Exhibit 99.B(7)(c)
FORM OF
AUTOMATIC YEARLY RENEWABLE TERM
REINSURANCE AGREEMENT
AGREEMENT #
BETWEEN
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
and
GENERAL RE LIFE CORPORATION
of
STAMFORD, CONNECTICUT
REINSURANCE AGREEMENT
Summary
COMPANY: Liberty Life Assurance Company of Boston
AGREEMENT NUMBER:
ACCOUNT NUMBER:
REINSURER: General Re Life Corporation
Stamford, Connecticut
EFFECTIVE DATE:
PLANS COVERED: As shown in Exhibit A
TYPE OF TREATY: Automatic YRT
RETENTION: As shown in Exhibit A
BINDING LIMIT: As shown in Exhibit A
PREMIUMS: As shown in Exhibit B
ADMINISTRATIVE BASIS: As shown in Exhibit C
POLICY FEE: [ _________ to be paid upon cession of a policy.] or [No policy fee.]
PREMIUM TAX: Not reimbursed.
MINIMUM CESSION: Amounts of reinsurance less than [$ XXXXX] will not be ceded under
this Agreement. Cessions less than [$ XXXXX] can be automatically
terminated at the option of Company or the Reinsurer.
MINIMUM FACULTATIVE
SUBMISSION: As shown in Article III
JUMBO LIMIT: All life insurance in-force and applied for with all companies, shall
not be more than [$XXXXXXXX].
RECAPTURE: After [XX] policy years
In the event of any conflict between this Summary Page and the terms and
conditions of the
Reinsurance Agreement, the terms and conditions of the
Agreement shall govern.
TABLE OF CONTENTS
PAGE
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ARTICLE I. PARTIES TO THE AGREEMENT x
ARTICLE II. AUTOMATIC REINSURANCE x
A. General Conditions
B. Coverages
C. Ceding upon Maximum Retention
D. Ceding upon Less than Maximum Retention
E. Prior Notification to Reinsurer
ARTICLE III. FACULTATIVE REINSURANCE x
A. Procedure
B. Continuing Notice Obligation
C. Minimum Facultative Submission
ARTICLE IV. LIABILITY x
A. Automatic Reinsurance
B. Facultative Reinsurance
C. Conditional Receipt
ARTICLE V. REINSURANCE BENEFIT AMOUNTS x
A. Life
B. Disability Waiver of Premium
C. Accidental Death Benefit
ARTICLE VI. REDUCTIONS, TERMINATIONS AND CHANGES x
A. Reductions and Terminations
B. Noncontractual Increases
C. Contractual Increases
D. Risk Classification Changes
E. Nonforteiture Benefits
F. Reinstatement
ARTICLE VII. CONVERSIONS, EXCHANGES AND REPLACEMENTS x
A. Conversions
B. Exchanges and Replacements
ARTICLE VIII. PREMIUM ACCOUNTING xx
A. Premium Payment
B. Delayed Payment
C. Failure to Pay Premiums
D. Premium Rate Guarantee
TABLE OF CONTENTS
PAGE
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ARTICLE IX. CLAIMS xx
A. Notice
B. Liability
C. Proof of Loss
D. Settlement
E. Contested Claims
F. Extra-Contractual Damages
G. Misstatement
H. Misrepresentation or Suicide
I. Policy or Process
ARTICLE X. RETENTION LIMIT CHANGES xx
ARTICLE XI. RECAPTURE xx
ARTICLE XII. GENERAL PROVISIONS xx
A. Premium Tax
B. Offset
C. Currency
D. Company Data
E. Errors and Omissions
F. Inspection of Records
G. Severability
ARTICLE XIII. FORMS, MANUALS & ISSUE RULES xx
ARTICLE XIV. WARRANTIES AND REPRESENTATIONS xx
ARTICLE XV. DAC TAX xx
ARTICLE XVI. INSOLVENCY xx
A. Insolvency of a Party to this Agreement
B. Insolvency of the Company
C. Insolvency of the Reinsurer
D. Definition of Insolvency
ARTICLE XVII. ARBITRATION xx
ARTICLE XVIII. CONFIDENTIALITY xx
ARTICLE XIX. DURATION OF AGREEMENT xx
ARTICLE XX. EXECUTION xx
TABLE OF CONTENTS
PAGE
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[EXHIBITS NOT AVAILABLE IN FORM OF AGREEMENT]
EXHIBIT A - PLANS, RETENTION AND BINDING LIMITS
EXHIBIT B - REINSURANCE PREMIUMS
EXHIBIT C - REPORTING METHOD
EXHIBIT D - ALLOCATION RULES FOR PLACEMENT OF FACULTATIVE CASES
ARTICLE I
PARTIES TO THE AGREEMENT
This is an agreement for indemnity reinsurance (the "Agreement") solely between
liberty Life Assurance Company of Boston (the "Company") and General Re Life
Corporation, a
Connecticut Corporation (the "Reinsurer"). This Agreement shall
be construed in accordance with the laws of the State of
Connecticut.
This Agreement shall constitute the entire agreement between the parties with
respect to the business reinsured hereunder. There shall be no understanding
between the parties other than that expressed in this Agreement. Any change or
modification to this Agreement shall be null and void unless made by amendment
to this Agreement and signed by both parties.
The acceptance of risks under this Agreement shall create no right or legal
relation whatsoever between the Reinsurer and the insured, owner, or beneficiary
of any insurance policy or other contract of the Company.
This agreement applies only to the issuance of insurance by the Company in a
jurisdiction in which it is properly licensed. The Company represents that to
the best of its knowledge, it is in compliance with all state and federal laws
applicable to the business reinsured under this Agreement. In the event that the
Company is found to be in non-compliance with any law material to this
Agreement, the Agreement will remain in effect and the Company will indemnify
the Reinsurer for any direct loss the Reinsurer suffers as a result of
non-compliance, and will seek to remedy the non-compliance.
ARTICLE II
AUTOMATIC REINSURANCE
A. GENERAL CONDITIONS. On or after 12:01 A.M. Eastern Standard Time on the
effective date of this Agreement, reinsurance under this Agreement shall
be in force and binding on the Reinsurer provided that the issuance of
such insurance by the Company constitutes the transaction of business in a
jurisdiction in which the Company is properly licensed, the insurance is
issued on the lives of residents of the United States or Canada, and the
reinsurance premiums continue to be paid in accordance with this
Agreement. The Company may not reinsure the amount it has retained on the
business covered under this Agreement on any basis with the Reinsurer's
written consent, which consent may be withheld for any reason.
B. COVERAGES. Life insurance, Waiver of Premium Disability benefits for an
amount not greater than the corresponding life insurance, Accidental Death
Benefits and benefits under associated riders are the coverages reinsured
automatically under this Agreement, up to the limits shown in Exhibit A.
C. CEDING UPON MAXIMUM RETENTION. When the Company retains its maximum limit
of retention with respect to a life, as shown in Exhibit A, the Company
shall cede and the Reinsurer shall automatically accept as reinsurance
under the terms and conditions of this Agreement, liability on individual
life insurance on such life, together with all reinsured supplemental
coverages, provided that the policies are issued directly by the Company
on those plans of insurance shown in Exhibit A and fully underwritten by
employees of the Company in accordance with the Company's usual
underwriting standards and requirements which the Reinsurer has
acknowledged in writing.
Reinsurance shall not be ceded automatically to the Reinsurer on any risk
if:
1. the amount of ultimate reinsurance causes the Binding Limit, shown
in Exhibit A, to be exceeded, or
2. the amount of ultimate reinsurance causes the Jumbo Limit, as shown
in Exhibit A, to be exceeded, or
3. the Company has submitted the risk for facultative underwriting
consideration to any reinsurer, including the Reinsurer, within [XX]
years except for any prior facultative submission that was solely
for capacity and which may now be accommodated within the terms of
this Agreement, or
4. the substandard mortality rating assessed to the risk exceeds
[XXXXX] (XXX%) or its equivalent on an extra premium basis, or
5. the risk at the time of issue exceeds the maximum issue age shown in
Exhibit A.
D. CEDING WHILE RETAINING LESS THAN FULL RETENTION. When the Company retains
or has retained less than its maximum limit of retention on a life and all
other conditions in Section C above are satisfied, the Company may cede
automatically only an amount equal to or less than the amount retained.
E. PRIOR NOTIFICATION TO REINSURER. The Company may not reinsure the amount
it has retained on the business covered under this Agreement, on any
basis, without prior notification to and agreement from the Reinsurer.
ARTICLE III
FACULTATIVE COVERAGE
A. PROCEDURE. When a risk does not qualify for automatic reinsurance or if
the Company so desires, the Company may request facultative consideration
of any risk on those plans of insurance shown in Exhibit A by sending the
Reinsurer a reinsurance application form, in substantially the form as set
forth in Exhibit D, showing details of the risk together with copies of
the original application and all information known to the Company
pertaining to the insurability of the risk. The Reinsurer shall give the
reinsurance application prompt consideration and shall notify the Company
of its decision and risk classification. The Company will notify the
Reinsurer in writing of its acceptance of an offer. If any risk is to be
submitted to more than one reinsurer for consideration, the Allocation
Rules for Placement of Facultative Cases as outlined in Exhibit D will
apply.
After the first premium has been received by the Company on a policy that
has been submitted to and accepted by the Reinsurer on a facultative
basis, the Company shall promptly report placement of the policy to the
Reinsurer in the agreed upon format.
Unless specifically agreed to the contrary, the Reinsurer shall hold its
offer on a pending case open for ninety (90) days, at the end of which
time the Reinsurer shall, in the absence of notification of case status,
routinely close its file and consider the offer to reinsure as formally
withdrawn.
The Company may not reinsure the amount it has retained on the business
covered under this Agreement on any basis without the Reinsurer's written
consent, which consent may be withheld for any reason.
B. CONTINUING NOTICE OBLIGATION. Both prior to and subsequent to the
Reinsurer's acceptance of a risk, the Company shall send to the Reinsurer
all information that is related to the insurability of such risk.
C. MINIMUM FACULTATIVE SUBMISSION. The minimum facultative submission under
this Agreement shall be [$ XXXXXX].
ARTICLE IV
LIABILITY
A. AUTOMATIC REINSURANCE. The liability of the Reinsurer on any automatic
reinsurance covered under this Agreement shall begin and end
simultaneously with that of the Company, subject to the conditions of
Article II.
B. FACULTATIVE REINSURANCE. For facultative reinsurance, the Reinsurer's
liability will commence at the same time as the Company's liability,
provided that the Reinsurer has made a facultative offer and that offer
was accepted, during the lifetime of the insured, in accordance with the
terms of this Agreement. The Reinsurer shall become liable for its share
of the risk, provided that the policy has been delivered according to the
usual procedures of the Company and that the Company has followed its
facultative coverage rules for reinsurance placement.
C. CONDITIONAL RECEIPT. The Reinsurer will accept liability on the Company's
Conditional Receipt or Pre-paid business up to the amount shown in Exhibit
A, provided that all procedures, terms and conditions of the Company's
Conditional Receipt are followed. All Conditional Receipt forms in use by
the Company, as well as any subsequent changes or modifications must be
approved in writing by the Reinsurer.
1. COVERAGE FOR AUTOMATIC REINSURANCE. The Reinsurer's liability on
automatic reinsurance shall begin and end with the Company's
conditional receipt liability.
2. COVERAGE FOR FACULTATIVE REINSURANCE. For those risks submitted
facultatively, conditional receipt liability shall not commence
until the Reinsurer has made an explicit acceptance of the risk.
3. DISCREPANCY WITH CONDITIONAL RECEIPT. In the case where the
conditional receipt is given for an amount less than the policy
application, the Reinsurer shall not be liable for more than its
proportionate share of the maximum limit as shown in the Company's
conditional receipt.
ARTICLE V
REINSURANCE BENEFIT AMOUNTS
A. LIFE. (YRT Quota Share)
The net amount at risk of the policy is defined as the policy face amount
less the account value. The reinsured net amount at risk for each policy
is determined by multiplying the total net amount at risk on the policy by
the Reinsurer's share as defined in Exhibit A. For variable amount plans,
the net amount at risk is calculated using the account value in effect at
the end of the monthly reinsurance billing period. The Company will
maintain a quota share retention on each policy, up to the maximum limits
of its retention per life for the insured's issue age and rating, as shown
in Exhibit A. Risk amounts above that limit will be reinsured under the
terms of this Agreement on an excess basis.
Any change in the net amount at risk due to changes in the policy's
account value will be shared proportionately between the Company and the
Reinsurer(s).
(YRT Excess)
The reinsured net amount at risk of the policy is defined as the policy
face amount less the account value, less the amount retained by the Ceding
Company, and for automatic policies, multiplied by the Reinsurer's share
as stated in Exhibit A. For variable amount plans, the reinsured net
amount at risk is calculated using the account value in effect at the end
of the monthly reinsurance billing period.
The Company's retention on the policy will remain constant. Any change in
the net amount at risk due to changes in the policy's cash value or
account value will be allocated to the reinsured amount.
(Coinsurance Quota Share)
The reinsured risk amount is equal to the policy face amount multiplied by
the Reinsurer's share as defined in Exhibit A for automatic policies. The
Company will maintain a quota share retention on each policy, up to the
maximum limits of its retention per life for the insured's issue age and
rating, as shown in Exhibit A. Risk amounts above that limit will be
reinsured under the terms of this Agreement on an excess basis.
(Option Excess)
The reinsured risk amount is defined as the policy face amount less the
amount retained by the Company, multiplied by the Reinsurer's share as
stated in Exhibit A.
B. DISABILITY WAIVER OF PREMIUM. The reinsured proportion of Disability
Waiver of Premium will not be greater than the proportion reinsured on the
corresponding life insurance benefit.
C. ACCIDENTAL DEATH BENEFIT. The Accidental Death Benefit amount reinsured
will not be greater than the corresponding Life Insurance benefit
reinsured.
ARTICLE VI
REDUCTIONS, TERMINATIONS AND CHANGES
Whenever a change is made in the status, plan, amount or other material feature
of a policy reinsured under this Agreement, the Reinsurer shall, upon receipt of
notification of the change, provide appropriately adjusted reinsurance coverage.
The Company shall notify the Reinsurer of any such change, not more than sixty
(60) days after its effective date.
A. REDUCTIONS AND TERMINATIONS. In the event of the reduction, lapse or
termination of insurance with the Company on a life, the Company shall
reduce reinsurance proportionately. In the event that there is more than
one reinsurer on the policy being reduced, the reduction in reinsurance
shall be proportionate among the reinsurers. The Reinsurer shall refund
any unearned premiums. However, policy fees, if any, shall be deemed
earned for a policy year if during any portion of such policy year, ceded
insurance is exposed to risk.
B. NONCONTRACTUAL INCREASES. If the amount of insurance is increased as a
result of a noncontractual change, the increase will be underwritten by
the Company in accordance with its customary standards and procedures and
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 Automatic Binding Limits or the Jumbo Limits shown in
Exhibit A.
Option 1 (Excess Basis)
The Reinsurer will assume its share of the entire amount in excess of the
Company's applicable retention. Premiums for the additional reinsurance
will be point-in-scale from the original issue date.
Option 2 (Quota Share Basis)
The Company and the Reinsurer will share the increased amount
proportionately. Once the Company's maximum retention has been reached,
the remaining amount will be reinsured on a proportional basis. Premiums
for the additional reinsurance will be point-in-scale from the original
issue date.
C. CONTRACTUAL INCREASES. For policies reinsured on an automatic basis,
reinsurance of increases in amount resulting from contractual policy
provisions will be accepted only up to the Automatic Binding Limits shown
in Exhibit A.
For policies with increasing net amount at risk, the Reinsurer's
additional liability will be no more than its share of one times the
initial net amount at risk. In no event will the Reinsurer's liability
exceed the automatic binding limit.
For policies reinsured on a facultative basis, reinsurance will be limited
to the ultimate Amount shown in the Reinsurer's facultative offer.
Reinsurance premiums for Contractual increases will be on a point-in-scale
basis from the original issue age of Policy.
D. RISK CLASSIFICATION CHANGES. If the policyholder requests a Table Rating
reduction or removal of a Flat extra, such change will be underwritten
according to the
Company's normal underwriting practices. Risk classification on
facultative policies will be subject to the Reinsurer's approval.
E. NONFORFEITURE BENEFITS. A. 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 period.
B. Reduced Paid-up
If the original policy lapses and reduced paid-up insurance is elected
under the terms of the policy, the amount will be reduced.
Option 1 (Excess)
Reinsurance will be reduced by the full amount of the reduction. The
reinsurance premiums will be calculated on the same manner as reinsurance
premiums were calculated on the original policy. If the amount of
reduction exceeds the risk amount reinsured, the reinsurance on the policy
will be terminated.
Option 2 (Quota Share)
The amount reinsured and the amount retained will be reduced
proportionately. The reinsurance premiums will be calculated in the same
manner as reinsurance premiums were calculated on the original policy.
F. REINSTATEMENT. If a policy that has lapsed or surrendered is reinstated in
accordance with its terms and in accordance with Company rules and
procedures, the Reinsurer shall, upon notification of reinstatement,
reinstate the pre-existing reinsurance coverage. However, if the policy
were facultatively reinsured with the Reinsurer, approval by the Reinsurer
shall be required prior to the reinstatement of the reinsurance if the
Company retained less than fifty (50) percent of the risk and the policy
has been lapsed for more than ninety (90) days. Upon reinstatement of the
reinsurance coverage, the Company shall pay the reinsurance premiums which
would have accrued had the policy not lapsed, together with interest at
the same rate as the Company receives under its policy.
ARTICLE VII
CONVERSIONS, EXCHANGES AND REPLACEMENTS
If a policy reinsured under this Agreement is converted, exchanged or replaced,
the Company will promptly notify the Reinsurer. Unless mutually agreed
otherwise, policies that are not reinsured with the Reinsurer and that exchange
or convert to a plan covered under this Agreement will not be reinsured
hereunder.
A. CONVERSIONS. The Reinsurer shall continue to accept reinsurance
resulting from the contractual conversion of any policy reinsured
under this Agreement, in an amount not to exceed the original amount
reinsured hereunder. If the plan to which the original policy is
converting is reinsured by the Reinsurer, either under this
Agreement or under a different Agreement, reinsurance premium rates
for the resulting converted policy will be those contained in the
Agreement that covers the plan to which the original policy is
converting. However, if the Reinsurer does not reinsure the new
plan, reinsurance premiums for a policy resulting from a contractual
conversion will use the rates shown in Exhibit B. Reinsurance
premiums and any allowances for conversions will be on a
point-in-scale basis from the issue age of the original policy.
If the conversion results in an increase in the risk amount, the
increase will be underwritten by the Company in accordance with its
customary standards and procedures. The Reinsurer will accept its
share of such increases, subject to the new business provisions of
this Agreement. Reinsurance premiums and any allowances for
increased risk amounts will be first-year premiums at the
agreed-upon premium rate schedule.
B. EXCHANGES AND REPLACEMENTS. The Reinsurer will consider exchanges
and replacements to the plans reinsured under this agreement.
First-year premium calculations will apply to any policy on which:
1. the Company has obtained complete and current underwriting
evidence on the full amount; and
2. the full normal commissions are paid for the new plan; and
3. the Suicide and Contestable provisions apply as if the policy
were newly issued.
The Reinsurer's approval to exchange or replace the policy
will be required if the original policy was reinsured on a
facultative basis.
If the Company's guidelines do not treat the policy as new
business, the exchange or replacement will continue to be
ceded to the Reinsurer. The rates will be based on the
original issue age, underwriting class and duration since the
issuance of the original policy.
ARTICLE VIII
PREMIUM ACCOUNTING
A. PAYMENT OF PREMIUMS. Reinsurance premiums for life insurance, waiver of
premium disability benefits and accidental death benefits shall be the
premiums shown in Exhibit B. Reinsurance premiums are payable in
accordance with the method outlined in Exhibit C.
B. DELAYED PAYMENT. Premium balances which remain unpaid for more than sixty
(60) days shall incur interest from the due date, calculated from that
date by using the 13-week Treasury ▇▇▇▇ rate reported for the last working
day of the calendar month in the "Money Rates" section of THE WALL STREET
JOURNAL or comparable publications.
C. FAILURE TO PAY PREMIUMS. The payment of reinsurance premiums shall be a
condition precedent to the liability of the Reinsurer for reinsurance
covered by this Agreement. In the event that reinsurance premiums are not
paid when due, the Reinsurer shall have the right to terminate the
reinsurance under all policies having reinsurance premiums in arrears. If
the Reinsurer elects to exercise its right of termination, it shall give
the Company thirty (30) days written notice of its intention to terminate
said reinsurance. If all reinsurance premiums in arrears, including any
which may become in arrears during the thirty (30) day period, are not
paid before the expiration of said period, the Reinsurer shall be relieved
of all liability. Policies on which reinsurance premiums subsequently fall
due will automatically terminate if reinsurance premiums are not paid.
Terminated reinsurance may be reinstated, subject to approval by the
Reinsurer, within sixty (60) days of the date of termination upon payment
of all reinsurance premiums in arrears. The Reinsurer shall have no
liability for any claims incurred between the date of termination and the
date of the reinstatement of the reinsurance. The right to terminate
reinsurance shall not prejudice the Reinsurer's right to collect premiums
for the period reinsurance was in force prior to the expiration of the
thirty (30) day notice.
The Company will not force termination under the provisions of this
Article solely to avoid the provisions regarding recapture in Article XI,
or to transfer the reinsured policies to another reinsurer.
D. PREMIUM RATE GUARANTEE. The Reinsurer anticipates continuing to accept
premiums on the basis of the rates shown in Exhibit B, however, the
Reinsurer can only guarantee that the life reinsurance premium rates
payable under this Agreement shall not exceed the one-year term net
premiums computed on the 1980 CSO Mortality Table at the maximum valuation
interest rate allowable for the policies reinsured.
ARTICLE IX
CLAIMS
Claims covered under this Agreement include only death claims, which are those
due to the death of the insured on a policy reinsured under this Agreement, and
any additional benefits specified in Exhibit A, which are provided by the
underlying policy and are reinsured under this Agreement.
A. NOTICE. The Company will notify the Reinsurer, as soon as possible, after
it receives a claim on a policy reinsured under this Agreement.
B LIABILITY. Whenever a claim is made on a policy reinsured under this
Agreement, the Reinsurer shall consider its liability to the Company to be
for the amount of reinsurance for that policy as determined in Article V
and Exhibit A. If the Company has been paying premium to the Reinsurer on
an estimated reinsured net amount at risk, the Reinsurer's claim liability
shall not exceed that amount provided by the Company. The Reinsurer will
accept the good faith decision of the Company in settling a claim and
shall pay the amount of its liability in effect at the time of settlement,
including its proportionate share of any interest paid to the claimant.
If the Company has retained either a) less than its full retention or b)
fifty (50) percent or less of the risk, the Company shall consult with the
Reinsurer before making an admission of liability on any claim on which
death has occurred during the contestable period. If the Company chooses
to pay such a claim that the Reinsurer believes should be contested, then
the dispute may be submitted to arbitration.
C. PROOF OF LOSS. In every case of loss, the Company shall provide the
Reinsurer with copies of all proofs of loss, underwriting papers,
investigation reports and a statement showing the amount paid on the claim
by the Company, plus any information the Reinsurer may request.
D. SETTLEMENT.
1. LIFE. For Life insurance claims, the Reinsurer shall pay its share
of death benefits in a lump sum regardless of the form of claim
settlement by the Company.
2. WAIVER OF PREMIUM. For an approved Waiver of Premium benefit claim,
the Reinsurer shall pay its share of the gross premium waived by the
Company, and the Company shall continue to pay the total reinsurance
premium, excluding the corresponding waiver premium. If the policy
is subject to recapture, the reinsurance premium shall be
appropriately adjusted. For Universal Life products, the gross
premium waived shall be the cost of insurance premium waived by the
Company. The Reinsurer may pay Waiver of Premium claims in one (1)
payment per year regardless of the mode of premium payment specified
in the policy.
E. CONTESTED CLAIMS. The Company shall notify the Reinsurer of its intention
to contest or compromise a claim. Unless agreed otherwise, all contestable
claims will be routinely investigated. If the Reinsurer chooses not to
participate in a contested claim, it shall pay its full amount of
reinsurance liability on such claim and shall thereby be relieved of all
future liability with respect to such contested claim.
If the Reinsurer joins the Company in a contest or compromise, the
Reinsurer shall participate in the same proportion that the amount at risk
reinsured with the Reinsurer bears to the total amount at risk to the
Company on the claim and shall share in the reduction in liability in the
same proportion. The Reinsurer shall pay its share of "routine expenses"
which are considered to be investigative or administrative expenses
incurred by the Company that are customarily incurred with respect to most
claims. Participation in "unusual expenses" shall require written consent
by the Reinsurer. Unusual expenses shall include, but not be limited to,
fees of outside attorneys, investigators or consultants. The Reinsurer
shall not reimburse expenses or compensation of salaried officers and
employees of the Company or expenses incurred by the Company as a result
of a dispute arising out of conflicting claims of entitlement to policy
proceeds or benefits.
F. EXTRA-CONTRACTUAL OBLIGATIONS. The Reinsurer shall not participate in
punitive or compensatory damages or statutory penalties that are awarded
against the Company as a result of an act, omission or course of conduct
committed solely by the Company, its agents, or representatives in
connection with claims covered under this Agreement. The Reinsurer shall,
however, pay its share of statutory penalties awarded against the Company
in connection with claims covered under this Agreement if the Reinsurer
elected in writing to join in the contest of the coverage in question.
The parties recognize that circumstances may arise in which equity would
require the Reinsurer, to the extent permitted by law, to share
proportionately in punitive and compensatory damages. Such circumstances
are difficult to define in advance, but would generally be those
situations in which the Reinsurer was an active party and, in writing,
recommended, consented in writing to, in advance, the act or course of
conduct of the Company that would result in the assessment of the
extra-contractual damages. In such situations, the Reinsurer and the
company shall share such damages so assessed, in equitable proportions.
For purposes of this Article, the following definitions shall apply:
"Punitive Damages" are those damages awarded as a penalty, the amount of
which is neither governed nor fixed by statute.
"Compensatory Damages" are those amounts awarded to compensate for the
actual damages sustained, and are not awarded as a penalty nor fixed in
amount by statute.
"Statutory penalties" are those amounts awarded as a penalty, but are
fixed in amount by statute.
G. MISSTATEMENT. In the event of an increase or decrease in the amount of the
Company's liability on a policy reinsured hereunder because of a
misstatement of age, sex, or other risk classification, which is
established after the death of the insured, the Company and the Reinsurer
shall share in the change in amount in proportion to its respective net
liability prior to the change. The reinsurance premium for all policy
years shall be recalculated on the basis of the adjusted amount using
premiums and reserves at the correct risk classification, and the
adjustment for the difference in reinsurance premiums shall be made
without interest.
H. MISREPRESENTATION OR SUICIDE. If the company returns premiums to the
policyholder or beneficiary as a result of misrepresentation or suicide of
the insured, the Reinsurer will refund net reinsurance premiums received
on that policy without interest to the Company in lieu of any other form
of reinsurance benefit payable under this Agreement.
I. POLICY OR PROCESS. In the event of any change in the claims policy or
process of the Company, including but not limited to a change in the
principal claims personnel or the delegation of the claim settlement to a
third party or the decision to close to new business, the Company shall
inform the Reinsurer without delay and the Reinsurer shall have the right
to review and adjust the Claims Authority with immediate effect by giving
written notice of such change to the Company.
ARTICLE X
RETENTION LIMIT CHANGES
If the Company changes its maximum retention limits as shown in Exhibit A, it
will provide the Reinsurer with written notice of the intended changes ninety
(90) days in advance of their effective date.
A change to the company's maximum retention limits will not affect the reinsured
policies in force except as specifically provided elsewhere in this Agreement.
Furthermore, unless agreed between the parties, an increase in the Company's
retention schedule will not effect an increase in the total risk amount that it
may automatically cede to the Reinsurer.
ARTICLE XI
RECAPTURE
Option 1 (Excess Reinsurance)
Whenever the Company increases its maximum retention limits over the maximum
retention limits set forth in Exhibit A, the Company has the option to recapture
certain risk amounts. If the Company has maintained its maximum stated retention
(not a special retention limit) for the plan and insured's age, sex, and
mortality classification, it may apply its increased retention limits to reduce
the amount of reinsurance in force as follows.
a. The Company must give the Reinsurer thirty (30) days written notice
prior to its intended date of the commencement of recapture.
b. The reduction of reinsurance on affected policies will become
effective on the policy anniversary date immediately following the
notice of election to recapture; however, no reduction will be made
until a policy has been in force for at least [insert number of
years] years.
c. If any reinsured policy is recaptured, all reinsured policies
eligible for recapture under the provisions of this Article must be
recaptured up to the company's new maximum retention limits in a
consistent manner and the Company must increase its total amount of
insurance on each reinsured life. The Company may not revoke its
election to recapture for policies becoming eligible at future
anniversaries.
If portions of the reinsured policy have been ceded to more than one reinsurer,
the Company must allocate the reduction on reinsurance so that the amount
reinsured by each reinsurer after the reduction is proportionately the same as
if the new maximum dollar retention limits had been in effect at the time of
issue.
The amount of reinsurance eligible for recapture is based on the current amount
at risk as of the date of recapture. For a policy issued as a result of
exchange, conversion, or re-entry, the recapture terms of the
reinsurance
agreement covering the original policy will apply, and the duration for the
purpose of recapture will be measured from the effective date of the reinsurance
on the original policy.
If there is a reinsured waiver of premium claim in effect when recapture takes
place, the Reinsurer will continue to pay its share of the waiver claim until it
terminates. The Reinsurer will not be liable for any other benefits, including
the basic life risk, that are eligible for recapture. All such eligible benefits
will be recaptured as if there were no waiver claim in effect.
After the effective date of recapture, the Reinsurer will not be liable for any
reinsured policies or portions of such reinsured policies eligible for recapture
that the Company has overlooked.
The terms and conditions for the Company to recapture reinsured policies, as
made necessary by the insolvency of the Reinsurer, are set forth in Article XIV,
C.
No recapture will be permitted if the Company has either obtained or increased
stop loss reinsurance coverage as justification for the increase on retention
limits.
Option 2 (First Dollar Quota Share Reinsurance).
a. Recapture will not be allowed under this Agreement.
ARTICLE XII
GENERAL PROVISIONS
A. PREMIUM TAX. The Reinsurer shall not reimburse the Company for premium
taxes on reinsurance premiums.
B. OFFSET. Upon notice to the other party, the Company or the Reinsurer may
offset any undisputed balance(s) due from one party to the other from
premiums, allowances, claims, or any other amount(s) due under this
Agreement. The right of offset will not be affected or diminished because
of the insolvency of either party.
C. CURRENCY. All payments under this Agreement shall be made in United States
currency.
D. COMPANY DATA. The Company agrees to keep the Reinsurer informed of the
identity and terms of its policies, riders and contracts reinsured under
this Agreement, as well as any special programs affecting reinsurance
hereunder, with copies of its application forms, policy forms,
supplementary agreements, rate books, plan codes and all other materials
relevant to the coverages reinsured.
Further, the Company agrees to furnish the Reinsurer with all underwriting
manuals or criteria, requirements, and retention schedules affecting
reinsurance ceded and to keep the Reinsurer fully informed of all
subsequent changes to said materials.
E. ERRORS AND OMISSIONS. This provision applies only to 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 Company to its insured or any other errors or omissions committed
by the Company with regard to the policy reinsured hereunder. If through
unintentional clerical error, oversight, omission or misunderstanding,
collectively referred to as "errors", the Reinsurer or Company fails to
comply with the terms of this Agreement and if, upon discovery of the
error by either party, the other is promptly notified, each thereupon will
be restored to the position it would have occupied if the error had not
occurred.
If it is not possible to restore each party to the position it would have
occupied but for the error, the parties will endeavor in good faith to
promptly resolve the situation in a manner that is fair and reasonable,
and most closely approximates the intent of the parties as evidenced by
this Agreement.
Notwithstanding the foregoing, the Reinsurer will not provide reinsurance
for policies that do not satisfy the parameters of this Agreement,
including but not limited to the agreed upon underwriting guidelines, nor
will the Reinsurer be responsible for negligent or deliberate acts or for
repetitive errors in administration by the Company.
If a proof of claim approved by the Company or proof of claims payment
made by the Company is not provided to the Reinsurer within twelve (12)
calendar months from the date such proof of claim is approved or paid,
whichever is
is earlier, then the Reinsurer shall be relieved of all liability. Any
policy which qualified for automatic coverage to this Agreement which is
reported more than twelve (12) months after it was bound will be subject
to facultative review by the Reinsurer in accordance with Article III of
this Agreement. If any termination of a policy is reported more than two
(2) years after the date of termination, then the Reinsurer shall
reimburse premium on a pro rata basis, but in no event shall the Reinsurer
reimburse more than two (2) years of said premium.
If either party discovers that the Company has failed to cede reinsurance
as provided in this Agreement, or failed to comply with its reporting
requirements, the Reinsurer, in its sole discretion, shall require the
Company to audit its records for similar errors and to take all reasonable
actions necessary to avoid similar errors in the future.
This provision applies only to errors relating to the administration of
reinsurance by this Agreement. This provision does not apply to the
administration of the insurance provided by the Company to its insured or
any other errors or omissions committed by the Company with regard to the
policy reinsured hereunder.
F. INSPECTION OF RECORDS. The Reinsurer and the Company, or duly authorized
representatives, shall have the right at any reasonable time to inspect,
at the office of the other, all books and documents relating, directly or
indirectly, to any business reinsured under this Agreement.
G. SEVERABILITY. If any provision of this Agreement is determined to be
invalid or unenforceable, such determination will not impair or affect the
validity or the enforceability of the remaining provisions of this
Agreement.
H. COVERAGE. This Agreement applies only to policies written directly by the
Company. Policies where liability is assumed by the Company through
reinsurance, acquisition, mergers or portfolio transfers are not reinsured
under this Agreement.
ARTICLE XIII
FORMS, MANUALS & ISSUE RULES
It is the Company's obligation to ensure that business ceded under this
Agreement does not deviate from the underwriting criteria:
a. The Preferred Criteria for business ceded under this Agreement is
included Exhibit _______.
b. The Age and Amount requirements for business ceded under this
agreement are included in Exhibit _______.
c. The Underwriting Manual used for the classification or risk business
ceded under this agreement is _______.
d. The application for insurance and conditional receipt or temporary
insurance agreement is included in Exhibit _______.
The Company warrants that its retention schedule, Age and Amount requirements,
Preferred Criteria, Underwriting Manual, premium rates and policy forms
applicable to the reinsured policies and in use as of the effective date of this
agreement have been supplied to the Reinsurer. If the Underwriting Manual has
not been supplied, the company will inform the Reinsurer of the manual in use.
The Company will promptly notify the Reinsurer of any proposed changes to the
above or any changes that will alter the risk profile of business reinsured
under this Agreement. This Agreement will not extend to any policies issued
pursuant to any changes unless the Reinsurer has consented in writing to accept
policies to such changes.
This Agreement will not provide automatic reinsurance where a policy has been
issued contrary to the agreed upon underwriting criteria. The following list is
meant to provide examples, but is not intended to be all-inclusive:
a. The risk should have been declined, postponed, or additional
information obtained based on the underwriting manual cited above,
b. A risk that exceeds the agreed upon limits or capacity,
c. Not obtaining Age and Amount requirements,
d. Reducing ratings outside approved guidelines.
If a policy is issued at a premium rate different from the agreed upon
Underwriting guidelines then:
Absent any knowledge by the company of a claim on the policy, the Reinsurer
will receive the appropriate premium, based on the appropriate underwriting
rate per the agreed upon underwriting guidelines. The Reinsurer's liability
remains unchanged.
In all other cases, the Reinsurer's liability will be reduced to the same
proportion as in the reinsurance premiums credited to the Reinsurer bears to
the reinsurance premiums based on the appropriate underwriting rating per the
agreed upon underwriting guidelines.
ARTICLE XIV
WARRANTIES AND REPRESENTATIONS
The Company warrants and represents to the Reinsurer as a continuing warranty
and representation that all information supplied by the Company to the Reinsurer
in connection with this Agreement prior to the Agreement Commencement Date and
the date of its execution, is to the best of the knowledge and belief of the
Company true, complete and accurate in all respects and the Company is not aware
of any such facts or circumstances that have not been disclosed to the Reinsurer
and which might in the reasonable opinion of the Reinsurer if disclosed,
adversely have affected the decision of the Reinsurer in considering whether or
on what terms and conditions to provide reinsurance to the Company. The Company
acknowledges that the Reinsurer has relied upon the information supplied by the
Company prior to the execution date of the Agreement on deciding whether or not
to enter into the Agreement.
ARTICLE XV
DAC TAX
The 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. This election
shall be effective for all taxable years for which this Agreement remains in
effect.
A. The term "party" will refer to either the Company or the Reinsurer, as
appropriate.
B. The terms used in this Article are defined by reference to Regulation
Section 1.848-2 in effect as of December 29, 1992.
C. The party with the net positive consideration for this Agreement for each
taxable year will capitalize specified policy acquisition expense with
respect to this Agreement without regard to the general deductions
limitation of Section 848 (c)(1).
D. The Company and the Reinsurer agree to exchange information pertaining to
the amount of the net consideration under this Agreement each year to
ensure consistency or as otherwise required by the Internal Revenue
Service.
E. The Company will submit a schedule to the Reinsurer by June 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 Company stating that the Company will report
such net consideration in its tax return for the preceding calendar year.
F. The Reinsurer may contest such calculation by providing an alternative
calculation to the Company in writing within thirty (30) days of the
Reinsurer's receipt of the Company's calculation. If the Reinsurer does
not so notify the Company, the Reinsurer will report the net consideration
as determined by the Company in the Reinsurer's tax return for the
previous calendar year.
G. If the Reinsurer contests the Company's calculation of the net
consideration, the parties will 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 the Reinsurer and the Company
reach agreement on an amount of net consideration, each party shall report
such amount in their respective tax returns for the previous calendar
year.
ARTICLE XVI
INSOLVENCY
A. INSOLVENCY OF A PARTY TO THIS AGREEMENT. A party to this Agreement will be
deemed insolvent when it:
1. applies for or consents to the appointment of a receiver,
rehabilitator, conservator liquidator or statutory successor of its
properties or assets: or
2. is adjudicated as bankrupt or insolvent; or
3. files or consents to the filing of a petition in bankruptcy, seeks
reorganization to avoid insolvency or makes formal application for
any bankruptcy, dissolution, liquidation or similar law or statute;
or
4. becomes the subject of an order to rehabilitate or an order to
liquidate as defined by the insurance code of the jurisdiction of
the party's domicile.
B. INSOLVENCY OF THE COMPANY. In the event of insolvency of the Company, all
payments due the Company by the Reinsurer shall be payable directly to the
Company, its liquidator, receiver or statutory successor on the basis of
the liability of the Company under the policies reinsured without
diminution because of insolvency of the Company.
In the event of insolvency of the Company, the liquidator, receiver or
statutory successor shall give the Reinsurer written notice of the
pendency of a claim on a policy reinsured within a reasonable time after
the claim is filed in the solvency proceeding. During the pendency of the
claim, the Reinsurer may investigate the claim and, in a proceeding where
the claim is to be adjudicated, the Reinsurer may, at the Reinsurer's own
expense, interpose in the name of the Company (its liquidator, receiver or
statutory successor) any defense or defenses which the Reinsurer may deem
available to the Company or its liquidator, receiver or statutory
successor.
Subject to court approval, the expense thus incurred by the Reinsurer
shall be chargeable against the Company as part of the expense of
liquidation to the extent of the proportionate share of the benefit which
may accrue to the Company solely as a result of the defense undertaken by
the Reinsurer. Where two (2) or more reinsurers participate in the same
claim and a majority in interest elect to interpose a defense to the
claim, the expense shall be apportioned in accordance with the terms of
the
reinsurance agreements as if the expense had been incurred by the
Company.
C. INSOLVENCY OF THE REINSURER. In the event of the insolvency of the
Reinsurer, the Company may retain all or any portion of any amount then
due or which may become due the Reinsurer under this Agreement and use
such amounts for the purposes of paying any and all liabilities of the
Reinsurer incurred under this Agreement. When all such liability hereunder
has been discharged, the Company shall pay the Reinsurer, its receiver, or
statutory successor, the balance of such amounts withheld as may remain.
In the event of the insolvency of the Reinsurer, the Company may, upon
ninety (90) days written notice to the Reinsurer, its liquidator, receiver
or statutory successor, recapture, without penalty, the entire amount of
reinsurance under this Agreement.
D. DEFINITION OF INSOLVENCY. For purposes of this Agreement, the Company or
the Reinsurer shall be deemed insolvent if:
1. a court order is issued voluntarily or involuntarily placing it into
conservatorship, rehabilitation, receivership, or liquidation, or
appointing a conservator, rehabilitator, receiver or liquidator to
take over its business; or
2. it has filed or consents to the filing of a petition in bankruptcy,
seeks reorganization or an arrangement with creditors or takes
advantage of any bankruptcy, dissolution, liquidation or similar law
or statute.
ARTICLE XVII
ARBITRATION
It is the intention of the Reinsurer and the Company that the customs and
practices of the life insurance and reinsurance industry will be given full
effect in the operation and interpretation of this Agreement. The parties agree
to act in all matters with the highest good faith. However, if the Reinsurer and
the Company cannot mutually resolve a dispute that arises out of or relates to
this Agreement, and the dispute cannot be resolved through a dispute resolution
process, the dispute will be decided through arbitration as a precedent to any
right of action hereunder.
To initiate arbitration, either the Company or the Reinsurer will notify the
other party in writing of its desire to arbitrate, stating the nature of its
dispute and the remedy sought. The party to which the notice is sent will
respond to the notification in writing within fifteen (15) days of its receipt.
There will be three arbitrators who will be current or former officers of United
States domiciled life insurance or life reinsurance companies other than the
parties to this Agreement, their affiliates or subsidiaries. Each of the parties
will appoint one of the arbitrators and these two arbitrators will select the
third. If either party refuses or neglects to appoint an arbitrator within sixty
(60) days of the initiation of the arbitration, the other party may appoint the
second arbitrator. If the two arbitrators do not agree on a third arbitrator
within thirty (30) days of the appointment of the second arbitrator, each of
them shall name three individuals, of whom the other shall decline two, and the
decision as to the third arbitrator shall be determined by drawing lots.
Once chosen, the arbitrators are empowered to select the site of the arbitration
and decide all substantive and procedural issues by a majority of votes. As soon
as possible, the arbitrators will establish arbitration procedures as warranted
by the facts and issues of the particular case. The arbitrators will have the
power to determine all procedural rules of the arbitration, including but not
limited to inspection of documents, examination of witnesses and any other
matter relating to the conduct of the arbitration. The arbitrators may consider
any relevant evidence; they will weigh the evidence and consider any objections.
Each party may examine any witnesses who testify at the arbitration hearing.
The arbitrators will base their decision on the terms and conditions of this
Agreement and the customs and practices of the life insurance and reinsurance
industries rather than on strict interpretation of the law. The decision of the
arbitrators will be made by majority rule and will be submitted in writing. The
decision will be final and binding on both parties and there will be no appeal
from the decision. Either party to the arbitration may petition any court having
jurisdiction over the parties to reduce the decision to judge.
Unless the arbitrators decide otherwise, each party will bear the expense of its
own arbitration activities, including its appointed arbitrator and any outside
attorney and witness fees. The parties will jointly and equally bear the expense
of the third arbitrator and other costs of the arbitration.
This Article will survive termination of this Agreement.
ARTICLE XVIII
CONFIDENTIALITY
The Company and the Reinsurer agree that Customer and Proprietary Information
will be treated as confidential. Customer Information includes, but is not
limited to, medical, financial, and other personal information about proposed,
current, and former policyowners, insureds, applicants, and beneficiaries of
policies issued by the Company. Proprietary Information includes, but is not
limited to, business plans and trade secrets, mortality and lapse studies,
underwriting manuals and guidelines, applications and contract forms, and
specific terms and conditions of this Agreement.
Customer and Proprietary Information will not include information that:
a. is or becomes available to the general public through no fault of
the party receiving the Customer or Proprietary Information (the
"Recipient");
b. is independently developed by the Recipient;
c. is acquired by the Recipient from a third party not covered by a
confidentiality agreement; or
d. is disclosed under a court order, law, or regulation.
The parties will not disclose such information to any other parties unless
agreed to in writing, except as necessary for retrocession purposes, as
requested by external auditors, as required by court order, or as required or
allowed by law or regulation.
The Company acknowledges that the Reinsurer can aggregate data with other
companies reinsured with the Reinsurer as long as the data cannot be identified
as belonging to the Company.
ARTICLE XIX
DURATION OF AGREEMENT
This Agreement is indefinite as to its duration. The Company or the Reinsurer
may terminate this Agreement with respect to the reinsurance of new business by
giving ninety (90) days written notice or termination to the other party, sent
by certified mail. The first day of the notice period is deemed to be the date
the document is postmarked.
During the notification period, the ceding company will continue to cede and the
Reinsurer will continue to accept policies covered under the terms of this
Agreement. Reinsurance coverage on all reinsured policies will remain in force
until the termination or expiry of the policies or until the contractual
termination of reinsurance under the terms of this Agreement, whichever occurs
first.
ARTICLE XX
EXECUTION
This Agreement represents the entire contract between the Reinsurer and the
Company and supersedes any prior oral or written agreements.
IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Agreement No. [XXX] in duplicate at the dates
and places indicated with an effective date of [XXXXX].
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
BY:
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TITLE:
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DATE:
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ATTEST:
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GENERAL RE LIFE CORPORATION
BY:
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TITLE:
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DATE:
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ATTEST:
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