Exhibit 99.27(7)
REINSURANCE AGREEMENT
THIS AUTOMATIC SELF ADMINISTERED YRT REINSURANCE AGREEMENT
Effective January 1, 2002
(hereinafter referred to as the "Agreement")
is made between
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
of Ft. ▇▇▇▇▇, Indiana
(hereinafter referred to as "the Company")
and
XXXXXXXX REINSURANCE COMPANY
of xxxx,xx
(hereinafter referred to as "the Reinsurer")
TABLE OF CONTENTS
PREAMBLE
ARTICLE 1
1.1 Scope of Coverage
ARTICLE 2
2.1 Automatic Reinsurance
2.2 Facultative Reinsurance
ARTICLE 3
3.1 Automatic Submissions
3.2 Facultative Submissions
ARTICLE 4
4.1 Liability
4.2 Commencement of Automatic Reinsurance Liability
4.3 Commencement of Facultative Reinsurance Liability
4.4 Conditional or Interim Receipt Liability
ARTICLE 5
5.1 Premium Accounting
5.2 Non-Payment of Premiums
ARTICLE 6
6.1 Right of Offset
ARTICLE 7
7.1 Continuations
7.2 Policy Changes
7.3 Reductions
7.4 Lapses
7.5 Reinstatements
7.6 Last Survivor
ARTICLE 8
8.1 Retention Limit Changes
8.2 Recapture
8.3 Revision of Premium Rates and Special Termination Provision
ARTICLE 9
9.1 Claims Notice
9.2 Claims Payment
9.3 Contested Claims
9.4 Claims Expenses
9.5 Extra Contractual Obligations
9.6 Misstatement of Age or Sex
ARTICLE 10
10.1 Errors and Omissions
10.2 Dispute Resolution
10.3 Arbitration
ARTICLE 11
11.1 Insolvency
ARTICLE 12
12.1 DAC Tax
12.2 Taxes and Expenses
ARTICLE 13
13.1 Entire Agreement
13.2 Inspection of Records
13.3 Good Faith
13.4 Confidentiality
ARTICLE 14
14.1 Duration of Agreement
14.2 Severability
14.3 Construction
14.4 Regulatory Compliance
EXECUTION
EXHIBITS
A Business Covered
A-1 Required Forms, Manuals & Issue Rules - Conditional Receipt Amount
B Reinsurance Application
B-1 Temporary Life Insurance Agreement Form
C General Terms (including Reinsurance Rates and Allowances)
C-1 SpecificTerms
D The Company's Retention Limits
E The Reinsurer's Automatic Acceptance Limits
F Reinsurance Reports
F-1 Policy Exhibit Summary
F-2 Valuation Summary
F-3 Statutory Reserve Certification
F-4 Tax Reserve Certification
PREAMBLE
This Agreement is solely between the Company and the Reinsurer. Except
for the rights allowed M Life in Section 8.3, the acceptance of risks
under this Agreement will create no right or legal relation between
the Reinsurer and the insured, owner, or beneficiary of any insurance
policy or other contract of the Company
This Agreement will be binding upon the parties hereto and their
respective successors and assigns.
ARTICLE 1
1.1 SCOPE OF COVERAGE
This Agreement applies to all insurance policies and supplementary
benefits and riders attached thereto (hereinafter referred to as
"policies") listed in Exhibit A, which have been issued directly by
the Company in accordance with its new business underwriting rules,
premium rates and policy forms as provided to the Reinsurer. The
issuance of such business by the Company to lives resident in the
countries stated in Exhibit A, if issued in or issued for delivery in
such country, constitutes the transaction of business in a
jurisdiction in which the Company is properly licensed.
On and after the effective date of this Agreement, the Company will
cede, and the Reinsurer will accept risk on the above referenced
policies in accordance with the terms and conditions of this
Agreement. The policies accepted by the Reinsurer will be hereinafter
referred to as "Reinsured Policies".
This Agreement does not cover the following unless specified elsewhere
in this Agreement:
1.1.1 Non-contractual conversions, rollovers, exchanges or group
conversions; or
1.1.2 Any business issued under a program where full current
evidence of insurability consistent with the amount of
insurance is not obtained, or where conventional selection
criteria are not applied in underwriting the risk; or
1.1.3 Any conversion of a previously issued policy that had been
reinsured with another reinsurer.
Conversions arising from 1.1.1 and 1.1.3 will be covered under this
agreement provided that the conversions are underwritten as new
business.
Each policy covered under this Agreement must provide for the maximum
normal periods of suicide and contestability protection permitted in
the state in which the policy is executed.
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ARTICLE 2
2.1 AUTOMATIC REINSURANCE
The Company will automatically cede the Reinsurer's share of the
policies, supplementary benefits and riders covered under this
Agreement to the Reinsurer in accordance with the Automatic Acceptance
Limits specified in Exhibit E, provided that:
2.1.1 the Company has retained the amount stipulated in Exhibit D
according to the age and mortality rating at the time of
underwriting; and
2.1.2 the total of the new reinsurance required and the amount
already reinsured on that life under this Agreement and all
other life agreements between the Reinsurer and the Company,
does not exceed the Automatic Acceptance Limits set out in
Exhibit E; and
2.1.3 the amount of insurance on that life in all companies does not
exceed the Inforce Limits stated in Exhibit E; and
2.1.4 the application is on a life for which an application has not
been submitted by the Company on a facultative basis,
(excluding lives submitted for facultative excess of the
Company's automatic binding capacity), to the Reinsurer or any
other reinsurer within the last 3 years, unless the original
reason for submitting facultatively no longer applies.
2.2 FACULTATIVE REINSURANCE
If the Company receives an application for a policy covered under this
Agreement that does not meet the automatic coverage criteria listed in
section 2.1 above, it may submit the application facultatively to the
Reinsurer for its consideration.
The relevant terms and conditions of this Agreement will apply to
those facultative offers made by the Reinsurer which are accepted by
the Company.
ARTICLE 3
3.1 AUTOMATIC SUBMISSIONS
The Company will submit automatic policies to the Reinsurer in an
electronic TAI format.
Upon the request of the Reinsurer, the Company will send to the
Reinsurer copies of the application, underwriting papers and other
papers on a life reinsured automatically under this Agreement.
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3.2 FACULTATIVE SUBMISSIONS
The Company will apply for reinsurance on a facultative basis by
sending to the Reinsurer an Application for Reinsurance, a sample of
which is included as Exhibit B. Unless specified elsewhere in the
Agreement, accompanying this Application for Reinsurance will be
copies of all underwriting evidence that is available for risk
assessment including, but not limited to, copies of the application
for insurance, medical examiners' reports, attending physicians'
statements, inspection reports, and other papers bearing on the
insurability of the risk. The Company will also notify the Reinsurer
of any outstanding underwriting requirements at the time of the
facultative submission. Any subsequent information received by the
Company that is pertinent to the risk assessment will be transmitted
to the Reinsurer immediately.
After consideration of the Application for Reinsurance and related
papers, the Reinsurer will promptly inform the Company of its
underwriting decision. The Reinsurer's offer will expire at the end of
the period stated in Exhibit A, unless otherwise specified by the
Reinsurer. If the underwriting decision is acceptable to the Company
and the Company's policy is subsequently placed in force in accordance
with the issue rules provided to the Reinsurer, the Company will duly
notify the Reinsurer.
If any risk is submitted to more than one reinsurer for consideration,
facultative placement is based on the order of the responses received
from the reinsurers, first offer in, taking into consideration the
amount and rating requested by the Company. .
ARTICLE 4
4.1 LIABILITY
Unless specified elsewhere in the Agreement, the Reinsurer's liability
for the Reinsured Policies is restricted to its share of the Company's
liability as limited by the terms and conditions of the particular
policy under which the Company is liable.
The Reinsurer's liability to the Company for the reinsurance due shall
be based on the net amount at risk at the time of the Insured
Individual death. The Reinsurer's liability to the Company for the net
amount at risk on a Policy that is reinsured shall be determined based
on a ratio of the Reinsurer's liability to the total net amount at
risk under the policy at the time the reinsurance is placed. The
Reinsurer shall share in any decrease in the net amount at risk in
proportion to its share of the reinsurance on the Policy.
The Reinsurer may terminate its liability for any policies for which
reinsurance premium payments are in arrears, according to the terms
set out in Article 5.2 of this Agreement.
4.2 COMMENCEMENT OF AUTOMATIC REINSURANCE LIABILITY
The Reinsurer's liability for any Reinsured Policy accepted
automatically will begin simultaneously with the Company's contractual
liability for that policy.
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4.3 COMMENCEMENT OF FACULTATIVE REINSURANCE LIABILITY
If a facultative application is submitted by the Company to the
Reinsurer only, then the Reinsurer's liability will begin
simultaneously with the Company's contractual liability for this
facultative policy. The amount of the Reinsurer's liability will be
the lesser of the Reinsurer's offer, the Conditional Receipt Amount
set out in Exhibit A-1, the Automatic Acceptance Limits set out in
Exhibit E, or Temporary Insurance Agreement. The Reinsurer's liability
ceases when the Reinsurer declines the risk and duly notifies the
Company. The Reinsurer's liability would also cease when the Company
declines the Reinsurer's offer.
If, however, a facultative application is submitted by the Company to
any other reinsurer, in addition to the Reinsurer, the liability of
the Reinsurer will commence when the Reinsurer has received notice
from the Company, during the lifetime of the insured, that the
Reinsurer's offer has been accepted. The Company will have the number
of days specified in Exhibit A from the date of the Reinsurer'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.
4.4 CONDITIONAL OR INTERIM RECEIPT LIABILITY
Temporary Insurance Agreement coverage applicable to automatic
reinsurance under this Agreement will be limited to amounts accepted
within the company's usual cash-with-application procedures that
provide temporary coverage up to the limits shown in Exhibit A-1.
However, for facultative reinsurance, the Reinsurer's liability will
not commence until the Reinsurer's facultative offer has been accepted
by the Company; and then is limited to the company's usual
cash-with-application procedures, which provide temporary coverage up
to the limits shown in Exhibit A-1.
ARTICLE 5
5.1 PREMIUM ACCOUNTING
The Company will pay the Reinsurer premiums in accordance with the
terms specified in Exhibit C.
The Reinsurer reserves the right to charge interest on overdue
premiums. The interest will be calculated according to the terms and
conditions specified in Exhibit C.
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5.2 NON-PAYMENT OF PREMIUMS
The payment of reinsurance premiums is a condition precedent to the
liability of the Reinsurer for reinsurance covered by this Agreement.
In the event that reinsurance premiums are not paid within 60 days of
the Due Date stated in Exhibit F, the Reinsurer will have the right to
terminate the reinsurance under all policies having reinsurance
premiums in arrears. If the Reinsurer elects to exercise its right of
termination, it will give the Company 15 days written notice of its
intention to terminate said reinsurance. If all reinsurance premiums
in arrears, including any which may become in arrears during the 15
day period, are not paid before the expiration of said period, the
Reinsurer will be relieved of all liability under those policies as of
the last date for which premiums have been paid for each policy. This
right to terminate reinsurance will not prejudice the Reinsurer's
right to collect premiums for the period during which reinsurance was
in force prior to the expiration of the 15 days notice. The Company is
still obligated to pay such overdue premiums.
The Company will not force termination under the provisions of this
Article solely to avoid the recapture requirements of this Agreement
or to transfer the Reinsured Policies to another reinsurer.
ARTICLE 6
6.1 RIGHT OF OFFSET
The Company and the Reinsurer will have the right to offset any
balance or balances whether on account of premiums, allowances or
claims due from one party to the other, under this Agreement or under
any other
reinsurance agreement between the Company and the Reinsurer.
The right of offset will not be affected or diminished because of the
insolvency of either party.
ARTICLE 7
7.1 CONTINUATIONS
If a Reinsured Policy is converted, exchanged or internally replaced
the Company will promptly notify the Reinsurer. Such non-underwritten
policy arising from the conversion, exchange or replacement, will
continue to be reinsured with the Reinsurer. The amount to be
reinsured will be determined on the same basis as used for the
original policy but will not exceed the amount reinsured as of the
date of conversion unless mutually agreed otherwise.
If the policy arising from a conversion, exchange or replacement is on
a plan that is not covered by any
reinsurance agreement with the
Reinsurer, reinsurance will be on a YRT basis using the YRT rates
specified in Exhibit C-1, at the attained age and duration of the
original policy.
A conversion, exchange or replacement that is fully underwritten shall
be treated as new business.
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The above terms will apply unless specified otherwise in Exhibit C-1.
A policy resulting from a conversion, exchange or replacement of a
policy that was originally underwritten by First-Penn Pacific Life
Insurance Company of Ft. ▇▇▇▇▇ Indiana prior to 1/1/2001 shall be
reinsured under this agreement under the terms of Article 7.1 of this
agreement. Unless mutually agreed otherwise, any other policies that
had been reinsured with another reinsurer and which convert to a plan
covered under this Agreement will not be reinsured with the Reinsurer.
7.2 POLICY CHANGES
If the plan, the amount of reinsurance, or the premiums of a Reinsured
Policy are changed, the Company will promptly inform the Reinsurer.
Whenever a Reinsured Policy 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 Reinsured Policy will
apply to the reissued Reinsured Policy and the duration will be
measured from the effective date of the original Reinsured Policy.
Whenever a Reinsured Policy 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:
7.2.1 The new amount of the Reinsured Policy would be in excess of
the Automatic Acceptance Limit, in effect at the time of the
change, as set out in Exhibit E; or
7.2.2 The new amount of the policy and the amount already in force
on the same life exceeds the Inforce Limit stated in Exhibit
E; or
7.2.3 The Reinsured Policy is submitted for facultative excess of
Company's automatic binding capacity.
The amount of any non-contractual increase will be subject to the
terms stated in Exhibit C.
For changes not covered under this Agreement, which affect the terms
of any Reinsured Policy, the Company must obtain the Reinsurer's
approval before such changes become effective.
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7.3 REDUCTIONS
Unless specified otherwise in this Agreement, if the amount of
insurance of a policy issued by the Company is reduced and
7.3.1 the amount of reinsurance is on excess basis, then the amount
of reinsurance on that life will be reduced effective the same
date by the full amount of the reduction under the original
policy. If the amount of insurance terminated equals or
exceeds the amount of reinsurance, the full amount of
reinsurance is terminated, or
7.3.2 the amount of reinsurance is on a quota share basis, then the
amount of reinsurance on that life will be reduced effective
the same date by the same proportion as the reduction under
the original policy.
The reduction will first apply to any reinsurance on the policy being
reduced and then if applicable in a chronological order according to
policy date ("first in, first out") to any reinsurance on the other
policies in force on the life. However, the Company will not be
required to assume a risk for an amount in excess of its regular
retention for the age at issue and the mortality rating of the policy
under which reinsurance is being terminated.
If the reinsurance for a policy has been placed with more than one
reinsurer, the reduction will be applied to all reinsurers pro rata to
the amounts originally reinsured with each reinsurer.
7.4 LAPSES
When a Reinsured Policy lapses, reinsurance thereon will be terminated
effective the same date.
Unless specified otherwise in this Agreement, if a policy fully
retained by the Company lapses, the terms under the preceding
Reductions clause would apply.
If a Reinsured Policy lapses and extended term insurance is elected
under the terms of the policy, the reinsurance thereon will continue
on the same basis as the original policy until the expiry of the
extended term period.
If a Reinsured Policy lapses and reduced paid-up insurance is elected
under the terms of the policy, the amount of reinsurance will be
reduced according to the terms under the preceding Reductions clause.
If the Company allows the Reinsured Policy to remain in force under
its automatic premium loan regulations, the reinsurance will continue
unchanged and in force as long as such regulations remain in effect,
except as provided for otherwise in this Agreement.
The Reinsurer does not participate in policy loans or other forms of
indebtedness on policies reinsured under this Agreement. Therefore,
policy loans do not affect the amount of reinsurance.
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7.5 REINSTATEMENTS
If a policy reinsured on an automatic basis is reinstated in
accordance with its terms or the rules of the Company the Reinsurer
will, upon notification of reinstatement, reinstate the Reinsured
Policy automatically. The Reinsurer's approval is required only for
the reinstatement of a facultative policy when the Company's regular
reinstatement rules indicate that more evidence than a Statement of
Good Health is required.
7.6 LAST SURVIVOR
With respect to any Last Survivor Policy covered hereunder, the
Company's retention shall be equal to the lowest amount which could
have been retained by the Company as set forth in Exhibit D taking
into account amounts issued and retained on either of the lives
insured under the Last Survivor Policy.
The Company may reinsure the policy automatically if both insureds
fall within the appropriate age limits and underwriting classes as
specified in Exhibit C-1.
The Company shall obtain proof of death upon the death of each Insured
Individual and shall investigate each death and assert any defense
against liability in accordance with its normal claims procedures. The
Company shall notify the Reinsurer of each death.
If the life upon which the Company was most highly retained at the
time of issue dies first, the Company may recapture reinsurance ceded
on the surviving life up to the amount needed for it to retain its
retention at issue of the Last Survivor Policy on the life which
survives.
In the event the Last Survivor Policy permits the insureds to split
the Last Survivor Policy into separate policies on the life of each
insured under the Last Survivor Policy, the new policies shall be
Continuations as Defined in Article 7.1 of this agreement. Any
substandard or flat extras assessed a life under the Last Survivor
Policy shall be payable under the appropriate Continuation Policy. The
reinsured premiums for the Individual Policies shall be in accordance
with the terms specified in Exhibit C.
In the event one life is determined to be uninsurable, the provisions
of this Article will continue to apply with the following exceptions:
a) The Company may reinsure the policy automatically if the
insurable life falls within the appropriate age limit and
underwriting class as specified in Exhibit C1 and the policy
meets the criteria specified in Article 2.1.
b) The Company need only apply its standard underwriting rules
and practices to the insurable life.
c) The reinsurance premium shall be computed on the age and
premium rates applicable to the insured risk.
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ARTICLE 8
8.1 RETENTION LIMIT CHANGES
If the Company changes its retention limits, it will provide the
Reinsurer with written notice of the new retention limits and the
effective date.
A change to the Company's Retention Limits in Exhibit D will not
affect the Reinsured Policies in force at the time of such a change
except as specifically provided for elsewhere in this Agreement.
Furthermore, such a change will not affect the Automatic Acceptance
Limits in Exhibit E unless mutually agreed by the Company and the
Reinsurer.
8.2 RECAPTURE
When the Company increases the dollar retention limit the amount of in
force Reinsured Policies may be reduced provided:
8.2.1 The Company gives the Reinsurer written notice of its
intention to recapture within 90 days of the effective date of
the retention increase; and
8.2.2 The amount eligible for recapture will be the difference
between the amount originally retained and the amount the
Ceding Company would have retained on the same 10% quota share
basis had the new retention limit schedule been in effect at
the time of issue.
8.2.3 Such recaptures are made on the next anniversary of each
Reinsured Policy affected unless mutually agreed otherwise by
the Company and the Reinsurer and with no recapture being made
until the Reinsured Policy has been in force for the period
stated in Exhibit C. For a conversion or re-entry, the
recapture terms of the original policy will apply and the
duration for the recapture period will be measured from the
effective date of the original policy; and
8.2.4 The Company has maintained from the time the policy was
issued, its full retention as set out in Exhibit D for the
plan and the insured's classification; and
8.2.5 The Company has applied its increased Retention Limits in a
consistent manner to all categories of its Retention Limits
set out in Exhibit D unless otherwise agreed to by the
Reinsurer.
In applying its increased Retention Limits to Reinsured Policies, the
age and mortality rating at the time of issue will be used to
determine the amount of the Company's increased retention.
Recapture as provided herein is optional with the Company, but if any
Reinsured Policy is recaptured, all Reinsured Policies eligible for
recapture under the provisions of this Article must be recaptured. If
there is reinsurance in other companies on risks eligible for
recapture, the necessary reduction is to be applied pro rata to the
total outstanding reinsurance.
The amount of reinsurance eligible for recapture is based on the
reinsurance net amount at risk as of the date of recapture.
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The Company may not revoke its election to recapture for Reinsured
Policies becoming eligible at future anniversaries.
No recapture of Reinsured Policies will occur if the Company has
either obtained or increased stop loss reinsurance coverage as
justification for the increase in retention.
The Reinsurer will not be liable, after the effective date of
recapture, for any Reinsured Policies or portions of such Reinsured
Policies eligible for recapture that the Company has overlooked. The
Reinsurer will be liable only for a credit of the premiums, received
after the recapture date, less any allowance.
The terms and conditions for the Company to recapture in force
Reinsured Policies due to the insolvency of the Reinsurer are set out
in the Insolvency clause in Article 11.
If the Company transfers business which is reinsured under this
Agreement to a successor company, then the successor company has the
option to recapture the reinsurance, in accordance with the recapture
criteria outlined in this Article, only if the successor company has
or adopts a higher retention limit than the Company.
8.3 REVISION OF PREMIUM RATES AND SPECIAL TERMINATION PROVISION
8.3.1 The Ceding Company may, at its option, initiate a review of
the mortality experience with respect to the business
reinsured hereunder. cost of insurance rates the Company
charges each insured life and the If the Ceding Company
modifies the COI rates charged to its policyholders for new
and/or inforce business specifically as a result of any such
review, the parties agree to negotiate a corresponding change
to the reinsurance YRT rates under this Agreement.
8.3.2 The parties agree to evaluate the mortality experience by
policy issue year, with respect to the application of cost of
insurance rates and reinsurance premium rates. If modified
cost of insurance rates or the premium rate change applies to
inforce policies, the application of the reinsurance premium
rates will remain on a point-in-scale (durational) basis.
Grouping of policy issue years will be agreed upon by the
parties for evaluation and rate application purposes.
8.3.3 If it is agreed among the parties that the mortality
experience is less than favorable than anticipated, an
increase in the cost of insurance rates and the reinsurance
premium rates will be initiated. If the parties agree that the
mortality experience is better than anticipated, a decrease in
the cost of insurance rates and the reinsurance premium rates
may be initiated.
8.3.4 If M Life evaluates and believes the mortality experience is
less favorable than anticipated, and the Reinsurer believes,
however, the experience remains consistent with its
anticipation or more favorable, M Life may increase its cost
of insurance rates while the Reinsurer may agree not to modify
the reinsurance premium rates charged per policy.
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8.3.5 If, however, the parties are unable to agree on the results of
the mortality experience whereby the Reinsurer determines a
need for no change or an increase in the reinsurance premium
rates and the Company and M Life do not agree, the Company and
M Life may terminate reinsurance on each policy under this
Agreement and reinsure such policies elsewhere. Such
termination may be exercised three (3) years after such a
disagreement, provided the policies affected have been
reinsured with the Reinsurer for a period of no less than five
(5) years in total. Within twelve (12) months following such
disagreement, either party may retract its position with
respect to the modification of the cost of insurance rates or
the reinsurance premium rates.
8.3.6 This Agreement includes no subsidization by duration, and
therefore no termination charge will be paid by the Company
and M Life to the Reinsurer, if the Company and M Life elect
to terminate the reinsurance under this Agreement based upon
the foregoing.
ARTICLE 9
9.1 CLAIMS NOTICE
The Company will notify the Reinsurer as soon as reasonably possible
after the Company receives a claim on a Reinsured Policy. The Ceding
Company will provide the following information on each Policy on which
a Claim is made: Insured Individual's name; Policy number; issue date;
death benefit; reinsured amount; interest amount; date of birth; date
of death; and cause of death. The settlement made by the Company will
be binding on the Reinsurer. However, for claims made during the
contestable period or in any case where the total amount of
reinsurance ceded to the Reinsurer is greater than the amount retained
by the Company, or if the Company retained less than, or none of, its
usual retention on the policy, then the Company will seek the Lead
Claim Reinsurer's recommendation before conceding liability or making
settlement to the claimant. The Reinsurer shall not be relieved of its
obligation under this agreement in the event the Company inadvertently
fails to provide notice of a Claim pursuant to this Section.
On claims involving automatic reinsurance, the Lead Claim Reinsurer
shall review any claims submitted in accordance with this Article on
behalf of the Reinsurers, and any recommendations or actions taken by
the Lead Claim Reinsurer, arrived at or taken independently or in
consultation with other Reinsurers, shall be binding on the remaining
Reinsurers. The Lead Claims Reinsurer may share proof of death,
related claim papers and any other documentation with the other
Reinsurers.
On facultative reinsurance, when the Reinsurers liability on the
contestable portion of any claim exceeds 50% or if the Ceding Company
has held less than, or none of its regular retention, the Reinsurer
shall have the right to review all pertinent documentation before any
liability is admitted. Within five (5) business days of receipt of the
final document, the Reinsurer will make a recommendation. If no
recommendation is made in the five (5) day period, this right is
thereby forfeited.
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9.2 CLAIMS PAYMENT
Provided there is no existing material breach of this Agreement by the
Company, the Reinsurer will be liable to the Company for the benefits
reinsured and the reinsurance will not exceed the Company's
contractual liability under the terms of its policies less the amount
retained. If a claim is made under insurance reinsured under this
Agreement, the payment of the Reinsurer's share of the reinsurance
proceeds will be deducted from the premium due the Reinsurer. The
Ceding Company does reserve the right, however, to request a cash
payment from the Reinsurer on any particular Claim rather than
deducting the payment from the premium due. The payment of reinsurance
proceeds shall be in one lump sum, regardless of the method of
settlement under the Policy.
If the Company pays interest from a specified date, such as the date
of death of the insured, on the contractual benefit of a policy
reinsured under this agreement, the Reinsurer shall indemnify the
Company for the Reinsurer's share of such interest. Interest paid by
the Reinsurer under this paragraph shall be computed at the same rate
and commencing on the same date as that paid by the Company. The
computation of interest paid by the Reinsurer under this paragraph
shall cease the earlier of (1) the date of payment of the Reinsurer's
share of reinsurance liability and (2) the date of the termination of
the period for which the Company has paid interest.
9.3 CONTESTED CLAIMS
The Company will notify the Reinsurer of its intention to contest,
compromise or litigate a claim involving a Reinsured Policy. The
Company will also provide the Reinsurer prompt notice of any legal
proceedings initiated against the Company in response to its denial of
a claim on a reinsured policy. Should any claim be settled on a
reduced compromise basis, or should a contested claim be settled for a
reduced sum, the Company and the Reinsurer will participate in such
reductions in proportion to their respective liabilities under the
policy or policies reinsured.
The Reinsurer may pay its share of the death benefit if it does not
deem it advisable to contest the claim.
9.4 CLAIMS EXPENSES
The Reinsurer will pay its share of reasonable investigation and legal
expenses incurred in adjudicating or litigating the claim in
proportion to the liabilities it assumes hereunder. The Reinsurer will
not be liable for any portion of any routine investigative or
administrative expenses incidental to the settlement of claims (such
as compensation of salaried employees) which are incurred by the
Company; nor for any expenses incurred in connection with a dispute or
contest arising out of conflicting claims of entitlement to policy
proceeds or benefits that the Company admits are payable.
In the event that the Reinsurer pays its share of the death benefit of
a policy for which the Company is contesting the claim, the Reinsurer
will not be liable for any subsequent expenses incurred by the
Company.
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9.5 EXTRA CONTRACTUAL OBLIGATIONS
Extra Contractual Obligations are obligations outside of the
contractual obligations and include but are not limited to punitive
damages, bad faith damages, compensatory damages, and other damages or
statutory penalties which may arise from the willful and/or negligent
acts or omissions by the Company.
The Reinsurer is not liable for Extra Contractual Obligations unless
it concurred in writing and in advance with the actions of the Company
which ultimately led to the imposition of the Extra Contractual
Obligations. In such situations, the Company and the Reinsurer will
share in Extra Contractual Obligations, in equitable proportions, but
all factors being equal, the division of any such assessments would be
in proportion to the total risk accepted by each party for the plan of
insurance involved.
Notwithstanding anything stated herein, this Agreement will not apply
to any Extra Contractual Obligations incurred by the Company as a
result of any negligence, fraud or wrong doing by any employee or
officer of the Company or an agent representing the Company unless
there has been negligence, fraud or wrong doing by any employee or
officer of the Reinsurer or an agent or representative of the
Reinsurer.
9.6 MISSTATEMENT OF AGE OR SEX
In the event of an increase or reduction in the amount payable under a
policy due to a misstatement in age or sex, the proportionate
liabilities under this Agreement will be the basis for determining
each party's share of any increase or reduction. The Reinsured Policy
will be rewritten from commencement on the basis of the adjusted
amounts using premiums and amounts at risk for the correct ages and
sex, and the proper adjustment for the difference in reinsurance
premiums, without interest, will be made.
ARTICLE 10
10.1 ERRORS AND OMISSIONS
No delays, errors or omissions on the part of the Company shall
relieve the Reinsurer of liability provided such delays, errors or
omissions are rectified as soon as possible after discovery. However,
the Reinsurer shall not be liable with respect to any reinsurance
which may have been inadvertently included in the premium calculation
but which ought to not have been included by reason of the terms and
conditions of this agreement. Such inadvertent premium payments shall
be returned
14
10.2 DISPUTE RESOLUTION
If either the Company or the Reinsurer has given written notification
of a dispute to the other party, then within 15 days of such
notification both parties must designate an officer of their
respective companies to attempt to resolve the dispute. The officers
will meet at a mutually agreeable location as soon as possible and as
often as necessary, in order to gather and furnish the other with all
appropriate and relevant information concerning the dispute. The
officers will discuss the problem and will negotiate in good faith
without the necessity of any formal arbitration proceedings. During
the negotiation process, all reasonable requests made by one officer
to the other for information will be honored. The specific format for
such discussions will be decided by the designated officers.
If these officers are unable to resolve the dispute within 30 days of
their first meeting, the dispute will be submitted to formal
arbitration, unless the parities agree in writing to extend the
negotiation period for an additional 30 days.
10.3 ARBITRATION
If the Company and Reinsurer are unable to mutually resolve a dispute
or controversy relating to policies covered under this Agreement or
the breach thereof, the matter will be referred to arbitration.
To initiate arbitration, either the Company or the Reinsurer will
notify the other party in writing of its desire to arbitrate, stating
the nature of its dispute and the remedy sought. There will be three
arbitrators selected who will be officers of Life Insurance Companies
or Life Reinsurance Companies excluding officers of the parties to
this Agreement, their affiliates or subsidiaries or past employees of
any of these entities. The arbitrators, who will regard this Agreement
from the standpoint of practical business as well as the law, are
empowered to determine the interpretation of the treaty obligation.
Each party will appoint one arbitrator and these two arbitrators will
select a third arbitrator within 2 weeks of the appointment of the
second. If either party refuses or neglects to appoint an arbitrator
within 60 days after receipt of the written request for arbitration,
the other party may appoint a second arbitrator. Should the two
arbitrators not agree on the choice of the third, then each party will
name four candidates to serve as the arbitrator. Beginning with the
party who did not initiate arbitration, each party will eliminate one
candidate from the eight listed until one candidate remains. If this
candidate declines to serve as the arbitrator, the candidate last
eliminated will be approached to serve. This process will be repeated
until a candidate has agreed to serve as the third arbitrator.
The place of meeting of the arbitrators will be decided by a majority
vote of the arbitrators. The written decision of a majority of the
arbitrators will be final and binding on both parties and their
respective successors and assigns.
15
The arbitrators will render a decision within 4 months of the
appointment of the third arbitrator, unless both parties agree
otherwise. In the event no decision is rendered within 4 months, new
arbitrators will be selected as above. There will be no appeal from
the decision. Either party to the arbitration may petition any court
having jurisdiction over the parties to reduce the decision to
judgment. Alternatively, if both parties consent, any controversy may
be settled by arbitration in accordance with the rules of the American
Arbitration Association.
Unless the Arbitrators decide otherwise, each party will bear the
expense of its own arbitration, including its appointed arbitrator and
any outside attorney and witness fees. The parties will jointly and
equally bear the expense of the third arbitrator and other costs of
the arbitration.
It is specifically the intent of both parties that these arbitration
provisions will replace and be in lieu of any statutory arbitration
provision, if the law so permits.
ARTICLE 11
11.1 INSOLVENCY
A party to this Agreement will be deemed "insolvent" when it:
11.1.1 Applies for or consents to the appointment of a receiver,
rehabilitator, conservator, liquidator or statutory successor
(hereinafter referred to as the Authorized Representative) of
its properties or assets; or
11.1.2 Is adjudicated as bankrupt or insolvent; or
11.1.3 Files or consents to the filing of a petition in bankruptcy,
seeks reorganization or an arrangement with creditors or takes
advantage of any bankruptcy, dissolution, liquidation, or
similar law or statute; or
11.1.4 Becomes the subject of an order to rehabilitate or an order to
liquidate as defined by the insurance code of the jurisdiction
of the party's domicile.
In the event of the insolvency of the Company, all reinsurance made,
ceded, renewed or otherwise becoming effective under this Agreement
will be payable by the Reinsurer directly to the Company or to its
Authorized Representative, on the basis of the liability of the
Company under the Reinsured Policies without diminution because of the
insolvency of the Company.
The Reinsurer will be liable only for the amounts reinsured and will
not be or become liable for any amounts or reserves to be held by the
Company on policies reinsured under this Agreement. The Authorized
Representative will give written notice to the Reinsurer of all
pending claims against the Company on any policies reinsured within a
reasonable time after such claims are filed in the insolvency
proceedings. While a claim is pending, the Reinsurer may investigate
such claim and interpose, at its own expense, in the proceedings where
the claim is to be adjudicated, any defense or defenses which it may
deem available to the Company or the Authorized Representative.
16
The expense incurred by the Reinsurer will be chargeable, subject to
court approval, against the Company as part of the expense of
conservation or liquidation to the extent of a proportionate share of
the benefit which may accrue to the Company solely as a result of the
defense undertaken by the Reinsurer. Where two or more reinsurers are
involved in the same claim and a majority in interest elect to
interpose a defense to such claim, the expense will be apportioned in
accordance with the terms of the Agreement as though such expense had
been incurred by the Company.
In the event of insolvency, the Right of Offset afforded under Article
6-1 will remain in full force and effect to the extent permitted by
applicable law.
In the event of the insolvency of the Reinsurer, the Company may
cancel this Agreement for new business by promptly providing the
Reinsurer, its receiver, rehabilitator, conservator, liquidator or
statutory successor with written notice of the cancellation effective
the date on which the Reinsurer's insolvency is established by the
authority responsible for such determination. Any requirement for a
notification period prior to the cancellation of the Agreement would
not apply under such circumstances.
In addition, the Company may provide the Reinsurer, its receiver,
rehabilitator, conservator, liquidator or statutory successor with
written notice of its intent to recapture all reinsurance in force
under this Agreement regardless of the duration the reinsurance has
been in force or the amount retained by the Company on the policies
reinsured hereunder. The effective date of a recapture due to
insolvency would be at the election of the Company and would not be
earlier than the date on which the Reinsurer's insolvency is
established by the authority responsible for such determination. Any
Recapture Fee applicable will be mutually agreed upon by the Company
and the Reinsurer, its rehabilitator, conservator, liquidator or
statutory successor.
ARTICLE 12
12.1 DAC TAX
The Company and the Reinsurer agree to the DAC Tax Election pursuant
to Section 1.848-2(g)(8) of the Income Tax Regulations effective
December 29, 1992, under Section 848 of the Internal Revenue code of
1986, as amended, whereby:
12.1.1 The party with the net positive consideration for this
Agreement for each taxable year will capitalize specified
policy acquisition expenses with respect to this Agreement
without regard to the general deductions limitation of Section
848(c)(1); and
17
12.1.2 Both parties agree to exchange information pertaining to the
amount of net consideration under this Agreement each year to
ensure consistency. To achieve this, the Company shall provide
the Reinsurer with a schedule of its calculation of the net
considerations for all
reinsurance agreements in force between
them for a taxable year by no later than May 1 of the
succeeding year. The Reinsurer shall advise the Company no
later than May 31, otherwise the amounts will be presumed
correct and shall be reported by both parties in their
respective tax returns for such tax year. If the Reinsurer
contests the Company's calculation of net consideration, the
parties agree to act in good faith to resolve any differences
within thirty (30) days of the date the Reinsurer submits its
alternative calculation and report the amounts agreed upon in
their respective tax returns for such year.
The term "net consideration" will refer to the net consideration as
defined in Regulation Section 1.848-2(f).
The Company and the Reinsurer will report the amount of net
consideration in their respective federal income tax returns for the
previous calendar year.
The Company and the Reinsurer will also 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.
This DAC Tax Election will be effective for all years for which this
Agreement remains in effect.
The Company and the Reinsurer 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.
12.2 TAXES AND EXPENSES
Apart from any taxes, allowances, refunds, and expenses specifically
referred to elsewhere in this Agreement, no taxes, allowances, or
proportion of any expense will be paid by the Reinsurer to the Company
in respect of any Reinsured Policy.
ARTICLE 13
13.1 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
with respect to the business reinsured hereunder. There are no
understandings between the Company and the Reinsurer with respect to
the business reinsured hereunder other than as expressed in this
Agreement.
Any alteration to this Agreement will be null and void unless made by
written amendment, attached to the Agreement and signed by both
parties.
18
13.2 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.
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.
13.3 GOOD FAITH
All matters with respect to this Agreement require the utmost good
faith of both parties.
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.
The Reinsurer has entered into this Agreement in reliance upon the
Company's representations and warranties. The Company affirms that it
has and will continue to disclose all matters material to this
Agreement. Examples of such matters are a change in underwriting or
issue practices or philosophy, a change in underwriting or claims
management personnel, or a change in the Company's ownership or
control.
The Company affirms that the underwriting, administration and claims
practices it employs are consistent with the customary and usual
practices of the insurance industry as a whole. Should the Company
engage in exceptional or uncustomary practices, it will inform the
Reinsurer of such action and obtain its written consent before
assigning any liability to the Reinsurer with respect to any policies
covered under this Agreement.
13.4 CONFIDENTIALITY
Both the Company and the Reinsurer will hold confidential and not
disclose or make competitive use of any shared client and proprietary
information unless otherwise agreed to in writing, or unless the
information otherwise becomes publicly available or the disclosure of
which is required for retrocession purposes or has been mandated by
law or is duly required by external auditors.
Client information includes medical, financial and other personal
information about proposed, current and former policyowners, insureds,
applicants, and beneficiaries of policies issued by the Company.
Proprietary Information includes but is not limited to underwriting
manuals and guidelines, applications and contract forms and premium
rates and allowances of the Reinsurer and the Company.
In addition, the Company and the Reinsurer will comply with relevant
privacy legislation.
19
ARTICLE 14
14.1 DURATION OF AGREEMENT
This Agreement is unlimited as to its duration. The Reinsurer or the
Company may terminate this Agreement with respect to the reinsurance
of new business by giving at least 90 days written notice of
termination to the other party.
During the 90-day notification period, the Company will continue to
cede and the Reinsurer will continue to accept policies covered under
the terms of this Agreement.
Further, the Reinsurer remains liable for all Reinsured Policies in
force at the date of the termination stated in the notice of
termination, until their natural expiration, unless the parties
mutually decide otherwise or as specified otherwise in this Agreement.
The Company shall have the option of terminating this agreement for
new business at anytime, upon delivery of written notice to the
Reinsurer of at least 30 days prior to such termination of any of the
following events:
14.1.1 The Reinsurer's rating by A.M. Best is reduced from the rating
which existed at the time this agreement became effective to a Best's
rating below A-;
14.1.2 The Reinsurer is placed on a "watch list" by its domiciliary
state's insurance regulators;
14.1.3 The regulatory authority of any state in which the Reinsurer
is authorized to do business revokes the Reinsurer's right to continue
conducting business in that state for financial reasons;
14.1.4 An order appointing a receiver or trustee for management of
the Reinsurer is entered or a proceeding is commenced for
rehabilitation, liquidation, supervision, or conservation of the
Reinsurer;
14.1.5 The Reinsurer notifies the Company of a request for increase
in premium.
14.2 SEVERABILITY
If any provision of this Agreement is determined to be invalid or
unenforceable, such determination will not affect or impair the
validity or the enforceability of the remaining provisions of this
Agreement.
14.3 CONSTRUCTION
The rights and obligations under this Agreement will be construed and
administered in accordance with the laws of the Company's state of
domicile stated in Exhibit A.
20
14.4 REGULATORY COMPLIANCE
Each party hereto warrants that it has secured all necessary federal
and state licenses and approvals and that it is operating in
compliance with federal and state insurance laws and regulations.
The parties intend that the Company will receive full statutory
reserve credit for the Reinsured Policies in its state of domicile.
The parties agree to make all reasonable efforts to ensure that this
is accomplished.
EXECUTION
This Agreement has been made in duplicate and hereby executed by both parties.
Signed for and on behalf of LINCOLN NATIONAL LIFE INSURANCE COMPANY
By: By:
----------------------------- --------------------------------
Title: Title:
----------------------------- --------------------------------
Date: Date:
----------------------------- --------------------------------
Place: Place:
----------------------------- --------------------------------
Signed for and on behalf of xxxxxxxxxx
By: By:
----------------------------- --------------------------------
Title: Title:
----------------------------- --------------------------------
Date: Date:
----------------------------- --------------------------------
Place: Place:
----------------------------- --------------------------------
EXHIBIT A
BUSINESS COVERED
AGREEMENT EFFECTIVE DATE:
February 1, 2004. The commencement dates for specific plans are shown below.
COVERAGE:
The policies/riders on the plans shown below which have policy issue dates
falling in the period that begins with the Commencement Date and ends with the
Termination Date and that qualify for automatic reinsurance are covered
according to the Basis specified below provided:
1. The policies/riders are on lives resident in the United States or
Foreign Nationals in accordance with Ceding Companies guidelines.
2. The policies/riders are on lives with surnames commencing with
the letters A to Z inclusive.
BASIS:
yy% on a First Dollar Quota Share basis to the maximum Automatic Acceptance
Limits stated in Exhibit E.
CURRENCY: US$
COMPANY'S STATE OF DOMICILE: Connecticut
PLANS, RIDERS AND BENEFITS:
PLAN EXHIBIT REFERENCE . COMMENCEMENT TERMINATION
IDENTIFICATION FOR RATES DATE DATE
All Proprietary Products
Developed for M Life and
Associated Riders
Individually underwritten
at the Company's
Connecticut office. C-1 February 1, 2004 N/A
2
FACULTATIVE SUBMISSIONS:
The Company may submit, on a facultative basis, to the Reinsurer any application
for a policy on a plan or rider listed above which qualifies for automatic
reinsurance.
The Company will submit on a facultative basis to the Reinsurer any application
for a policy on a plan or rider listed above which does not meet the criteria
listed in Article 2 under Automatic Reinsurance.
The Reinsurer's facultative offer will expire at the end of 120 days, unless
otherwise specified by the Reinsurer.
Facultative cessions will be accepted at the automatic rates.
The minimum facultative cession size is $20,000.
EXHIBIT A-1
REQUIRED FORMS, MANUALS AND ISSUE RULES
The Company affirms that its retention schedule, underwriting guidelines, issue
rules, premium rates and policy forms applicable to the Reinsured Policies and
in use as of the effective date of this Agreement have been supplied to the
Reinsurer. This includes:
1. Policy Application Form(s)
2. Underwriting Manual and Agent's Guide
3. Policy Delivery Rules and Reinstatement Rules
4. Non-medical and Medical Requirements
5. Tobacco Use Guidelines and Questionnaires
6. Preferred Underwriting Guidelines
The Company will promptly notify the Reinsurer of any proposed material changes
to the above underwriting guidelines, issue rules, premium rates, retention
schedule and policy forms. The Reinsurer shall be entitled to thirty (30)
calendar days following the receipt of such notice in which to review such
revisions. If the Reinsurer fails to provide written notice within the thirty
(30) days calendar review period that the revisions are not acceptable the
revisions shall be deemed acceptable to the Reinsurer. This Agreement will not
extend to policies issued pursuant to such changes unless the Reinsurer has
accepted such changes.
It is the Company's responsibility to ensure that the applicable forms are in
compliance with current Medical Information Bureau (M.I.B.) regulations.
CONDITIONAL RECEIPT AMOUNT
The amount of coverage provided by the Reinsurer under a Conditional Receipt (or
Interim Receipt) will not exceed the lesser of:
1. The Reinsurer's share of $500,000; or
2. The Automatic Acceptance Limits; or
3. The Reinsurer's share of the difference between the amount of
insurance provided by the Conditional Receipt (or Interim Receipt) and
the Company's maximum retention assuming the life had been
underwritten as standard. The Company's retention will include any
amounts retained under any in force policies on the life.
EXHIBIT B
1
FACULTATIVE LIFE REINSURANCE - INDIVIDUAL Please check below (send to:)
/ / All Companies OR
TO: Reinsurance Administration - MRM1 / / Allianz / / Annuity / / Cologne / / Munich
/ / RGA / / Scor Life / / Swiss Re
INSTRUCTIONS: Complete all sections of form, printing clearly. Indicate any
papers in the file that you do not want sent to the outlets
by putting a RED "X" in the left lower corner of each page.
Bring the form and the file to Reinsurance Administration to
photocopy. The file will be returned to the underwriter.
Full Name of Insured:
--------------- ---------------- -------------
Last First MI
Date of Birth: / /
------------------------------
Month Day Year
Social Security Number: - -
------------------------------
TOTAL Line of Insurance
inforce and applied for
in all companies:
(include group only if
known)
------------------------------------------------------
Policy Number(s) to be
reinsured:
------------------------------------------------------
Plan of Insurance:
------------------------------------------------------
IN FORCE
1. Prior Inforce with
Lincoln: *
---------------------------------------
2. 1st Layer on Prior
Inforce:
---------------------------------------
3. Additional Retention
on Prior Inforce:
---------------------------------------
NEW Increasing Risk: / / Yes / / No
4. Amount Applied for
Currently:
---------------------------------------
5. 1st Layer on
Current:
---------------------------------------
6. Additional Retention
on Current: **
---------------------------------------
7. FACULTATIVE
REINSURANCE APPLIED
FOR:
---------------------------------------
If this is a replacement of prior Lincoln
coverage, list the old policy numbers:
-------------------------------------
If this is an Exchange Case, does the underwriting evidence used for the
exchange constitute current medical evidence? / / Yes / / No
Retention: / / Full Limited due
-------------------------------------
RISK CLASSIFICATION
/ / Standard / / Preferred / / Smoker / / Non-Smoker
Rating:
------------------------------------------------------
Reason for Rating:
------------------------------------------------------
Outstanding
Requirement(s):
------------------------------------------------------
1. Are the Outstanding
Requirements Subject to: / / Lincoln Approval / / Outlet Approval
2. Is there underwriting evidence
from prior files to be sent
with this case? / / Yes / / No
Notes:
----------------------------------------------------------------------
--------------------------------------------------------------------------------
------------------------------------- ---------------- ----------------
Underwriter Signature Ext. Date
By:
----------------------------------- --------------------------------------
Date Received in Reinsurance Unit Reinsurance Analyst Signature
* Include any concurrently issued policies which are not being reinsured.
** 2 + 3 + 5 + 6 = Retention
Revised: 12/3/2003
FACULTATIVE LIFE REINSURANCE - JOINT Please check below (send to:)
/ / All Companies OR
TO: Reinsurance Administration - MRM1 / / Allianz / / Annuity / / Cologne / / Munich
/ / RGA / / Scor Life / / Swiss Re
INSTRUCTIONS: Complete all sections of form, printing clearly. Indicate any
papers in the file that you do not want sent to the outlets
by putting a RED "X" in the left lower corner of each page.
Bring the form and the file to Reinsurance Administration to
photocopy. The file will be returned to the underwriter.
HUSBAND WIFE
------- ----
Full Name of Insured:
--------------------------- ---------------------------
(Last, First, MI) (Last, First, MI)
Date of Birth: / / / /
--------------------------- ---------------------------
Month Day Year Month Day Year
Social Security Number: - - - -
--------------------------- ---------------------------
TOTAL Line of Insurance
inforce and applied for
in all companies:
(include group only if
known)
--------------------------- ---------------------------
Policy Number(s) to be
reinsured:
--------------------------------------------------------
Plan of Insurance:
--------------------------------------------------------
IN FORCE
1. Prior Inforce with
Lincoln: *
--------------------------- ---------------------------
2. 1st Layer on Prior
Inforce:
--------------------------- ---------------------------
3. Additional
Retention on Prior
Inforce:
--------------------------- ---------------------------
NEW Increasing Risk: / / Yes / / No
4. Amount Applied for
Currently:
--------------------------------------------------------
5. 1st Layer on
Current:
--------------------------------------------------------
6. Additional
Retention on
Current: **
--------------------------------------------------------
7. FACULTATIVE
REINSURANCE
APPLIED FOR:
--------------------------------------------------------
If this is a replacement of prior Lincoln
coverage, list the old policy numbers:
-----------------------------------
If this is an Exchange Case, does the underwriting evidence used for the
exchange constitute current medical evidence? / / Yes / / No
RISK CLASSIFICATION HUSBAND WIFE
------------------- ------- ----
/ / Standard / / Preferred / / Standard / / Preferred
/ / Smoker / / Non-Smoker / / Smoker / / Non-Smoker
Rating:
--------------------------- ---------------------------
Reason for Rating:
--------------------------- ---------------------------
Outstanding
Requirement(s):
--------------------------- ---------------------------
1. Are the Outstanding
Requirements Subject to: / / Lincoln Approval / / Outlet Approval
2. Is there underwriting evidence
from prior files to be sent
with this case? / / Yes / / No
Notes:
----------------------------------------------------------------------
--------------------------------------------------------------------------------
------------------------------------- ---------------- ----------------
Underwriter Signature Ext. Date
By:
----------------------------------- --------------------------------------
Date Received in Reinsurance Unit Reinsurance Analyst Signature
* Include any concurrently issued policies which are not being reinsured.
** 2 + 3 + 5 + 6 = Retention
Revised: 12/3/2003
EXHIBIT B-1
TEMPORARY LIFE INSURANCE AGREEMENT
Variations of the Temporary Life Insurance Agreement forms exist for
some states. The generic U.S. version is attached to this treaty.
ALL PREMIUM CHECKS MUST BE MADE PAYABLE TO THE INSURANCE COMPANY-DO NOT MAKE
CHECKS PAYABLE TO THE AGENT OR LEAVE THE PAYEE BLANK.
DO NOT COMPLETE THIS AGREEMENT IF ONE OF THE FOLLOWING SITUATIONS APPLY:
AMOUNT APPLIED FOR EXCEEDS $3,000,000, OR AGE OF INSURED IS UNDER 15 DAYS OLD OR
OVER AGE 70 (NEAREST BIRTHDAY). UNDER SURVIVORSHIP LIFE INSURANCE THIS MAXIMUM
AGE LIMITATION APPLIES ONLY TO THE YOUNGER PROPOSED INSURED.
IF ANY OF THE QUESTIONS BELOW ARE ANSWERED YES OR LEFT BLANK WITH RESPECT TO A
PROPOSED INSURED(S), NO REPRESENTATIVE OF THE COMPANY IS AUTHORIZED TO ACCEPT
MONEY, AND NO COVERAGE WILL TAKE EFFECT UNDER THIS AGREEMENT WITH RESPECT TO
SUCH PROPOSED INSURED(S).
Has Proposed Insured(s) (Questions apply to Proposed Insured A or B, if any.):
1. within the past 90 days, been admitted to a hospital or other medical
facility, been advised to be admitted or had surgery performed or
recommended? / / YES / / NO
2. within the past 2 years been treated for heart trouble, stroke, or cancer,
or had such treatment recommended by a physician or other medical
practitioner? / / YES / / NO
This Agreement provides a LIMITED AMOUNT of Life Insurance protection for a
LIMITED PERIOD of time, subject to the terms of this Agreement, in consideration
of advance payment in the amount of $_______________ in connection with the
Application dated __________________________ made on the life of:
1)_______________________________________________, or on the life of all
Name(s) of Proposed Insured(s)
individuals who are to be insured in the Pension or Profit Sharing Plan of
2)__________________________________________.
Name of Pension or Profit Sharing Plan of Participants to be
insured (the Proposed Insureds)
TERMS AND CONDITIONS
AMOUNT OF COVERAGE - $500,000 MAXIMUM FOR ALL APPLICATIONS OR AGREEMENTS
If money has been accepted by the Company as advance payment for an application
for Life Insurance and death of a Proposed Insured(s) (and death of the
surviving Proposed Insured under Survivorship Life Insurance) occurs while this
Agreement is in effect, the Company will pay to the beneficiary designated in
the Application the lesser of A) the amount of all death benefits applied for in
the Application(s) with respect to said Proposed Insured(s), including any
accidental or supplemental death benefits, if applicable, or B) $500,000. This
total benefit limit applies to all insurance applied for under this and any
current Applications to the Company and any other Temporary Life Insurance
Agreements.
DATE COVERAGE BEGINS
Coverage under this Agreement will begin on the date of this Agreement but only
if Part I of the Application(s) has been completed on the same date or not more
than 30 days prior to the date of this Agreement.
DATE COVERAGE TERMINATES - 90 DAY MAXIMUM
Coverage under this Agreement will terminate automatically on the earliest of:
A) 45 days from date of this Agreement if a required Exam or Non medical is not
received by the Company, or B) 90 days from the date of this Agreement, or C)
the date the insurance takes effect under the policy applied for, or D) the date
the Company mails notice of termination of coverage to the premium notice
address designated in Part I of the Application(s). The Company may terminate
coverage at any time.
SPECIAL LIMITATIONS
- This Agreement does not guarantee the Company will issue a life insurance
policy or any special riders or endorsement thereto.
- Fraud or material misrepresentations in the Application(s) or in the answers
to the Health Questions of this Agreement invalidates this Agreement and the
Company's only liability is for refund of any payment made.
- If a Proposed Insured(s) (or the surviving Proposed Insured under
Survivorship Life Insurance) dies by suicide, the Company's liability under
this Agreement is limited to a refund of the payment made.
- There is no coverage under this Agreement if the check or draft submitted as
payment is not honored by the bank.
- No one is authorized to waive or modify any of the provisions of this
Agreement.
I (WE) HAVE RECEIVED A COPY OF AND HAVE READ THIS AGREEMENT AND DECLARE THAT THE
ANSWERS ARE TRUE TO THE BEST OF MY (OUR) KNOWLEDGE AND BELIEF. I (WE) UNDERSTAND
AND AGREE TO ALL ITS TERMS.
-------------------------------------------------- -------------------------------------------- ---------------
SIGNATURE OF PROPOSED INSURED A WITNESS (LICENSED REPRESENTATIVE) DATE
-------------------------------------------------- -------------------------------------------- ---------------
SIGNATURE OF PROPOSED INSURED B WITNESS (LICENSED REPRESENTATIVE) DATE
-------------------------------------------------- -------------------------------------------- ---------------
SIGNATURE OF APPLICANT/OWNER/TRUSTEE (PROVIDE WITNESS DATE
OFFICER'S TITLE IF POLICY IS OWNED BY A
CORPORATION.)
EXHIBIT C
GENERAL TERMS
1. REINSURANCE RATES: The Company will pay the Reinsurer premiums based on the
rates and terms set out in the sub-section(s) of Exhibit C for the
Reinsured Policies.
2. PREMIUM TAX: The Reinsurer will not reimburse the Company for premium
taxes.
3. DIVIDEND PAYMENTS: The Reinsurer will not reimburse the Company for
dividends paid to policyholders.
4. POLICY LOANS: The Reinsurer will not participate in policy loans or other
forms of indebtedness on policies reinsured under this Agreement.
5. CASH SURRENDER VALUES: The Reinsurer will not reimburse the company for
cash surrender values paid to the policyholder.
6. RATES APPLICABLE TO INCREASES: First year reinsurance premium rates and
allowances will apply to the amount normally underwritten of a
non-contractual increase.
EXHIBIT C-1
SPECIFIC TERMS
1. REINSURANCE BASIS: YRT
2. AGE BASIS: Nearest
3. PREMIUMS: The Company will pay to the Reinsurer a basic premium calculated
by multiplying the net amount at risk of the Reinsured Policy by the
appropriate rate from THE SET OF RATES INCLUDED AT THE END OF THIS
SUB-SECTION. Premiums will be payable on a policy year basis, regardless of
the premium payment mode under the original insurance, and the Company will
continue to pay the appropriate premium to the Reinsurer as long as the
Reinsured Policy is in force.
4. PERCENTAGES:
ON BASIC PREMIUM(S)
Reinsurance premiums will be based on the following percentages of the
Society of Actuaries 1990-1995 ANB table, attached to this Exhibit C-1:
FIRST YEAR RENEWAL YEARS
---------------------------------
Preferred Non-Smoker 0% xx%
Standard Non-Smoker 0% yy%
Standard Smoker 0% zz%
Aggregate Non-Smoker 0% ww%
(For use where no Preferred
class, e.g. ages 81-90)
ON LAST SURVIVOR POLICIES
To calculate premium rates for last survivor policies, first determine the
appropriate single life rate for each Insured Individual. If the first year
percentage, as stated in 4. of this Exhibit, is 0% use the 2nd year
percentage for the first year. Then combine the rates using the Frasiar
calculation. If the first year percentage, as stated in 4. of this Exhibit,
for each individual is 0%, then multiply the resulting frasiarized rate by
0. A minimum rate of $.11 per $1,000 of Net Amount at risk shall apply in
renewal years.
ON TABLE EXTRA SUBSTANDARD RISKS
Substandard table extra will be reinsured using 25% per table rating
multiplied by the appropriate YRT rate. Substandard extras will be based
upon the underwriter's assessment regardless of how the policy is issued.
Substandard table ratings for a reinsured policy are applicable for the
first 20 years after issue or until the policyholder reaches attained age
65, whichever occurs last.
EXHIBIT C-1
2
ON FLAT EXTRA PREMIUMS
When a flat extra premium is payable for 5 years or less, an allowance of
10% of the gross flat extra charged by the Company will be made each year.
When a flat extra premium is payable for more than 5 years, an allowance of
100% of the gross flat extra charged by the Company will be made in the
first year and an allowance of 10% in each year thereafter.
ON MULTIPLE EXTRA PREMIUMS
The same allowances as those payable on the basic policy.
ON TERM PLANS
An 80% increase in rates will apply for term policies that are renewed at
very high premium levels (e.g. years 11 and later for the 10-year term plan
and years 16 and later for the 15-year term plan).
5. NET AMOUNTS AT RISK:
a) For Fixed Benefit Plans, the reinsured net amount at risk will be the
difference between the reinsured face amount and the cash values
applicable to the face amount reinsured. The reinsured face amount is
the initial amount reinsured under this Agreement, or as reset by
subsequent scheduled or fully underwritten increases. Commuted values,
if applicable, or any comparable approximation agreed to between the
Company and the Reinsurer, may be used to determine the net amount at
risk.
b) For term plans the net amount at risk will be based on the reinsured
face amount.
c) For VUL and UL Life type plans, if the death benefit is Option A, the
reinsured net amount at risk will be the difference between the
reinsured face amount and the account values applicable to the face
amount reinsured. If the death benefit is Option B, the reinsured net
amount at risk will be the reinsured face amount. For other Options,
such as the specified amount plus return of premium, the net amount at
risk equals the difference between the share of the death benefit
reinsured and the applicable cash or fund value.
Increases in the amount at risk due to contractual provisions contained
within the reinsured policies, Cost of Living Rider increases or
fluctuations in the amount at risk caused by the normal workings of the
cash value fund in Universal Life type plans will be shared by the Company
and the Reinsurer using the same retention method as for the base policy.
3
6. RATE LIMIT: The rates set out in this sub-section will be applicable,
provided the total of the new reinsurance amount and the amount already
reinsured on the life under this Agreement, and all other Agreements with
the Reinsurer, does not exceed the reinsurers quota share of the amount
shown in the table below. Individual consideration will be given to the
rates for any amounts over the limit shown in the table below:
ISSUE AGE CLASSIFICATION AMOUNT
0-80 Preferred - 500% $ xx,000,000
81-85 Standard-200% $ x,000,000
86-90 Standard Only $ x,000,000
7. RATE GUARANTEE:
The YRT reinsurance rates set out in this sub-section are guaranteed to the
extent that in the 2nd year and later the Reinsurer reserves the right to
increase the premiums for reinsurance but not above the statutory net
premium. Any change in rates will be based solely on a change in
anticipated mortality.
If the Reinsurer exercises this right and the Company has not increased its
rates to the policy owner, the Company may recapture the Reinsured Policies
on which the rates have been increased regardless of the Reinsured
Policies' duration in force. Such a recapture would not be subject to a
recapture fee.
8. DEFICIENCY RESERVES:
No Deficiency Reserves will be held by the Reinsurer for the Reinsured
policies.
9. RECAPTURE:
Any policy recaptured due to an increase in the Company's retention limit
must be reinsured for a minimum of ten years.
If the Reinsurer becomes insolvent, the Reinsured Policies may be
recaptured.
If this treaty is terminated due to the occurrence of any event described
in Article 14 subsections 14.1.1 - 14.1.5, the Reinsured policies may be
recaptured,
10. REDUCTIONS:
Reductions will be shared proportionately between the Company and its
reinsurers.
11. YRT RATES FOR CONVERSIONS TO NON-REINSURED PLANS: The YRT rates applicable
will be based on the following percentages of the Society of Actuaries
1975-1980 Select and Ultimate table rates (with Manulife's Extensions for
Issue Ages 71 and above), age nearest birthday:
Nonsmoker policies: xx%
Smoker policies: xx%
Insert Copy of Rates Here
EXHIBIT D
THE COMPANY'S RETENTION LIMITS
The company will retain the following:
Percentage Retention Limit: 10%, subject to the dollar limits below.
Dollar Retention Limit:
ISSUE AGE CLASSIFICATION AMOUNT
0 - 80 Preferred - 500% $ 2,500,000
81 - 85 Standard - 200% $ 2,500,000
86 - 90 Standard Only $ 500,000
The company will retain 10% of the liability associated with the rate limits set
forth in Exhibit C-1
It is understood that the amount retained by the Company includes its retention
under any inforce policies.
PROPORTIONATE RISK RETENTION
Any change in the net amount at risk due to changes in the cash value applicable
to the policy will be shared proportionately between the Company and its
reinsurers.
EXHIBIT E
THE REINSURER'S AUTOMATIC ACCEPTANCE LIMITS
The Reinsurer will automatically accept the First Dollar Quota Share of each
policy, as specified in Exhibit A, up to the following maximum limits on a per
life basis as set forth in Exhibit C-1:
ISSUE AGE CLASSIFICATION AMOUNT
0 - 80 Preferred - 500% $ 6,375,000
81 - 85 Standard - 200% $ 6,375,000
86 - 90 Standard Only $ 1,275,000
INFORCE LIMITS
The are no inforce limits for U.S. and Canadian Residents. For Foreign Nationals
a $20,000,000 inforce limit will apply.
EXHIBIT F
REINSURANCE REPORTS
REMITTANCE REPORTING:
The Company will self-administer reinsurance transactions. Reinsurance premiums
are payable annually in advance. During each accounting period, as defined
below, the Company will report to the Reinsurer all first year and renewal
premiums which became due during the previous accounting period. Any adjustments
made necessary by changes in reinsurance effective during a previous accounting
period will also be reported.
The Company will take credit, without interest, for any unearned premiums
arising due to reductions, cancellations or death claims. The unearned premiums
refunded will be net of allowances and policy fees.
The Company will pay the balance of arrears of premiums due under a reinstated
Reinsured Policy.
If a balance is due to the Reinsurer, the Company will forward a remittance in
settlement with its report. If the balance is due to the Company, the Reinsurer
will forward a remittance in settlement within 15 days of receipt of the report.
INFORMATION ON RISKS REINSURED
The reports for New Business, Renewal Business, Changes & Terminations and
Inforce, will include the following data:
1. Type of Transaction
2. Effective Date of Transaction
3. Automatic/Facultative Indicator
4. Policy Number
5. Full Name of Insured
6. Date of Birth
7. Male/Female/Unisex
8. Preferred Nonsmoker/Nonsmoker/Smoker/Substandard
9. Policy Plan Code
10. Insured's State of Residence
11. Issue Age
12. Issue Date
13. Duration from Original Policy Date
14. Face Amount Issued
15. Reinsured Amount (Initial Amount)
16. Reinsured Amount (Current Amount at Risk)
17. Death Benefit Option (For Universal Life Type Plans)
18. ADB Amount (If Applicable)
19. Substandard Rating
20. Flat Extra Amount Per Thousand
21. Duration of Flat Extra
22. Premiums
In addition, for the Changes and Terminations Report the effective date of each
transaction will be provided. If the change is a conversion or replacement the
attained age and duration will also be provided.
SAMPLE REPORT FORMS
Policy Exhibit see Exhibit F-1 for Sample Summary Reporting Form
Statutory Reserves See Exhibit F-2 for Sample Summary Reporting Form
Valuation Reserve
Certification See Exhibit F-3 for Sample
Tax Reserve Certification See Exhibit F-4 for Sample
EXHIBIT F-1
POLICY EXHIBIT
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY RUN DATE-
REINSURANCE POLICY EXHIBIT PAGE-
FOR THE PERIOD
REINSURANCE COMPANY:
TREATY:
NUMBER OF AMOUNT OF NET AMOUNT ACCIDENTAL WAIVER
CESSIONS REINSURANCE AT RISK DEATH BENEFIT PREMIUM
--------- ----------- ---------- ------------- -------
IN FORCE AS OF ▇▇▇▇▇▇▇▇▇ 0 0 0 0
NEW BUSINESS 0 0 0 0
CONTINUATIONS (ADDED) 0 0 0 0
REINSTATEMENTS 0 0 0 0
INCREASES 0 0 0 0
RECAPTURES 0 0 0 0
CHANGE DUE TO PRIOR INSURANCE 0 0 0 0
DECREASES 0 0 0 0
DROP OFFS 0 0 0 0
NOT TAKEN 0 0 0 0
CONTINUATIONS (TERMINATED) 0 0 0 0
LAPSES 0 0 0 0
DEATHS 0 0 0 0
EXPIRIES 0 0 0 0
MATURITIES 0 0 0 0
SURRENDERS 0 0 0 0
TERMINATIONS 0 0 0 0
SPECIAL ADJUSTMENTS 0 0 0 0
IN FORCE AS OF CURRENT REPORT 0 0 0
EXHIBIT F-2
VALUATION INFORMATION
LINCOLN NATIONAL LIFE INSURANCE COMPANY
TAX VALUATION REPORT and Page-
STAT VALUATION REPORT LAYOUT
TOTALS FOR PTR/RATE:
BASIS: FACTOR POINTER: 80CSO- AAGE RATE:
RECORDS NET AMT RISK RESERVE
BASE
SUBSTANDARD
TOTAL RESERVE:
TOTALS FOR PTR/RATE:
BASIS: FACTOR POINTER: 80CSO-AAGE RATE:
RECORDS NET AMT RISK RESERVE
BASE
SUBSTANDARD
TOTAL RESERVE:
TOTALS FOR PTR/RATE:
BASIS: FACTOR POINTER: 80CSO-AAGE RATE:
RECORDS NET AMT RISK RESERVE
BASE
TOTAL RESERVE:
EXHIBIT F-3
VALUATION RESERVE FOR SELF-ADMINISTERED BUSINESS CEDED TO XXX FROM THE LINCOLN
NATIONAL LIFE INSURANCE COMPANY
Inforce and Reserves at 200x:
Plan: Type: SM/NSM/AGGR/TOTAL
Inforce Reinsured Amount:
-----------------------
Inforce Number of Policies:
--------------------
Valuation Reserve as at 200x:
RESERVE BASIS
RESERVE (TABLE, INTEREST
TYPE AMOUNT ($) RATE AND METHOD)
Active Life Reserve
Unearned Premium Reserve
Disabled Life Reserve
Liability for Incurred But Not Reported Claims (IBNR)
Liability for Due and Unpaid Claims
Liability for claims in Course of Settlement
Other** (specify)
Total
**If credit for deficiency reserves is being taken, please specify under
"other".
As the valuation actuary of the above named company I certify that the
information above is correct as shown. *
Name:
Signature:
Actuarial Designation:
Title:
Date:
* Required only for Year End Valuation Reserves.
EXHIBIT F- 4
TAX RESERVE CERTIFICATION FOR SELF-ADMINISTERED BUSINESS CEDED XXXX FROM THE
LINCOLN NATIONAL LIFE INSURANCE COMPANY
Inforce and Reserves at December 31, 200x:
Plan: Type: SM/NSM/AGGR/TOTAL
Inforce Reinsured Amount:
-----------------------
Inforce Number of Policies:
-----------------------
Tax Reserve as at December 31, 200x:
RESERVE BASIS
RESERVE (TABLE, INTEREST
TYPE AMOUNT ($) RATE AND METHOD)
Active Life Reserve
Unearned Premium Reserve
Disabled Life Reserve
Liability for Incurred But Not Reported Claims (IBNR)
Liability for Due and Unpaid Claims
Liability for Claims in Course of Settlement
Other** (specify)
Total
**If credit for deficiency reserves is being taken, please specify under
"other".
As the valuation actuary of the above named company I certify that the
information above is correct as shown.
Name:
Signature:
Actuarial Designation:
Title:
Date:
