| 3.03 |
Automatic
Acceptance Limits.
The sum of the amount of individual life insurance issued by the
Company
on the life, and the amount of life insurance applied for from the
Company, on the current application shall not exceed the Automatic
Acceptance Limits as set forth in Schedule B. In determining issued
and
applied for amounts to be compared to the Automatic Acceptance Limits,
Ultimate Amounts shall be considered.
|
| 3.04 |
Automatic
In Force and Applied For Limits (aka Jumbo or Participation
Limits).
The sum of the amount of individual life insurance in
force
on
the life in all companies, including replacements and any known Ultimate
Amounts, and the amount of life insurance applied
for
from all companies, on the current application shall not exceed the
Automatic In Force and Applied For Limits (aka Jumbo or Participation
Limits) as set forth in Schedule B.
|
| 3.05 |
Occupation.
The proposed insured shall not be employed in an excluded occupation
as
shown in Schedule A.
|
| 3.06 |
Residency
and Travel.
The proposed insured meets the Company’s special underwriting requirements
pertaining to foreign residents at the time of issue, as shown in
Exhibit
F.
|
| 3.07 |
Compliance.
The Policy is issued and maintained in accordance with all Laws and
the
Company assures the Policy does not involve individuals appearing
on the
OFAC Specifically Designated Nationals or Blocked Persons list or
residing
in a prohibited country.
|
| 4.01 |
Application.
An
application form substantially similar to the “Facultative Reinsurance
Application Form” set forth as Exhibit C shall be used by the Company in
the manner specified in Schedule C.
|
| 4.02 |
Underwriting
Papers.
Copies of the original insurance application, medical examiner’s reports,
attending physician statements, inspection reports, financial information
and all other papers and information obtained by the Company concerning
insurability of the risk shall accompany the Facultative Reinsurance
Application Form. If there are outstanding underwriting requirements
not
yet available, the Company shall notify the Reinsurer and its facultative
underwriting Designee of such requirements. In addition, the Company
agrees to provide any subsequent information received pertinent to
the
risk assessment to the Reinsurer and its facultative underwriting
Designee
as soon as possible following receipt of such information by the
Company.
At the Reinsurer's direction, the Company shall submit the Facultative
Reinsurance Application Form for reinsurance and all supporting and
related documents and information directly to the Reinsurer or the
facultative underwriting Designee.
|
| 4.03 |
Reinsurer’s
or Designee’s Actions.
Following receipt of the Facultative Reinsurance Application Form,
as set
forth in Exhibit C, and the information as described above, the Reinsurer
or its facultative underwriting Designee agrees to promptly examine
the
underwriting information and notify the Company of any one of the
following:
|
|
d.
|
a
need for additional underwriting information to further consider
making a
facultative reinsurance offer; or
|
| 4.04 |
Expiration
of Facultative Offer.
Any offer from the Reinsurer or its facultative underwriting Designee
to
reinsure the Policy expires one hundred twenty (120) days after the
offer
is made, unless the facultative offer specifies otherwise or the
Reinsurer
extends the offer period in writing. The Company may accept the
facultative reinsurance offer within the offer period and shall notify
the
Reinsurer of such acceptance by following the procedures outlined
in
Schedule C.
|
| 4.05 |
Conflicts.
The terms and conditions of any facultative offer shall supersede
the
terms of the Agreement in case of conflicts between the two; otherwise
reinsurance of a Policy on a Facultative Reinsurance basis shall
comply
with the terms of this Agreement.
|
|
a.
|
For
Automatic Reinsurance, if the conditions for Automatic Reinsurance
coverage under Article 3, “Automatic Reinsurance” of this Agreement are
satisfied, the Reinsurer’s liability under the Company’s conditional
receipt or temporary insurance agreement shall commence simultaneously
with the Company's liability.
|
| b. |
For
Facultative Reinsurance, the Reinsurer shall only be liable for benefits
paid, pursuant to the terms and conditions of the Company's conditional
receipt or temporary insurance agreement, if the Reinsurer or its
facultative underwriting Designee has made a facultative offer and
the
offer is final and does not include any further underwriting action
to be
satisfied by the Company.
|
| c. |
For
all Automatic and Facultative cases, the conditional receipt or temporary
insurance liability applies only once on any given life regardless
of how
many receipts were issued or initial premiums were accepted by the
Company. After a Policy has been issued, no reinsurance benefits
are
payable under this conditional receipt or temporary insurance
provision.
|
|
d.
|
In
the event that the Company’s rules with respect to cash handling and the
issuance of conditional receipt or temporary insurance are not followed,
the Reinsurer shall participate in the liability provided (a), (b),
and
(c) above are satisfied and the Company does not knowingly allow
such
rules to be violated or condone such a
practice.
|
| e. |
For
all Automatic and Facultative cases, reinsurance coverage under a
conditional receipt or temporary insurance provision is limited to
the
Reinsurer’s share of the conditional receipt or temporary insurance limits
shown in Schedule B, as well as the Automatic Acceptance Limits.
All
provisions of Article 8, “Death Claims” apply to such a
claim.
|
| 5.02 |
Automatic
Reinsurance.
The Reinsurer’s liability for its share of a Policy ceded automatically,
as defined in this Agreement, shall commence simultaneously with
the
Company’s liability.
|
| 5.03 |
Facultative
Reinsurance.
The Reinsurer’s liability for a Policy ceded facultatively, as defined in
this Agreement, facultatively under this Agreement shall commence
when
both:
|
|
a.
|
the
Company accepts the Reinsurer’s or its facultative underwriting Designee’s
offer to reinsure by making a dated notation of its acceptance in
its
underwriting file; and
|
| b. |
the
Policy has been issued.
|
| a. |
the
date the Company's liability on such Policy is terminated under the
terms
of its Policy with the policyholder; or
|
| b. |
the
date this Agreement is terminated by the Company or the Reinsurer
as
specifically provided for and limited by this
Agreement.
|
| 6.01 |
Reinsurance
Premiums.
The Company agrees to pay Reinsurance Premiums to the Reinsurer for
each
and every accounting period, for the duration of this Agreement on
a
Policy. For purposes of this Agreement, the term Reinsurance Premiums
shall mean the premium collected by the Company, for such then accounting
period, from the policyholder times the Quota Share Percentage Reinsured
as set forth in Schedule B.
|
| 6.02 |
Decrease
in Modified Coinsurance Reserve.
The Company shall pay the Reinsurer, for each and every accounting
period
for the duration of this Agreement, the amount by which the total
modified
coinsurance reserve, as defined in Article 10, “Reserves”, in the
aggregate on the Policies has declined since the beginning of such
then
current accounting period, if any, as defined in Schedule C. The
amount of
such decrease for such then current accounting period shall be determined
by subtracting the amount of the modified coinsurance reserve on
the
Policies as of the end of the current accounting period, from the
amount
of the modified coinsurance reserve on the Policies as of the end
of the
immediately preceding accounting period. Should such calculation
result in
a positive number, this shall be the amount of the decrease for the
current accounting period. Should such calculation result in a negative
number, the amount of decrease for the current accounting period
shall be
zero or none. The result is further multiplied by the Quota Share
Percentage Reinsured, as set forth in Schedule
B.
|
| 6.03 |
Consideration
for Net Investment Income.
The Reinsurer is obligated, in accordance with Article 7.03, “Increase in
Modified Coinsurance Reserve”, to return all or a portion of the initial
Reinsurance Premium to the Company as an initial modified coinsurance
adjustment. Under coinsurance, the Reinsurer would retain all such
monies
for its own account and enjoyed the investment income thereon to
help
defray the liabilities of the Policies. However, under modified
coinsurance, the Reinsurer has allowed the Company to retain such
assets
but it is not the intent of the parties that the Reinsurer should
be
denied the investment income on such monies. Therefore, the Company
agrees
to remit, for each and every accounting period for the duration of
this
Agreement, as part of the quarterly cash flow settlements to the
Reinsurer, the investment income on such assets as provided for in
Schedule E. Furthermore, the parties agree that retention of the
assets by
the Company is not intended to in any way diminish or dilute the
investment risk transferred to the Reinsurer through the calculation
of
the investment income amount in Schedule E. The result is further
multiplied by the Quota Share Percentage Reinsured, as set forth
in
Schedule B.
|
| 7.01 |
Commissions.
The Reinsurer shall reimburse the Company for the commissions and
overrides actually paid by the Company for such then current accounting
period on the Policies eligible for commission for each and every
accounting period for the duration of this Agreement, provided no
increase
in the dollar amount of compensation or reimbursement has been made
in any
producer or agency contract without the express written consent of
the
Reinsurer. The Reinsurer shall not unreasonably withhold such consent.
The
result is further multiplied by the Quota Share Percentage Reinsured,
as
set forth in Schedule B.
|
| 7.02 |
Administration
Expense Allowance. The
Reinsurer shall reimburse the Company for the expenses it incurs
from the
on-going cost of administration on the Policies. Such amount shall
be as
defined in Schedule D. Schedule D charges shall remain in effect
for the
first three (3) years of this Agreement, but may be renegotiated
at three
(3) year intervals thereafter.
|
| 7.03 |
Increase
in Modified Coinsurance Reserve.
The Reinsurer shall pay the Company, for each and every accounting
period
for the duration of this Agreement, the amount by which the modified
coinsurance reserve, as defined in Article 10, “Reserves”, in the
aggregate on the Policies has increased since the beginning of such
then
current accounting period, if any, as defined in Schedule C. The
amount of
such increase for such then current accounting period shall be determined
by subtracting the amount of the modified coinsurance reserve on
the
Policies as of the beginning of the then current accounting period,
from
the amount of the modified coinsurance reserve on the Policies as
of the
end of the then current accounting period. Should such calculation
result
in a positive number, this shall be the amount of the increase for
the
current accounting period. Should such calculation result in a negative
number, the amount of the increase for the current accounting period
shall
be zero or none. The result is further multiplied by the Quota Share
Percentage Reinsured, as set forth in Schedule
B.
|
| 7.04 |
Claims.
The Reinsurer shall pay the Company the Reinsured Amount on any claim
paid
by the Company pursuant to a Policy, in accordance with Article 8,
“Death
Claims” and Article 9, “Disputed Claims.” However, for the portion of the
Reinsured Amount in excess of the Reinsurer’s Retention, it is
acknowledged and understood by the parties that such excess payment
shall
be paid by the Reinsurer’s claims paying Designee directly to the Company.
The Reinsurer’s payment along with the payment made by the claims paying
Designee shall constitute the Reinsurer’s full liability and shall release
the Reinsurer from any further liability associated with such claim.
The
Reinsurer’s liability to pay is expressly conditioned on the claim
qualifying for reimbursement as set forth in Exhibit I. If the claim
qualifies for reimbursement pursuant to the conditions as set forth
in
Exhibit I and any claims paying Designee fails to make a payment,
the
Reinsurer must make that payment as if the claims paying Designee
did not
exist. The Reinsurer shall be entitled to recover from the Company,
through offset or otherwise, any amounts paid by the Reinsurer on
claims
that are subsequently determined as not qualifying for
reimbursement.
|
| 7.05 |
Claim
Expenses.
The Reinsurer shall pay its proportionate share of expenses incurred
in
connection with a Policy claim, in accordance with Article 8.06,
“Expenses.”
|
| 7.06 |
Allowances
for Premium Taxes.
The Reinsurer shall reimburse the Company for the state premium taxes
payable by the Company for the Policies in an amount equal to the
Reinsurance Premiums for such then current accounting period, as
defined
in Article 6.01, “Reinsurance Premiums”, multiplied by the state specific
tax, as defined in Exhibit G, for the insured’s state of residence, for
each and every accounting period for the duration of this
Agreement.
|
| 7.07 |
Quarterly
Cash Flow Settlement
The parties agree to pay a quarterly cash flow settlement on the
Policies
as set forth in Schedule C.
|
| 8.01 |
Proofs.
The Company shall promptly provide the Reinsurer with proper claim
proofs,
including a copy of the proof of payment by the Company, a copy of
the
insured’s death certificate, and the necessary police reports in the event
of an accidental death. In addition, for disputed claims in the
contestable period, the Company shall also send the Reinsurer and
its
claims paying Designee a copy of all claims papers in connection
with the
claim. The Reinsurer or its claims paying Designee reserves the right
to
request additional information on any
claim.
|
| 8.02 |
Claims
Adjudication.
The Company agrees to act in good faith and in accordance with its
standard claims practices applicable for all claims, regardless if
reinsured, when enforcing the terms and conditions of the Policies
in
connection with the administration, negotiation, payment, denial
or
settlement of a claim.
|
| 8.03 |
Payment.
For non-disputed claims, the Reinsurer shall accept the good faith
decision of the Company and shall pay the Company the Reinsured Amount
on
which Reinsurance Premiums have been computed and paid, once the
Company
provides proper claim proofs in accordance with Article 8.01. However,
such payment shall be subject to the terms and conditions specified
in the
attached Exhibit I. Payment of the Reinsured Amount for the reinsured
death proceeds shall be made in one lump sum, regardless of the Company’s
settlement options.
|
| 8.04 |
Payment
Compliance.
A
claim shall not be payable if said payment would cause Reinsurer
or and
its claims paying Designee to be in violation of Laws applicable
to the
Reinsurer.
|
| 8.05 |
Maximum
Reinsurance Recoverable.
The total reinsurance recoverable from all reinsurers by the Company,
including the Reinsurer and claims paying Designee, shall not exceed
the
Company’s total contractual liability on the Policy, less the amount
retained by the Company. The maximum reinsurance death benefit payable
to
the Company under this Agreement is the Reinsured Amount specifically
reinsured with the Reinsurer. Any settlement amounts beyond the Reinsured
Amount voluntarily made by the Company are not reinsured hereunder.
The
Reinsurer shall pay its proportionate share of the interest that
the
Company pays on the death proceeds until the Company’s date of settlement,
provided that the interest rate applied does not exceed the amount
provided by state statute.
|
| 8.06 |
Expenses.
The Reinsurer’s liability shall include reimbursement for certain
reasonable documented third-party expenses incurred by the Company
in
connection with, investigating, defending or settling a Policy claim,
provided the Reinsurer has not discharged its liability pursuant
to
Article 9, “Disputed Claims”. In no event shall such expense reimbursement
include any of the following:
|
| a. |
the
Reinsurer has actively taken control of the litigation and is directing
the Company’s action; and
|
| b. |
the
Reinsurer is attempting to compel acceptance of its direction by
a
specific written threat of withholding payment of reinsurance proceeds.
|
|
a.
|
Risk
Classification Changes. If
the insured requests a table rating reduction or removal of a flat
extra
premium charge, such change shall be underwritten according to the
Company’s normal underwriting practices. Risk classification changes on
Facultative Policies shall be subject to the Reinsurer’s or facultative
underwriting Designee’s approval. Any reinsurance coverage shall be
adjusted accordingly.
|
|
b.
|
Reinstatements.
If
the Company terminates a Policy reinsured on an Automatic Reinsurance
basis, due to the policyholder’s actions or directions, and such a Policy
is reinstated in accordance with its terms and the Company’s rules and
procedures as disclosed to the Reinsurer, the Reinsurer shall, upon
notification of reinstatement, reinstate the reinsurance coverage.
If the
Company terminates a Policy reinsured on a Facultative Reinsurance
basis,
due to the policyholder’s actions or directions, and such Policy is
reinstated, the Company shall resubmit the case to the Reinsurer’s and
facultative underwriting Designee for underwriting approval before
the
reinsurance can be reinstated. The Reinsurer shall not be liable
for any
claims incurred between the date of termination and the date of
reinstatement of the reinsurance.
|
|
c.
|
Restorations.
If
a Policy is restored pursuant to any state law or regulation that
requires
reinstatement or restoration of a Policy following a “free look” period
allowed to the policyholder for a proposed replacement policy, and
said
replacement policy is subsequently rejected by the policyholder,
the
Reinsurer agrees to restore reinsurance of the Policy under its original
terms and conditions as set forth herein. The foregoing shall apply
to
Automatic and Facultative
Reinsurance.
|
| · |
to
exchange information pertaining to the amount of net consideration
under
this Agreement not later than May 1st for each and every taxable
year for
which this treaty is in effect; and
|
| · |
that
the party with net positive consideration, as defined in the regulations
promulgated under Internal Revenue Code Section 848, will capitalize
specific policy acquisition expenses with respect to this agreement
without regard to the general deductions limitation of Internal Revenue
Code Section 848(c)(1); and
|
| · |
that
the other party may challenge such calculation within ten (10) business
days of receipt of the such net positive consideration calculation;
and
|
| · |
that
should the other party challenge such calculation and the parties
are
unable to agree as to the appropriate methodology they shall refer
such
dispute to an outside tax consultant neutral to the parties; with
such
incurred expense equally borne by the
parties..
|
| a. |
it
is a corporation duly organized, existing and in good standing under
the
laws of its state of domicile; and
|
| b. |
it
has taken all requisite corporate proceedings to authorize it to
enter
into and it is empowered under applicable laws and by its charter
and
bylaws to enter into and perform the duties contemplated in this
Agreement; and
|
| c. |
that
data provided, both oral and written, as part of each party’s due
diligence process, is complete and accurately describes the current
financial condition of the party, and the Policies eligible for
reinsurance hereunder.
|
| a. |
it
shall not knowingly permit a person under its control to commit any
action
that would violate any state law or regulation, in those jurisdictions
covered hereunder, governing administration or servicing of insurance
as
defined thereunder;
and
|
| b. |
it
has obtained any and all regulatory approvals as may be required
for the
Company to cede the policies covered hereunder and to assure whatever
reserve credits it may wish to take for such cession;
and
|
|
c.
|
it
shall not take any unauthorized action that would encourage the
policyholders covered under this Agreement to surrender, reduce or
otherwise terminate their existing coverage either through direct
or
indirect acts, including but not limited to, a plan of internal
replacement; and
|
|
d.
|
that
no other reinsurance of any portion of the policies reinsured hereunder
shall be made to any third party without written notification to
the
Reinsurer. Furthermore, the Company shall fully disclose all terms
of any
such reinsurance to the Reinsurer.
|
| a. |
it
has obtained any and all regulatory approvals as may be required
for the
Reinsurer to provide the reinsurance covered hereunder;
and
|
| b. |
excluding
excess of retention YRT and aggregate catastrophic/stop loss coverages,
no
other retrocessions of any portion of the Policies hereunder shall
be made
to any other third party without written notification to the
Company.
|
| a. |
to
indemnify, defend and hold harmless the other, its directors, officers,
employees and agents from any and all claims, actions, suits, judgments,
damages (including punitive or exemplary damages), fines and other
proceedings, whether civil, criminal (only to the extent permitted
by law
or public policy), administrative, investigative or otherwise, together
with all costs, expenses and other amounts, including attorney's
fees,
arising or alleged to have arisen out of any act, error or omission
related to or resulting from the performance of the duties, obligations
or
responsibilities of the indemnifying party, its directors, officers,
employees and agents, under this Agreement. This Article 22.04 is
not
intended and shall not be construed to expand the remedies that may
be
awarded by arbitrators for breach of this Agreement in any arbitration
of
a dispute between the Company and Reinsurer pursuant to Article 20,
“Arbitration”; and
|
| b. |
the
Reinsurer shall have no obligation arising out of any breach of any
duty
on the part of the Company to any insured covered hereunder. The
Company
shall remain solely liable for all fines, penalties or other assessments
imposed against the Reinsurer by any Insurance Department or other
governmental entity for any conduct of the Company, its employees
or
authorized representatives, which was not expressly authorized, in
writing, by the Reinsurer; and
|
| c. |
no
commission, fee or compensation is due to any third person by virtue
of
having negotiated or arranged the transactions herein. Each of the
parties
agrees to pay all costs incurred by it for actuarial, legal and other
services received or utilized in connection
herewith.
|
| · |
the
continuing Policy is issued without the same new underwriting information
the Company would normally obtain for a newly issued policy;
or
|
| · |
the
continuing Policy is issued without a suicide exclusion or contestable
period for the same period of time as those contained in other newly
issued policies, and this suicide exclusion or contestable period
would be
permitted by law; or
|
| · |
the
Company does not pay the same commissions to its agent in the first
year
that it would normally pay for a newly issued
policy.
|
| 25.22 |
Ultimate
Amount.
The projected maximum face amount of a Policy that could be achieved
based
on certain assumptions made about the operation of the Policy during
the
insured’s lifetime.
|
|
Policy
Form & Plan Codes
|
Policy
Issue Dates
From
and To
|
| · |
New
Issues - those new Policies being reported for the first time to
the
Reinsurer.
|
| · |
Renewals
-those Policies beginning in their 13th
month since issue.
|
| · |
Changed
Policies - those Policies that have undergone a change since last
being
reported to the Reinsurer. Such changes shall include: reinstatements,
reissues, conversions, terminations, reductions, changes in retention,
mortality rating changes, increases, decreases,
etc.
|
| · |
Whenever
the term “the then current accounting period” is used herein it shall mean
the calendar quarter for which the reports described herein are being
prepared and not the calendar quarter in which the actual preparation
of
the report occurs.
|
| · |
Whenever
the term “beginning or opening” accounting period is used herein it shall
be the first day of such then current accounting period or, for the
first
accounting period, the Effective Date of this Agreement.
|
| · |
Opening
or beginning reserves shall mean the reserve as of the end of the
immediately preceding calendar quarter.
|
| · |
Whenever,
the term “ending or closing” accounting period is used herein it shall
mean the last day of the then current calendar quarter or, in the
event of
the final quarter, the date of expiration or termination of this
Agreement.
|
|
CEDING
COMPANY:
|
|||||||
|
REINSURER:
|
|||||||
|
ACCOUNT
NO:
|
|||||||
|
PREPARED
BY:
|
Phone:
|
(
)
|
|||||
|
DATE
PREPARED:
|
|
Yearly
Renewable Term
|
|
|
Coinsurance
|
|
|
Modified
Coinsurance
|
|
|
Other
|
|
(A
+ H - T)
|
|
CEDING
COMPANY:
|
|||||||
|
REINSURER:
|
|||||||
|
ACCOUNT
NO:
|
|||||||
|
PREPARED
BY:
|
Phone:
|
(
)
|
|||||
|
DATE
PREPARED:
|
|
Yearly
Renewable Term
|
|
|
Coinsurance
|
|
|
Modified
Coinsurance
|
|
|
Other
|
|
TOTAL
DUE
|
| a) |
total
Accrued Investment Income; plus
|
| b) |
realized
and unrealized capital gains; less
|
| c) |
realized
and unrealized capital losses; less
|
| d) |
investment
expenses as defined below; plus
|
| a) |
Investment
management fee paid by the Company’s General Account to the various
Investment Managers of the sub-accounts; and
|
| b) |
Investment
expenses paid by the Company’s General Account which pertain to activities
undertaken by the Company;
and
|
| c) |
Investment
expenses incurred by the Company’s Separate Account that are paid by the
General Account; and
|
| d) |
Investment
expenses paid by the Company.
|
| a) |
the
numeric result of the customary cash flow settlement as provided
for in
Schedule C, except that all amounts will be calculated as of the
instant
in time immediately before this Agreement expires. For example, the
ending
modified coinsurance reserve for purposes of this specific sub-paragraph
a) would be a numerical value and not the value zero, which it will
be
immediately upon the expiration of this Agreement; plus
|
| b) |
payment
by the Company to the Reinsurer of an amount equal to the modified
coinsurance reserves on the portion of the Policies as of the instant
in
time immediately before the expiration of this Agreement. This payment
is
the reversal of the initial modified coinsurance adjustment, returning
the
Reinsurer’s assets for the modified coinsurance portion of the reserves.
It is the intent of the parties that under no circumstances should
this
payment not be fully and completely offset by the payment of (c)
below and
that the only reason for making such offsetting payments is to demonstrate
the full release of liability from one another; less
|
| c) |
payment
by the Reinsurer to the Company of a final modified coinsurance reserve
adjustment equal to the modified coinsurance reserves on the portion
of
the Policies as of the instant in time immediately before the expiration
of this Agreement only if the Reinsurer has received full credit
for the
payment called for in b) above;
plus
|
| d) |
payment
to the Reinsurer for the future profits, if any, defined as: the
present
value of future reinsurance premiums minus the present value of future
claims, benefit payments and expenses as determined in accordance
with the
Assumptions to Calculate Future Profits defined below; less
|
| e) |
payment
to the Company for any negative future profit, if any, defined as:
the
present value of future reinsurance premiums minus the present value
of
future claims, benefit payments and expenses as determined in accordance
with the Assumptions to Calculate Future Profits defined below;
plus
|
| f) |
payment
to the Reinsurer of an amount equal to the unamortized prior years’ DAC
tax capitalization, determined in accordance with Exhibit
H.
|
| a) |
Mortality
The mortality assumption to be used in the calculation for such recaptured
Policies will be based on a blend of the Company's adjusted mortality
pricing assumption and the product of the Reinsurer's actual-to-expected
aggregate mortality ratio on Policies over the last five (5) years
on a
rolling average basis and the sum of the Company's original pricing
mortality table plus 2.5% of the mortality table used in the Company's
adjusted mortality pricing assumption.
|
| b) |
Lapse
Assumption
The lapse assumption used in the calculation for such recaptured
Policies
will be based on a blend of the Company's adjusted pricing lapse
assumption and the Reinsurer's actual lapse rate measured over the
last
three (3) years on a rolling average basis. The grade in period would
be
seven (7) years over which the Reinsurer's experience would be one
seventh
after year one, two-sevenths after year two, etc. up to one hundred
percent (100%) after this Agreement has been in effect for seven
(7) full
years.
|
| c) |
Special
Cases
If
the profit levels of a single case are different than the underlying
Policy form, either in amount or incidence, then such special case
will be
treated as a unique valuation cell. Determination of such special
cases
will be by mutual agreement between the Company and the Reinsurer.
|
| d) |
Expenses
Expenses shall be as defined in Article 7.02 and
7.06.
|
| e) |
Interest
Rate Used in the Calculation
In
order to determine the present value, the Company shall use a discount
rate 100 basis points higher than the Company's then current asset
share
target rate of return. For example, as of the effective date of this
Agreement, such asset share target rate of return is _________ for
all
products, and the discount rate for purposes of this paragraph would
be
__________. The Company shall provide notice of any change in its
asset
share target rate of return for any product and such change shall
be
effective for the purposes of this subparagraph six (6) months after
such
notice is received.
|
| f) |
Appropriateness
of Assumptions.
In the event that either party believes that any of the above methods
for
determining the mortality and lapse assumptions to be used to calculate
future profits is inappropriate based upon the expectation for future
experience, then that party may recommend that a different assumption
be
used. If the other party does not agree with the recommendation,
then an
independent actuary shall be used to develop the assumption. The
cost of
such actuary shall be borne equally by the
parties.
|
| g) |
Calculation
Process
The calculation will be initially done by the Reinsurer, but will
be
subject to review by the Company. At the Company's request, an independent
actuary shall be used to verify that the Reinsurer's calculations
are
accurate, and based on the assumptions described above. Such actuary
must
be satisfactory to both parties, and the cost of such actuary shall
be
borne equally by the parties. Upon such recapture, the Reinsurer's
obligation to the Company under this Agreement shall
terminate.
|
| h) |
Reasonability
of Final Calculations
In
doing this calculation a reasonability test will be employed using
current
actuarial principles not inconsistent with this Agreement since not
all
contingencies can be addressed in advance. Such reasonability testing
will
be also subject to review by the independent actuary, if requested.
The
cost of such actuary shall be borne equally by the
parties.
|
| 1. |
Criteria.
The Reinsurer acknowledges that Underwriting Guidelines are based
on the
Company’s underwriting manual and include the preferred criteria and the
age and amount requirements shown in Exhibits A and B, which have
been
reviewed and agreed to by the Reinsurer.
|
| 2. |
Prudent
Underwriter Standard.
When underwriting a risk to be reinsured under this Agreement, the
Company’s underwriters shall act in good faith and utilize the care, skill
and diligence that would be expected of a reasonably prudent underwriter,
with substantially similar knowledge of and experience in underwriting,
would use in doing the same (the “Prudent Underwriter Standard”).
|
| 3. |
Controls.
A
control process has been established and will remain in place that
effectively monitors underwriting activity to ensure that i) risks
are
evaluated by appropriate levels of experience and knowledge, ii)
appropriate reviews of underwriting decisions are made and iii) the
Underwriting Guidelines and Prudent Underwriter Standard are followed.
The
Company will not alter its control process without notifying the
Reinsurer.
|
| 4. |
Claim
Reviews.
A
review by the Reinsurer along with its claims paying Designee of
the
underwriting of a particular risk must be based on the Underwriting
Guidelines of the Company. Further, the review may include facts
that
should have been known as a result of diligent inquiry so long as,
based
upon the known facts, a reasonably prudent underwriter would have
been
expected to make further inquiry.
|
| 5. |
Audit
of Records.
Should the Company agree with a settlement adjustment sought by the
Reinsurer under Section 4 of this Exhibit, it will, on request, audit
its
own records and retroactively adjust other premiums and considerations
as
appropriate, with interest. The scope of the audit, which will be
agreed
by the parties, will be reasonable and will be limited to policies
that
have similar circumstances to the Policy or Policies in question.
|
| 6. |
Disputes
of Assessments.
Should the Company dispute the Reinsurer’s assessment, it may hire a
neutral and disinterested underwriter (the “Neutral Underwriter”), whose
decision will be binding on both parties. If the Neutral Underwriter
agrees with the Reinsurer, Section 4 of this Exhibit will apply as
if the
Company had not disputed the Reinsurer’s assessment. Should the Neutral
Underwriter agree with the Company, Article 6, “Payments by the Company”,
Article 8, “Death Claims”, and Article 9, “Disputed Claims”, will apply as
if the Reinsurer had not questioned the
underwriting.
|
| 7. |
Nomination
of Neutral Underwriter.
If
a Neutral Underwriter must be appointed to resolve an underwriting
dispute, both parties will nominate three life underwriters with
at least
ten years of experience who are not currently or formerly affiliated
with
either party. Both parties will strike two of the other side’s three
nominees, and the Neutral Underwriter will be chosen from among the
remaining two by drawing lots. The Neutral Underwriter must choose
one
party’s position or the other.
|
| 8. |
Right
of Termination.
Nothing in this Exhibit is intended to limit either party’s ability to
exercise its right to terminate the Agreement in accordance the terms
contained therein.
|