Exhibit 99.26(g)
YRT REINSURANCE TEMPLATE
NUMBER XXX-X
REINSURANCE AGREEMENT
BETWEEN
MINNESOTA LIFE INSURANCE COMPANY
(HEREINAFTER CALLED THE "CEDING COMPANY")
of St. ▇▇▇▇, Minnesota, U.S.A
AND
FULL COMPANY NAME
(HEREINAFTER CALLED THE "REINSURER")
of City, State, U.S.A.
EFFECTIVE MONTH, DAY, YEAR
TABLE OF CONTENTS
ARTICLE TITLE PAGE
------- ----- ----
I PARTIES TO THE AGREEMENT 1
II COMMENCEMENT, TERMINATION AND CONTINUANCE OF REINSURANCE 1
III SCOPE 2
IV COVERAGE 4
V UNDERWRITING GUIDELINES 5
VI ASSIGNMENT OR TRANSFER 6
VII LIABILITY 6
VIII RETENTION AND RECAPTURE 6
IX REINSURANCE PREMIUMS AND ALLOWANCES 7
X RESERVES 8
XI TERMINATIONS AND REDUCTIONS 8
XII POLICY ALTERATIONS 8
XIII POLICY ADMINISTRATION AND PREMIUM ACCOUNTING 10
XIV CLAIMS 11
XV OFFSET 14
XVI ISSUE RESOLUTION AND ARBITRATION 14
XVII INSOLVENCY 16
XVIII RIGHT TO INSPECT 17
XIX UNINTENTIONAL ERRORS, MISUNDERSTANDINGS OR OMISSIONS 17
XX CHOICE OF LAW AND FORUM 18
XXI GOOD FAITH 18
XXII CONFIDENTIALITY 18
XXIII ALTERATIONS TO THE AGREEMENT 19
XXIV COMPLIANCE WITH LAWS 19
XXV SEVERABILITY 19
XXVI EXECUTION OF THE AGREEMENT 20
SCHEDULES
I REINSURANCE SPECIFICATIONS 21
II CEDING COMPANY'S MAXIMUM LIMIT OF RETENTION 24
III BUSINESS COVERED 25
IV TEMPORARY INSURANCE AGREEMENT 26
V REINSURANCE PREMIUMS 27
VI AUTOMATIC ACCEPTANCE LIMITS 29
VII REINSURANCE RATES 30
VIII REINSURANCE BILLING ADMINISTRATION 31
IX SAMPLE POLICY EXHIBIT 32
X DEFINITIONS 33
ARTICLE I
PARTIES TO THE AGREEMENT
Reinsurance required by the Ceding Company will be assumed by the Reinsurer as
described in the terms of this Agreement.
This is an Agreement solely between the Reinsurer and the Ceding Company. In no
instance will anyone other than the Reinsurer or the Ceding Company have any
rights under this Agreement, and the Ceding Company is and will remain solely
liable to any insured, policy owner, or beneficiary under the Original Policies
reinsured hereunder. The Ceding Company agrees that it will not make the
Reinsurer a party to any litigation between any such third party and the Ceding
Company. The Ceding Company will not use the Reinsurer's name with regard to the
Ceding Company's agreements or transactions with these third parties, unless the
Reinsurer gives prior approval for the use of its name.
ARTICLE II
COMMENCEMENT, TERMINATION AND CONTINUANCE OF REINSURANCE
1. AGREEMENT COMMENCEMENT
This Agreement is effective as of the date shown in Schedule I and applies
to all eligible policies with issue dates on or after such date and to
eligible policies applied for on or after such date that were backdated.
2. AGREEMENT TERMINATION
This Agreement will be in effect for an indefinite period and may be
terminated as to new reinsurance at any time by either party giving ninety
(90) days' written notice of termination. The day the notice is mailed to
the other party's Home Office, or, if the mail is not used, the day it is
delivered to the other party's Home Office or to an Officer of the other
party will be the first day of the ninety (90) day period. During the
ninety-(90) day period, this Agreement will continue to operate in
accordance with its terms.
If the Reinsurer has made a facultative offer and the Ceding Company has
accepted that facultative offer before the termination of this Agreement,
the Reinsurer will be liable even if the effective date of the policy falls
beyond the termination date of this Agreement.
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3. POLICY TERMINATION
If the Policy is terminated by death, lapse, surrender or otherwise, the
reinsurance will terminate on the same date. If premiums have been paid on
the reinsurance for a period beyond the termination date, refunds will
follow the terms as shown in Schedule I.
If the Policy continues in force without payment of premium during any days
of grace pending its surrender, whether such continuance is a result of a
Policy provision or a practice of the Ceding Company, the reinsurance will
also continue without payment of premium.
If the Policy continues in force because of the operation of an Automatic
Premium Loan provision, extended term insurance or other such provision by
which the Ceding Company receives compensation for its risk, then the
reinsurance will also continue and the Ceding Company will pay the
Reinsurer the reinsurance premium for the period to the date of
termination.
4. CONTINUATION OF REINSURANCE
On termination of this Agreement in accordance with the provisions in
section two of this Article, the reinsurance ceded will remain in force
subject to the terms and conditions of this Agreement, unless otherwise
agreed by both parties in writing.
ARTICLE III
SCOPE
1. RETENTION OF THE CEDING COMPANY
The type and amount of the Ceding Company's retention on any one life is
shown in Schedule II. In determining the retention on each case, any
additional benefits on the same life will be taken into account, as will
the death benefit under any other policies existing at the time of
commencement of the policy ceded under this Agreement.
The Ceding Company may change its retention with respect to future new
business at any time. The Ceding Company will promptly notify the Reinsurer
of such change and its effective date.
2. THE REINSURER'S SHARE
The Reinsurer's Share is as shown in Schedule I.
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3. BASIS OF REINSURANCE
Products and Riders listed in Schedule III will be reinsured under this
Agreement on the basis described in Schedule II.
4. REINSURANCE PREMIUMS
The Ceding Company will pay the Reinsurer the premium rates as described in
Schedule V.
5. REINSURANCE ALLOWANCES
The Reinsurer will pay to the Ceding Company the reinsurance allowance, if
any, as shown in Schedule V. If any reinsurance premiums or installments of
reinsurance premiums are returned to the Ceding Company, any corresponding
reinsurance allowance previously credited to the Ceding Company will be
reimbursed to the Reinsurer.
6. PREMIUM RATE GUARANTEE
Premium Rate Guarantees, if any, are shown in Schedule V.
7. POLICY FEES
Policy fees, if any, are shown in Schedule V.
8. TAXES
Taxes, if any, are shown in Schedule I.
9. EXPERIENCE REFUND
If an experience refund is payable under this Agreement, the conditions and
formula are as shown in Schedule V.
10. EXPENSE OF THE ORIGINAL POLICY
The Ceding Company will bear the expense of all medical examinations,
inspection fees and other charges incurred in connection with the original
policy.
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ARTICLE IV
COVERAGE
AUTOMATIC PROVISIONS:
For each risk on which reinsurance is ceded, the Ceding Company's retention at
the time of issue will take into account both currently issued and previously
issued policies.
The Ceding Company must cede and the Reinsurer must automatically accept
reinsurance, if all of the following conditions are met for each life:
1. RETENTION
The Ceding Company will retain a percentage of the risk for the Products
and Riders noted in Schedule III up to the Ceding Company's Maximum Limit
of Retention as noted in Schedule II; and
2 AUTOMATIC ACCEPTANCE LIMITS
The age, minimum reinsurance amount, pool binding limits and jumbo limits
as shown in Schedule VI; and
3. UNDERWRITING
The risk is underwritten according to the Ceding Company's Underwriting
Guidelines; and the Ceding Company has never made facultative application
for reinsurance on the same life to the Reinsurer or any other Reinsurer.
Automatic Reinsurance does not include policies issued under simplified
underwriting or guaranteed issues, short form applications or internal or
external policy exchanges; and
4. RESIDENCE
The risk is a permanent resident of the Countries as shown in Schedule I.
If, for a given application, the Ceding Company cannot comply with the automatic
reinsurance conditions described above, or if the Ceding Company submits the
application to other Reinsurers for their facultative assessment, the Ceding
Company can submit this application to the Reinsurer on a facultative basis.
FACULTATIVE PROVISIONS:
The Ceding Company will send copies of the original applications, all medical
reports, inspection reports, attending physician's statement, and any additional
information pertinent to the insurability of the risk to the Reinsurer. For
policies which contain a
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guarantee increase, the Ceding Company will inform the Reinsurer of that fact.
The Ceding Company will also notify the Reinsurer of any underwriting
information requested or received after the initial request for reinsurance is
made.
On a timely basis, the Reinsurer will submit a written decision to the Ceding
Company. The Reinsurer's offer on facultative submissions will expire after 120
days from the date of the Reinsurer's final offer. On an individual case, the
120 day period may be shorter or longer if the Reinsurer specifies a different
period in its final offer. For all risks acceptance of the offer according to
the rules of the Ceding Company must occur within 120 days of the Reinsurer's
final offer.
ARTICLE V
UNDERWRITING GUIDELINES
1. GENERAL
The risk is underwritten according to the Ceding Company's Underwriting
Guidelines which have been reviewed and agreed to by the Reinsurer, as
referenced in Schedule XI. It is understood and agreed that the Reinsurer
will generally accept Ceding Company's underwriting decisions as long as
Ceding Company's underwriters act in good faith and consistent with Ceding
Company's underwriting guidelines and manual, age and amount requirements
and control procedures. Occasional mistakes in mortality assessment will be
accepted for automatic reinsurance by the Reinsurer provided such mistakes
are not systemic or part of a pattern that evidences disregard for the
company's underwriting guidelines. Reasonable underwriter discretion, which
may deviate from the underwriting guidelines or other requirements when
deemed warranted and appropriate by the Ceding Company underwriter
exercising his or her professional judgment, will also be accepted for
automatic reinsurance by the Reinsurer provided that the final underwriting
assessment is consistent with the expected mortality level of that
underwriting classification.
Notwithstanding the foregoing, business exceptions are not covered by the
automatic provisions of this Agreement unless approved in advance by the
Reinsurer. A business exception is a risk intentionally accepted by the
Ceding Company without a sound basis for accepting the risk based on
currently available underwriting evidence, including the waiving of normal
age and amount requirements without justification. In determining whether
there is justification for waiving underwriting requirements, the Ceding
Company's underwriter may exercise reasonable judgment in assessing the
protective value versus the additional cost, inconvenience or availability
of the requirement in question.
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2. CHANGES TO UNDERWRITING GUIDELINES
The Ceding Company reserves the right to revise the Underwriting Guidelines
from time to time. For any material change to the Underwriting Guidelines,
the Ceding Company agrees to provide twenty (20) days' written notice to
the Reinsurer, and the Reinsurer agrees to provide its decision in writing
with regard to the proposed change within twenty (20) days. The Reinsurer's
failure to respond within twenty (20) days will constitute its acceptance
of these changes.
ARTICLE VI
ASSIGNMENT OR TRANSFER
Neither this Agreement nor any new or inforce reinsurance under this Agreement,
may be sold or assigned in whole or in part by either the Ceding Company or the
Reinsurer without the prior written approval of the other party. The Ceding
Company and the Reinsurer reserve the right at their option, to terminate their
liability for inforce reinsurance, if written approval is not obtained. Nothing
herein shall prohibit the Reinsurer from retroceding or transferring risk
associated with the Agreement to other parties.
ARTICLE VII
LIABILITY
The liability of the Reinsurer for all claims automatically reinsured and all
claims arising after facultative acceptance as described in Article IV will
commence and cease simultaneously with that of the Ceding Company.
The Reinsurer will be liable under the Ceding Company's Temporary Insurance
Agreement as noted in Schedule IV.
ARTICLE VIII
RETENTION AND RECAPTURE
If the Ceding Company changes its limit of retention as shown in Schedule II,
written notice of the change will promptly be given to the Reinsurer. At the
option of the Ceding Company, a corresponding reduction may be made in the
reinsurance in force under this Agreement on all risks. The Ceding Company may
apply the new limits of retention to existing reinsurance and reduce and
recapture reinsurance inforce in accordance with the following rules:
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1. The policy has been reinsured under this Agreement and in force for the
minimum period shown in Schedule I.
2. Recapture will become effective on the policy anniversary date following
written notification of the Ceding Company's intent to recapture.
3. The Ceding Company retained its maximum limit of retention for the plan,
age and mortality rating at the time the policy was issued under this
Agreement and in accordance with Schedule I.
4. All reinsurance eligible for recapture, under the provisions of this
Article, must be recaptured.
5. If there is reinsurance with other reinsurers on risks eligible for
recapture, the necessary reduction is to be applied to each company in
proportion to the total outstanding reinsurance.
Special recapture on facultative business may be allowed under mutually agreed
upon terms and conditions.
ARTICLE IX
REINSURANCE PREMIUMS AND ALLOWANCES
1. LIFE REINSURANCE
Premiums are shown in Schedule V.
2. SUBSTANDARD PREMIUMS
Premiums will be increased by any (flat) extra premium as shown in Schedule
V, charged the insured on the face amount reinsured. Additional substandard
table extras increased on a per table basis are based upon the current net
amount at risk.
3. RIDER BENEFITS
The Reinsurer will receive premiums for additional riders as shown in
Schedule V, as well as for any extra premiums the Ceding Company may
collect for the coverage of special risks (traveling, climate, occupation,
etc.).
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ARTICLE X
RESERVES
Reserve requirements of the Ceding Company, if any, are as shown in Schedule I.
ARTICLE XI
TERMINATIONS AND REDUCTIONS
1. If insurance reinsured under this Agreement is terminated, the reinsurance
for the individual risk is terminated at the same time.
2. If insurance reinsured under this Agreement is reduced, the reinsurance
will be reduced by applying the retention limits as defined in Schedule II
which were in effect at the time the insurance was issued. The reinsurance
reduction will be effective on the same date as the insurance reduction.
3. If an automatic insurance policy is terminated or reduced, the reinsurance
for the individual risk involved will be determined in chronological order
beginning with the earliest reinsured insurance date. Two or more policies
issued on the same date will be considered one policy.
4. If facultative insurance reinsured under this Agreement is reduced, the
reinsurance for the individual risk involved will be reduced
proportionately on the effective date of reduction.
5. If the reinsurance amount is reinsured with multiple reinsurers, the
reinsurance will be reduced by the ratio of the amount of reinsurance in
each company to the total outstanding reinsurance on the risk involved.
ARTICLE XII
POLICY ALTERATIONS
1. INCREASES
UNDERWRITTEN INCREASES: If the amount of insurance is increased as a result
of an underwritten change, the increase will be considered new reinsurance
under this Agreement. The Reinsurer's approval is required if the original
policy was reinsured on a facultative basis or if the new amount will cause
the reinsured amount on the life to exceed either the Pool Binding Limits
or the Jumbo Limit shown in Schedule VI.
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NON-UNDERWRITTEN INCREASES: For policies reinsured on an automatic basis,
reinsurance on non-underwritten increases will be accepted up to the Pool
Binding Limits as shown in Schedule VI. For policies reinsured on a
facultative basis, reinsurance will follow the parameters outlined in the
Reinsurer's facultative offer. Reinsurance premiums for non underwritten
increases are described in Schedule V.
2. REINSTATEMENT
Any policy originally reinsured on an automatic basis in accordance with
the terms and conditions of this Agreement by the Ceding Company may be
automatically reinstated with the Reinsurer. Any reinstatement originally
reinsured with the Reinsurer on a facultative basis that requires
underwriting will be submitted with the underwriting requirements and
approved by the Reinsurer before it is reinstated. The Ceding Company will
pay the Reinsurer all reinsurance premiums in the same manner as the Ceding
Company received the insurance premiums under the particular policy.
3. EXTENDED TERM AND REDUCED PAID-UP
EXTENDED TERM: If the original policy lapses and extended term insurance is
elected under the terms of the policy, reinsurance will continue on the
same basis as under the original policy until the expiry of the extended
term.
REDUCED PAID-UP: If the original policy lapses and reduced paid-up
insurance is elected under the terms of the policy, the amount reinsured
will be reduced in accordance with Article X.
4. CONTRACTUAL OR NONCONTRACTUAL CONVERSIONS
A contractual or noncontractual conversion is a coverage that replaces all
or part of a policy issued earlier by the Ceding Company and reinsured by
the Reinsurer under this Agreement.
The Reinsurer will continue to reinsure the risk resulting from the
contractual or noncontractual conversion of any coverage reinsured under
this Agreement, in an amount not to exceed the original amount reinsured.
If the product to which the original coverage is converting is reinsured by
the Reinsurer, either under this Agreement or under a different Agreement,
reinsurance premium rates for the coverage will be those contained in the
Agreement that covers the product to which the original policy is
converting. However, if the new product is not reinsured by the Reinsurer,
reinsurance premiums for a policy resulting from a contractual or
noncontractual conversion will use the rates shown in Schedule V.
Reinsurance premiums and any allowances for conversions will be on a point
in scale basis from the original issue age of the policy.
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5. UNDERWRITING CLASSIFICATION
For automatic risks, the Ceding Company may reduce the rating
classification or change the tobacco classification. The Ceding Company
will notify the Reinsurer of this change. For facultative risks, the Ceding
Company will be subject to and the risk reinsured under the facultative
provisions in Article IV, except for tobacco classification changes. The
Reinsurer will accept the Ceding Company's tobacco usage reconsideration
practices and decisions.
ARTICLE XIII
POLICY ADMINISTRATION AND PREMIUM ACCOUNTING
1. ACCOUNTING PERIOD
Reinsurance premiums will be paid annually in advance according to the ▇▇▇▇
frequency in Schedule I. The Ceding Company will self administer all
reinsurance under this Agreement. Renewal premium will be due within sixty
(60) days of anniversary processing. New business premium is due within one
hundred twenty (120) days of the date the coverage is issued.
2. PAYMENT OF BALANCES
The Ceding Company will calculate the amount of reinsurance premium due and
within sixty (60) days after the last day of each billing period will send
the Reinsurer a statement that contains the information shown in Schedule
VIII, including any premiums due for that period.
If an amount is due the Ceding Company, the Reinsurer will remit that
amount to the Ceding Company within thirty (30) days of receipt of the
statement.
3. BALANCES IN DEFAULT
When balances are in default, each party reserves the right to charge
interest at the Prime Rate plus 2% as stated in the Wall Street Journal on
January 1, prior to the due date of the premium when premium is delinquent.
The payment of reinsurance premiums is a condition precedent to the
liability of the Reinsurer for reinsurance covered by this Agreement. In
the event that reinsurance premiums are not paid within sixty (60) days
after the last day of each billing month, the Reinsurer will have the right
to terminate the reinsurance for all coverages having reinsurance premiums
in arrears. If the Reinsurer elects to exercise its right of termination,
it will give the Ceding Company ninety (90) days written notice of its
intention. Such notice will be sent by certified mail.
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Terminated reinsurance may be reinstated, subject to approval by the
Reinsurer, within sixty (60) days of the date of termination, and upon
payment of all reinsurance premiums in arrears including any interest
accrued thereon.
The Ceding Company will not force termination under the provisions of this
section to avoid the recapture requirements or to transfer the block of
business to another Reinsurer.
ARTICLE XIV
CLAIMS
1. NOTICE
When the Ceding Company is informed of a claim, it will promptly notify the
Reinsurer of the claim. This notification will provide the Reinsurer with the
following: The Name, Policy Number, Issue Date, Date of Birth, Date of Death (if
known), Cause of Death (if known), Face Amount, Net Amount At Risk and an
Auto/Fac indicator.
2. PROOFS AND PAYMENT OF BENEFITS
The Ceding Company will examine and approve the claims and will send the
Reinsurer notification of all paid claims.
When requesting its share of the claim, the following proofs will be submitted
to the Reinsurer with each claim. A copy of the death certificate, proof of the
amount paid on such claim by the Ceding Company and a copy of the claimant's
statement will be furnished to the Reinsurer as proofs when requesting its share
of the claim. The Reinsurer will also pay its proportionate share of interest
that the Ceding Company is required to pay on the death benefit.
In every case of loss, copies of the proofs obtained by the Ceding Company will
be taken by the Reinsurer as sufficient provided proofs are in accordance with
the Ceding Company's current claim practices.
The Reinsurer reserves the right to request, and the Ceding Company will send
documents on any claim reinsured under this Agreement.
3. CLAIM ADMINISTRATION
Claim Payments:
As soon as the Reinsurer receives proper claim notice, proof of the claim and
the Death Claim Benefit Request Form, the Reinsurer shall within sixty days pay
the undisputed reinsurance benefits due the Ceding Company. The claim benefits
paid will be in a single
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sum, regardless of the Ceding Company's settlement options. Claim payments may
be netted against premium due, as long as the Ceding Company is in compliance
with Article XII - Policy Administration and Premium Accounting.
When death claim benefits due from the Reinsurer are in default, the Ceding
Company reserves the right to charge interest at the Prime Rate plus 2% as
stated in the Wall Street Journal on January 1, prior to the date of the death
claim. Claims benefits in default are defined as claim benefits not reimbursed
within ninety (90) days of the claim benefit request.
For policies where the Ceding Company decides not to pay the claim, the
procedures stated below under Section 4, Claim Denials, of this Article, will be
followed.
4. DENIALS AND CONTESTED CLAIMS
The Ceding Company will promptly notify the Reinsurer of its intent to deny,
contest or compromise a claim reinsured under this Agreement. The Ceding Company
will provide the Reinsurer with all papers for review. Within seven (7) days of
receiving the papers, the Reinsurer must communicate in writing its agreement to
be a party to the denial, contest, or compromise.
If the Reinsurer declines to be a party to such denial, contest or compromise,
the Reinsurer will discharge all of its liability by paying its proportionate
share of reinsurance due the Ceding Company as if there had been no denial,
contest or compromise. The Reinsurer will also pay its proportionate share of
covered expenses incurred to the date it notifies the Ceding Company it declines
to be a party.
5. CLAIM EXPENSES
The Reinsurer will pay its share of reasonable investigation and legal expenses
connected with the litigation or settlement of contractual liability claims,
unless the Reinsurer has discharged its liability as described in section 4
above, the Reinsurer will not participate in any expenses after the date of
discharge.
Claim expenses do not include routine claim and administration expenses,
including the Ceding Company's home office expenses. Expenses incurred in
connection with a dispute or contest arising out of conflicting claims of
entitlement to policy proceeds of benefits that the Ceding Company admits are
payable are not a claim expense under this Agreement.
6. MISSTATEMENT OF AGE OR SEX
If the amount of insurance changes because of a misstatement of age or sex
classification, the Reinsurer's share of liability will change proportionately.
Reinsurance premiums will be adjusted from the inception of the policy and any
differences will be settled without interest.
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7. MISREPRESENTATION OR SUICIDE
If the Ceding Company returns premium to the policyowner or beneficiary as a
result of fraud or misrepresentation within the policy contestable period or as
a result of the suicide of the insured, the Reinsurer will refund net
reinsurance premiums received on that policy without interest to the Ceding
Company in lieu of any other form of reinsurance benefit payable under this
Agreement.
8. EXTRA CONTRACTUAL OBLIGATIONS
The Reinsurer will not participate in and will not be liable to pay
extra-contractual damages that are awarded against the Ceding Company as a
result of an act, omission, or course of conduct committed solely by the Ceding
Company, its agents, or representatives in connection with claims covered under
this Agreement.
However, the parties recognize that circumstances may arise in which the
Reinsurer would participate in extra-contractual damages. The Reinsurer will be
liable for and reimburse the Ceding Company for the Reinsurer's share of extra-
contractual damages that result from actions approved in advance and in writing
by the Reinsurer unless the Reinsurer had discharged all of its liability. In
such situations, the Reinsurer and the Ceding Company will share such damages in
proportion to the original amount reinsured.
For purposes of this Agreement, the term "extra-contractual damages" will
include, by way of example and not limitation:
1. Actual and consequential damages;
2. Damages for emotional distress or oppression;
3. Punitive, exemplary or compensatory damages;
4. Statutory damages, fines or penalties;
5. Amounts in excess of the reinsured hereunder that the Ceding Company
pays to settle a dispute or claim;
6. Third-party attorney fees, cost and expenses.
9. ACCELERATED BENEFIT AGREEMENT
The Reinsurer will not participate on any accelerated or advance payments made
under an accelerated death benefit agreement. The Reinsurer will be notified at
time of death and will pay its share of the reinsured net amount at risk as
outlined above.
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ARTICLE XV
OFFSET
Any amounts due, by either of the parties to this Agreement, whether they arise
out of this Agreement, or out of any other reinsurance relationship between the
parties, may be offset and only the balance will be allowed or paid. This right
will continue to exist after the termination of this Agreement, or of any
business relationship between the parties. This right to offset is not
diminished by the insolvency of either party.
ARTICLE XVI
ISSUE RESOLUTION AND ARBITRATION
1. GENERAL
The parties agree to act with the highest good faith. However, if the parties
cannot mutually resolve a dispute or claim, which arises out of, or in
connection with this Agreement, including its formation and validity, and
whether arising during, or after the period of this Agreement and the dispute
cannot be resolved through Issue Resolution as described below, the dispute will
be decided through arbitration as a precedent to any right of action hereunder.
As a condition to the parties' right to arbitration under this Agreement, either
the Ceding Company or the Reinsurer will give written notification to the other
party of any dispute relating to or arising from this Agreement, including, but
not limited to, the formation or breach thereof.
2. ISSUE RESOLUTION
In the event of a dispute arising out of or relating to this Agreement, the
parties agree to the following process of issue resolution. Within 15 days of
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 to
attempt to negotiate a resolution of the dispute. During the negotiation
process, all reasonable requests made for information concerning the dispute
will be promptly honored. The format for discussions will be determined mutually
by the officers.
If these officers are unable to resolve the dispute within 30 days of their
first meeting, the parties may agree in writing to extend the negotiation period
for an additional 30 days. If the matter is not resolved within 30 days of the
first meeting or the additional 30 day period, if any, then either party may
demand arbitration as documented below. The discussions and all information
exchanged for the purposes of such discussions will be confidential and without
prejudice.
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If a resolution can not be reached as documented above, the dispute or claim
will be referred to an arbitration tribunal (a group of three arbitrators), and
settled through arbitration.
3. NOTICE OF ARBITRATION
To initiate arbitration, either party will notify the other party by Certified
Mail of its desire to arbitrate, stating the nature of the dispute and the
remedy sought. The party, to which the notice is sent, will respond to the
notification in writing, within ten (10) days of its receipt. Failure to respond
in a timely manner to the notice will be deemed a breach of this Agreement,
enforceable within an applicable court of law.
4. PROCEDURE
Each of the two parties will appoint one arbitrator. The arbitrators will be
individuals, other than from the contracting companies and/or affiliates of the
contracting companies, including those who have retired, with more than ten (10)
years insurance or reinsurance experience within the industry.
Notice of the appointment of these arbitrators will be given by each party to
the other party within thirty (30) days of the date of mailing of the
notification initiating the arbitration. These two arbitrators will, as soon as
possible, but no longer than 45 days after the day of the mailing of the
notification initiating the arbitration, then select the third arbitrator.
In the event that either party should fail to choose an arbitrator within thirty
(30) days after the other party has given notice of its arbitrator appointment,
the party which has already appointed an arbitrator may choose an additional
arbitrator, and the two shall, in turn, choose a third arbitrator. If the two
arbitrators are unable to agree upon the selection of a third arbitrator within
thirty (30) days following their appointment, each arbitrator shall nominate
three candidates within ten (10) days thereafter, two of whom the other shall
decline and the decision shall be made by drawing lots.
5. ARBITRATION COSTS
Unless the arbitrators decide otherwise, each party will bear the expense of its
own arbitration activities, including any outside attorney or witness fees. The
parties will jointly and equally bear the expense of the arbitration tribunal
and any other costs of the arbitration, such as hearing rooms, court reporters,
etc.
6. PLACE OF ARBITRATION
The home office of the Ceding Company or any mutually agreeable location.
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7. ARBITRATION SETTLEMENT
The award of the arbitration tribunal, will be in writing, and binding upon the
consenting parties. The arbitrators will base their decision on the terms and
conditions of this Agreement plus, as necessary, on the customs and practices of
the insurance and reinsurance industry rather than solely on a strict
interpretation of the applicable law; there will be no appeal from their
decision, and any court having jurisdiction of the subject matter, and the
parties, may reduce that decision to judgment.
ARTICLE XVII
INSOLVENCY
In the event that the Ceding Company is deemed insolvent, all reinsurance death
claims payable hereunder will be payable by the Reinsurer directly to the Ceding
Company, its liquidator, receiver or statutory successor, without diminution
because of the insolvency of the Ceding Company. It is understood, however, that
in the event of such insolvency, the liquidator, receiver or statutory successor
of the Ceding Company will give written notice to the Reinsurer of the pendency
of a death claim against the Ceding Company on a risk reinsured hereunder within
a reasonable time after such death claim is filed in the insolvency proceeding.
Such notice will indicate the policy reinsured and whether the death claim could
involve a possible liability on the part of the Reinsurer.
During the pendency of such claim, the Reinsurer may investigate such death
claim and interpose, at its own expense, in the proceeding where such death
claim is to be adjudicated, any defense or defenses it may deem available to the
Ceding Company, its liquidator, receiver or statutory successor. It is further
understood that the expense thus incurred by the Reinsurer will be chargeable,
subject to court approval, against the Ceding Company as part of the expense of
liquidation to the extent of a proportionate share of the benefit that may
accrue to the Ceding Company solely as a result of the defense undertaken by the
Reinsurer.
Where two or more reinsurers are participating in the same death claim and a
majority in interest (determined with respect to shares of net amount at risk)
elects to interpose a defense or defenses to any such death claim, the expense
will be apportioned among the reinsurers in the same proportion that the
reinsurer's net liability bears to the sum of the net liability of all
reinsurers on the insured's date of death.
In the event of the insolvency of the Reinsurer, the Ceding Company shall have
the right, at any time during such insolvency, to recapture all business ceded
to the Reinsurer. If a recapture is declared, a mutually agreed upon recapture
fee will be determined by both the Ceding Company and the Reinsurer.
16
ARTICLE XVIII
RIGHT TO INSPECT
Upon request, the Ceding Company will furnish the Reinsurer with detailed
information about the risks reinsured under this Agreement. During the Ceding
Company's normal office hours, copies of any documents relating to the risks
reinsured will be made available to the Reinsurer at its own expense. The
Reinsurer will give reasonable notification of any visit, and this right of
inspection will remain as long as either party to this Agreement is claiming
from the other.
ARTICLE XIX
UNINTENTIONAL ERRORS, MISUNDERSTANDINGS OR OMISSIONS
1. It is expressly understood and agreed that if failure to comply with any
terms of this Agreement is hereby shown to be the result of an
unintentional error, misunderstanding or omission, on the part of either
the Ceding Company or the Reinsurer, both the Ceding Company and the
Reinsurer, will be restored to the position they would have occupied, had
no such error, misunderstanding or omission occurred, subject always to the
correction of the error, misunderstanding or omission.
This provision applies only to oversights, misunderstandings or clerical
errors relating to the administration of reinsurance covered by this
Agreement. This provision does not apply to the administration of the
insurance provided by the Ceding Company to its insured or any other errors
or omissions committed by the Ceding Company with regard to the policy
reinsured hereunder, including the underwriting of the risk.
2. It is expressly understood and agreed that coverages will continue to be
reinsured under this Agreement, if failure to comply with any terms of this
Agreement is hereby shown to be the result of an unintentional underwriting
error, misunderstanding or omission, on the part of either the Ceding
Company or the Reinsurer.
17
ARTICLE XX
CHOICE OF LAW AND FORUM
1. CHOICE OF LAW AND FORUM
This Agreement, will in all respects be governed by, and construed in
accordance with the law and exclusive jurisdiction of the Courts, as shown
in Schedule I.
ARTICLE XXI
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 and the Ceding Company have entered into this Agreement in
reliance upon each other's representations and warranties. The Ceding Company
and the Reinsurer each affirms that it has and will continue to disclose all
matters material to this Agreement. Material for purposes of this Article will
mean information that a prudent actuary would consider as reasonably likely to
affect the Reinsurer's experience under this Agreement. Examples of such matters
are a change in distribution channel, issue practices, underwriting or claims
practices. This Agreement will not extend to policies issued pursuant to such
changes unless the Reinsurer has consented in writing to accept policies subject
to such changes.
Any outsourcing by the Ceding Company of material functions concerning the
Policies will be deemed material. The Company will secure the Reinsurer's right
to audit any outsourcing of any material Ceding Company functions concerning the
Policies.
ARTICLE XXII
CONFIDENTIALITY
Except for the purposes of carrying out this Agreement and as required by law,
the Reinsurer shall not disclose or use any non-public personally identifiable
customer or claimant information provided by the Ceding Company to the
Reinsurer, as such Customer or Claimant information is defined by the
▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and related regulations. Such Customer or Claimant
information shall be shared only with those entities with which the Reinsurer
may, from time to time, contract in accordance with the
18
fulfillment of the terms of this Agreement, including but not limited to the
Reinsurer's retrocessionaires and the Reinsurer's affiliates.
ARTICLE XXIII
ALTERATIONS TO THE AGREEMENT
This Agreement constitutes the entire Agreement between the parties, with
respect to the business being reinsured hereunder, and there are no
understandings between the parties other than expressed in this Agreement. Any
alterations to the provisions of this Agreement will be made by Amendment or
Addenda and must be signed by both parties. These documents will be regarded as
part of this Agreement and will be equally binding.
ARTICLE XXIV
COMPLIANCE WITH LAWS
The Policy is issued and maintained in accordance with all laws and the Ceding
Company assures the Policy does not involve individuals appearing on the OFAC
Specifically Designated Nationals or Blocked Persons list or residing in a
prohibited country. Neither the Ceding Company nor the Reinsurer shall be
required to take any action under this Agreement that would result in it being
in violation of said laws, including making any payments in violation of the
law. Should either party discover a reinsurance payment has been made in
violation of the law, it shall notify the other party and the parties shall
cooperate in order to take all necessary corrective actions, including the
return of the payment to the Reinsurer, unless prohibited by law.
ARTICLE XXV
SEVERABILITY
If any provision of this Agreement is determined to be invalid or unenforceable,
such determination will not impair or affect the validity or enforceability of
the remaining provisions of this Agreement.
19
ARTICLE XXVI
EXECUTION OF THE AGREEMENT
In witness whereof, we have caused this Agreement to be executed in duplicate at
the dates and places shown below, by our respective officers authorized to do
so.
MINNESOTA LIFE INSURANCE COMPANY
Date:
-----------------------------------
Place: St. ▇▇▇▇, MN
-----------------------------------
By: Attest:
----------------------------------- -------------------------------------
Title: Actuary, Life Products Title: Reinsurance Specialist
----------------------------------- -------------------------------------
NAIC #: ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇. #: ▇▇-▇▇▇▇▇▇▇
----------------------------------- -------------------------------------
FULL COMPANY NAME
Date:
-----------------------------------
Place:
-----------------------------------
By: Attest:
----------------------------------- -------------------------------------
Title: Title:
----------------------------------- -------------------------------------
NAIC #: Federal Id. #:
----------------------------------- -------------------------------------
20
SCHEDULE I
REINSURANCE SPECIFICATIONS
COMMENCEMENT AND TERMINATION OF REINSURANCE, ARTICLE II
1. AGREEMENT COMMENCEMENT:
This Agreement is effective MONTH, DAY, YEAR. It applies to all business
coverages as described in Schedule III with issue dates on or after such
date and to eligible policies applied for on or after such date that were
backdated for up to six (6) months to save age.
2. POLICY TERMINATION:
Unearned premiums will be refunded on lapses, conversion, exchanges,
rollovers, terminations and deaths.
SCOPE, ARTICLE III
1. CURRENCY:
United States Currency
2. THE REINSURER'S SHARE:
The Reinsurer"s share will be X% of the pool.
3. TAXES:
A. DAC TAX CALCULATION
The Ceding Company and the Reinsurer hereby agree to the following pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulations issued December 29, 1992,
under Section 848 of the Internal Revenue Code of 1986, as amended.
1. The term "party" will refer to either the Ceding Company or the Reinsurer
as appropriate.
2. The terms used in this Article are defined by reference to Treasury
Regulation Section 1.848-2 in effect as of December 29, 1992. The term "net
consideration" will refer to net consideration as defined in Treasury
Regulation Section 1.848-2(f).
21
3. 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 IRS Section 848(c)(1).
4. The Ceding Company and the Reinsurer agree to exchange information
pertaining to the amount of net consideration under this Agreement each
year to ensure consistency. The Ceding Company and the Reinsurer also agree
to exchange information, which may be otherwise required by the IRS.
5. The Ceding Company will submit a schedule to the Reinsurer by May 1 of each
year of its calculation of the net consideration for the preceding calendar
year. This schedule of calculations will be accompanied by a statement
signed by an officer of the Ceding Company stating that the Ceding Company
will report such net consideration in its tax return for the preceding
calendar year.
6. The Reinsurer may contest such calculation by providing an alternative
calculation to the Ceding Company. If the Reinsurer does not so notify the
Ceding Company, the Reinsurer will report the net consideration as
determined by the Ceding Company in the Reinsurer's tax return for the
previous calendar year.
7. If the Reinsurer contests the Ceding Company's calculation of the net
consideration, the parties will act in good faith to reach an agreement as
to the correct amount. When the Ceding Company and the Reinsurer reach an
agreement on an amount of net consideration, each party will report such
amount in their respective tax returns for the previous year.
8. Each party agrees to attach a schedule to its federal income tax return for
the first taxable year ending on or after the Effective Date that
identifies this Agreement as a
reinsurance agreement for which the joint
election under Regulation Section 1.848-2(g)(8) has been made.
B. PREMIUM TAX:
Premium tax WILL be reimbursed on an exact basis and calculated annually by
the Ceding Company.
OR
Premium tax WILL NOT be reimbursed under this Agreement.
C. EXCISE TAX:
None Applicable
22
COVERAGE, ARTICLE IV
1. RESIDENCE:
United States, Canada
RETENTION AND RECAPTURE, ARTICLE VII
Minimum Recapture Period: XXX (X) years
FDQS
Recapture is not available until the end of the XXX (Xth) policy year, and
then must be in conjunction with an increase in the Ceding Company's
maximum schedule of retention. 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 quota share basis had the
new retention schedule been in effect at the time of issue.
RESERVES, ARTICLE IX
YRT
The Ceding Company will calculate reserves based on 1/2 the gross premium
paid to the Reinsurer. The amount of reserves held by the Reinsurer for
business under this Agreement will be equal to the Reinsurers proportionate
share of the reserve credit taken by the Ceding Company for the same risks.
The Reinsurer will hold reinsurance reserves in accordance with all
applicable laws and regulations that the Reinsurer deems controlling.
POLICY ADMINISTRATION AND PREMIUM ACCOUNTING:
1. ACCOUNTING PERIOD:
The Ceding Company's ▇▇▇▇ frequency is monthly.
CHOICE OF LAW, FORUM AND LANGUAGE, ARTICLE XVIII
1. CHOICE OF LAW AND FORUM:
Minnesota law
23
SCHEDULE II
CEDING COMPANY'S MAXIMUM LIMIT OF RETENTION
The Ceding Company will retain XXX percent (XX%) of each policy subject to
the qualifications and retention limits given in the table below. If
because of previous retention on other policies, retaining XX% of the risk
on these policies will exceed the Ceding Company's Maximum Limits of
Retention, then the Ceding Company will retain less than XX%.
SINGLE/JOINT ISSUE AGE RATING RETENTION
--------------------------------------------------------------------------------
SINGLE LIFE ISSUE AGE 0 - 80 STD - TABLE 16 750,000
SINGLE LIFE ISSUE AGES 81 - 85 STD - TABLE 4 250,000
SINGLE LIFE ISSUE AGES GREATER THAN THAN 85 ALL RATINGS FACULTATIVE
SINGLE LIFE PRO. ATHLETE 15-70 STD - TABLE 16 375,000
24
SCHEDULE III
BUSINESS COVERED
The following products and riders will be covered under this agreement.
AUTO SHORT
PRODUCT NAME OR FAC NAME EFF. DATE TERMNATION DATE
--------------------------------------------------------------------------------
SINGLE PRODUCTS:
SINGLE RIDERS:
25
SCHEDULE IV
TEMPORARY INSURANCE AGREEMENT
The Reinsurer has reviewed the Ceding Company's Temporary Insurance Agreement
and has given its acceptance of the terms and procedures contained in the form.
The Ceding Company agrees to submit to the Reinsurer any changes to the
Temporary Insurance Agreement. The Reinsurer's Temporary Insurance Agreement
liability will be limited to the Ceding Company's liability as stated in the
Temporary Insurance Agreement.
The Reinsurer will be liable for either a proportionate share of the risk or a
set amount of the risk, according to the terms of its acceptance and the Ceding
Company's standard placement procedures.
The Reinsurer is liable for losses under the terms of a Temporary Insurance
Agreement when the following qualifications are met for automatic and
facultative reinsurance.
1. AUTOMATIC REINSURANCE
A) The risk would have qualified for automatic coverage under the Agreement as
specified in Article IV; and
B) the Ceding Company has kept its maximum retention for the age and table
rating of the risk as shown in Schedule II; and
C) the amount ceded to the Reinsurer does not exceed the Pool Binding Limits
as specified in Schedule VI; or
D) a court of competent jurisdiction finds that the Ceding Company is liable
under the Temporary Insurance Agreement despite the Ceding Company's denial
of liability and all of (A), (B) and (C) above have occurred.
2. FACULTATIVE REINSURANCE
The Reinsurer is liable under the terms of the Temporary Insurance Agreement
for a risk which has been submitted to the Reinsurer on a facultative basis
only when:
A) The Reinsurer has given the Ceding Company its final underwriting offer
pursuant to Article IV and;
B) The risk would have been placed with the Reinsurer according to the Ceding
Company's standard placement procedures; or
C) A court of competent jurisdiction finds that the Ceding Company is liable
under the Temporary Insurance Agreement despite the Ceding Company's denial
of liability and both (A) and (B) above have occurred.
26
SCHEDULE V
REINSURANCE PREMIUMS
1. REINSURANCE PREMIUMS: - YRT
Business covered, as shown in Schedule III will be reinsured on the yearly
renewable term basis with the Reinsurer participating only in mortality risks
(not cash values, loans, dividends or other features). The mortality risk shall
be the net amount at risk on that portion of the policy that is reinsured with
the Reinsurer. Premiums will be paid on an annual basis.
Schedule VII provides the factors by product that will be applied to the 75-80
ANB Basic Mortality Tables with the Manulife extension to determine the
reinsured YRT rate per $1,000. An additional 25% of the standard rates will be
charged per table of substandard rating. The same procedure will apply to single
premium policies and for paid up policies. The premium rates will be reduced by
the applicable allowance as noted below.
THE FIRST YEAR ALLOWANCE IS 100%. RENEWAL YEAR ALLOWANCES ARE 0%.
2. FLAT EXTRA PREMIUMS:
The flat extra premium will be the annual flat premium which the Ceding Company
charges the policy owner on that amount of insurance reinsured less the
following allowances on all products:
DURATION OF FLAT EXTRA FIRST YEAR YEARS 2 +
-----------------------------------------------------------
5 Years or less 10% 10%
More than 5 Years 100% 10%
3. PREMIUM RATE GUARANTEE: YRT - NEED TO DEFINE GUARANTEED VS NONGUARANTEED.
The Life Reinsurance premium rates contained in this Agreement are guaranteed
for one year, and the Reinsurer anticipates continuing to accept premiums on the
basis of these rates indefinitely. If the Reinsurer deems it necessary to
increase rates, such increased rates cannot be higher than the valuation net
premiums for annual renewable term insurance calculated using the minimum
statutory mortality rates and maximum statutory interest rate for each year of
issue.
For inforce blocks of business, if an increase in reinsurance rates occurs on a
guaranteed product that is reinsured on non-guaranteed terms, the Ceding Company
has the right to recapture the reinsurance as of the effective date of the
increase in reinsurance rates.
For inforce blocks of business, if an increase in reinsurance rates occurs on a
non-guaranteed product that is reinsured on non-guaranteed terms, the Ceding
Company
27
should investigate the possibility of increasing its direct premiums to restore
the product to previous profitability. If the Ceding Company determines that it
cannot reasonably implement such a premium increase then it has the right to
recapture the reinsurance as of the effective date of the increase in
reinsurance rates.
EXPERIENCE REFUND:
There will be no experience refund calculated for business reinsured under this
Agreement.
NET AMOUNT AT RISK CALCULATION:
The cash value will be applied to the reinsured amount. The Ceding Company will
retain a level retention. When multiple layers are reinsured, the cash value
will be applied to the oldest layer first. If multiple companies exist on a
layer, the cash value will be split proportionately among the Reinsurers. Term
policies will have a level net amount at risk.
Ten years prior to maturity, the greater of the cash value and reserve will be
used to calculate the reinsured net amount at risk.
UNDERWRITTEN POLICY WITHDRAWAL
Underwritten policy withdrawals reinsured on an automatic or facultative basis
will be underwritten by the Ceding Company. This type of policy change will not
exceed the original face amount reinsured. The increase in net amount at risk
will not receive first year select YRT reinsurance premium rates. Rates will
remain point in scale.
28
SCHEDULE VI
AUTOMATIC ACCEPTANCE LIMITS
1. AGE LIMITS:
Issue Ages 0 - 85
2. MINIMUM REINSURANCE AMOUNT:
Automatic Initial Reinsurance Amount - $0
Subsequent Reinsurance Amount - $0
3. POOL BINDING LIMITS:
AVUL
--------------------------------------------------------------------------------
ISSUE AGE STD - TABLE 4 TABLE 5 - TABLE 8 TABLE 9 - TABLE 16
--------------------------------------------------------------------------------
0 - 14 15,000,000 15,000,000 15,000,000
15- 80 30,000,000 30,000,000 30,000,000
81 - 85 3,750,000 FACULTATIVE FACULTATIVE
GREATER THAN 85 FACULTATIVE FACULTATIVE FACULTATIVE
Pro. Athlete FACULTATIVE FACULTATIVE FACULTATIVE
4. JUMBO LIMIT:
$65,000,000
29
SCHEDULE VII
REINSURANCE RATES
1. AUTOMATIC REINSURANCE RATES
THE FOLLOWING FACTORS DIFFER BY UNDERWRITING CLASS AND AGE. THE PERCENTAGES
LISTED ARE A PERCENTAGE OF THE 75-80 ANB MORTALITY RATES WITH THE MANULIFE
EXTENSION APPLIED FOR POLICIES REINSURED AUTOMATICALLY.
AUTOMATIC
--------------------------------------------------
UNDERWRITING CLASS AGES 0-59 AGES 60+
--------------------------------------------------
Preferred Select
Preferred NonTobacco
Standard NonTobacco
Preferred Tobacco
Standard Tobacco
THE FIRST YEAR ALLOWANCE IS 100%, ALL RENEWAL ALLOWANCES ON BASE RATES IS 0%
2. FACULTATIVE REINSURANCE RATES
THE FOLLOWING FACTORS DIFFER BY UNDERWRITING CLASS AND AGE. THE PERCENTAGES
LISTED ARE A PERCENTAGE OF THE 75-80 ANB MORTALITY RATES WITH THE MANULIFE
EXTENSION APPLIED FOR POLICIES REINSURED FACULTATIVELY.
FACULTATIVE
--------------------------------------------------
UNDERWRITING CLASS AGES 0-59 AGES 60+
--------------------------------------------------
Preferred Select
Preferred NonTobacco
Standard NonTobacco
Preferred Tobacco
Standard Tobacco
THE FIRST YEAR ALLOWANCE IS 100%, ALL RENEWAL ALLOWANCES ON BASE RATES IS 0%
3. CONTRACTUAL OR NONCONTRACTUAL CONVERSIONS
Contractual or noncontractual conversions from this Agreement that are not
covered under a separate
reinsurance agreement will continue under this
Agreement using the appropriate factors above on a point in scale basis.
30
SCHEDULE VIII
REINSURANCE BILLING ADMINISTRATION
SAMPLE STATEMENT SPECIFICATIONS
The following information should appear on each Statement and Inforce listing:
- Name of the Insured(s)
- Date of Birth of the Insured(s)
- The Issue Age of each Insured(s)
- The Sex of the Insured(s)
- The Insured(s) State of Residence
- Underwriting Classification (i.e. Preferred, Standard,
Rating, etc.)
- Smoking Class (i.e. Smoker, Non Smoker, Tobacco, Non Tobacco
etc.)
- Indication if Business is Facultative or Automatic
- Policy Number(s)
- Face Amount of the Policy(s)
- Amount(s) Ceded to the Reinsurer
- Amount of Premium being Paid; separated for Supplementary
Benefits .
- The Amount of any Reinsurance Premium Allowances
- Any Extra Premiums concerned. Example: $5 / 1000 / 5 YRS
- Effective Date and Duration of any Policy(s) Change,
Reissue, or Termination
31
SCHEDULE IX
SAMPLE POLICY EXHIBIT
Inforce as of Last Report
POLICY COUNT NAR
------------ ---
ADD IN:
New Issues
Reinstatements
Increases
Decreases - Still Inforce
Rollover - In
DEDUCT BY:
Death
Surrender
Lapse
Conversion - Out Decreases - Terminations
Inactive - Pending
Not Taken
Inforce as of Current Report
32
SCHEDULE X
DEFINITIONS
ASSUME - To accept or take over a risk, the converse of cede.
AUTOMATIC REINSURANCE - A
reinsurance agreement under which the Reinsurer is
obligated to accept or assume risks that meet certain specific criteria based on
the Ceding Company's underwriting.
BINDING LIMIT - The amount of risk over the Ceding Company's retention, which
can be ceded automatically if all automatic conditions are met.
CASH VALUE - The amount of money, which the policy owner will receive if the
policy owner cancels the coverage and returns the policy to the company.
CEDE - To transfer an insurance risk from the company originally issuing the
policy to another insurance company known as the Reinsurer.
CEDING COMPANY - An insurer which underwrites and issues an original, principal
policy to an insured and contractually cedes a portion of the risk to the
Reinsurer.
COINSURANCE - Indemnity life reinsurance under which the reserves as well as the
risk are transferred to the Reinsurer; the Ceding Company retains its liability
to the contractual relationship with the insured. Under the Coinsurance method,
the Ceding Company will pay the Reinsurer a proportionate part of the premiums
it receives. In return, the Reinsurer agrees to pay the Ceding Company a
proportionate part of the claim and participate in all other policy benefits
explicitly stated in this Agreement.
CONTRACTUAL CONVERSION - A conversion privilege as defined within the policy
form not requiring evidence of insurability.
EXCESS REINSURANCE - A form of reinsurance under which recoveries are available
when a given loss exceeds the Ceding Company's retention (excess of loss
reinsurance) as defined in the Agreement.
FACULTATIVE - Reinsurance under which the Ceding Company has the option
(faculty) of submitting and the Reinsurer has the option of accepting or
declining individual risks.
"FACULTATIVE OTHER" pertains to policies submitted to the Reinsurer for medical
or other types of impairments or avocations. "FACULTATIVE DUE TO AMOUNT"
pertains to policies submitted to the Reinsurer based solely on the amount of
insurance that the insured has applied for and what this insured already has
inforce.
FIRST DOLLAR QUOTA SHARE - An Agreement which provides that a fixed percentage
of each risk issued will be reinsured.
33
FLAT EXTRA PREMIUM - A method for rating substandard risks used when the extra
risk is considered to be constant. The underwriter assesses a specific extra
premium for each $1,000 of insurance. Flat extra ratings usually apply to
applicants in hazardous occupations or avocations, aviation, or with certain
physical impairments of a temporary nature.
JUMBO LIMIT - The limit placed on an amount of coverage that may be inforce, or
applied for in all companies, including any amounts to be replaced on an
individual life for automatic reinsurance purposes. If such insurance exceeds
the limit, the Ceding Company must submit the risk to the Reinsurer for
facultative review.
NON-CONTRACTUAL CONVERSION - An internal company practice which allows coverage
to exchange, roll or replace from one product to another for which no evidence
of insurability is required.
ORIGINAL POLICY(s) - Insurance contracts between the original Ceding Company and
the Insured(s).
POLICY RESERVE - A liability account that identifies the amount of assets that,
together with the future premiums to be received from inforce policies, is
expected to be sufficient to pay future claims on those inforce policies. Also
called a legal reserve or a statutory reserve.
POOL - A method of allocating reinsurance among several Reinsurers. Using this
method, each Reinsurer receives a specified percentage of each risk ceded into
the pool. A reinsurance pool is a multi-Reinsurer agreement under which each
Reinsurer in the group or pool assumes a specified portion of each risk ceded to
the pool.
PREMIUM - Written premium is premium registered on the books of an insurer or
Reinsurer at the time a policy is issued and paid. Premium for a future exposure
period is said to be unearned premium. For an individual policy, written premium
minus unearned premium equals earned premium. Earned premium is income for the
accounting period while unearned premium will be income in a future accounting
period.
PROFESSIONAL ATHLETE - An individual who is a team member in any of the four
major U.S. professional sports - National Football League (NFL), National
Basketball Association (NBA), Major League Baseball (MLB) or National Hockey
League (NHL).
QUOTA SHARE - A form of reinsurance in which premiums and losses are shared
proportionately between the Ceding Company and the Reinsurer, in which the same
percentage applies to all policies reinsured.
RECAPTURE - The process by which the Ceding Company recovers the liabilities
transferred to the Reinsurer.
34
REINSURER - A company which contractually assumes all or part of the Ceding
Company's risk.
RETENTION - The dollar amount or percentage of each loss retained by the Ceding
Company under the
reinsurance agreement.
RISK - Insurance on an individual life.
SELF ADMINISTRATION - A reinsurance arrangement where the Ceding Company
provides the Reinsurer with periodic reports for reinsurance ceded giving
premium, inforce, reserve, and any other information required by the Reinsurer
for its financial reports. Self-Administration is also known as Bulk or
Bordereaux.
SUBSTANDARD RISKS - Those insureds who, under the terms of the Ceding Company's
standard guidelines, do not meet the criteria for issuance at standard or better
premium rates. An additional premium may be charged as described in Schedule V.
YEARLY RENEWABLE TERM - . A form of reinsurance under which the risks, but not
the permanent plan reserves, are transferred to the Reinsurer for a premium that
varies each year with the amount at risk and the ages of the insureds. Under the
YRT method, the Ceding Company will transfer to the Reinsurer the mortality risk
on either a net amount at risk basis or on an approximation of the net amount at
risk basis.
35