Exhibit g
a
FORM OF
REINSURANCE AGREEMENT #
THIS AUTOMATIC [SELF ADMINISTERED] [INDIVIDUAL] [YRT] [COINSURANCE] REINSURANCE
AGREEMENT
Effective MONTH DD, 200X
(hereinafter referred to as the "Agreement"
is made between
COMPANY NAME
of City, State of Domicile
(hereinafter referred to as "the Company")
and
COMPANY NAME.
of City, State of Domicile
(hereinafter referred to as "the Reinsurer")
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TABLE OF CONTENTS
PREAMBLE
ARTICLE 1
1.1 Scope of Coverage
ARTICLE 2
2.1 Automatic Reinsurance
2.2 Facultative Reinsurance
ARTICLE 3
3.1 Automatic Submissions
3.2 Facultative Submissions
ARTICLE 4
4.1 Liability
4.2 Commencement of Automatic Reinsurance Liability
4.3 Commencement of Facultative Reinsurance Liability
4.4 Conditional or Interim Receipt Liability
ARTICLE 5
5.1 Premium Accounting
5.2 Non-Payment of Premiums
ARTICLE 6
6.1 Right of Offset
ARTICLE 7
7.1 Conversions
7.2 Policy Changes
7.3 Reductions
7.4 Lapses
7.5 Reinstatements
7.6 Minimum Reinsurance Limit
ARTICLE 8
8.1 Retention Limit Changes
8.2 Recapture
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ARTICLE 9
9.1 Claims Notice
9.2 Claims Payment
9.3 Contested Claims
9.4 Claims Expenses
9.5 Extra Contractual Obligations
9.6 Misstatement of Age or Sex
ARTICLE 10
10.1 Errors and Omissions
10.2 Dispute Resolution
10.3 Arbitration
ARTICLE 11
11.1 Insolvency
ARTICLE 12
12.1 DAC Tax
12.2 Taxes and Expenses
ARTICLE 13
13.1 Entire Agreement
13.2 Inspection of Records
13.3 Good Faith
13.4 Confidentiality
ARTICLE 14
14.1 Duration of Agreement
14.2 Severability
14.3 Construction
14.4 Regulatory Compliance
EXECUTION
EXHIBITS
A Business Covered
A-1 Required Forms, Manuals & Issue Rules - Conditional Receipt Amount
B Reinsurance Application
C General Terms (including Reinsurance Rates and Allowances)
D The Company's Retention Limits
E The Reinsurer's Automatic Acceptance Limits
F Reinsurance Reports
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PREAMBLE
This Agreement is solely between the Company and the Reinsurer. The
acceptance of risks under this Agreement will create no right or legal
relation between the Reinsurer the insured, owner, or beneficiary of
any insurance policy or other contract of the Company.
This Agreement will be binding upon the parties hereto and their
respective successors and assigns.
ARTICLE 1
1.1 SCOPE OF COVERAGE
This Agreement applies to all insurance policies and supplementary
benefits and riders attached thereto (hereinafter referred to as
"policies") listed in Exhibit A, which have been issued directly by the
Company in accordance with its underwriting rules, premium rates and
policy forms as provided to the Reinsurer. The issuance of such
business by the Company to lives resident in the countries stated in
Exhibit A, constitutes the transaction of business in a jurisdiction in
which the Company is properly licensed.
On and after the effective date of this Agreement, the Company will
cede, and the Reinsurer will accept risk on the above referenced
policies in accordance with the terms and conditions of this Agreement.
The policies accepted by the Reinsurer will be hereinafter referred to
as "Reinsured Policies".
The Company may not reinsure the amount it has retained on the business
covered hereunder on any basis whatsoever without the Reinsurer's
written consent.
This Agreement does not cover the following unless specified elsewhere
in this Agreement:
1.1.1 Noncontractual conversions, rollovers, exchanges or group
conversions; or
1.1.2 Any business issued under a program where full current
evidence of insurability consistent with the amount of
insurance is not obtained, or where conventional selection
criteria are not applied in underwriting the risk; or
1.1.3 Any conversion of a previously issued policy that had been
reinsured with another reinsurer.
Each policy covered under this Agreement must provide for the maximum
normal periods of suicide and contestability protection permitted in
the state in which the policy is executed.
ARTICLE 2
2.1 AUTOMATIC REINSURANCE
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The Company will automatically cede the Reinsurer's share of the
policies, supplementary benefits and riders covered under this
Agreement to the Reinsurer in accordance with the Automatic Acceptance
Limits specified in Exhibit E, provided that:
2.1.1 the Company has retained the amount stipulated in Exhibit D
according to the age and mortality rating at the time of
underwriting; and
2.1.2 the total of the new reinsurance required and the amount
already reinsured on that life under this Agreement and all
other life agreements between the Reinsurer and the Company,
does not exceed the Automatic Acceptance Limits set out in
Exhibit E; and
2.1.3 the amount of insurance on that life in all companies does not
exceed the Inforce Limits stated in Exhibit E; and
2.1.4 the application is on a life for which an application has not
been submitted by the Company on a facultative basis to the
Reinsurer or any other reinsurer within the last 3 years,
unless the original reason for submitting facultatively no
longer applies.
If the Company is already on the risk for its retention under
previously issued policies, the Reinsurer will automatically accept
reinsurance according to the Automatic Acceptance Limits set out in
Exhibit E, provided the Company has applied the same underwriting
guidelines it would have applied if the new policy had fallen
completely within its retention.
2.2 FACULTATIVE REINSURANCE
If the Company receives an application for a policy covered under this
Agreement that does not meet the automatic coverage criteria listed in
section 2.1 above, it may submit the application facultatively to the
Reinsurer for its consideration.
The reinsurance will also be on a facultative basis if the Company
submits an application to the Reinsurer for its consideration on a plan
or rider that qualifies for automatic reinsurance under this Agreement.
The relevant terms and conditions of this Agreement will apply to those
facultative offers made by the Reinsurer which are accepted by the
Company.
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ARTICLE 3
3.1 AUTOMATIC SUBMISSIONS
The Company will submit automatic policies to the Reinsurer according
to the reporting terms set out in Exhibit F.
Upon the request of the Reinsurer, the Company will send to the
Reinsurer copies of the application, underwriting papers and other
papers on a life reinsured automatically under this Agreement.
3.2 FACULTATIVE SUBMISSIONS
The Company will apply for reinsurance on a facultative basis by
sending to the Reinsurer an Application for Reinsurance, a sample of
which is included as Exhibit B. Unless specified elsewhere in the
Agreement, accompanying this Application for Reinsurance will be copies
of all underwriting evidence that is available for risk assessment
including, but not limited to, copies of the application for insurance,
medical examiners' reports, attending physicians' statements,
inspection reports, and other papers bearing on the insurability of the
risk. The Company will also notify the Reinsurer of any outstanding
underwriting requirements at the time of the facultative submission.
Any subsequent information received by the Company that is pertinent to
the risk assessment will be transmitted to the Reinsurer immediately.
After consideration of the Application for Reinsurance and related
papers, the Reinsurer will promptly inform the Company of its
underwriting decision. The Reinsurer's offer will expire at the end of
the period stated in Exhibit A, unless otherwise specified by the
Reinsurer. If the underwriting decision is acceptable to the Company
and the Company's policy is subsequently placed in force in accordance
with the issue rules provided to the Reinsurer, the Company will duly
notify the Reinsurer according to the terms outlined in Exhibit F.
If any risk is submitted to more than one reinsurer for consideration,
the Allocation Rules for placement of facultative cases as provided in
Exhibit A-1 will apply.
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ARTICLE 4
4.1 LIABILITY
Unless specified elsewhere in the Agreement, the Reinsurer's liability
for the Reinsured Policies is restricted to its share of the Company's
liability as limited by the terms and conditions of the particular
policy under which the Company is liable.
The Reinsurer may terminate its liability for any policies for which
reinsurance premium payments are in arrears, according to the terms set
out in Article 5.2 of this Agreement.
4.2 COMMENCEMENT OF AUTOMATIC REINSURANCE LIABILITY
The Reinsurer's liability for any Reinsured Policy accepted
automatically will begin simultaneously with the Company's contractual
liability for that policy.
4.3 COMMENCEMENT OF FACULTATIVE REINSURANCE LIABILITY
If a facultative application is submitted by the Company to the
Reinsurer only, then the Reinsurer's liability will begin
simultaneously with the Company's contractual liability for this
facultative policy. The amount of the Reinsurer's liability will be the
lesser of the Reinsurer's offer, the Conditional Receipt Amount set out
in Exhibit A-1 or the Automatic Acceptance Limits set out in Exhibit E.
The Reinsurer's liability ceases if the Reinsurer declines the risk and
duly notifies the Company. The Reinsurer's liability would also cease
if the Company declines the Reinsurer's offer.
If, however, a facultative application is submitted by the Company to
any other reinsurer, in addition to the Reinsurer, the liability of the
Reinsurer will commence when the Reinsurer has received notice from the
Company, during the lifetime of the insured, that the Reinsurer's offer
has been accepted. The Company will have the number of days specified
in Exhibit A from the date of the Reinsurer's final offer in which to
place the policy with the insured/owner, after which time the
Reinsurer's offer will expire unless the Reinsurer explicitly states in
writing that the offer is extended for some further period.
4.4 CONDITIONAL OR INTERIM RECEIPT LIABILITY
Conditional or Interim Receipt coverage applicable to automatic
reinsurance under this Agreement will be limited to amounts accepted
within the company's usual cash-with-application procedures that
provide temporary coverage up to the limits shown in Exhibit A-1.
However, for facultative reinsurance, the Reinsurer's liability will
not commence until the Reinsurer's facultative offer has been accepted
by the Company; and then is limited to the company's usual
cash-with-application procedures, which provide temporary coverage up
to the limits shown in Exhibit A-1.
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ARTICLE 5
5.1 PREMIUM ACCOUNTING
The Company will pay the Reinsurer premiums in accordance with the
terms specified in Exhibit C.
The method and requirements for reporting and remitting premiums are
outlined in Exhibit F.
The Reinsurer reserves the right to charge interest on overdue
premiums. The interest will be calculated according to the terms and
conditions specified in Exhibit C.
5.2 NON-PAYMENT OF PREMIUMS
The payment of reinsurance premiums is a condition precedent to the
liability of the Reinsurer for reinsurance covered by this Agreement.
In the event that reinsurance premiums are not paid within 60 days of
the Due Date stated in Exhibit F, the Reinsurer will have the right to
terminate the reinsurance under all policies having reinsurance
premiums in arrears. If the Reinsurer elects to exercise its right of
termination, it will give the Company 15 days written notice of its
intention to terminate said reinsurance. If all reinsurance premiums in
arrears, including any which may become in arrears during the 15 day
period, are not paid before the expiration of said period, the
Reinsurer will be relieved of all liability under those policies as of
the last date for which premiums have been paid for each policy.
This right to terminate reinsurance will not prejudice the Reinsurer's
right to collect premiums for the period during which reinsurance was
in force prior to the expiration of the 15 days notice. The Company is
still obligated to pay such overdue premiums, plus interest to the date
of payment.
The Company will not force termination under the provisions of this
Article solely to avoid the recapture requirements of this Agreement or
to transfer the Reinsured Policies to another reinsurer.
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ARTICLE 6
6.1 RIGHT OF OFFSET
The Company and the Reinsurer will have the right to offset any balance
or balances whether on account of premiums, allowances or claims due
from one party to the other, under this Agreement or under any other
reinsurance agreement between the Company and the Reinsurer.
The right of offset will not be affected or diminished because of the
insolvency of either party.
ARTICLE 7
7.1 CONVERSIONS
If a Reinsured Policy is converted, the Company will promptly notify
the Reinsurer. The policy arising from the conversion will be reinsured
with the Reinsurer. The amount to be reinsured will be determined on
the same basis as used for the original policy (e.g. excess of
retention or quota share) but will not exceed the amount reinsured as
of the date of conversion unless mutually agreed otherwise.
If the policy arising from a conversion is on a plan that is:
7.1.1 Reinsured on a coinsurance basis with the Reinsurer either
under this Agreement or under a different agreement, the
appropriate premium at the attained age will be used and the
policy year for the purpose of commission rates will be based
on the duration of the original policy; or
7.1.2 Reinsured on a YRT basis with the Reinsurer, either under this
Agreement or under a different agreement, the appropriate YRT
rate at the attained age and duration of the original policy
will be used and any allowance will be based on the duration
of the original policy; or
7.1.3 Not covered by any reinsurance agreement with the Reinsurer,
reinsurance will be on a YRT basis using the YRT rates
specified in Exhibit C-1, at the attained age and duration of
the original policy.
The above terms will apply unless specified otherwise in Exhibit C-1.
Unless mutually agreed otherwise, policies that had been reinsured with
another reinsurer and which convert to a plan covered under this
Agreement will not be reinsured with the Reinsurer.
7.2 POLICY CHANGES
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If the plan, the amount of reinsurance or the premiums of a Reinsured
Policy are changed, the Company will promptly inform the Reinsurer.
Whenever a Reinsured Policy is changed and the Company's underwriting
rules do not require that full evidence be obtained, the reinsurance
will remain in effect with the Reinsurer. The suicide, contestability
and recapture periods applicable to the original Reinsured Policy will
apply to the reissued Reinsured Policy and the duration will be
measured from the effective date of the original Reinsured Policy.
Whenever a Reinsured Policy is changed and the Company's underwriting
rules require that full evidence be obtained, the change will be
subject to the Reinsurer's approval, if:
7.2.1 The new amount of the Reinsured Policy would be in excess of
the Automatic Acceptance Limit, in effect at the time of the
change, as set out in Exhibit E; or
7.2.2 The new amount of the policy and the amount already in force
on the same life exceeds the Inforce Limit stated in Exhibit
E; or
7.2.3 The Reinsured Policy is on a facultative basis.
The amount of any non-contractual increase will be subject to the terms
stated in Exhibit C.
The Company will report the details of all changes according to the
terms outlined in Exhibit F, Reinsurance Reports.
For changes not covered under this Agreement, which affect the terms of
any Reinsured Policy, the Company must obtain the Reinsurer's approval
before such changes become effective.
7.3 REDUCTIONS
Unless specified otherwise in this Agreement, if the amount of
insurance of a policy issued by the Company is reduced and
7.3.1 the amount of reinsurance is on excess basis, then the amount
of reinsurance on that life will be reduced effective the same
date by the full amount of the reduction under the original
policy. If the amount of insurance terminated equals or
exceeds the amount of reinsurance, the full amount of
reinsurance is terminated, or
7.3.2 the amount of reinsurance is on a quota share basis, then the
amount of reinsurance on that life will be reduced effective
the same date by the same proportion as the reduction under
the original policy.
The reduction will first apply to any reinsurance on the policy being
reduced and then if applicable in a chronological order according to
policy date ("first in, first out") to any reinsurance on the other
policies in force on the life. However, the Company will not be
required to assume a risk for an amount in excess of its regular
retention for the age at issue and the mortality rating of the policy
under which reinsurance is being terminated.
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If the reinsurance for a policy has been placed with more than one
reinsurer, the reduction will be applied to all reinsurers pro rata to
the amounts originally reinsured with each reinsurer.
7.4 LAPSES
When a policy lapses, the corresponding Reinsured Policy will be
terminated effective the same date.
Unless specified otherwise in this Agreement, if a policy fully
retained by the Company lapses, the terms under the preceding
Reductions clause would apply.
If a policy lapses and extended term insurance is elected under the
terms of the policy, the corresponding Reinsured Policy will continue
on the same basis as the original policy until the expiry of the
extended term period.
If a policy lapses and reduced paid-up insurance is elected under the
terms of the policy, the amount of the corresponding Reinsured Policy
will be reduced according to the terms under the preceding Reductions
clause.
If the Company allows the policy to remain in force under its automatic
premium loan regulations, the reinsurance will continue unchanged and
in force as long as such regulations remain in effect, except as
provided for otherwise in this Agreement.
The Reinsurer does not participate in policy loans or other forms of
indebtedness on policies reinsured under this Agreement. Therefore,
policy loans do not affect the amount of reinsurance.
7.5 REINSTATEMENTS
If a policy reinsured on an automatic basis is reinstated in accordance
with its terms or the rules of the Company the Reinsurer will, upon
notification of reinstatement , reinstate the Reinsured Policy
automatically. The Reinsurer's approval is required only for the
reinstatement of a facultative policy when the Company's regular
reinstatement rules indicate that more evidence than a Statement of
Good Health is required.
The Company's liability with respect to the premiums in arrears is set
out in Exhibit F.
7.6 MINIMUM REINSURANCE LIMIT
The Company will not submit a policy to the Reinsurer unless the amount
of the policy to be reinsured exceeds the Minimum Initial Reinsurance
Limit specified in Exhibit C. The Reinsured Policy will be canceled
when its net amount at risk becomes less than the Minimum Final
Reinsurance Limit set out in Exhibit C.
ARTICLE 8
8.1 RETENTION LIMIT CHANGES
If the Company changes its retention limits, it will provide the
Reinsurer with written notice of the new retention limits and the
effective date.
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A change to the Company's Retention Limits in Exhibit D will not affect
the Reinsured Policies in force at the time of such a change except as
specifically provided for elsewhere in this Agreement. Furthermore,
such a change will not affect the Automatic Acceptance Limits in
Exhibit E unless mutually agreed by the Company and the Reinsurer.
8.2 RECAPTURE
The Company may apply its increased retention limits to reduce the
amount of in force Reinsured Policies provided:
8.2.1 The Company gives the Reinsurer written notice of its
intention to recapture within 90 days of the effective date of
the retention increase; and
8.2.2 Such recaptures are made on the next anniversary of each
Reinsured Policy affected unless mutually agreed otherwise by
the Company and the Reinsurer and with no recapture being made
until the Reinsured Policy has been in force for the period
stated in Exhibit C. For a conversion or re-entry, the
recapture terms of the original policy will apply and the
duration for the recapture period will be measured from the
effective date of the original policy; and
8.2.3 The Company has maintained from the time the policy was
issued, its full retention as set out in Exhibit D for the
plan and the insured's classification. Reinsured policies on a
first dollar quota share basis will not be eligible for
recapture; and
8.2.4 The Company has applied its increased Retention Limits in a
consistent manner to all categories of its Retention Limits
set out in Exhibit D unless otherwise agreed to by the
Reinsurer.
In applying its increased Retention Limits to Reinsured Policies, the
age and mortality rating at the time of issue will be used to determine
the amount of the Company's increased retention.
Recapture as provided herein is optional with the Company, but if any
Reinsured Policy is recaptured, all Reinsured Policies eligible for
recapture under the provisions of this Article must be recaptured. If
there is reinsurance in other companies on risks eligible for
recapture, the necessary reduction is to be applied pro rata to the
total outstanding reinsurance.
The amount of reinsurance eligible for recapture is based on the
reinsurance net amount at risk as of the date of recapture.
The Company may not revoke its election to recapture for Reinsured
Policies becoming eligible at future anniversaries.
No recapture of Reinsured Policies will occur if the Company has either
obtained or increased stop loss reinsurance coverage as justification
for the increase in retention.
If there is a Waiver of Premium (W.P.) claim in effect when recapture
takes place, the W.P. claim will stay in effect and the Reinsurer will
continue to pay its share of the W.P. claim until it terminates. The
Reinsurer will not be liable for any other benefits, including the
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basic life risk, which are eligible for recapture. All such eligible
benefits will be recaptured as if there was no W.P. claim.
The Reinsurer will not be liable, after the effective date of
recapture, for any Reinsured Policies or portions of such Reinsured
Policies eligible for recapture that the Company has overlooked. The
Reinsurer will be liable only for a credit of the premiums, received
after the recapture date, less any allowance.
The terms and conditions for the Company to recapture in force
Reinsured Policies due to the insolvency of the Reinsurer are set out
in the Insolvency clause in Article 11.
If the company transfers business which is reinsured under this
Agreement to a successor company, then the successor company has the
option to recapture the reinsurance, in accordance with the recapture
criteria outlined in this Article, only if the successor company has or
adopts a higher retention limit than the Company.
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ARTICLE 9
9.1 CLAIMS NOTICE
The Company will notify the Reinsurer as soon as reasonably possible
after the Company receives a claim on a Reinsured Policy. Copies of all
claims papers will be sent promptly by the Company to the Reinsurer.
The settlement made by the Company will be binding on the Reinsurer.
However, for claims made during the contestable period or in any case
where the total amount of reinsurance ceded to the Reinsurer is greater
than the amount retained by the Company, or if the Company retained
less than, or none of, its usual retention on the policy, then the
Company will seek the Reinsurer's recommendation before conceding
liability or making settlement to the claimant.
The Company will provide the Reinsurer with all further reports and
papers required by the Reinsurer for its consideration of the claim.
For Joint Life Last Survivor business, the Company, if notified, will
in turn notify the Reinsurer of the first death.
9.2 CLAIMS PAYMENT
Provided there is no existing breach of this Agreement by the Company,
the Reinsurer will be liable to the Company for the benefits reinsured
and the reinsurance will not exceed the Company's contractual liability
under the terms of its policies less the amount retained. The payment
of death claims by the Reinsurer will be in one lump sum regardless of
the mode of settlement under the original policy. The Reinsurer's share
of interest, which is based on the death proceeds paid by the Company,
will be payable in addition to the death claim settlement.
For a waiver claim, the Company will continue to pay premiums for
reinsurance except the premium for disability reinsurance. The
Reinsurer will pay its proportionate share of the gross premium waived
by the Company on the original policy, including its share of the
premiums for benefits that remain in effect during disability.
For claims on Accelerated Benefits riders reinsured under this
Agreement, the benefit amount payable by the Reinsurer will be
calculated by multiplying the total accelerated death benefit rider
payout by the ratio of the reinsured net amount at risk to the face
amount.
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9.3 CONTESTED CLAIMS
The Company will notify the Reinsurer of its intention to contest,
compromise or litigate a claim involving a Reinsured Policy. The
Company will also provide the Reinsurer prompt notice of any legal
proceedings initiated against the Company in response to its denial of
a claim on a reinsured policy. Should any claim be settled on a reduced
compromise basis, or should a contested claim be settled for a reduced
sum, the Company and the Reinsurer will participate in such reductions
in proportion to their respective liabilities under the policy or
policies reinsured.
The Reinsurer may pay its share of the death benefit if it does not
deem it advisable to contest the claim.
9.4 CLAIMS EXPENSES
The Reinsurer will pay its share of reasonable investigation and legal
expenses incurred in adjudicating or litigating the claim. The
Reinsurer will not be liable for any portion of any routine
investigative or administrative expenses incidental to the settlement
of claims (such as compensation of salaried employees) which are
incurred by the Company; nor for any expenses incurred in connection
with a dispute or contest arising out of conflicting claims of
entitlement to policy proceeds or benefits that the Company admits are
payable.
In the event that the Reinsurer pays its share of the death benefit of
a policy for which the Company is contesting the claim, the Reinsurer
will not be liable for any subsequent expenses incurred by the Company.
9.5 EXTRA CONTRACTUAL OBLIGATIONS
Extra Contractual Obligations are obligations outside of the
contractual obligations and include but are not limited to punitive
damages, bad faith damages, compensatory damages, and other damages or
statutory penalties which may arise from the willful and/or negligent
acts or omissions by the Company.
The Reinsurer is not liable for Extra Contractual Obligations unless it
concurred in writing and in advance with the actions of the Company
which ultimately led to the imposition of the Extra Contractual
Obligations. In such situations, the Company and the Reinsurer will
share in Extra Contractual Obligations, in equitable proportions, but
all factors being equal, the division of any such assessments would be
in proportion to the total risk accepted by each party for the plan of
insurance involved.
Notwithstanding anything stated herein, this Agreement will not apply
to any Extra Contractual Obligations incurred by the Company as a
result of any negligence, fraud or wrong doing by any employee or
officer of the Company or an agent representing the Company.
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9.6 MISSTATEMENT OF AGE OR SEX
In the event of an increase or reduction in the amount payable under a
policy due to a misstatement in age or sex, the proportionate
liabilities under this Agreement will be the basis for determining each
party's share of any increase or reduction. The Reinsured Policy will
be rewritten from commencement on the basis of the adjusted amounts
using premiums and amounts at risk for the correct ages and sex, and
the proper adjustment for the difference in reinsurance premiums,
without interest, will be made.
ARTICLE 10
10.1 ERRORS AND OMISSIONS
Any unintentional or accidental failure to comply with the terms of
this Agreement which can be shown to be the result of an oversight,
misunderstanding or clerical error, by either the Company or the
Reinsurer, will not be deemed to be a breach of this Agreement. Upon
discovery, the error will be corrected so that both parties are
restored to the position they would have occupied had the oversight,
misunderstanding or clerical error not occurred, including the effect
of the time value of money. Should it not be possible to restore both
parties to such a position, the party responsible for the oversight,
misunderstanding or clerical error will be responsible for any
resulting liabilities and expenses.
This provision will apply only to oversights, misunderstandings or
clerical errors relating to the administration of reinsurance covered
by this Agreement and not to the administration of the insurance
provided by the Company to its insured.
The Reinsurer will not provide reinsurance for policies that do not
satisfy the terms of this Agreement, nor will the Reinsurer be
responsible for negligent or deliberate acts or for repetitive errors
in administration by the Company.
If either party discovers that the Company has failed to cede
reinsurance as provided for under this Agreement, or failed to comply
with reporting requirements, the Reinsurer may require the Company to
audit it records for similar errors, and to take the actions necessary
to avoid similar errors in the future. If the Reinsurer receives no
evidence that the Company has taken action to remedy such a situation,
the Reinsurer reserves the right to limit its liability to correctly
reported policies only.
Any negligent or deliberate acts or omissions by the Company regarding
the insurance or reinsurance provided are the responsibility of the
Company and its liability insurer, if any, but not that of the
Reinsurer.
10.2 DISPUTE RESOLUTION
If either the Company or the Reinsurer has given written notification
of a dispute to the other party, then within 15 days of such
notification both parties must designate an officer of their
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respective companies to attempt to resolve the dispute. The officers
will meet at a mutually agreeable location as soon as possible and as
often as necessary, in order to gather and furnish the other with all
appropriate and relevant information concerning the dispute. The
officers will discuss the problem and will negotiate in good faith
without the necessity of any formal arbitration proceedings. During the
negotiation process, all reasonable requests made by one officer to the
other for information will be honored. The specific format for such
discussions will be decided by the designated officers.
If these officers are unable to resolve the dispute within 30 days of
their first meeting, the dispute will be submitted to formal
arbitration, unless the parities agree in writing to extend the
negotiation period for an additional 30 days.
10.3 ARBITRATION
If the Company and Reinsurer are unable to mutually resolve a dispute
or controversy relating to policies covered under this Agreement or the
breach thereof, the matter will be referred to arbitration.
To initiate arbitration, either the Company of the Reinsurer will
notify the other party in writing of its desire to arbitrate, stating
the nature of its dispute and the remedy sought. There will be three
arbitrators selected who will be officers of Life Insurance Companies
or Life Reinsurance Companies excluding officers of the parties to this
Agreement, their affiliates or subsidiaries or past employees of any of
these entities. The arbitrators who will regard this Agreement from the
standpoint of practical business as well as the law, are empowered to
determine the interpretation of the treaty obligation.
Each party will appoint one arbitrator and these two arbitrators will
select a third arbitrator within 2 weeks of the appointment of the
second. If either party refuses or neglects to appoint an arbitrator
within 60 days after receipt of the written request for arbitration,
the other party may appoint a second arbitrator. Should the two
arbitrators not agree on the choice of the third, then each party will
name four candidates to serve as the arbitrator. Beginning with the
party who did not initiate arbitration, each party will eliminate one
candidate from the eight listed until one candidate remains. If this
candidate declines to serve as the arbitrator, the candidate last
eliminated will be approached to serve. This process will be repeated
until a candidate has agreed to serve as the third arbitrator.
The place of meeting of the arbitrators will be decided by a majority
vote of the arbitrators. The written decision of a majority of the
arbitrators will be final and binding on both parties and their
respective successors and assigns.
The arbitrators will render a decision within 4 months of the
appointment of the third arbitrator, unless both parties agree
otherwise. In the event no decision is rendered within 4 months, new
arbitrators will be selected as above. There will be no appeal from the
decision. Either party to the arbitration may petition any court having
jurisdiction over the parties to reduce the decision to judgment.
Alternatively, if both parties consent, any controversy may be settled
by arbitration in accordance with the rules of the American Arbitration
Association.
Unless the Arbitrators decide otherwise, each party will bear the
expense of its own arbitration, including its appointed arbitrator and
any outside attorney and witness fees. The
18
parties will jointly and equally bear the expense of the third
arbitrator and other costs of the arbitration.
It is specifically the intent of both parties that these arbitration
provisions will replace and be in lieu of any statutory arbitration
provision, if the law so permits.
ARTICLE 11
11.1 INSOLVENCY
A party to this Agreement will be deemed "insolvent" when it:
11.1.1 Applies for or consents to the appointment of a receiver,
rehabilitator, conservator, liquidator or statutory successor
(hereinafter referred to as the Authorized Representative) of
its properties or assets; or
11.1.2 Is adjudicated as bankrupt or insolvent; or
11.1.3 Files or consents to the filing of a petition in bankruptcy,
seeks reorganization or an arrangement with creditors or takes
advantage of any bankruptcy, dissolution, liquidation, or
similar law or statute; or
11.1.4 Becomes the subject of an order to rehabilitate or an order to
liquidate as defined by the insurance code of the jurisdiction
of the party's domicile.
In the event of the insolvency of the Company, all reinsurance made,
ceded, renewed or otherwise becoming effective under this Agreement
will be payable by the Reinsurer directly to the Company or to its
Authorized Representative, on the basis of the liability of the Company
under the Reinsured Policies without diminution because of the
insolvency of the Company.
The Reinsurer will be liable only for the amounts reinsured and will
not be or become liable for any amounts or reserves to be held by the
Company on policies reinsured under this Agreement. The Authorized
Representative will give written notice to the Reinsurer of all pending
claims against the Company on any policies reinsured within a
reasonable time after such claims are filed in the insolvency
proceedings. While a claim is pending, the Reinsurer may investigate
such claim and interpose, at its own expense, in the proceedings where
the claim is to be adjudicated, any defense or defenses which it may
deem available to the Company or the Authorized Representative.
The expense incurred by the Reinsurer will be chargeable, subject to
court approval, against the Company as part of the expense of
conservation or liquidation to the extent of a proportionate share of
the benefit which may accrue to the Company solely as a result of the
defense undertaken by the Reinsurer. Where two or more reinsurers are
involved in the same claim and a majority in interest elect to
interpose a defense to such claim, the expense will be apportioned in
accordance with the terms of the Agreement as though such expense
19
had been incurred by the Company.
In the event of insolvency, the Right of Offset afforded under Article
6-1 will remain in full force and effect to the extent permitted by
applicable law.
In the event of the insolvency of the Reinsurer, the Company may cancel
this Agreement for new business by promptly providing the Reinsurer,
its receiver, rehabilitator, conservator, liquidator or statutory
successor with written notice of the cancellation effective the date on
which the Reinsurer's insolvency is established by the authority
responsible for such determination. Any requirement for a notification
period prior to the cancellation of the Agreement would not apply under
such circumstances.
In addition, the Company may provide the Reinsurer, its receiver,
rehabilitator, conservator, liquidator or statutory successor with
written notice of its intent to recapture all reinsurance in force
under this Agreement regardless of the duration the reinsurance has
been in force or the amount retained by the Company on the policies
reinsured hereunder. The effective date of a recapture due to
insolvency would be at the election of the Company and would not be
earlier than the date on which the Reinsurer's insolvency is
established by the authority responsible for such determination. Any
Recapture Fee applicable will be mutually agreed upon by the Company
and the Reinsurer, its rehabilitator, conservator, liquidator or
statutory successor.
20
ARTICLE 12
12.1 DAC TAX
The Company and the Reinsurer agree to the DAC Tax Election pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulations effective December
29, 1992, under Section 848 of the Internal Revenue code of 1986, as
amended, whereby:
12.1.1 The party with the net positive consideration for this
Agreement for each taxable year will capitalize specified
policy acquisition expenses with respect to this Agreement
without regard to the general deductions limitation of Section
848(c)(1); and
12.1.2 Both parties agree to exchange information pertaining to the
amount of net consideration under this Agreement each year to
ensure consistency.
The term "net consideration" will refer to the net consideration as
defined in Regulation Section 1.848-2(f).
The Company and the Reinsurer will report the amount of net
consideration in their respective federal income tax returns for the
previous calendar year.
The Company and the Reinsurer will also attach a schedule to their
respective federal income tax returns which identifies the Agreement as
a reinsurance agreement for which the DAC Tax Election under Regulation
Section 1.848.2 (g) (8) has been made.
This DAC Tax Election will be effective for all years for which this
Agreement remains in effect.
The Company and the Reinsurer represent and warrant that they are
subject to U.S. taxation under either the provisions of subchapter L of
Chapter 1 or the provisions of subpart F of subchapter N of Chapter 1
of the Internal Revenue Code of 1986, as amended.
12.2 TAXES AND EXPENSES
Apart from any taxes, allowances, refunds, and expenses specifically
referred to elsewhere in this Agreement, no taxes, allowances, or
proportion of any expense will be paid by the Reinsurer to the Company
in respect of any Reinsured Policy.
21
ARTICLE 13
13.1 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
with respect to the business reinsured hereunder. There are no
understandings between the Company and the Reinsurer other than as
expressed in this Agreement.
Any alteration to this Agreement will be null and void unless made by
written amendment, attached to the Agreement and signed by both
parties.
13.2 INSPECTION OF RECORDS
The Reinsurer, or its duly appointed representatives, will have access
to the records of the Company concerning the business reinsured
hereunder for the purpose of inspecting, auditing and photocopying
those records. Such access will be provided at the office of the
Company and will be during reasonable business hours.
Provided there is business in force under this Agreement, the
Reinsurer's right of access as specified above will survive the term of
the Agreement.
13.3 GOOD FAITH
All matters with respect to this Agreement require the utmost good
faith of both parties.
Each party represents and warrants to the other party that it is
solvent on a statutory basis in all states in which it does business or
is licensed. Each party will promptly notify the other if it is
subsequently financially impaired.
The Reinsurer has entered into this Agreement in reliance upon the
Company's representations and warranties. The Company affirms that it
has and will continue to disclose all matters material to this
Agreement. Examples of such matters are a change in underwriting or
issue practices or philosophy, a change in underwriting or claims
management personnel, or a change in the Company's ownership or
control.
The Company affirms that the underwriting, administration and claims
practices it employs are consistent with the customary and usual
practices of the insurance industry as a whole. Should the Company
engage in exceptional or uncustomary practices, it will inform the
Reinsurer of such action and obtain its written consent before
assigning any liability to the Reinsurer with respect to any policies
covered under this Agreement.
13.4 CONFIDENTIALITY
Both the Company and the Reinsurer will hold confidential and not
disclose or make competitive use of any shared client and proprietary
information unless otherwise agreed to in writing, or unless the
information otherwise becomes publicly available or the disclosure of
which is required for retrocession purposes or has been mandated by law
or is duly
22
required by external auditors.
Client information includes medical, financial and other personal
information about poposed, current and former policyowners, insureds,
applicants, and beneficiaries of policies issued by the Company.
Proprietary Information includes but is not limited to underwriting
manuals and guidelines, applications and contract forms and premium
rates and allowances of the Reinsurer and the Company.
In addition, the Company and the Reinsurer will comply with relevant
privacy legislation.
ARTICLE 14
14.1 DURATION OF AGREEMENT
This Agreement is unlimited as to its duration. The Reinsurer or the
Company may terminate this Agreement with respect to the reinsurance of
new business by giving at least 90 days written notice of termination
to the other party.
During the 90 day notification period, the Company will continue to
cede and the Reinsurer will continue to accept policies covered under
the terms of this Agreement.
Further, the Reinsurer remains liable for all Reinsured Policies in
force at the date of the termination stated in the notice of
termination, until their natural expiration, unless the parties
mutually decide otherwise or as specified otherwise in this Agreement.
14.2 SEVERABILITY
If any provision of this Agreement is determined to be invalid or
unenforceable, such determination will not affect or impair the
validity or the enforceability of the remaining provisions of this
Agreement.
14.3 CONSTRUCTION
The rights and obligations under this Agreement will be construed and
administered in accordance with the laws of the Company's state of
domicile stated in Exhibit A.
14.4 REGULATORY COMPLIANCE
The Company warrants that it has secured all necessary federal and
state licenses and approvals and that it is operating in compliance
with federal and state insurance laws and regulations.
The parties intend that the Company will receive full statutory reserve
credit for the Reinsured Policies in its state of domicile. The parties
agree to make all reasonable efforts to ensure that this is
accomplished.
EXECUTION
23
This Agreement has been made in duplicate and hereby executed by both parties.
Signed for and on behalf of COMPANY NAME
By: By:
---------------------------- -------------------------------
Title: Title:
---------------------------- -------------------------------
Date: Place:
---------------------------- -------------------------------
Signed for and on behalf of Reinsurance Company Name.
By: By:
---------------------------- -------------------------------
Title: Title:
---------------------------- -------------------------------
Date: Place:
---------------------------- -------------------------------
24
Prepared by ______________
EXHIBIT A
BUSINESS COVERED
AGREEMENT EFFECTIVE DATE:
Month DD, 200X. The commencement dates for specific plans are shown below.
COVERAGE:
The policies on the plans shown below which have policy issue dates falling in
the period that begins with the Commencement Date and ends with the Termination
Date and that qualify for automatic reinsurance are covered according to the
Basis specified below provided:
1. The policies are on lives resident in the United States [or
XXX].
2. The policies are on lives with surnames commencing with the
letters A to Z inclusive.
BASIS:
[XX% of the excess over the Company's retention stated in Exhibit D, up to the
Automatic Acceptance Limits stated in Exhibit E.]
or
[XX% on a First Dollar
Quota Share basis up to the Automatic Acceptance Limits stated in Exhibit E.]
CURRENCY: US$
COMPANY'S STATE OF DOMICILE: XXXX
PLANS, RIDERS AND BENEFITS:
PLAN EXHIBIT REFERENCE COMMENCEMENT TERMINATION
IDENTIFICATION FOR RATES DATE DATE
Plan Name or Code C-1 Month DD, 200X Month DD, 200X
EXHIBIT A
PAGE 2
FACULTATIVE SUBMISSIONS:
The Company may submit, on a facultative basis, to the Reinsurer any application
for a policy on a plan or rider listed above which qualifies for automatic
reinsurance.
The Company will submit on a facultative basis to the Reinsurer any application
for a policy on a plan or rider listed above which does not meet the criteria
listed in Article 2 under Automatic Reinsurance.
The Reinsurer's facultative offer will expire at the end of 120 days, unless
otherwise specified by the Reinsurer.
EXHIBIT A-1
REQUIRED FORMS, MANUALS AND ISSUE RULES
The Company affirms that its retention schedule, underwriting guidelines, issue
rules, premium rates and policy forms applicable to the Reinsured Policies and
in use as of the effective date of this Agreement have been supplied to the
Reinsurer. This includes:
1. Policy Application Form(s)
2. Underwriting Manual and Agent's Guide
3. Policy Delivery Rules and Reinstatement Rules
4. Non-medical and Medical Requirements
5. Financial Questionnaires
6. Tobacco Use Guidelines and Questionaires
7. Preferred Underwriting Guidelines
8. Premium Rates
9. Retention Schedule
10. Allocation Rules for Facultative Cases Among Reinsurers
The Company will promptly notify the Reinsurer of any proposed material changes
to the above underwriting guidelines, issue rules, premium rates, retention
schedule and policy forms. This Agreement will not extend to policies issued
pursuant to such changes unless the Reinsurer has consented in writing to accept
policies subject to such changes.
It is the Company's responsibility to ensure that the applicable forms are in
compliance with current Medical Information Bureau (M.I.B.) regulations.
CONDITIONAL RECEIPT AMOUNT
The amount of coverage provided by the Reinsurer under a Conditional Receipt (or
Interim Receipt) will not exceed the lesser of:
1. The Reinsurer's share of $500,000; or
2. The Automatic Acceptance Limits; or
3. The Reinsurer's share of the difference between the amount of
insurance provided by the Conditional Receipt (or Interim
Receipt) and the Company's maximum retention assuming the life
had been underwritten as standard. The Company's retention
will include any amounts retained under any in force policies
on the life.
ABCD
EXHIBIT B
REINSURANCE APPLICATION
From: Company Name
Company Name
-----------------------------------------------------------------------------------------------------------------------------------
Last First Middle Date of Birth Age Sex
Applicant's Name
--------------------------------------------------------------------------------------------------------------
Plan Preferred Smoker Nonsmoker Reunderwriting
-------------------------------------------
Curr Residence For Premium Tax Policy Number Policy Date Preliminary Term From
-----------------------------------------------------------------------------------------------------------------------------------
Type of Application
Facultative Automatic PLACEMENT DATE SELF ADMINISTERED (Bulk) Terms YRT Coinsurance
-----------------------------------------------------------------------------------------------------------------------------------
Decrement Cash Values Reserves AGE BASIS RETENTION CODE Full Reduced Nil
---------------------------------------------------------- -------------------------------------
Reinsurance Amounts Basic Coverage Additional Coverage Waiver Premium Accidental Death Other Benefits
Benefit Benefit
Previous Insurance In Force
----------------------------------------------------------------------------------------------------
Of Which We Retained -
----------------------------------------------------------------------------------------------------
Insurance Now Applied For -
----------------------------------------------------------------------------------------------------
Of Which We Retain -
----------------------------------------------------------------------------------------------------
Reinsurance This Cession -
----------------------------------------------------------------------------------------------------
Extra Premium
----------------------------------------------------------------------------------------------------
Rating If Substandard -
----------------------------------------------------------------------------------------------------
Coinsurance Premium -
----------------------------------------------------------------------------------------------------
*For YRT cases state Gross Premiums WP AD Other Amount of Premium Annual Decrement for
and Expiry Ages for benefits to be Waived Amount at Risk
---------------------------------------------------------------------------------------------
Additional Information or Remarks
--- ---
--- ---
Date By
------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT C
GENERAL TERMS
1. REINSURANCE RATES: The Company will pay the Reinsurer premiums based on
the rates and terms set out in the sub-section(s) of Exhibit C for the
Reinsured Policies.
2. PREMIUM TAX: The Reinsurer will not reimburse the Company for premium
taxes.
3. DIVIDEND PAYMENTS: The Reinsurer will not reimburse the Company for
dividends paid to policyholders.
4. POLICY LOANS: The Reinsurer will not participate in policy loans or
other forms of indebtedness on policies reinsured under this Agreement.
5. CASH SURRENDER VALUES: The Reinsurer will not reimburse the Company
for cash surrender values paid to the policyholder.
6. MINIMUM INITIAL REINSURANCE LIMIT: [0] [$25,000]
7. INTEREST RATE FOR OVERDUE PREMIUMS: The interest rate payable by the
Company to the Reinsurer for overdue premiums will be the 90 Day
Federal Government Treasury ββββ rate as first published in the Wall
Street Journal in the month following the end of the billing period
plus 50 basis points. The method of calculation will be simple interest
"Bankers' Rule" (or 360 day year).
8. RATES APPLICABLE TO INCREASES: First year reinsurance premium rates and
allowances will apply to the amount normally underwritten of a
non-contractual increase.
EXHIBIT C-1
SPECIFIC TERMS
1. REINSURANCE BASIS: [YRT or Coinsurance]
2. AGE BASIS: [Nearest or Last].
3. PREMIUMS: The Company will pay to the Reinsurer a basic premium
calculated by multiplying the net amount at risk of the Reinsured
Policy by the appropriate rate from THE SET OF RATES INCLUDED AT THE
END OF THIS SUB-SECTION . Premiums will be payable on a policy year
basis, regardless of the premium payment mode under the original
insurance, and the Company will continue to pay the appropriate premium
to the Reinsurer as long as the Reinsured Policy is in force.
Any extra premiums payable on account of additional mortality risk will
be payable to the Reinsurer.
For Waiver of Premium, Accidental Death and Payor Death and Disability
benefits, premiums will be calculated on the amount reinsured using the
same annual rate as is applicable to the original policy.
4. ALLOWANCES:
ON BASIC PREMIUM(S)
The Reinsurer will pay to the Company the following allowances on the
premiums payable hereunder:
Insert Allowances here
ON FLAT EXTRA PREMIUMS
When a flat extra premium is payable for 5 years or less, an allowance
of 10% of the gross flat extra charged by the Company will be made each
year. When a flat extra premium is payable for more than 5 years, an
allowance of 100% of the gross flat extra charged by the Company will
be made in the first year and an allowance of 10% in each year
thereafter.
ON MULTIPLE EXTRA PREMIUMS
The same allowances as those payable on the basic policy.
ON BENEFITS
For Waiver of Premium, Accidental Death and Payor Death and Disability
premiums an allowance of 100% of the gross premium charged by the
Company in the first year will be paid and an allowance of 10% in each
year thereafter.
EXHIBIT C-1
PAGE 2
5. NET AMOUNTS AT RISK:
a) For Fixed Benefit Plans, the reinsured net amount at risk will
be the difference between the reinsured face amount and the
cash values applicable to the face amount [reinsured if
Proportionate Risk] [of the policy if Constant Risk]. The
reinsured face amount is the initial amount reinsured under
this Agreement, or as reset by subsequent scheduled or fully
underwritten increases. Commuted values, if applicable, or any
comparable approximation agreed to between the Company and the
Reinsurer, may be used to determine the net amount at risk.
b) For term plans the net amount at risk will be based on the
reinsured face amount.
c) For Variable Benefit Plans, the reinsured net amount at risk
will be the difference between the reinsured face amount and
the account value applicable to the face amount [reinsured if
Proportionate Risk] [of the policy if Constant Risk] The
reinsured face amount is the initial amount reinsured under
this Agreement, or as reset by subsequent scheduled or fully
underwritten increases. For reinsured net amount at risk
purposes, the account value is that which is in effect for
each reinsurance premium accounting period.
For UL Life type plans, if the death benefit is Option A, the
reinsured net amount at risk will be the difference between
the reinsured face amount and the account values applicable to
the face amount [reinsured if Proportionate Risk Retention]
[of the policy if Constant Risk Retention]. If the death
benefit is Option B, the reinsured net amount at risk will be
the reinsured face amount.
Increases in the amount at risk due to Cost of Living Rider increases
or fluctuations in the amount at risk caused by the normal workings of
the cash value fund in Universal Life type plans will be shared by the
Company and the Reinsurer using the same retention method as for the
base policy.
6. [RATE] [ALLOWANCE] LIMIT: The [rates] [allowances] set out in this
sub-section will be applicable, provided the total of the new
reinsurance amount and the amount already reinsured on the life under
this Agreement, and all other Agreements with the Reinsurer, does not
exceed the amount shown in the table below. Individual consideration
will be given to the [rates] [allowances] for any amounts over the
limit shown in the table below:
ISSUE AGE STD.(100%) - 500%
0 - 75 $10,000,000
76 - 85 2,500,000
EXHIBIT C-1
PAGE 3
7. RATE GUARANTEE:
The [YRT][Coinsurance] reinsurance rates set out in this sub-section
are guaranteed to the extent that in the [2nd][Nth] year and later the
Reinsurer reserves the right to increase the premiums for reinsurance
but not above the statutory net premium.
If the Reinsurer exercises this right and the Company has not increased
its rates to the policy owner, the Company may recapture the Reinsured
Policies on which the rates have been increased regardless of the
Reinsured Policies' duration in force. Such a recapture would be
subject to a recapture fee mutually agreed upon by the Company and the
Reinsurer.
8. DEFICIENCY RESERVES:
If YRT [No Deficiency Reserves will be held by the Reinsurer for the
Reinsured policies.]
If Coinsurance [The Reinsurer anticipates that it will use the
Company's X Factors in calculating deficiency reserves. Such X factors
and supporting actuarial certification and memorandum will be made
available to the Reinsurer. The Company will promptly communicate any
change in its mortality reserve assumptions to the Reinsurer.
If the Company makes any change to its reserving methodology that
results in differences in the level of reserves it must hold on
statutory basis, then the Reinsurer reserves the the right to make
changes to the reinsurance allowances under this Agreement. Should the
Reinsurer calculate its own X Factors for the purpose of determining
reserves on the Reinsured Policies and hold reserves based on such
calculations, the rates and allowances under this Agreement will be
unaffected.]
9. RECAPTURE:
[Reinsured Policies on an excess basis may be recaptured under the
following situations provided the Reinsured Policies have been in force
for the specified period:
Increase in Company's Retention
Inforce Period: 10 years (or end of Level Term period if later);
or
Insolvency of Reinsurer
Inforce Period: Not applicable]
OR
[Reinsured Polices on a first dollar quota share basis will not be
eligible for recapture due to an increase in retention.
If the Reinsurer becomes insolvent, the Reinsured Policies may be
recaptured.]
EXHIBIT C-1
PAGE 4
10. REDUCTIONS: [Reinsured Policies will be reduced on a full reduction
basis.][Full Reductions] [Reinsured Policies will be reduced in
proportion to the reduction under the original policy or policies. A
reduction to one of the Company's policies not reinsured hereunder will
not affect any Reinsured Policy on the same life.] [Proportionate
Reductions - Excess of Retention]
[Reductions will be shared proportionately between the Company and its
reinsurers.] [use for Quota Share]
11. YRT RATES FOR CONVERSIONS TO NON-REINSURED PLANS: The YRT rates
applicable will be based on the following percentages of the Society of
Actuaries 1975-1980 Select and Ultimate table rates:
Nonsmoker policies: 50%
Smoker policies: 110%
Insert Copy of Rates Here
EXHIBIT D
THE COMPANY'S RETENTION LIMITS
------------------------------------------ ---------------------------------------- ----------------------------------------
ISSUE AGE STANDARD TO TABLE ? TABLE ? TO TABLE ?
FLAT EXTRA $ TO $ FLAT EXTRA $ TO $
------------------------------------------ ---------------------------------------- ----------------------------------------
------------------------------------------ ---------------------------------------- ----------------------------------------
------------------------------------------ ---------------------------------------- ----------------------------------------
Waiver of Premium:
Accidental Death Benefits:
It is understood that the amount retained by the Company includes its retention
under any inforce policies.
[CONSTANT RISK RETENTION] [PROPORTIONATE RISK RETENTION]
The Company will retain a constant amount of the net amount at risk on a policy.
Any change in the net amount at risk due to changes in the cash value applicable
to the policy will be allocated to the reinsurers.
[Any change in the net amount at risk due to changes in the cash value
applicable to the policy will be shared proportionately between the Company and
its reinsurers.]
EXHIBIT E
THE REINSURER'S AUTOMATIC ACCEPTANCE LIMITS
[The Reinsurer will automatically accept the excess over the Company's Retention
up to the following limits on a per life basis:
------------------------------------------ ---------------------------------------- ----------------------------------------
ISSUE AGE STANDARD TO TABLE ? TABLE ? TO TABLE ??
FLAT EXTRA $ TO $ FLAT EXTRA $ TO $ ]
------------------------------------------ ---------------------------------------- ----------------------------------------
------------------------------------------ ---------------------------------------- ----------------------------------------
------------------------------------------ ---------------------------------------- ----------------------------------------
or
[The Reinsurer will automatically accept XX% on a First Dollar Quota Share basis
of each policy up to the following limits on a per life basis:]
INFORCE LIMITS
[$10,000,000 inforce and applied for on any one life] or
[$10,000,000 inforce and to be placed on any one life.]
PARTICIPATION LIMITS
W.P.: Plans with an Increasing Premium Feature
Issue Ages Initial Face Amount
Under 40 $6,000,000
40 - 49 4,000,000
50 and over 2,000,000
Other plans - $60,000 of annual premium to be waived.
A.D.: $500,000 of Accidental Death (A.D.)
$300,000 of Accidental Death with Common Carrier (A.D.C.C.)
No combination of accidental death benefits to exceed a potential claim
amount of $600,000.
EXHIBIT F (BULK)
REINSURANCE REPORTS
REMITTANCE REPORTING:
The Company will self-administer reinsurance transactions. Reinsurance premiums
are payable [annually in advance]. During each accounting period, as defined
below, the Company will report to the Reinsurer all first year and renewal
premiums which became due during the previous accounting period. Any adjustments
made necessary by changes in reinsurance effective during a previous accounting
period will also be reported.
The Company will take credit, without interest, for any unearned premiums
arising due to reductions, cancellations or death claims. The unearned premiums
refunded will be net of allowances and policy fees.
The Company will pay the balance of arrears of premiums due under a reinstated
Reinsured Policy.
If a balance is due to the Reinsurer, the Company will forward a remittance in
settlement with its report. If the balance is due to the Company, the Reinsurer
will forward a remittance in settlement within 15 days of receipt of the report.
REPORT REQUIREMENTS:
The Company will send to the Reinsurer the following reports [electronically],
by the times indicated below:
REPORT ACCOUNTING PERIOD DUE DATE
1. New Business [Monthly] 21st day after
(New issues only- first time [month] end
policy reported to the Reinsurer)
2. Renewal Business [Monthly] 21st day after
(Policies with renewal dates [month] end
within Accounting Period)
3. Changes & Terminations [Monthly] 21st day after
(including conversions, replacements [month] end
reinstatements, increases, decreases,
recaptures, lapses, claims, etc.)
4. Inforce [Quarterly] 21st day after
(Listing of each policy in force) [quarter] end
EXHIBIT F (BULK)
PAGE 2
5. Accounting Information [Monthly] 21st day after
(See Exhibit F-1 for Sample [month] end
Summary Reporting Form, section I)
6. Statutory Reserves [Quarterly] 21st day after
(See Exhibit F-1 for Sample [quarter] end
Summary Reporting Form, section II)
7. Policy Exhibit [Monthly] 21st day after
(See Exhibit F-1 for Sample [month] end
Summary Reporting Form, section III)
8. Valuation Reserve [Annually] January 10th
Certification
(See Exhibit F-2 for Sample)
9. Tax Reserve Certification [Annually] June 1st
(See Exhibit F-3 for Sample)
REPORT DETAILS:
The reports for New Business, Renewal Business, Changes & Terminations and
Inforce, will include the following data:
1. Reporting Date
2. Policy Number
3. Insured Data: Full Name, Date of Birth , Sex
4. Residence
5. Policy Date
6. Issue Age
7. Plan Name and\or Code
8. Premium (not applicable to Inforce Report)
9. Smoker Code
10. Underwriting Risk Classification (including table
rating and flat extra amount & applicable number of
years)
11. Automatic or Facultative
12. Direct Face ββββββ
ββ. Reinsured Amount and Net Amount at Risk
14. Death Benefit Option (for UL policies only)
15. Transaction Code (not applicable to Inforce Report)
In addition, for the Changes and Terminations Report the effective date of each
transaction will be provided. If the change is a conversion or replacement the
attained age and duration will also be provided.
EXHIBIT F (BULK)
PAGE 3
REPORTING SYSTEM: The system used by the Company to administer its reinsurance
is:
Name of System
The Company will inform the Reinsurer of any change in the reporting format or
data prior to use in reports to the Reinsurer.
NOTIFICATION OF ACCEPTANCE OF FACULTATIVE OFFER: The Company will advise the
Reinsurer of its acceptance of the Reinsurer's underwriting decision pertaining
to facultative business by sending notice to the Reinsurer. The Company will
provide the full details of the facultative new business on the next New
Business Report.
ADDITIONAL INFORMATION: The Company will provide the Reinsurer upon request,
with any additional information related to the Reinsured Policies and which the
Reinsurer requires in order to complete its financial statements.
EXHIBIT F-1
REINSURANCE COMPANY
SELF ADMINISTERED REINSURANCE SUMMARY REPORTING FORM
Ceding Company Reinsurer
---------------------------------- -------------------------------------
Treaty/Account # Period Experience is for
-------------------------------- ----------------------
Coin YRT Mod Co Other Interest Sensitive: Yes No
---- ---- ---- ---- ----
Reinsurance Premium Mode: Monthly Quarterly Annual In Advance In Arrears
----- ----- ----- ----- -----
Reinsurance Reporting Mode: Monthly Quarterly Annual
----- ----- -----
Contact Date Phone#
------------------------------- ---------------------- -------------------------------------
---------------------------------------------------------------------------------------------------------------------------
SECTION I - ACCOUNTING
---------------------------------------------------------------------------------------------------------------------------
* * Premiums * * * * Allowances Other* *
-----------------------------------------------------------------------------
First Year Renewal Year First Year Renewal Year Benefit Total
-----------------------------------------------------------------------------------------------------------
Life
---------------------------------------------------------------------------------------------------------------------------
ADB
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Waiver of Premium
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TOTAL
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SECTION II - RESERVE INFORMATION
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Amount of Rein (000) Issue Reserves Reinsured
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Life ADB Year Life ADB Waiver Subst'd Deficiency
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SECTION III - POLICY EXHIBIT INFORMATION
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Current Period Year to Date
------------------------------ -------------------------------
No. of Amt of * No. of Amt. of *
Policies Rein (000) Policies Rein (000)
------------------------------ -------------------------------
A. Inforce Beg. of Period A.
------------------------------ -------------------------------
1. New Business Auto β.ββββ
------------------------------ -------------------------------
Fac Fac
------------------------------ -------------------------------
2. Conversions/Replacements - On 2.
------------------------------ -------------------------------
3. Reinstatements 3.
------------------------------
-------------------------------
4. Other Increases 4.
------------------------------ -------------------------------
5. Not Takens 5.
a) Total Inc (1+2+3+4-5) a)
============================== 6. ===============================
6. Death
------------------------------ -------------------------------
7. Conversions/Replacements - Off 7.
------------------------------ -------------------------------
8. Lapses 8.
------------------------------ -------------------------------
9. Surrenders 9.
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10. Expiry 10.
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11. Recapture 11.
------------------------------ -------------------------------
12. Other Decreases 12.
------------------------------ -------------------------------
b) Total Dec (6+7+8+9+10+11+12) b)
------------------------------ -------------------------------
B. Inforce End of Period (A+a-b) B.
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EXHIBIT F-2
VALUATION RESERVE FOR SELF-ADMINISTERED BUSINESS CEDED TO
(REINSURANCE COMAPANY) FROM (NAME OF COMPANY)
Inforce and Reserves at 200x:
Plan: Type: SM/NSM/AGGR/TOTAL
Inforce Reinsured Amount:
-------------
Inforce Number of Policies:
-------------
Valuation Reserve as at 200x:
RESERVE RESERVE BASIS
TYPE AMOUNT ($) (TABLE, INTEREST
RATE AND METHOD)
Active Life Reserve
Unearned Premium Reserve
Disabled Life Reserve
Liability for Incurred But Not Reported Claims (IBNR)
Liability for Due and Unpaid Claims
Liability for claims in Course of Settlement
Other** (specify)
Total
**If credit for deficiency reserves is being taken, please specify under
"other".
As the valuation actuary of the above named company I certify that the
information above is correct as shown. *
Name:
Signature:
Actuarial Designation:
Title:
Date:
* Required only for Year End Valuation Reserves.
EXHIBIT F- 3
TAX RESERVE CERTIFICATION FOR SELF-ADMINISTERED BUSINESS CEDED TO (REINSURANCE
COMPANY) FROM (NAME OF COMPANY)
Inforce and Reserves at December 31, 200x:
Plan: Type: SM/NSM/AGGR/TOTAL
Inforce Reinsured Amount:
-------------
Inforce Number of Policies:
-------------
Tax Reserve as at December 31, 200x:
RESERVE RESERVE BASIS
TYPE AMOUNT ($) (TABLE, INTEREST
RATE AND METHOD)
Active Life Reserve
Unearned Premium Reserve
Disabled Life Reserve
Liability for Incurred But Not Reported Claims (IBNR)
Liability for Due and Unpaid Claims
Liability for Claims in Course of Settlement
Other** (specify)
Total
**If credit for deficiency reserves is being taken, please specify under
"other".
As the valuation actuary of the above named company I certify that the
information above is correct as shown.
Name:
Signature:
Actuarial Designation:
Title:
Date:
EXHIBIT F (INDIV)
REINSURANCE REPORTS
REPORTING REINSURANCE TRANSACTIONS:
For new business, the Company will send to the Reinsurer as soon as possible
after the original policy has been issued, an Application for Reinsurance
(Exhibit B).
The Company will also promptly send to the Reinsurer complete details of any
changes to Reinsured Policies.
REMITTANCE REPORTING:
The reinsurance transactions will be administered by the Reinsurer. During each
accounting period, as defined below, the Reinsurer will provide the Company with
a report showing all first year and renewal premiums which became due during the
previous accounting period. Also included in the report will be any adjustments
made necessary by changes in reinsurance effective during a previous accounting
period.
The Company will take credit, without interest, for any unearned premiums
arising due to reductions, cancellations or death claims. The unearned premiums
refunded will be net of allowances and policy fees.
The Company will pay the balance of arrears of premiums due under a reinstated
Reinsured Policy.
The balance due, as calculated above, will then become payable. If the balance
so calculated is due to the Company, the Reinsurer will forward a remittance in
settlement with the report. If the balance is due to the Reinsurer, the Company
will forward a remittance in settlement within 15 days of receipt of the report.
REPORT REQUIREMENTS:
The Reinsurer will send to the Company the following reports by the times
indicated below:
REPORT ACCOUNTING PERIOD DUE DATE
1. Detail Reports [Monthly] 21st day after
(Reinsurance Ceded) [month] end
2. Policy Detail Report [Monthly] 21st day after
Totals (Summary Report) [month] end
3. Accounting and Policy [Monthly] 21st day after
Exhibit (Movement Summary) [month] end
4. Reserves [Quarterly] 21st day after
[quarter] end
5. Inforce List [Annually] 21st day after
[quarter] end
EXHIBIT F (INDIV)
Page 2
NOTIFICATION OF ACCEPTANCE OF FACULTATIVE OFFER: The Company will advise the
Reinsurer of its acceptance of the Reinsurer's underwriting decision pertaining
to facultative business by sending notice to the Reinsurer.
ADDITIONAL INFORMATION: The Company will provide the Reinsurer, upon request,
with any additional information related to the Reinsured Policies and which the
Reinsurer requires in order to complete its financial statements.