AUTOMATIC YRT REINSURANCE AGREEMENT NO. 3137
EFFECTIVE SEPTEMBER 1, 2008
between
PHOENIX LIFE INSURANCE COMPANY
and
PHL VARIABLE INSURANCE COMPANY
as Ceding Company
and
SWISS RE LIFE & HEALTH AMERICA INC.
as Reinsurer
TABLE OF CONTENTS
Article I Scope of the Agreement Page 1
Article II Reinsurance Coverage Page 2
Article III Procedures Page 3
Article IV Liability Page 4
Article V Reinsurance Premium Rates and Payments Page 5
Article VI Changes to the Reinsurance Page 8
Article VII Recapture Page 10
Article VIII Claims Page 12
Article IX Arbitration Page 14
Article X Insolvency Page 16
Article XI Inspection of Records Page 16
Article XII Offset Page 17
Article XIII Credit For Reinsurance Page 17
Article XIV Confidentiality Page 19
Article XV Good Faith Page 19
Article XVI Severability Page 20
Article XVII Miscellaneous Page 21
Article XVIII Execution of the Agreement Page 22
EXHIBITS
Exhibit A Reinsurance Coverage
Retention Limits
Automatic Acceptance Limits
Reserves
Exclusions to Automatic Reinsurance Coverage,
including Jumbo Limits
Exhibit B Reinsurance Administration
Exhibit C Reinsurance Rates and Allowances
ARTICLE I - SCOPE OF THE AGREEMENT
1. Parties to the Agreement
The parties to this Agreement are Phoenix Life Insurance Company and PHL
Variable Insurance Company ( as ceding company referred to as Company, we,
us and our) and Swiss Re Life & Health America Inc. (as reinsurer referred
to as Reinsurer, you and your). The parties mutually agree to transact
reinsurance according to the terms of this Agreement. This Agreement is for
indemnity reinsurance and the Company and the Reinsurer are the only two
parties to the Agreement. There will be no right or legal relationship
whatsoever created by this Agreement in any other person having an interest
of any kind in policies that are reinsured under this Agreement.
The Company agrees that the Reinsurer will not be made a party to any
litigation between any such third party and the Company. Neither party will
disclose the other's name to these third parties with regard to the
agreements or transactions that are between our companies, unless prior
written approval is obtained from the other party.
2. Effective Date of the Agreement
This Agreement will go into effect at 12:00 A.M., September 1, 2008, and
will cover policies effective on and after that date.
3. Entire Agreement
The text of this Agreement and all Exhibits, Schedules and Amendments
appended hereto constitute the entire agreement between the parties. There
are no other understandings or agreements between the parties regarding the
policies reinsured other than as expressed in this Agreement.
4. Modification of the Agreement
The parties may modify this Agreement, only by means of a written amendment
to this Agreement which has been signed by all parties.
5. Duration of the Agreement
The duration of this Agreement will be unlimited. However, either party may
terminate the Agreement for new issues at any time by giving the other party
ninety days prior written notice. You will continue to accept new
reinsurance during the ninety-day period.
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Existing reinsurance will not be affected by the termination of this
Agreement for new reinsurance. Existing reinsurance will remain in force
until the termination or expiry of the policy on which reinsurance is based,
as long as the Company continues to pay reinsurance premiums as shown in
Article V (Reinsurance Premium Rates and Payment), unless otherwise
terminated in accordance with the terms of this Agreement. However, the
Reinsurer will not be held liable for any claims or premium refunds which
are not reported to the Reinsurer within one hundred eighty days following
the termination or expiry of the last cession remaining reinsured under this
Agreement.
ARTICLE II - REINSURANCE COVERAGE
1. Automatic Reinsurance
The Reinsurer will accept automatically reinsurance of death benefits on the
Company's individually underwritten Corporate Owned Life Insurance (COLI)
policies on any permanent resident of the United States or Canada, in
agreement with the provisions and limitations shown in Exhibit A
(Reinsurance Coverage). The individual risk must be underwritten in
accordance with the guidelines established for Guaranteed Issue and
Simplified Issue COLI by the Company.
The Reinsurer will also accept automatically reinsurance of riders and
supplementary benefits written with the covered death benefits, but only to
the extent that the Company specifically list the riders and supplementary
benefits in Exhibit A, Part I.
The Company has the right to modify the retention shown in Exhibit A, Part
II at any time. If the Company's retention is reduced as a result of the
modification, the Company will notify the Reinsurer in writing before the
Reinsurer is required to reinsure the increase in the Reinsurer's quota
share percentage caused by the Company's reduced retention. The Company will
prepare a treaty amendment which both parties will sign as evidence of their
agreement to the reduction in the Company's retention and the increase in
the Reinsurer quota share percentage.
The Reinsurer has the right to amend the Automatic Acceptance Limits shown
in Exhibit A, Part III if the Company modify's their retention. The
Reinsurer also may reserve the right to modify the Automatic Acceptance
Limits if the Company elects to participate in any other arrangement(s) to
secure additional automatic binding capacity.
2. Facultative Reinsurance
If the Company wishes to submit a risk not covered automatically under this
Agreement, or if the Company wishes the Reinsurer's advice on any
application, the Company may submit and the Reinsurer will consider the risk
on a facultative basis. Once the Reinsurer notify's us of their willingness
to reinsure a risk, as provided in Article III, the Reinsurer agrees that
their offer is open and will neither be withdrawn nor conditioned until the
termination date specified in their offer.
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3. Basis of Reinsurance
Reinsurance under this Agreement will be on a YRT basis for the portion of
the original policy that is reinsured with the Reinsurer.
Riders or supplementary benefits ceded with death benefits will be reinsured
as shown in Exhibit C.
ARTICLE III - PROCEDURES
1. Automatic Reinsurance
Individual notification for the placement of automatic reinsurance will not
be necessary. Subject to Article V (Reinsurance Premium Rates and Payments)
and Exhibit B (Reinsurance Administration), new business or changes to
existing reinsurance will be shown on the Company's periodic billing report.
2. Facultative Reinsurance
When the Company wishes to submit a risk for facultative consideration, the
Company will send the Reinsurer a reinsurance application form along with
copies of all the information the Company has regarding the insurability of
the risk. The Company will also notify the Reinsurer of any outstanding
underwriting requirements at the time of the facultative submission and any
subsequent information received will be promptly transmitted to the
Reinsurer. The Reinsurer will review the information and notify the Company
of their decision promptly.
After the Reinsurer has given the Company their unconditional offer to
reinsure a risk, the Company will confirm in writing the Company's
acceptance of the Reinsurer's offer and the placement of the reinsurance.
The Company's confirmation must be sent on or before the expiration date the
Reinsurer specifies in their offer to reinsure, that is, one hundred and
twenty days from the date of the Reinsurer's offer, unless specified
otherwise in the offer.
The Company may request an extension of the expiration period shown in the
Reinsurer's offer, by written request. If the Reinsurer agrees, the
Reinsurer will give us written confirmation of the extension. Any such
extension will terminate automatically, if not previously accepted by the
Company, on the expiration date shown on the extension.
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3. Policy Expenses
The Company will bear the expenses of all medical examinations, inspection
fees and other charges incurred in connection with policy issues,
reinstatements or reentries.
4. Reference Materials
Upon request the Company will provide the Reinsurer with any reference
materials which the Reinsurer may require for proper administration of
cessions under this Agreement. All information will be subject to the
confidentiality and privacy requirements set forth in Article XIV
(Confidentiality).
ARTICLE IV - LIABILITY
1. Automatic Reinsurance
The Reinsurer's liability for cessions ceded automatically under this
Agreement will begin and end simultaneously with the Company's contractual
liability for the policy on which reinsurance is based, unless otherwise
terminated in accordance with this agreement, subject to the Agreement
effective date shown in Article I (Scope of the Agreement), Section 2.
2. Facultative Reinsurance
The Reinsurer's liability for facultative reinsurance which the Reinsurer
offered and which the Company accepted will begin and end simultaneously
with the Company's liability for the policy on which reinsurance is based.
If, however, a facultative application is submitted by the Company to any
other reinsurer, in addition to the Reinsurer, the Reisnurer's liability
will commence when the Company has advised the Reinsurer of the Company's
acceptance of the Reinsurer's offer, which must occur during the lifetime of
the insured. The Company will have the number of days specified in Article
III from the date of the Reinsruer's final offer in which to place the
policy with the insured/owner, after which time the Reinsurer's offer will
expire unless the Reinsurer explicitly states in writing that the offer is
extended for some further period.
3. Continuation of Liability
Continuation of the Reinsurer's liability is conditioned on the Company's
payment of reinsurance premiums as provided in Article V (Reinsurance
Premium Rates and Payments) and is subject to Article VI (Changes to the
Reinsurance), Article VII (Recapture), and Article I (Scope of the
Agreement).
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4. Temporary Insurance Receipt Liability
You will not be liable for losses under the terms of a Temporary Insurance
Receipt.
ARTICLE V - REINSURANCE PREMIUM RATES AND PAYMENTS
1. Reinsurance Rates
Reinsurance premium rates that we will pay you for business reinsured under
this Agreement are shown in Exhibit C. The reinsurance premium rate payable
for any cession for any accounting period will be calculated on the basis of
the net amount at risk reinsured as of that period.
The reinsurance rates shown in Exhibit C are to be guaranteed for the first
policy year. In subsequent policy years, the Reinsurer reserves the right to
increase the premiums for reinsurance but not above the statutory net
valuation premium applicable to the Reinsured Policies after increase.
While you anticipate that the reinsurance rates shown in Exhibit C will
continue to be charged, it may become necessary for you to charge a rate
that is the greater of the rate from Exhibit C or the corresponding
statutory net premium rate based on the 2001 Valuation Basic Table at 4.5%
interest for the applicable mortality rating. If you increase the
reinsurance rates in Exhibit C, in an amount greater than that required to
ensure that the Reinsurer will participate in its share of any increases in
premium rates, costs, charges or fees as implemented by the Company for the
reinsured policies, the Company may recapture all business reinsured under
this Agreement on which reinsurance rates have been increased regarless of
the reinsured policies' duration in force. If the Company elects to
recapture reinsurance under this provision, unearned premiums, net of
outstanding balances, will be paid by the party with the positive balance.
The recapture will be without penalty.
Procedures and details of the reinsurance rate calculation for any benefits
or riders ceded under this Agreement are shown in Exhibit C.
All financial transactions under this Agreement will be in United States
dollars.
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2. Payments
The Company will self-administer the periodic reporting of the company's
statements of account and payment of balances due to the Reinsurer as shown
in Exhibit B.
Within thirty days after the close of each reporting period, the Company
will send the Reinsurer a statement of account for that period along with
payment of the premium due. If the statement of account shows a net balance
due the Company, the Reinsurer will remit that amount to the Company within
thirty days of the Reinsurer's receipt of the statement of account.
The Company's timely payment of reinsurance premiums is a condition
precedent to the Reinsurer's continued liability. If the Company has not
paid the balance due the Reinsurer by the thirty-first day following the
close of the reporting period, the Reinsurer has the right to give the
Company thirty days' written notice of the Reinsurer's intention to
terminate the reinsurance on which the balance is due and unpaid. At the end
of this thirty-day period, the Reinsurer's liability will automatically
terminate for all reinsurance on which balances remain due and unpaid, (the
"termination date"). Even though the Reinsurer has terminated the
reinsurance, the Company will continue to be liable for the payment of
unpaid premium balances through the termination date. The Company agrees
that the company will not force termination under the provisions of this
paragraph to avoid the recapture requirements or to transfer the block of
business reinsured to another reinsurer.
If the 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 Company for a credit in the amount of the
overpayment, without interest.
If the Company fails to make a full premium payment for a policy or policies
reinsured hereunder, due to an error or omission as defined in Article VI,
the amount of reinsurance coverage provided by the Reinsurer shall not be
reduced. However, once the underpayment is discovered, the Company will be
required to pay the Reinsurer the difference between the full premium amount
actually paid, with interest. The interest rate payable by the Company to
the Reinsurer for overdue premiums will be the 90 Day Federal Government
Treasury ▇▇▇▇ rate as first published 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). 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 subject to the conditions above.
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Unearned premiums will be returned on deaths, surrenders and other
terminations. This refund will be on a prorated basis without interest from
the date of termination of the policy to the date to which a reinsurance
premium has been paid.
The Company may reinstate reinsurance terminated for non-payment of premium
at any time within sixty days of the termination date, by paying the
Reinsurer all premium in full. However, the Reinsurer will have no liability
for claims incurred between the termination date and the reinstatement date,
subject to the requirements of Article VI.
3. Tax Reimbursements
A. Premium Tax
Details of any reimbursement of premium taxes that the Company pays on
behalf of reinsurance payments to the Reinsurer are shown in Exhibit C,
Section VIII (Premium Taxes).
B. DAC Tax
1. The parties mutually agree to the following pursuant to Section 1.848-2
(g) (8) of the Income Tax Regulation issued December 29, 1992 under
Section 848 of the Internal Revenue Code of 1986, as amended. This
election will be effective for all taxable years for which this
Agreement remains in effect.
The terms used in this Section are defined in Regulation Section 1.848-2
in effect as of December 29, 1992. The term "net consideration" will
refer to net consideration as defined in Section 1.848-2 (f).
a) The party with the net positive consideration for this Agreement for
each taxable year will capitalize specified policy acquisition
expenses with respect to this Agreement without regard to the General
Deductions Limitation of IRC Section 848 (c) (1).
b) The parties mutually agree to exchange information pertaining to the
amount of net consideration under this Agreement each year to ensure
consistency. The parties also mutually agree to exchange information
otherwise required by the Internal Revenue Service.
c) Both parties will report the amount of net consideration in their
respective federal income tax returns for the previous calendar year.
d) The parties will act in good faith to reach an agreement as to the
correct amount of net consideration. The ceding Company will provide
supporting information reasonably requested by the Reinsurer. If the
ceding Company and the Reinsurer reach agreement on an amount of net
consideration, each party shall report such amount in their
respective tax returns for the previous calendar year.
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e) Both parties will attach a schedule to their respective federal
income tax returns which identifies the Agreement as a reinsurance
agreement for which the DAC Tax Election under Regulation
Section 1.848.2 (g)(8) has been made. The DAC Tax Election will be
effective for all years for which this Agreement remains in effect.
f) Both parties to this Agreement represent and warrant that they are
subject to U.S. taxation under either the provisions of subchapter L
of Chapter 1 or the provisions of subpart F of subchapter N of
Chapter 1 of the Internal Revenue Code of 1986, as amended.
4. Experience Refund
Details of any Experience Refund payable to the Company will be shown in
Exhibit C, Section X (Experience Refund).
ARTICLE VI - CHANGES TO THE REINSURANCE
1. Errors and Oversights
Any unintentional or accidental failure to comply with the terms of this
Agreement which can be shown to be the result of an oversight,
misunderstanding or clerical error, by either the Company or the Reinsurer,
will not be deemed to be a breach of this Agreement. Upon discovery, the
error will be corrected so that both parties are restored to the position
they would have occupied had the oversight, misunderstanding or clerical
error not occurred, including the effect of the time value of money. Should
it not be possible to restore both parties to such a position, the party
responsible for the oversight, misunderstanding or clerical error will be
responsible for any resulting liabilities and expenses.
This provision will apply only to oversights, misunderstandings or clerical
errors relating to the administration of reinsurance covered by this
Agreement and not to the administration of the insurance provided by the
Company to its insured.
If either party discovers that the Company has failed to cede reinsurance as
provided for under this Agreement, or failed to comply with reporting
requirements, the Reinsurer may require the Company to audit its records for
similar errors, and to take the actions necessary to avoid similar errors in
the future. If the Reinsurer receives no evidence that the Company has taken
action to remedy such a situation, the Reinsurer reserves the right to limit
its liability to correctly reported policies only.
Any negligent or deliberate acts or omissions by the Company regarding the
insurance or reinsurance provided are the responsibility of the Company and
its liability insurer, if any, but not that of the Reinsurer.
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2. Misstatement of Age or Sex
If the misstatement of the age or sex of a reinsured life causes an increase
or reduction in the amount of insurance in the policy, the parties will
share in the change in proportion to the original liabilities as of the time
the policy was issued.
3. Changes to the Policy
If the plan, the amount of reinsurance or the premiums of a policy ceded
under this Agreement are changed, the Company will promptly inform the
Reinsurer of such change.
Whenever a policy ceded under this Agreement is changed and the Company's
underwriting rules do not require that full evidence be obtained, the
reinsurance will remain in effect with the Reinsurer. The suicide,
contestability and recapture periods applicable to the original policy will
apply to the existing policy and the duration will be measured from the
effective date of the original policy.
Whenever a policy ceded under this Agreement is changed and the Company's
underwriting rules require that full evidence be obtained, the change will
be subject to the Reinsurer's approval if:
1. The new amount ceded to the Reinsurer under this Agreement would be in
excess of the Automatic Acceptance Limit in effect at the time of the
change, as set out in Exhibit A; or
2. The new amount of the policy and the amount already in force on the same
life exceeds the Jumbo Limit stated in Exhibit A.
The Company will report the details of all changes according to the terms
outlined in Exhibit B, Reinsurance Administration.
4. Reductions, Terminations and Reinstatements
If any part of the coverage on a life reinsured under this Agreement is
reduced or terminated, the amount reinsured will also be reduced or
terminated to the extent that the Company will continue to maintain the
Company's appropriate retention as shown in Exhibit A. The Company will not
be required to assume amounts in excess of the retention limit that was in
force when the affected policy or policies were issued.
If a policy reinsured under this Agreement is lapsed or terminated, the
reinsurance of such policy will also terminate. If a policy automatically
reinsured lapses and is reinstated in accordance with the Company's standard
rules and procedures, reinsurance for the amount at risk effective at the
time of the lapse will be reinstated automatically at the date of
reinstatement of the policy. The Company will notify the Reinsurer of the
reinstatement on the Company's periodic statement of account. The Company
will send the Reinsurer copies of reinstatement papers only upon request.
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The Company has the authority to reinstate a policy reinsured under this
Agreement on a facultative basis without the Reinsurer's prior approval when:
a) The Company has kept their full retention on the policy; and
b) the reinsured amount falls within the automatic acceptance limits shown
in Exhibit A.
Otherwise, the company will need the Reinsurer's prior review and approval
for reinstatement of any facultative reinsurance. The Company will send the
Reinsurer prompt written notice of the Company's intention to reinstate the
policy along with copies of the reinstatement papers required by the
Company's standard rules and procedures. The reinsurance will be reinstated
at the same time as the policy, subject to the Reinsurer's written approval
of the reinstatement.
The Company will notify the Reinsurer of all reinstatements on the Company's
periodic statement of account and the Company will pay all reinsurance
payments due from the date of reinstatement to the date of the current
statement of account. Thereafter, reinsurance payments will be in accordance
with Article V (Reinsurance Premium Rates and Payments).
ARTICLE VII - RECAPTURE
1. Basis of Recapture
Recapture will be allowed under this Agreement only as specifically stated
under Articles V and X, or if the Company increases the maximum retention
limits shown in Exhibit A. If the Company increases the maximum retention
limits, policies will then be eligible for recapture if:
a) The Company has maintained the Maximum Dollar Retention Limit shown in
Exhibit A. Policies on which the Company retained a less than our quota
share percentage will not be eligible for recapture unless the Company
is partially or fully retained on the insured life in a prior policy;
b) the policy has been in force under this Agreement for the Recapture
Period shown in Exhibit C, Section VIII. The recapture period will
always be measured from the original policy issue date.
c) the recapturable amount is only that amount that would have been
retained had the new maximum retention limit been in place at the time
of the original cession.
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2. Method of Recapture
The Company will give the Reinsurer written notice of the Company's
intention to recapture within ninety days of the effective date of the
Company's increase of the maximum retention limit. However, the prior
sentence not withstanding, the Company may elect to recapture at a later
date, provided the Company gives the Reinsurer written notice before the
Company begins the recapture.
When the Company has given the Reinsurer written notice of the Company's
intent to recapture, and the date that we will begin the process of
recapture:
a) All eligible policies will be recaptured;
b) The effective date of the recapture will be the next anniversary date of
each eligible policy;
c) Reinsurance on each eligible policy will be reduced by an amount that
will increase the Company's retention to the current limit set forth in
Exhibit A.
If the Company increases the retention shown in Exhibit A, the
percentage of the risk reinsured will reduce proportionately. If
reinsurance was placed with more than one reinsurer, each reinsurer's
percentage will be reduced in the same proportion that each reinsurer's
original percentage bore to the total percentage reinsured.
d) If there is reinsurance in force in other companies on any one insured
life, the reduction of the reinsurance in force under this Agreement
will be in the same proportion that the amount reinsured with you bears
to the total reinsurance on the life.
If the Company omits or overlooks the recapture of any eligible policy or
policies, the Reinsurer's acceptance of reinsurance premiums after the date
the recapture would have taken place will not cause the Reinsurer to be
liable for the amount of the risk that would have been recaptured. The
Reinsurer will be liable only to refund any such reinsurance premiums
received, without interest.
If the increase in the Company's maximum retention limit is due to the
Company's purchase by or purchase of another company, or the Company's
merger, assumption or any other affiliation with another company, no
immediate recapture will be allowed. However, the Company may recapture
eligible policies once the Recapture Period set out in Exhibit C, Section IX
has expired.
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ARTICLE VIII - CLAIMS
1. Notice of Claim
Claims will be reported and administered on a bulk basis. The Company will
give the Reinsurer notification of all incurred and settled claims on the
Company's monthly statement of account. Notification of rescission of
policies where the insured is still alive will be provided in writing.
2. Settlement of Claims
Claim payments will be applied against premium payments. If the amount of
claim payment due exceeds the amount of premium payment due the Reinsurer,
the Reinsurer will remit the balance due the Company within thirty days of
the Company's receipt of the statement of account. The Reinsurer will accept
the Company's good faith decision in settling any claim except as specified
in this Article.
The Reinsurer will be notified of and provided with claim documentation for
all contestable claims where the Company elects to deny, rescind or reduce
the claim payment. The Company will provide notification on the Company's
monthly claims reports for non-contestable claims. The Reinsurer's
consultation rights will not impair the Company's freedom to determine the
proper action on and settlement of the claim.
The Company's claim settlements will be administered according to the
standard procedures the Company applies to all claims, whether reinsured or
not.
3. Claim Expenses
Except as provided in Article VIII, Section 4, the Reinsurer will pay the
Reinsurer's proportionate share of any interest paid to the claimant on
death benefit proceeds according to the Company's practices and either at
the same rate that the Company uses, or at the rate prescribed by state law
in connection with the settlement of a claim.
The Reinsurer's share of claim expenses will be in the same proportion that
the Reinsurer's original liability bears to the Company's original
liability. These expenses include, but are not limited to investigative
expenses, attorney's fees, penalties and interest imposed automatically by
statute and rising solely out of a judgement rendered against the Company in
a suit for policy benefits.
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The Company will be responsible for and shall not hold the Reinsurer
responsible for payment of the following claim expenses:
a) routine administrative expenses for the home office or elsewhere,
including the Company's employees' salaries;
b) expenses incurred in connection with any dispute or contest arising out
of a conflict in claims of entitlement to policy proceeds or benefits
which the Company admits are payable.
4. Contested Claims
The Company will promptly notify the Reinsurer if the Company intends to
contest, compromise or litigate a claim covered by this agreement.
a) If the Reinsurer prefers not to participate in the contest, the
Reinsurer will notify the Company of the Reinsurer's decision within
fifteen days of the Reinsurer's receipt of all documents requested, and
the Reinsurer will immediately pay the Company the full amount of
reinsurance due. Once the Reinsurer has paid the Reinsurer's reinsurance
liability, the Reinsurer will not be liable for any legal and/or
investigative expenses and the Reinsurer will have no further liability
for those expenses described in subparagraph b, below, which are
associated with the contest, compromise or litigation of a claim.
b) When the Reinsurer agrees to participate in a contest, compromise or
litigation involving reinsurance, the Company will give the Reinsurer
prompt notice of the beginning of any legal proceedings involving the
contested policy. The Company will promptly furnish the Reinsurer with
copies of all documents pertaining to a lawsuit or notice of intent to
file a lawsuit by any of the claimants or parties to the policy.
c) The Reinsurer will share in the payment of reasonable investigative and
attorney's fees relating to a contested claim in the same proportion as
the Reinsurer's original liability bears to the Company's original
liability prior to the contest of the claim. In addition the Reinsurer
will share in payment of any penalties and interest imposed
automatically against the Company by statute and arising solely out of a
judgement rendered against the Company in a suit or a settlement for
policy benefits relating to a contested claim in the same proportion as
the Reinsurer's original liability bears to the Company's original
liability prior to the contest of the claim. The Reinsurer will not
reimburse expenses associated with non-reinsured policies.
d) If the Company's contest, compromise or litigation results in a
reduction in the liability of the contested policy, the Reinsurer will
share in the reduction in the same proportion that the amount of
reinsurance bore to the amount payable under the terms of the policy on
the date of death of the insured.
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5. Extra Contractual Damages
The Reinsurer will not participate in punitive or compensatory damages that
are awarded against the Company as a result of an act, omission or course of
conduct committed solely by the Company, its agent, or representatives in
connection with claims covered under this Agreement. The Reinsurer will,
however, pay its share of statutory penalties awarded against the Company in
connection with claims covered under this Agreement if the Reinsurer elected
in writing to join in the contest of the coverage in question.
The parties recognize that circumstances may arise in which equity would
require the Reinsurer to the extent permitted by law, to share
proportionately in punitive and compensatory damages. Such circumstances are
difficult to define in advance, but would generally be those situations in
which the Reinsurer was an active party, and in writing, recommended,
consented to, or ratified the act or course of conduct of the Company that
ultimately resulted in the assessment of the extra-contractual damages. In
such situations, the Reinsurer and the Company will share such damages so
assessed, in equitable proportions.
ARTICLE IX - ARBITRATION
1. Basis for Arbitration
The parties to this Agreement understand and agree that the wording and
interpretation of this Agreement is based on the usual customs and practices
of the life insurance and life reinsurance industry. While the parties agree
to act in good faith in our dealings with each other, it is understood and
recognized that situations may arise in which agreement cannot be reached.
In the event that the parties cannot resolve any dispute to their mutual
satisfaction, the dispute will first be subject to good-faith negotiation as
described below in an attempt to resolve the dispute without the need to
institute formal arbitration proceedings.
2. Negotiation
Within ten days after one of the parties has given the other the first
written notification of the specific dispute, each party will appoint a
designated officer to attempt to resolve the dispute. The officers will meet
at a mutually agreeable location as early 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 specific format for such discussions will be decided by the designated
officers.
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If the officers cannot resolve the dispute within thirty days of their first
meeting, it is agreed that the dispute will be submitted to formal
arbitration. However, the parties may agree in writing to extend the
negotiation period.
3. Arbitration Proceedings
No later than fifteen days after the final negotiation meeting, the officers
taking part in the negotiation will give written confirmation that they are
unable to resolve the dispute and that they recommend establishment of
formal arbitration.
An arbitration panel consisting of three past or present officers of life
insurance or life reinsurance companies not affiliated with any of the
parties in any way will settle the dispute. The party seeking arbitration
will appoint one arbitrator and give notice of such appointment to the other
party, who must appoint its arbitrator within 30 days of receiving such
notice. If the notified party does not select its arbitrator by the
expiration of the 30 days, the party giving notice may appoint a second
arbitrator. The two arbitrators will select a third. If the two arbitrators
cannot agree on the choice of a third within 30 days of 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.
The arbitration proceedings will be conducted according to the Commercial
Arbitration Rules of the American Arbitration Association which are in
effect at the time the arbitration begins.
The arbitration will take place at a location mutually agreed upon by the
parties to this Agreement.
Within sixty days after the beginning of the arbitration proceedings the
arbitrators will issue a written decision on the dispute and a statement of
any award to be paid as a result. The decision will be based on the terms
and conditions of this Agreement as well as the usual customs and practices
of the life insurance and life reinsurance industry, rather than on strict
interpretation of the law. The decision will be final and binding and there
will be no further appeal, except that either party may petition any court
having jurisdiction regarding the award rendered by the arbitrators.
The parties may agree to extend the appointment or the arbitrators periods
set forth in this Article. Unless otherwise decided by the arbitrators, each
party will pay the fees of its own attorneys, the arbitrator appointed by
the party, and all other expenses connected with the presentation of its own
case. The two parties will share equally in the cost of the third
arbitrator. The arbitrators shall operate in a fair but cost efficient
manner. For example, the arbitrators are not bound by technical rules of
evidence and may limit the use of depositions and discovery.
-15-
ARTICLE X - INSOLVENCY
If the Company is judged insolvent, the Reinsurer will pay all reinsurance
death benefits due under this Agreement directly to the Company, our
liquidator, receiver or statutory successor on the basis of the Reinsurer's
liability under the policy or policies reinsured without diminution because
of the Company's insolvency. It is understood, however, that in the event of
the Company's insolvency the liquidator, receiver or statutory successor
will give the Reinsurer written notice of a pending claim on a policy
reinsured within a reasonable time after the claim is filed in the
insolvency proceedings. While the claim is pending, the Reinsurer may
investigate and interpose at the Reinsurer's own expense in the proceedings
where the claim is to be adjudicated, any defense which the Reinsurer may
deem available to the Company, our liquidator, receiver or statutory
successor. It is further understood that the expense the Reinsurer incurs
will be chargeable, subject to court approval, against the Company as part
of the expense of liquidation to the extent of a proportionate share of the
benefit which may accrue to the Company solely as a result of the defense
the Reinsurer has undertaken. Where two or more reinsurers are involved in
the same claim and a majority in interest, determined in proportion to each
reinsurer's share of the risk, elect to interpose defense to the claim, the
expenses will be apportioned in accordance with the terms of the reinsurance
agreement as though the Company had incurred the expense.
2. If the Reinsurer is deemed insolvent by the Insurance Commissioner of their
state of domicile, the Reinsurer will be bound by any legal directions
imposed by the Reinsurer's liquidator, receiver or statutory successor.
However, if not in conflict with such legal directions and the Reinsurer
fails to meet any undisputed obligations under this Agreement, at the
Company's option and with prior written notice the Company may terminate the
Reinsurer's rights and duties under this Agreement. However, the Reinsurer,
its liquidator, receiver or statutory successor will be liable for any claim
payments or refunds of unearned premiums which remain outstanding. Should
the Company decide to terminate the Reinsurer's rights and duties under this
Agreement, no other amounts will be payable by either party, except for
outstanding cash settlements required under this Agreement.
ARTICLE XI - INSPECTION OF RECORDS
1. Inspection of Records
The Reinsurer, or its duly appointed representatives, will have access to
the records of the Company concerning the business reinsured hereunder for
the purpose of inspecting, auditing and photocopying those records. Such
access will be provided at the office of the Company and will be during
reasonable business hours.
-16-
Provided there is business in force under this Agreement, the Reinsurer's
right of access as specified above will survive the term of the Agreement.
ARTICLE XII - OFFSET
Either party to this Agreement may offset any balances, whether on account
of premiums, allowances, claims or expenses due from one party to the other
as respects business reinsured under this Agreement. This right of offset
will not be affected or diminished because of the insolvency of either party.
ARTICLE XIII - CREDIT FOR REINSURANCE
The parties intend that the Company will receive statutory reserve credit in
its state of domicile for reinsurance provided under this Agreement. The
parties agree to use reasonable efforts to ensure that such reserve credit
will remain available to the Company.
If reserve credit is lost in part or in total due to a change in law or
regulation (or a change in the interpretation or application of existing law
or regulation by a regulator) or due to a failure by the Reinsurer to
maintain in effect a required license or accreditation in the Company's
state of domicile (hereinafter a "Reserve Credit Event"), then, subject to
the Reinsurer's rights of cure, the parties will take the steps specified
below. The parties will provide prompt notice of the occurrence of any
Reserve Credit Event.
Upon notification of the occurrence of any Reserve Credit Event, the
Reinsurer will have the right to cure the Reserve Credit Event in a manner
that eliminates the need for or enables the Company to continue to receive
statutory reserve credit in its state of domicile for the reinsurance ceded
under this Agreement. The Company will not unreasonably deny any cure
proposal presented by the Reinsurer. Without limiting potential cure
options, the Reinsurer's cure may be implemented by:
i. Modifying the settlement terms of this Agreement during the Reserve
Credit Event to provide for monthly settlements in arrears during the
pendency of the Reserve Credit Event; or
-17-
ii. Modifying the settlement terms of this agreement during the Reserve
Credit Event to provide for settlements on a funds withheld basis during the
pendency of the Reserve Credit Event; or
iii. Transferring the reinsurance provided under this Agreement to another
reinsurer by assignment of this Agreement or otherwise, provided that the
alternative reinsurer has an A.M. Best rating of (A) or better at the time
of the transfer and that the alternative reinsurer accepts transfer by
assignment of this Agreement (and all amendments) without any material
modification to the substantive terms of the Agreement; or
iv. A combination of the foregoing or comparable approaches.
If the Company loses statutory reserve credit in part or in total due to a
change in law or regulation (or a change in the interpretation or
application of existing law or regulation by a regulator) and is not cured
as set forth above within 120 days of notice of a Reserve Credit Event, then
the Reinsurer will establish and maintain collateral, however, the cost of
establishing and maintaining the collateral will be shared equally by the
Company and the Reinsurer.
If the Company loses statutory reserve credit in part or in total due to a
failure by the Reinsurer to maintain in effect a required license or
accreditation in the Company's state of domicile and is not cured as set
forth above within 45 days of notice of a Reserve Credit Event, then the
Reinsurer will establish and maintain collateral permitting the Company to
receive statutory reserve credit in its state of domicile for reinsurance
provided under this Agreement during the pendency of the Reserve Credit
Event.
If a Reserve Credit Event is not cured and the Reinsurer fails to establish
or maintain collateral as set forth above, then the Company may recapture
the business ceded under this Agreement. In that event, the Company and the
Reinsurer will negotiate in good faith the terms of a mutually agreed
recapture of the reinsurance provided hereunder, consisting of the
appropriate amount of net reserves to be held in respect of the reinsured
amounts being recaptured, determined as of the effective date of the
recapture based on U.S. generally accepted accounting principles ("GAAP")
consistent with FASB Statement 60 computed using original pricing
assumptions without provision for adverse deviation.
-18-
ARTICLE XIV - CONFIDENTIALITY
1. The Reinsurer will hold in trust for the Company and, except as necessary
for retrocession purposes, will not disclose or cause to be disclosed to any
non-party to this Agreement any of the Company's confidential information.
Confidential information is information which relates to policy owner data,
experience information (including but not limited to mortality and/or lapse
information) and any other information considered nonpublic personal
information as defined under statute or state law, risk selection
guidelines, any and all information contained in the Company's current and
future underwriting manuals, trade secrets, research, products and business
affairs, but does not include:
a) Information which is generally known or easily ascertainable by
non-parties of ordinary skill; and
b) Information acquired from non-parties who have no confidential
commitment to either party to this Agreement.
The Reinsurer will take all necessary and appropriate measures to ensure
that the Reinsurer's employees and agents abide by the terms of this Article.
2. Confidential information as defined above may be shared or used by the
Reinsurer within the Reinsurer's organization and with a third party only if
required to administer or perform services under this agreement. If required
by law, the Reinsurer agrees that the Reinsruer will enter into a written
agreement with such third parties not to disclose the Company's confidential
information, before the Reinsurer shares confidential information with such
third parties. The Reinsurer will take all necessary and appropriate
measures to ensure that the Reinsurer's employees and representatives abide
by the terms of this agreement.
3. In the event the Reinsurer is requested or required by law, regulation, or
order, subpoena or civil process to disclose any confidential information,
the Reinsurer agrees that the Reinsurer will provide the Company with an
opportunity to take appropriate action.
4. Notwithstanding the foregoing, the Company agrees that the Reinsurer may
aggregate the Company's data with that of other companies reinsured, on the
condition that the Company's data not be identified by the Company's
corporate name, logo or any other means. The Company also agrees that, upon
request, the Reinsurer may make available any necessary data or information
to the Reinsurer's auditors, or any governmental or administrative agencies
in the course of their examination of the Reinsurer's records, systems and
procedures, provided that they are (1) made aware by the Reinsurer that this
is Confidential Information; and (2) agree to abide by the restrictions of
this Agreement on further dissemination of said Confidential Information.
ARTICLE XV - GOOD FAITH
All matters with respect to this Agreement require the utmost good faith of
both parties.
-19-
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 will promptly notify the other if it is subsequently financially
impaired.
Each party has entered into this Agreement in reliance upon each other's
representations and warranties. Each party affirms that they have and will
continue to disclose all matters material to the business reinsured under
this Agreement. Material for purposes of this Article will mean changes in
underwriting, claims practices, issue practices, outsourcing, or the
introduction of distribution methods other than the conventional use of
agents/brokers, such as internet sales, direct response sales, direct mail
sales, etc., that a prudent actuary would consider as likely to adversely
affect the experience of the business reinsured under this Agreement.
The Reinsurer will have the right to accept in writing any material change
as applied to the business reinsured under this Agreement. In the event a
material change is implemented without the Reinsurer's prior consent:
i. the parties will attempt to negotiate mutually agreed revised terms
under which the policies affected by the material change may continue to
be reinsured; and
ii.if the parties are unable to agree on revised terms in 120 days, the
policies affected by the material change will be excluded from the scope
of coverage under this Agreement.
If policies are excluded, the parties will make payments constituting
returns of agreement cash settlements previously made in connection with the
excluded policies. For purposes of this Article, agreement cash settlements
will mean premiums, allowances, commissions, cash surrender values, death
claims, dividends, experience refund payments and similar settlements made
under this Agreement, but excludes items relating to reserves or interest on
reserves. Nothing herein will affect the policies which are not affected by
a material change.
ARTICLE XVI - SEVERABILITY
In the event that any provision or term of this Agreement shall be held by
any court, arbitrator, or administrative agency to be invalid, illegal or
unenforceable, all of the other terms and provisions shall remain in full
force and effect to the extent that their continuance is practicable and
consistent with the original intent of the parties. In addition, if any
provision or term is held invalid, illegal or unenforceable, the parties
will attempt in good faith to renegotiate the Agreement to carry out the
original intent of the parties.
-20-
ARTICLE XVII - MISCELLANEOUS
1. Assignment
Rights and obligations of this Agreement cannot be assigned by either party
unless mutually agreed to by all parties.
2. Notices
Any notices or other communications required or permitted hereunder shall be
sufficiently given only if in writing and personally delivered or sent by
mail, postage prepaid, by overnight courier, or by confirmed facsimile,
addressed as follows or to such other address as the parties shall have
given notice of pursuant hereto:
If to Phoenix: Phoenix Life Insurance Company
PHL Variable Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Reinsurance/Actuarial Financial H-2
Facsimile: (▇▇▇)-▇▇▇-▇▇▇▇
Telephone: (▇▇▇)-▇▇▇-▇▇▇▇
If to Reinsurer: Swiss Re Life & Health America Inc
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile:
Telephone: (▇▇▇)-▇▇▇-▇▇▇▇
3. Applicable Law
This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of New York without giving effect to the conflict
of laws provisions thereof.
4. Counterparts
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same Agreement.
-21-
ARTICLE XVIII - EXECUTION OF THE AGREEMENT
In witness whereof, both parties have caused this Agreement to be executed in
duplicate at the dates and places shown below, by the respective officers duly
authorized to do so.
PHOENIX LIFE INSURANCE COMPANY
PHL VARIABLE INSURANCE COMPANY
------------------------------
Signature
Senior Vice President -------------------
Title
--------------------------
Date of Signature
SWISS RE LIFE & HEALTH AMERICA INC.
------------------------------------ -----------------------------------
Signature Signature
------------------------------------ -----------------------------------
Title Title
------------------------------------ -----------------------------------
Date of Signature Date of Signature
-22-
EXHIBIT A
(Effective September 1, 2008)
REINSURANCE COVERAGE
I. REINSURANCE COVERAGE
This is a first dollar quota share agreement for COLI policies that we issue
directly, using Guarantee Issue (GI) or Simplified Issue (SI) guidelines on
the plans listed below. We will retain 20% of the Death Benefit on each
policy and cede to you 40% of the Death Benefit on each policy up to the
Automatic Acceptance Limit shown in Section III below.
Plans Covered are Phoenix Executive VUL II, Phoenix Executive UL III,
Phoenix Indexed UL II.
Riders covered are Term Riders, Exchange of Insured Riders.
Reinsurance will be placed automatically under this Agreement provided that
all of the following conditions are met for Underlying Policies:
. The policies are issued on the Effective Date of Coverage of this
Agreement or later.
. The individual risk must be underwritten in accordance with the
Underwriting Guidelines, Requirements, Exceptions Limits, Distribution
Method and Sales Practices provided to you.
. Each insured life at the time of the application must be a permanent
resident of the United States or Canada.
. We have maintained our percentage of risk up to the Maximum Dollar
Retention Limit on the life of the insured as shown below.
. The total of the new ultimate face amount of reinsurance required,
including an contractual increases and the amount already reinsured on
that life under this Agreement and all other agreements between the
Reinsurer and the company covering business written on an Employer
Sponsored plan issued on any underwriting basis, does not exceed the
specified Automatic Acceptance and Per Location Limits.
. The lives covered are not employed within any geographical boundary that
the Reinsurer has notified the Company that it is unable to accept
reinsurance from.
For the purposes of this Agreement, the term "location" shall mean any
one or more structures within a one mile radius of any building that
serves as the place of employment of any insured at the time a Reinsured
Policy is issued.
For purposes of this Agreement, "ultimate face amount" will mean the
projected maximum policy face amount that could be achieved based on
reasonable assumptions made about the policy.
Reinsurance coverage will not provide cash surrender values or loan values.
II. MAXIMUM RETENTION LIMITS
A. DEATH BENEFIT
For policies issued by us and ceded to you on an automatic basis, the
Company will retain 20% of each policy up to a Maximum Dollar Retention
Limit per life as shown below:
Issue Age Standard
--------- -----------
0-14 $10,000,000
15-70 $10,000,000
71-80 $10,000,000
81-85 $ 4,000,000
86-90 $ 0
B. WAIVER OF PREMIUM DISABILITY
Not reinsured under this Agreement.
C. ACCIDENTAL DEATH BENEFITS
Not reinsured under this Agreement.
III. AUTOMATIC ACCEPTANCE LIMITS
A. DEATH BENEFIT
For policies issued by us and ceded to you on an automatic basis, you
will accept automatically 40% of each risk up to a maximum of:
For Guaranteed Issue:
# Lives Issue Ages Maximum Face Amount Per Policy
------- ---------- ------------------------------
10 - 20 18 - 65 $20,000 x Number of Lives
21 - 24 18 - 65 $25,000 x Number of Lives
25+ 18 - 65 The lesser of:
* $30,000 x Number of Lives
* $3,000,000
* 4 x Avg. Case Face Amount
For Simplified Issue:
Issue Age Maximum Face Amount Per Policy
--------- ------------------------------
18 - 45 $1,000,000
46 - 60 $500,000
61 - 70 $300,000
B. PER LOCATION LIMITS
$100,000,000 ultimate amount of reinsurance for all policies covered by
this Agreement and all other agreements between the Reinsurer and the
Company covering business written on an Employer Sponsored plan issued
on a Simplified and/or guaranteed Issue underwriting basis with respect
to any one location at the time of policy issue.
For the purposes of this Agreement, the term "location" shall mean any
one or more structures within a one mile radius of any building that
serves as the place of employment of any insured at the time a Reinsured
Policy is issued.
IV. RESERVES
The Reinsurer will hold their share of basic and deficiency reserves.
V. UNDERWRITING GUIDELINES
Policies will be underwritten strictly according to the Underwriting
Guidelines, Requirements, Exceptions Limits, Distribution Method and Sales
Practices in place at inception of this Agreement. Material proposed changes
to any of these guidelines, requirements, limits or practices must be agreed
on between the parties prior to their implementation in order for such
policies to fall within the scope of the proposed reinsurance. Policies
purchased as part of a premium financing program or third party investment
program will not qualify for automatic reinsurance unless such programs have
been approved by the Reinsurer in advance.
VI. EXCLUSIONS TO AUTOMATIC REINSURANCE COVERAGE
Automatic reinsurance will not be available in the following situations:
1. The policy has been submitted on a facultative, facultative obligatory
or initial inquiry basis to the Reinsurer or to any other reinsurer;
2. The life to be reinsured is not a permanent resident of the United
States, its territories, or Canada.
3. Professional athletes that are a member of a team that is part of Major
League Baseball, the National Football League, the National Basketball
Association or the National Hockey League.
EXHIBIT B
(Effective September 1, 2008)
REINSURANCE ADMINISTRATION
Reinsurance administration and premium accounting will be on a
self-administered basis. Premiums will be paid Annually.
For each Monthly reporting period, the Company will submit to the Reinsurer
reports containing information in general compliance with the following:
. BILLING REPORT
Policy Number, Sequence, Name of Insured, Date of Birth, Sex, Original Issue
Date, Issue Date, Issue Age, Underwriting Class, Automatic/Facultative
Indicator, Substandard Rating, Premium Information, Allowance Information,
First Year/Renewal Year Distinction, Net Amount At Risk, Transaction code,
Transaction Effective Date.
. POLICY EXHIBIT
Case
Count Volume
----- ------
Beginning In Force
New Business
Reinstatements
Other Increases
Lapses
Deaths
Other Terminations
Recaptures
Other Decreases
Natural Variance
Ending In Force
On a Quarterly basis the Company will submit to the Reinsurer an in force
listing containing information in general compliance with the following:
. IN FORCE LISTING
Policy Number, Sequence, Name of Insured, Date of Birth, Sex, Original Issue
Date, Issue Date, issue Age, Underwriting Class, Automatic/Facultative
Indicator, Substandard Rating, Net Amount At Risk.
. RESERVES
Summary of reserves by product.
EXHIBIT C
(Effective September 1, 2008)
REINSURANCE RATES AND ALLOWANCES
I. RATES AND ALLOWANCES FOR LIFE REINSURANCE
The single life YRT Rates shown in this Exhibit are a percentage of the 2001
Valuation Basic Table (VBT), NS/SM, ALB. These are annual rates for standard
risks and are per $1,000 of the Net Amount at Risk reinsured. We will pay
you these rates multiplied by the following percentages:
Durations
---------
Non-Tobacco 1-25 26+
Issue Ages 0-39 61% 72%
Issue Ages 40-59 56% 67%
Issue Ages 60+ 63% 74%
Tobacco 1-25 26+
Issue Ages 0-39 80% 91%
Issue Ages 40-59 74% 85%
Issue Ages 60+ 83% 94%
II. POLICY FEE
None
III. RATES FOR SUBSTANDARD TABLE RATINGS
Substandard risks will not be ceded under this Agreement.
IV. RATES AND ALLOWANCES FOR FLAT EXTRA RATINGS
Substandard risks will not be ceded under this Agreement.
V. PREMIUM TAXES
You will not reimburse premium taxes for reinsurance ceded under this
Agreement.
VI. RECAPTURE PERIOD
Recapture will not be allowed.
VII. EXPERIENCE REFUND
Reinsurance under this Agreement is not eligible for an Experience Refund.