YRT AGREEMENT
No. 6410-19
Between
Sentry Life Insurance Company
Of Stevens Point, Wisconsin
(Ceding Company)
and
Transamerica Occidental Life Insurance Company
Of Los Angeles, California
(Reinsurer)
Effective January 1, 2000
TABLE OF CONTENTS
Articles
1 Preamble
2 Basis of Reinsurance
3 Automatic Reinsurance
4 Procedures for Facultative Reinsurance
5 Liability
6 Formal Cession
7 Plans of Insurance
8 Reinsurance Premiums
9 Premium Accounting
10 Reinstatement
11 Reductions, Terminations and Changes
12 Claims
13 Extra Contractual Damages
14 Increase in Retention and Recapture
15 Insolvency
16 Arbitration
17 DAC Tax
18 Entire Agreement
19 Service of Suit
20 General Provisions
21 Commencement and Termination
Schedules
A Specifications
B Limits
C Exceptions
D Definitions
Exhibit
I Reinsurance Premiums
II YRT Premiums
III Reports
Article 1
Preamble
1.01 This Agreement is made and entered into by and between Sentry Life
Insurance Company (hereinafter referred to as the "Ceding Company") and
Transamerica Occidental Life Insurance Company (hereinafter referred to as
the "Reinsurer").
1.02 The Ceding Company and the Reinsurer mutually agree to reinsure on the
terms and conditions stated herein. This Agreement is an indemnity
reinsurance agreement and the performance of the obligations of each party
under this Agreement shall be rendered solely to the other party.
Article 2
Basis of Reinsurance
2.01 Basis. Reinsurance under this Agreement must be life insurance as described
in Schedule A.
2.02 Automatic Reinsurance. The Ceding Company shall cede and the Reinsurer
shall automatically reinsure policies issued under the plans of insurance
and other additional benefits described in Schedule A subject to the
requirements described in Article 3.
2.03 Facultative Reinsurance. The Ceding Company may submit to the Reinsurer any
coverage described in Schedule A for facultative review subject to the
procedures described in Article 4.
2.04 Initial Minimum. The initial minimum amount of life reinsurance on any
individual policy must be greater than or equal to the amount stated in
Schedule A.
2.05 Subsequent Minimum. If the subsequent amount of life reinsurance net amount
at risk falls below the minimum amount stated in Schedule A on any policy,
as of that date all of the life reinsurance on that policy shall terminate.
2.06 Issuance of Business. In no event shall the Reinsurer be liable for
reinsurance unless the issuance of the insurance by the Ceding Company
constituted the transacting of business in a jurisdiction in which the
Ceding Company is properly licensed.
Article 3
Automatic Reinsurance
3.01 Requirements.
a) The individual risk must be a permanent resident of the United States
or its territories.
b) The individual risk must be underwritten by the Ceding Company
according to its standard underwriting practices and guidelines. Any
risk falling into the category of special underwriting programs shall
be excluded from this Agreement. Any proposed changes to the Ceding
Company's standard underwriting practices or guidelines shall be
submitted to the Reinsurer for written approval prior to placement.
c) Any risk offered on a facultative basis by the Ceding Company to the
Reinsurer or any other company shall not qualify for automatic
reinsurance.
d) The issue age on any risk must not exceed the limited stated in
Schedule A.
e) The mortality rating on each individual risk must not exceed the
limited stated in Schedule A.
f) The maximum amount of insurance issued and applied for in all
companies on each risk (without deductions for replacements) must not
exceed the jumbo limits as stated in Schedule B.
g) On each individual life, the Ceding Company must retain the amounts of
insurance as stated in Schedule B.
h) The maximum amounts of insurance to be reinsured on a life must not
exceed the automatic binding limits as stated in Schedule B.
Article 4
Procedures for Facultative Reinsurance
4.01 Submission. The Ceding Company may submit for facultative evaluation any
coverage applied for under a plan of insurance described in Schedule A that
does not qualify for Automatic Reinsurance, or that the Ceding Company
prefers to submit on a facultative basis.
4.02 Coverage. An application for facultative reinsurance may include life
insurance with or without disability waiver of premium.
4.03 Underwriting Documentation and Acceptance. Copies of all underwriting
documentation relating to the insurability of the individual risk submitted
for facultative reinsurance must be sent to the Reinsurer. After the
Reinsurer has examined the underwriting documentation sent, it will
promptly notify the Ceding Company of its final underwriting acceptance or
its underwriting offer subject to additional requirements. The Reinsurer's
final underwriting acceptance on the individual risk will automatically
terminate when the first of the following situations occurs:
a) The date the Reinsurer receives notice from the Ceding Company of the
withdrawal of the Ceding Company's application, or
b) One hundred and twenty (120) days after the Reinsurer made its
acceptance or
c) The date specified in the Reinsurer's approval to extend its
acceptance.
Article 5
Liability
5.01 Automatic Reinsurance. The Reinsurer's liability for automatic reinsurance
shall begin simultaneously with the Ceding Company's liability.
5.02 Conditional Receipt. The Reinsurer shall be liable for benefits paid under
the Ceding Company's conditional receipt, temporary insurance or other
pre-issue benefit or liability provided the requirements for automatic
reinsurance, as stated in Article 3 of this Agreement, are met.
5.03 Facultative Reinsurance. The Reinsurer's liability for facultative
reinsurance on the individual risk shall begin simultaneously with the
Ceding Company's liability once the Reinsurer has accepted in writing the
application for facultative reinsurance and the Ceding Company has accepted
the Reinsurer's offer.
5.04 Termination. The Reinsurer's liability for reinsurance on the individual
risk shall terminate when the Ceding Company's liability terminates.
5.05 Liability of Reinsurer. The Reinsurer shall be liable for the Ceding
Company in the same manner as the Ceding Company is liable on the
particular policy form(s) reinsured under this Agreement to the extent such
terms and conditions are not contrary to the terms and conditions of this
Agreement.
5.06 Receipt of Premium. The initial and subsequent reinsurance premiums must be
received by the Reinsurer as stated in Article 9 in order to maintain the
Reinsurer's liability on each individual risk.
Article 6
Formal Cession
6.01 Notification. Promptly after the Ceding Company's liability for insurance
has begun on the individual risk, the Ceding Company shall send to the
Reinsurer a "Formal Reinsurance Cession," shown in Exhibit III. Based upon
the information on the "Formal Reinsurance Cession," the Reinsurer shall
prepare and send to the Ceding Company a "Reinsurance Cession Card," also
shown in Exhibit III.
6.02 Electronic Reporting. If possible, the Ceding Company shall utilize
electronic media for reporting purposes and shall consult with the
Reinsurer to determine an appropriate format. Any subsequent changes to the
reporting format shall be approved by the Reinsurer prior to
implementation.
Article 7
Plans of Insurance
7.01 Life Reinsurance [Level Retention] - Life reinsurance shall be on the
yearly renewable term basis for the net amount at risk as described below:
a) Level Term Plans (twenty years or less) - The Reinsurer's net amount
at risk shall be the reinsurance face amount.
b) Decreasing Term Plans - The Reinsurer's net amount at risk shall be
determined in accordance with the Ceding Company's table of reducing
amount or commuted values for each policy year applied to the initial
amount of insurance involved, less the Ceding Company's retention.
c) Level Term Plans (more than twenty years) or Permanent Plans - The
Reinsurer's net amount at risk shall be the difference between the
insurance face amount and the cash value or termination reserve of the
life insurance, less the Ceding Company's retention. The cash value
shall be based on the cash value of the corresponding life insurance
and shall be rounded to the nearest dollar amount.
d) Universal Life Plans - The Reinsurer's net amount at risk shall be the
insurance face amount less the account value less the Ceding Company's
retention.
e) The methods of calculating the net amount at risk described above may
not be appropriate because of special options, structure of tables of
amounts, rate of accumulation of cash surrender values and provisions
guaranteeing an increase in the face amount under a given plan of
insurance Under these circumstances, the method for calculating the
net amount at risk shall be submitted by the Ceding Company and must
be agreed to by the Reinsurer.
7.02 Disability Waiver of Premium. Disability wavier of premium reinsurance
shall be on the coinsurance basis.
7.03 Statutory Reserves. The Reinsurer will hold reserves on a 1/2c(x) basis
using 1980 CSO Select and Ultimate mortality tables and the prevailing
statutory interest rate.
Article 8
Reinsurance Premiums
8.01 Reinsurance Premiums. The Ceding Company shall pay the reinsurance premium
for each ceded risk to the Reinsurer on the basis described in Exhibit I,
regardless of the method in which the Ceding Company receives premiums from
its insured.
8.02 Discounts. The reinsurance premium payable to the Reinsurer shall be
calculated on the basis of the premium rates in Exhibit I less the
discounts shown in Exhibit I.
8.03 Guaranteed Rate. The life reinsurance rates described in 8.02 above are
guaranteed for one policy year. However, the Reinsurer anticipates
continuing to accept reinsurance premiums on the basis of the rates shown
in Exhibit I. If the Reinsurer deems it necessary to increase rates, such
increased rates cannot be higher than the valuation net premiums for yearly
renewable term insurance calculated using the minimum statutory mortality
rates and maximum statutory interest rate for each year of issue.
8.04 Increase in Mortality Charge. The Ceding Company shall notify the Reinsurer
of any increase in the mortality charge for the underlying insurance within
thirty (30) days of such increase. The Reinsurer shall then have the right
to revise the reinsurance premiums based on such increase.
8.05 Premium Tax. The Reinsurer shall reimburse the Ceding Company for any
premium taxes except for the Accommodator II and the Mortgage Protector
Plan 15, 20 and 20 Year.
Article 9
Premium Accounting
9.01 Payment of Reinsurance Premiums and Interest Penalties by the Ceding
Company.
a) The reinsurance premiums shall be paid to the Reinsurer on the basis
stated in Exhibit I.
b) Each month, the Reinsurer will send the Ceding Company two copies of
the statement that references this Agreement and lists first year and
renewal reinsurance premiums, expense allowances, benefits, statutory
reserves and other data mutually agreed upon by both parties as
described in Exhibit III.
c) If the net reinsurance premium balance is payable to the Reinsurer,
the Ceding Company must pay this balance within thirty (30) days after
the close of that month. If the next reinsurance premium balance is
not received by the Reinsurer within the thirty (30) day period, the
reinsurance premiums for all of the reinsurance risks listed on the
statement will be delinquent.
d) When reinsurance premiums due the Reinsurer are deemed delinquent, as
defined in Section 9.02(c) above, a compound interest penalty may be
assessed each month the premiums remain delinquent. Interest shall be
calculated from the day following the date the premiums are due and
payable to the day such premium payment is mailed or the last day of
the accounting period, whichever comes first, regardless of holidays
and weekends. The rate of interest charged each month shall be the
lesser of (I) the 30 Day Treasury ▇▇▇▇ rate as published in the Money
Rate Section or any successor section of the Wall Street Journal on
the first business day following the date the premiums are deemed
delinquent or (ii) the maximum rate allowed by law in the State of
Wisconsin. Premiums and interest penalties that remain unpaid shall be
carried forward into the next month's interest penalty calculation.
9.02 Termination Because of Non-Payment of Premium.
a) When reinsurance premiums are delinquent, the Reinsurer has the right
to terminate the reinsurance risks on the statement by giving the
Ceding Company thirty (30) days' written notice. As of the close of
this thirty-day period, all of the Reinsurer's liability shall
terminate for:
i) The risks described in the preceding sentence and
ii) The risks where the reinsurance premiums became delinquent during
the thirty-day period.
b) Regardless of these terminations, the Ceding Company shall continue to
be liable for the Reinsurer for all unpaid reinsurance premiums earned
by the Reinsurer.
9.03 Reinstatement of a Delinquent Statement. The Ceding Company may reinstate
the terminated risks within sixty (60) days after the effective date of
termination by paying the unpaid reinsurance premiums, including the
interest penalty as defined above, for the risks in force prior to the
termination. However, the Reinsurer shall not be liable for any claim
incurred between the date of termination and reinstatement. The effective
date of reinstatement shall be the day the Reinsurer receives the required
back premiums and any assessed interest.
9.04 Payment of Reinsurance Premium Balance by the Reinsurer. If the net
reinsurance premium balance is payable to the Ceding Company, the Reinsurer
must remit payment to the Ceding Company within thirty (30) days after
receiving the statement.
9.05 In Force List. Within sixty (60) days after the close of the calendar year,
the Ceding Company shall send the Reinsurer an in force listing of all
policies reinsured under this Agreement. Such listing shall include the
data specified in Exhibit III.
Article 10
Reinstatement
10.01 Lapses. If insurance lapses for nonpayment of premium and is reinstated
under the terms of the particular policy and the Ceding Company's usual
reinstatement practices and procedures, the reinsurance shall be reinstated
by the Reinsurer as of the date of reinstatement. The Ceding Company must
pay the Reinsurer all back reinsurance premiums and interest in the same
manner as the Ceding Company received insurance premiums and interest under
the particular policy.
10.02 Reinstatement. On a particular policy ceded to the Reinsurer on an
automatic basis, reinstatement of reinsurance shall be automatic. On a
particular policy ceded to the Reinsurer on a facultative basis,
reinstatement of reinsurance shall require written approval of the
Reinsurer in the event that the policy was not reinstated within the time
limited mandated by the policy.
Article 11
Reductions, Terminations and Changes
11.01 Replacement or Change. If there is a contractual or non-contractual
replacement or change in a particular policy reinstated under this
Agreement, including, but not limited to, conversions or exchanges where
full underwriting evidence according to the Ceding Company's regular
underwriting rules is not required or plans of internal replacement where
full underwriting evidence is required, the policy shall continue to be
reinsured by the Reinsurer under this Agreement provided it meets the
initial minimum amount stated in Schedule A.
11.02 Early Recapture. If at the time of a contractual or non-contractual
replace or change as described in 11.01 above, the Ceding Company elects
not continue to reinsure a particular policy with the Reinsurer, the Ceding
Company must pay the Reinsurer an early recapture charge which shall be a
mutually acceptable reasonable actuarial representation of the Reinsurer's
unamortized acquisition expenses.
11.03 Increase in Face Amount. If the face amount of a particular policy
reinsured under this Agreement increases and
a) The increase is subject to new underwriting evidence and
(i) The original policy was reinsured automatically, the provisions
of Article 3 shall apply to the increase in reinsurance.
(ii) The original policy was are insured facultatively, the provisions
of Article 4 shall apply to the increase in reinsurance.
b) The increase is not subject to new underwriting evidence, the
Reinsurer shall accept automatically the increase in reinsurance but
not to exceed the automatic binding limits as stated in Schedule A.
11.04 If the face amount of a particular policy reinsured under this Agreement
is increased or reduced, the reinsurance for the particular policy involved
shall be increased or reduced by the same amount on the effective date of
increase or reduction.
11.05 Retained Reinsurance. If any portion of the total face amount of a
particular policy retained by the Ceding Company reduces or terminates, any
reinsurance under this Agreement based on the same life shall also be
reduced or terminated. The Ceding Company shall reduce its reinsurance by
applying the maximum retention limits that were in effect at the time the
policy was issued. The Ceding Company shall not be required to retain an
amount in excess of its maximum retention limit for the age, mortality
rating and risk classification at the time of issue for any policy on which
reinsurance is being reduced.
11.06 Reduction Procedure. The Ceding Company must first reduce the reinsurance
of the particular policy that has the same mortality rating as the
terminated insurance. If further reduction is required, the reinsurance to
be terminated or reduced shall be effected in the inverse order in which
the particular policy was first reinsured.
11.07 More Than One Reinsurer. If the reinsurance of a particular policy is
shared by more than one reinsurer, the Reinsurer's percentage of the
increased or reduced reinsurance shall be the same as its initial
percentage of reinsurance of the policy.
11.08 Termination. If a particular policy reinsured under this Agreement is
terminated, the reinsurance for the policy shall be terminated on the
effective date of termination.
11.09 Facultative Change. On facultative reinsurance, if the Ceding Company
wishes to reduce the mortality rating on a particular policy, this
reduction shall be subject to the facultative provisions of this Agreement.
11.10 Refund. The Reinsurer shall refund to the Ceding Company all unearned
reinsurance premiums, less applicable allowances but excluding policy fees,
arising from reductions, terminations and changes as described in this
Article.
11.11 Extended Term or Reduced Paid-Up. If applicable, changes as a result of
extended term or reduced paid-up shall be handled the same as reductions as
described above.
ARTICLE 12
Claims
12.01 Notification. The Ceding Company shall promptly notify the Reinsurer in
writing whenever the Ceding Company has received notice of a claim where
reinsurance under this Agreement is involved. If a survivor life plan is
involved, the Ceding Company shall notify the Reinsurer of each death as
soon as possible after it has occurred.
12.02 Liability. The Reinsurer's liability for the insurance benefits reinsured
under this Agreement shall be subject to the same terms and conditions of
the particular policy under which the Ceding Company is liable.
12.03 Contestable or Incontestable Period. If a claim is made within the
contestable or incontestable period, the Reinsurer shall accept the
decision of the Ceding Company on the payment of a claim.
12.04 Payment. The Ceding Company shall provide the Reinsurer with proper claim
papers and proofs when requesting payment. The Reinsurer shall pay its
share of each claim in a lump sum without regard to the form of claim
settlement by the Ceding Company.
12.05 Interest. If the Ceding Company is obliged by applicable state law or
court order to pay interest from a specified date, such as the date of
death of an insured, in a particular policy, the Reinsurer shall pay its
share of the claim at the same rate and for the same period as that which
the Ceding Company is required, excluding extra-contractual obligations.
12.06 Contest, Compromise or Litigation. The Ceding Company shall promptly
notify the Reinsurer in writing of the Ceding Company's intention to
contest, compromise or litigate a claim. The Ceding Company shall provide
the Reinsurer with all papers and the Reinsurer shall have an opportunity
to review the papers. Within fifteen (15) working days after receipt of all
the necessary papers, the Reinsurer shall have the following options:
a) Decline to participate in the contest, compromise or litigation of the
claim. The Reinsurer shall thereafter discharge its liability with
respect to any contested, compromised or litigated claim by paying to
the Ceding Company the Reinsurer's proportionate share of the claim as
if there had been no controversy. Upon such discharge, the Reinsurer
shall not be liable for any portion of any "routine expenses" or
"non-routine expenses," as defined in Section 12.08 below, incurred
with respect to such claim, nor shall the Reinsurer share in any
reduced settlement.
b) After consultation with the Ceding Company, the Reinsurer agrees to
pay its share based on the results of the contest, compromise or
litigation (agreement to be communicated by the Reinsurer to the
Ceding Company in writing). The Ceding Company will pay its share of
all "routine expenses" and the Reinsurer will pay its share of all
"non-routine expenses," as defined in Section 12.08 below, of the
contest, compromise or litigation.
12.07 Routine/Non-Routine Expenses. For the purpose of this Article, the term
"routine expenses" shall mean fees, charges, costs and expenses of retained
legal and investigative personnel, excluding employees, that are incurred
in rescinding a policy, contesting a policy or litigating a claim. The term
"non-routine expenses" of the contest shall mean any penalties, attorney's
fees and interest imposed automatically by statute against the Ceding
Company which arise solely out of any judgment rendered against the Ceding
Company in a suit for policy benefits. However, "non-routine expenses"
shall not include extra-contractual damages. Notwithstanding the foregoing
definitions, the Reinsurer shall not be liable for any office expenses or
salaries or expenses of employees of the Ceding Company, or of any
subsidiary or affiliate of the Ceding Company, incurred in connection with
the administration of the business reinsured pursuant to this Agreement or
the disposition of a claim, loss or legal proceeding (including
investigation, negotiation, legal expenses and court costs).
12.08 Misstatement of Age or Sex. If the amount of insurance provided by any
policy or policies reinsured hereunder is increased or reduced because of a
misstatement of age or sex that is established after the death of the
insured, the Reinsurer shall share in the increase or reduction in the
proportion that the net liability of all reinsurers, including the
Reinsurer, immediately prior to such increase or reduction. The reinsurance
shall be restructured from commencement on the basis of the adjusted amount
using premiums and reserves for the correct age or sex. The adjustment for
the difference in reinsurance premiums and any associated commissions or
allowances, dividends, policy value or reserves shall be made without
interest.
12.09 Waiver of Premium. In the case of a disability waiver of premium claim,
the Reinsurer shall reimburse the Ceding Company for its proportionate
share of the Ceding Company's annual liability actually waived. The Ceding
Company shall continue to pay the Reinsurer the reinsurance premiums on the
policy.
ARTICLE 13
Extra-Contractual Damages
13.01 Definitions. For purposes of this Article, the following are definitions
of elements of extra-contractual damages:
a) "Punitive Damages" are those damages awarded as a penalty, the amount
of which is not governed or fixed by statute;
b) "Statutory Damages" are those amounts awarded as a penalty, but are
fixed in amount by statute;
c) "Compensatory Damages" are those amounts awarded to compensate for
actual damages sustained and are not awarded as a penalty or fixed in
amount by statute.
13.02 Extra-Contractual Damages. Extra-contractual damages are defined as
punitive, statutory or compensatory damages due to the Ceding Company's
negligence, oppression, malice, fault, wrongdoing or bad faith in
connection with an award against the Ceding Company in excess of the limits
of the policy reinsured as a result of, but not limited to, an act,
omission or course of conduct committed solely by the Ceding Company in
connection with the benefits payable under a particular policy reinsured
under this Agreement.
13.03 Exception. Except as provided in Section 13.04 below, the Reinsurer shall
not be liable for any extra-contractual damages.
13.04 Assessment of Damages. The Reinsurer recognizes that circumstances may
arise under which the Reinsurer, in equity, should share, to the extent
permitted by law, in paying certain assessed damages. The Reinsurer may be
liable for any punitive, statutory or compensatory damages awarded or
assessed against the Ceding Company if the Reinsurer elected to join in the
contest, litigation or denial of the claim, in writing, and actively
directed, participated in, consented to or ratified an act, error, omission
or course of conduct of the Ceding Company that ultimately resulted in the
award or assessment of punitive, statutory or compensatory damages. The
extent of such sharing is dependent on the good faith assessment of
culpability in each case, but all factors being equal, the division of such
assessment would be in proportion to what impact the Reinsurer's opinion
had on such damages.
13.05 Legal Fees. If the Reinsurer has liability for damages as stated in
Section 13.04 above, the Reinsurer shall reimburse the Ceding Company for
its share of reasonable legal fees incurred in defense of punitive,
statutory or compensatory damages.
ARTICLE 14
Increase in Retention and Recapture
14.01 The reinsurance under this Agreement shall be maintained in force without
reduction except as specifically provided for in this Agreement.
14.02 The Ceding Company may increase its retention limit on new business being
issued at any time by giving written notice to the Reinsurer of the new
retention limit and the effective date of such increase.
14.03 The Ceding Company shall have the option of recapturing the reinsurance
under this Agreement in the event the Ceding Company increases its
retention limit. The Ceding Company may exercise its option to recapture by
giving written notice to the Reinsurer within ninety (90) days after the
effective date of the retention limit increase. If the recapture option is
not exercised within ninety (90) days after the effective date of the
retention limit increase, the Ceding Company may choose to recapture not
later than two (2) years after the date of retention limit increase.
14.04 If the Ceding Company exercises its option to recapture, then the
following rules apply:
a) The Ceding Company shall reduce all eligible reinsurance on each
individual risk on which it retained its retention limit for the age
and mortality rating that was in effect at the time the reinsurance
was ceded.
b) The Ceding Company shall increase its total amount of insurance on the
individual risk up to its new retention limit by reducing the amount
of reinsurance. If an individual risk is shared by more than one
reinsurer, the Reinsurer's percentage of the reduced reinsurance shall
be the same as the Reinsurer's initial percentage of the reinsurance
on the individual risk.
c) No reduction of reinsurance due to recapture shall occur until the
later of the following dates:
i) The policy anniversary date immediately following the effective
date the recapture program begins and
ii) The number of years stated in Schedule A starting with the
original "policy date."
14.05 Reinsurance shall not be eligible for recapture on an individual risk if
(a) the Ceding Company retained less than its retention limit for the age
and mortality rating in effect at the time the reinsurance was ceded to the
Reinsurer, or if (b) the Ceding Company did not retain any of the
individual risk.
14.06 In the event the Ceding Company overlooks any reduction in the amount of
reinsurance on a particular policy because of an increase in the Ceding
Company's retention limit, the acceptance by the Reinsurer of reinsurance
premiums under these circumstances shall not constitute a liability on the
part of the Reinsurer for such reinsurance. The Reinsurer shall be liable
only for a refund of premiums.
14.07 If there is a Waiver of Premium claim in effect when recapture takes
place, the Waiver of Premium shall continue in effect until the Waiver of
Premium claim terminates. The Reinsurer shall not be liable for any other
benefits, including the basic life risks that are eligible for recapture.
All such eligible benefits shall be recaptured as if there were no Waiver
of Premium Claim.
14.08 If there is an extension of that Waiver of Premium claim under the terms
of the Ceding Company's policy, the Reinsurer shall pay its share of the
Waiver of Premium claim, provided the Ceding Company continues to pay to
the Reinsurer all Waiver of Premium reinsurance premiums for the period
from the date of recapture.
ARTICLE 15
Insolvency
15.01 In the event of the Ceding Company's insolvency and the appointment of a
conservator, liquidator, or statutory successor, the portion of any risk or
obligation assumed by the Reinsurer shall be payable to the conservator,
liquidator, or statutory successor on the basis of claims allowed against
the Ceding Company by any court of competent jurisdiction or by any
conservator, liquidator, or statutory successor of the company having
authority to allow such claims, without diminution because of that
insolvency, or because the conservator, liquidator, or statutory successor
has failed to pay all or a portion of any claims. Payments by the Reinsurer
as set forth in this Section shall be made directly to the Ceding Company
or to its conservator, liquidator, or statutory successor, except where the
contract of insurance or reinsurance specifically provides another payee of
such reinsurance in the event of the Ceding Company's insolvency.
15.02 In the event of the Ceding Company's insolvency, the conservator,
liquidator, or statutory successor shall give written notice of the
pendency of a claim against the Ceding Company on any policies reinsured
within a reasonable time after such claim is filed. The Reinsurer may
interpose, at its own expense, in the proceeding where such claim is to be
adjudicated, any defense or defenses which it may deem available to the
Ceding Company or its conservator, liquidator or statutory successor.
15.03 The expenses incurred by the Reinsurer shall be chargeable, subject to
court approval, against the Ceding 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 Ceding Company in the conservation or
liquidation, 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 or defenses to this claim, the
expense shall be shared as though such expense had been incurred by the
Ceding Company.
ARTICLE 16
Arbitration
16.01 As a condition precedent to any right of action hereunder, any dispute or
difference between the Ceding Company and the Reinsurer relating to the
interpretation or performance of this Agreement, including its formation or
validity, or any transaction under this Agreement, whether arising before
or after termination, shall be submitted to arbitration. Arbitration shall
be the method of dispute resolution, regardless of the insolvency of either
party, unless the conservator, receiver, liquidator or statutory successor
is specifically exempted from arbitration proceeding by applicable state
law of the insolvency.
16.02 Arbitration shall be initiated by the delivery of written notice of demand
for arbitration by one party to another. Such written notice shall contain
a brief statement of the issue(s), the failure on behalf of the parties to
reach amicable agreement and the date of demand for arbitration.
16.03 The arbitrators and umpire shall be present or former disinterested
officers of life reinsurance or insurance companies other than the two
parties to the Agreement or any company owned by, or affiliated with,
either party. Each party shall appoint an individual as arbitrator and the
two so appointed shall then appoint the umpire. If either party refuses or
neglects to appoint an arbitrator within thirty (30) days, the other party
may appoint the second arbitrator. If the two arbitrators do not agree on
an umpire within sixty (60) days of the appointment of the second appointed
arbitrator, each of the two arbitrators shall nominate three individuals.
Each arbitrator shall then decline two of the nominations presented by the
other arbitrator. The umpire shall be chosen from the remaining two
nominations by drawing lots.
16.04 The arbitration hearings shall be held in the city in which the Ceding
Company's head office is located or any such other place as may be mutually
agreed. Each party shall submit its case to the arbitrators and umpire
within one hundred and eighty (180) days of the selection of the umpire or
within such longer period as may be agreed.
16.05 The arbitration panel shall make its decision with regard to the custom
and usage of the insurance and reinsurance business. The arbitration panel
shall interpret this Agreement as an honorable engagement; they are
relieved of all judicial formalities and may abstain from following strict
rules of law. The arbitration panel shall be solely responsible for
determining what shall be considered and what procedure they deem
appropriate and necessary in the gathering of such facts or data to decide
the dispute.
16.06 The decision in writing of the majority of the arbitration panel shall be
final and binding upon the parties. Judgment may be entered upon the final
decision of the arbitration panel in any court having jurisdiction.
16.07 The jointly incurred costs of the arbitration are to be borne equally by
both parties. Jointly incurred costs are specifically defined as any
costs that are not solely incurred by one of the parties (e.g.,
attorney's fees, expert witness fees, travel to the hearing site, etc.).
Costs incurred solely by one of the parties shall be borne by that party.
Once the panel has been selected, the panel shall agree on one billable
rate for each of the arbitrators and umpire and that sole cost shall be
disclosed to the parties and become payable as a jointly incurred cost as
described above.
16.08 If more than one reinsurer is involved in the same dispute, all such
reinsurers shall constitute an act as one party for the purposes of the
Arbitration Article, provided however, that nothing herein shall impair the
rights of such reinsurers to assert several, rather than joint, defenses or
claims, nor be construed as changing the liability under the terms of the
Agreement from several to joint.
Article 17
DAC Tax
Section 1.848-2(g)(8) Election
17.01 If applicable, both parties agree to the following pursuant to Section
1.848-2(g)(8) of the Income Tax Regulation issued December 1992, under
Section 848 of the Internal Revenue Code of 1986, as amended. This
election shall be effective for all subsequent taxable years for which
this Agreement remains in effect.
17.02 The term "party" shall refer to either the Ceding Company or the Reinsurer
as appropriate.
17.03 The terms used in this Article are defined by reference to Section 1.848-2
of the Income Tax Regulation in effect December 1992.
17.04 The party with the net positive consideration for this Agreement for each
taxable year shall capitalize specified policy acquisition expenses with
respect to this Agreement without regard to the general deductions
limitation of Section 848(c)(1) of the Internal Revenue Code of 1986.
17.05 Both parties agree to exchange information pertaining to the amount of net
consideration under this Agreement each year to ensure consistency or as
otherwise required by the Internal Revenue Service.
17.06 The Ceding Company shall submit a schedule to the Reinsurer by April 1 of
each year of its calculation of the net consideration for the preceding
calendar year. This schedule of calculations shall be accompanied by a
statement signed by one of the Ceding Company's officers stating that the
Ceding Company shall report such net consideration in its tax return for
the preceding calendar year.
17.07 The Reinsurer may contest such calculation by providing an alternative
calculation to the Ceding Company in writing within thirty (30) days of the
Reinsurer's receipt of the Ceding Company's calculation. If the Reinsurer
does not so notify the Ceding Company, the Reinsurer shall report the net
consideration as determined by the Ceding Company in the Reinsurer's tax
return for the previous calendar year.
17.08 If the Reinsurer contests the Ceding Company's calculation of the net
consideration, both parties shall act in good faith to reach an agreement
as to the correct amount within thirty (30) days of the date the Reinsurer
submits its alternative calculation. If both parties reach agreement on an
amount of net consideration, each party shall report such amount in its
respective tax returns for the previous calendar year.
Article 18
Entire Agreement
18.01 This Agreement supersedes any and all prior discussions and understandings
between the parties and, upon its execution, constitutes the sole and
entire Agreement with respect to the reinsurance provided hereunder. There
are no understandings between the parties other than as expressed in this
Agreement. Any change or modification to the Agreement shall be null and
void unless effected by a writing subscribed by both the Ceding Company and
the Reinsurer. Any waiver shall constitute a waiver only in the
circumstances for which it was given and shall not be a waiver of any
future circumstance.
Article 19
Service of Suit
19.01 It is agreed that in the event the obligations under this Agreement are
not performed by the Reinsurer, at the request of the Ceding Company, the
Reinsurer shall submit to the jurisdiction of any court of competent
jurisdiction within the United States and shall comply with all the
requirements necessary to give that court jurisdiction. All matters arising
under this Agreement shall be determined in accordance with the law and
practice of such court. Nothing in this clause constitutes or should be
understood to constitute a waiver of the Reinsurer's rights to commence an
action in any court of competent jurisdiction in the United States, to
remove an action to a United States District Court, or to seek a transfer
of a case to another court as permitted by the laws of the United States or
of any state in the United States. Service of process, in any suit, may be
made upon any then duly elected officer of the Reinsurer (agent for service
of process) at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇. The Reinsurer shall abide by the final decision of such court or of
any appellate court in the event of an appeal, for any suit instituted
against the Reinsurer under this Agreement.
19.02 The agent for service of process is authorized and directed to accept
service of process on behalf of the Reinsurer in any such suit and/or upon
the request of the Ceding Company, give a written undertaking to the Ceding
Company that the agent will enter a general appearance on behalf of the
Reinsurer in the event such a suit is instituted.
19.03 The Reinsurer hereby designates the Superintendent, Commissioner or
Director of Insurance or his successor or successors in office, for the
State of California, as its true and lawful agent for service of process
(in addition to the above named agent), who may be served any lawful
process in any action, suit or proceeding instituted by or on behalf of the
Ceding Company or any beneficiary arising out of this Agreement, and hereby
designates the above named as the person to whom the Ceding Company is
authorized to mail such process or a true copy thereof.
Article 20
General Provisions
20.01 Inspection of Records. Either company, their respective employees or
authorized representatives, may audit, inspect and examine, during regular
business hours, at the home office of either company, any and all books,
records, statements, correspondence, reports, trust accounts and their
related documents or other documents that relate to the policies covered
hereunder. The audited party agrees to provide a reasonable work space for
such audit, inspection or examination and to cooperate fully and to
faithfully disclose the existence of and produce any and all necessary and
reasonable materials requested by such auditors, investigators, or
examiners. The company performing a routine audit shall provide five (5)
working days advance notice to the other party. The expense of the
respective party's employee(s) or authorized representative(s) engaged in
such activities will be borne solely by such party.
20.02 Representation and Warrants. The Ceding Company and the Reinsurer agree
that all matters with respect to this Agreement require their utmost good
faith. Each party represents and warrants to the other party that it is
solvent on a statutory basis in all jurisdictions in which it does business
or is licensed. Each party agrees to promptly notify the other party of any
material change in its financial condition. The reinsurer has entered into
this Agreement in reliance upon the Ceding Company's representations and
warranties. Each party affirms that it has and will continue to disclose
all matters material to the Agreement and each cession. Examples of such
matters are a material change in underwriting or issue practices or
philosophy or a change in each party's ownership or control.
20.03 Assignment or Transfer. Neither this Agreement nor any reinsurance under
this Agreement shall be sold, assigned or transferred by the Ceding Company
without prior written consent of the Reinsurer. Such approval shall not
unreasonably be withheld. If it is determined that such sale, assignment or
transfer would result in a material adverse economic impact to the
Reinsurer, and the Reinsurer so objects, this Agreement shall be terminated
with respect to all policies reinsured under this Agreement. The Ceding
Company and the Reinsurer agree to mutually calculate a termination charge
that shall be paid by the Ceding Company to the Reinsurer upon the
transfer. The provisions of this Section 20.03 are not intended to preclude
the Reinsurer from retroceding the reinsurance on an indemnity basis.
20.04 Severability. If any term or provision under this Agreement shall be held
or made invalid, illegal or unenforceable by a court decision, statute,
rule or otherwise, such term or provision shall be amended to the extent
necessary to conform with the law and all of the other terms and provisions
of the Agreement shall remain in full force and effect. If the term or
provision held to be invalid, illegal or unenforceable is also held to be a
material part of this Agreement, such that the party in whose favor the
material term or provision was stipulated herein would not have entered
into this Agreement without such term or provision, then the party in whose
favor the material term or provision was stipulated shall have the right,
upon such holding, to terminate this Agreement.
20.05 Parties to Agreement. This Agreement is solely between the Ceding Company
and the Reinsurer. There is no third party to this Agreement. Reinsurance
under this Agreement shall not create any right or legal relationship
between the Reinsurer and any other person, for example, any insured,
policy owner, agent, beneficiary or assignee. The Ceding Company fur6ther
agrees that it will not make the Reinsurer a party to any litigation
between any such third party and the Ceding Company.
20.06 Offset. All monies due either company under this Agreement may be offset
against each other, dollar for dollar, regardless of any insolvency of
either party unless otherwise prohibited by law. If the Reinsurer advances
payment through offset of any claim it is contesting and prevails in the
contest, the Ceding Company shall return such payment plus interest
calculated as per the provisions of Section 9.01(d) of this Agreement.
20.07 Governing Law. In the event of litigation, the parties shall submit to the
competent jurisdiction of a court in the State of Wisconsin and shall abide
by the final decision of such court. This Agreement shall be governed as to
performance, administration and interpretation by the laws of the State of
Wisconsin applies with respect to rules for credit for reinsurance.
20.08 Expenses. The Ceding Company shall pay the expense of all medical
examinations, inspection fees and other charges in connection with the
issuance of the insurance.
20.09 Errors and Omissions. Unintentional clerical errors, omissions or
misunderstandings in the administration of this Agreement by either the
Ceding Company or the Reinsurer shall not invalidate the reinsurance
hereunder provided the error, omission or misunderstanding is corrected
promptly after discovery. Both companies shall be restored, to the extent
possible, to the position they would have occupied had the error, omission
or misunderstanding not occurred, but the liability of the Reinsurer under
this Agreement shall in no event exceed the limits specified herein.
20.10 Schedules, Exhibits and Section Headings. Schedules and Exhibits attached
hereto are made a part of this Agreement. Section headings are provided for
reference purposes only and are not made a part of this Agreement.
20.11 Definitions. The definitions that apply in the interpretation of this
Agreement are located in Schedule D.
Article 21
Commencement and Termination
21.01 This Agreement shall be effective as of January 1, 2000 and shall remain
in force for an indefinite period. Either the Ceding Company or the
Reinsurer may terminate the Agreement by giving ninety (90) days written
notice by certified or registered mail to the other party. The day the
notice is deposited in the mail addressed to an officer of the other
company shall be the first day of the ninety-day period.
21.02 During this ninety-day period, the Reinsurer shall continue to accept and
the Ceding Company shall continue to cede any new policies issued prior to
the termination of this ninety-day period.
21.03 All automatic reinsurance that has been placed in effect prior to the
expiration date set forth in the notice and all facultative reinsurance
approved by the Reinsurer based upon an application the Reinsurer received
prior to the expiration date set forth in the notice shall remain in effect
in accordance with the terms of this Agreement until the reinsured policy's
natural expiration or as specified otherwise in this Agreement.
21.04 This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
Executed in duplicate by Executed in duplicate by
Sentry Life Transamerica Occidental
Insurance Company Life Insurance Company
at Stevens Point, Wisconsin at Charlotte, North Carolina
on 8/27, 2001 on June 1, 2001.
By: s/▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ By: s/
Title: President Title: Vice President
By: s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇ By: s/
Title: Treasurer Title: Vice President & Associate
General Counsel