YEARLY RENEWABLE TERM REINSURANCE AGREEMENT, Effective March 1, 1996
between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(Worcester)
and
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
(Hartford, Connecticut)
YEARLY RENEWABLE TERM REINSURANCE AGREEMENT, Effective March 1, 1996
between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(Worcester)
and
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
(Hartford, Connecticut)
INDEX
ARTICLE PAGE
Access to Records 11 12
Arbitration 15 13
Automatic Reinsurance 3 2
Basis of Reinsurance 3 2
Claims 5 6
Currency 13 12
DAC Tax Regulation 7 10
Definitions 2 1
Delays 12 12
Effective Date 16 14
Errors 12 12
Extra Contractual Obligations 9 11
Facultative Reinsurance 3 3
General Provisions 3 3
Integration 18 15
Insolvency 14 13
Liability of Connecticut General 4 4
Notices 17 15
Offset 10 12
Omissions 12 12
Payments in Excess of Policy Limits 9 11
Parties to the Agreement 1 1
Premium Accounting 6 7
Recapture 8 11
Reinsurance Premiums 6 7
Retention 8 11
Term and Termination 16 14
SCHEDULES
A Policy and Rider Forms Subject to this Agreement
B Retention of First Allmerica Financial
B Automatic Reinsurance in Connecticut General
C Schedule of Premium Rates and Supplemental Benefits
YEARLY RENEWABLE TERM REINSURANCE AGREEMENT
between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(Hereinafter called First Allmerica)
and
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
(Hereinafter called Connecticut General)
ARTICLE 1
PARTIES TO THE AGREEMENT
This Agreement is solely between First Allmerica Financial and
Connecticut General. It shall not create any right, interest or legal
relationship to or with anyone other than First Allmerica Financial or
Connecticut General, including without limitation, any insured
individual, beneficiary, policy owner, applicant, or assignee under any
Policy issued by First Allmerica Financial.
ARTICLE 2
DEFINITIONS
"Agreement" Agreement shall include this document and
all schedules, exhibits and amendments
identified in the Table of Contents and/or
attached hereto.
"Claim" Claim shall mean loss or losses sustained
by any Insured Individual for which
coverage is sought under any Policy
reinsured pursuant to this Agreement.
"Effective Date" Effective Date is the date First
Allmerica Financial and Connecticut General
enter into this Agreement as outlined in
ARTICLE 16.
"Insured Individual" A person eligible for benefits
under the Policy forms reinsured pursuant
to this Agreement and included on SCHEDULE
A.
"Jumbo Risk" For the purpose of this Agreement, a
jumbo risk is one with respect to which
commonly accepted underwriting evidence of
insurability indicates that the proposed
insured's total life insurance in force and
applied for from all insurers exceeds the
amounts outlined on SCHEDULE B.
1
"Policy" The Policy underwritten and issued and/or
amended by First Allmerica Financial to an
Insured Individual and Rider issued by
First Allmerica Financial shall be
identified on SCHEDULE A.
ARTICLE 3
BASIS OF INSURANCE
The reinsurance shall be on the yearly renewable term basis.
AUTOMATIC REINSURANCE
On or after the Effective Date of this Agreement, First Allmerica
Financial shall cede and Connecticut General shall accept life
reinsurance of First Allmerica Financial's liability subject to the
following:
the Policy forms underwritten and issued by First Allmerica
Financial shall be identified on SCHEDULE A; and
the Policy forms assumed and retroceded by First Allmerica
Financial that were underwritten and issued by Allmerica
Financial Life Insurance and Annuity Company, a subsidiary of
First Allmerica Financial, shall be identified on SCHEDULE A;
and
the Policy forms assumed and retroceded on SCHEDULE A shall be
based on First Allmerica Financial's underwriting rules and
practices that were reviewed with and approved by Connecticut
General as of the Effective Date of this Agreement;
First Allmerica Financial's issue and Retention Limit and
Connecticut General's Maximum Liability for each Insured
Individual shall be as set forth on SCHEDULE B and First
Allmerica Financial must retain its maximum retention limit
for the policy; and
the total amount of insurance, including base policy and any
term riders on the life of an Insured Individual in force or
being applied for in all insurance companies shall not exceed
the Jumbo Risk Limits set forth on SCHEDULE B; and
such reinsurance is not being submitted on any reinsurer on a
facultative basis; and
the terms, conditions and restrictions contained in this
Agreement.
2
FACULATIVE REINSURANCE
For any Policy that exceeds the limits set forth on SCHEDULE B or for
any Policy that will be issued that is not based on the underwriting
guidelines, limits and rules provided for in the Automatic Reinsurance
section of this Article, First Allmerica Financial shall submit such
reinsurance coverage proposal to Connecticut General for consideration.
The information to be submitted to Connecticut General shall be on such
form acceptable to Connecticut General and shall include any and all
underwriting information required by Connecticut General.
No reinsurance coverage for the Policy described in the immediately
preceding paragraph shall be provided by Connecticut General unless and
until a written offer is provided to First Allmerica Financial setting
forth the terms and conditions upon which Connecticut General will
provide coverage and First Allmerica Financial provides written
acceptance of those terms and conditions. Written acceptance by First
Allmerica Financial must take place within one hundred twenty (120)
days or within the time period set forth in Connecticut General's
written offer, if different. Any change to the terms of Connecticut
General's written offer that are requested by First Allmerica Financial
shall require the acceptance in writing of Connecticut General. The
agreed reinsurance coverage shall then take effect as of the date of
Connecticut General's written offer unless the parties agree otherwise
in writing.
GENERAL PROVISIONS
The Policy forms identified on SCHEUDLE A were reviewed and approved by
Connecticut General prior to the Effective Date of this Agreement.
First Allmerica Financial shall provide written notice to Connecticut
General of its intention to issue new or revised Policy forms if it
intends such forms to be covered under this Agreement. Connecticut
General shall be entitled to thirty (30) calendar days following
receipt of such notice in which to review such new or revised forms;
provided, however, that Connecticut General shall be deemed to have
approved any changes in Policy forms that are mandated by a State
Insurance Department. If Connecticut General fails to provide written
notice within the thirty (30) calendar day review period of its
decision to deny approval, Connecticut General shall be deemed to have
provided approval on the basis that First Allmerica Financial
requested.
First Allmerica Financial shall provide written notice to Connecticut
General of any revisions in the underwriting rules and practices of
First Allmerica Financial. Connecticut General shall be entitled to
thirty (30) calendar days following receipt of such notice in which to
review such revised rules and/or practices. If Connecticut General
fails to provide written notice within the thirty (30) calendar day
review period that the revised rules and/or practices are not
acceptable, the revised rules and/or practices shall be deemed to be
acceptable to Connecticut General.
3
First Allmerica Financial shall notify Connecticut General in writing
within ninety (90) calendar days of any change in any Policy reinsured
under this Agreement which affects the underwriting classification of
the Policy and/or exceeds the limits on SCHEDULE B. Connecticut General
shall be entitled to thirty (30) calendar days following receipt of
such notice in which to review the change in underwriting
classification of the Policy and/or limits of the Policy. If
Connecticut General fails to provide written notice within the thirty
(30) calendar day review period that it will not accept the change in
the Policy which affects the underwriting classification and/or the
limits which exceed the limits set forth on SCHEDULE B, the change(s)
shall be deemed to be acceptable to Connecticut General.
Connecticut General shall not participate in loans on any Policy
reinsured under this Agreement.
ARTICLE 4
LIABILITY OF CONNECTICUT GENERAL
Connecticut General's liability shall follow that of First Allmerica
Financial in every case, and be subject in all respects to the general
stipulations, terms, clauses, conditions, waivers and modifications of
the Policy forms issued by First Allmerica Financial and identified on
SCHEDULE A.
Connecticut General's liability to First Allmerica Financial for the
amount of reinsurance due and payable shall be based on the net amount
at risk at the time of the Insured Individual's death.
The reinsurance net amount at risk is defined to be the reinsurance
face amount less an appropriate percentage of the policy's total
account value (certificate value) at the end of the prior policy year.
The appropriate percentage is sixty percent (60%) for Connecticut
General and twenty (20%) for the other reinsurer.
The reinsurance net amount at risk for the first policy year
equals the reinsurance face amount.
The reinsurance face amount equals sixty percent (60%) of the
policy's face amount for Connecticut General and twenty
percent (20%) for the other reinsurer.
If the policy has Option Two (2) for the death benefit the
reinsurance face amount remains level for all policy years.
4
Changes in the account value between anniversaries will not
impact the reinsurance net amount at risk for the policy year.
The reinsurance net amount at risk will be calculated on each
anniversary and remain constant during the policy year unless
a specific reduction in coverage occurs. If such a reduction
occurs, a premium refund will result and a new reinsurance net
amount at risk will be calculated using the account value on
the prior policy anniversary. Increases in coverage will be
treated as new business starting from the effective date of
the increase.
Should the Minimum Death Benefit apply when an insured dies,
an appropriate adjustment will be made in the reinsurance
death benefit.
As this is a first dollar quota share reinsurance agreement,
there will be no minimum reinsurance issue amounts nor will
there be a minimum reinsurance net amount at risk at renewal.
Connecticut General shall have no liability under supplementary benefit
riders for Disability Waiver of Premium, Accidental Death Benefits,
Other Insured Rider, or Dependent coverages attached to policies
reinsured under this Agreement.
A Claim is deemed to be paid on the date when First Allmerica
Financial's payment, check or draft is issued, or when amounts to
satisfy the payment are made available by First Allmerica Financial to
the payee.
In the event that the amount of the Claim is increased or decreased due
to misstatement of age or sex of Insured Individual discovered after
such Claim, Connecticut General's liability for the increase or
decrease shall be determined in accordance with its share of liability
under the Policy set forth in Paragraphs 2 and 3 of ARTICLE 4.
Connecticut General shall not be responsible for reinsurance on any
Claim or excess payment which is the result of negligence or criminal
act or omissions of an employee, agent, broker officer or director of
First Allmerica Financial.
This Agreement does not apply to and specifically excludes the
salaries, administrative, office expenses and any other expenses
incurred by First Allmerica Financial while issuing Policy forms
identified on SCHEDULE A.
This Agreement shall apply only to Policy forms identified on SCHEDULE
A that cover Insured Individuals that are domiciled in the United
States of America, the District of Columbia and the province of Canada
in which First Allmerica Financial is properly licensed and authorized
to do business unless the Policy form issued by First Allmerica
Financial specifically provides coverage outside the aforesaid
territorial limits, subject to written notice or approval by
Connecticut General.
5
In no event shall Connecticut General have any reinsurance liability
unless the Policy form identified on SCHEDULE A, underwritten and
issued by First Allmerica is in force and the issuance of such Policy
form constitutes the doing of business in a state of the United States
of American and/or province of Canada in which First Allmerica
Financial is properly licensed and authorized to do business.
ARTICLE 5
CLAIMS
First Allmerica Financial is solely responsible for payment of Claims
under the Policy forms identified on SCHEDULE A.
Connecticut General reserves the right to require First Allmerica
Financial to provide documentation relating to any Claim payment made
by First Allmerica Financial prior to the payment of any reinsurance.
If Connecticut General requires documentation, it shall make payment of
any reinsurance which it determines to be due and payable to First
Allmerica Financial within thirty (30) calendar days after receiving
the required documentation and will pay one lump sum to First Allmerica
Financial, regardless of the method of settlement under the original
policy.
First Allmerica Financial shall provide written notice to Connecticut
General of any Claim which may impact the reinsurance coverage under
this Agreement within thirty (30) calendar days of receipt of
notification of claim. First Allmerica Financial shall also provide
prompt notice to Connecticut General of all subsequent significant
developments relating to such Claim. Inadvertent oversight or omission
in the provision of such notice shall not relieve Connecticut General
of liability provided First Allmerica Financial informs Connecticut
General of such oversight or omission promptly upon its discovery.
Connecticut General shall have the right to associate with First
Allmerica Financial in the control of the Claim, including
investigation, contest, denial or litigation of such Claim, and upon
exercising such right, First Allmerica Financial and Connecticut
General shall cooperate in every respect in regard to the response to
such Claim. In addition, where Connecticut General bears the majority
of the risk, Connecticut General may elect to assume full control of
the Claim. If Connecticut General elects to assume full control of the
Claim, First Allmerica Financial may pay its share of the applicable
limits of the Policy at the time and be relieved of any further
obligation in respect of the Claim. If First Allmerica Financial does
not make this payment then it will be bound to pay its share of any
payment under the Policy, together with its share of the expenses as
described in Paragraph 5 of ARTICLE 5 and any interest charges that may
be incurred in connection with the Claim.
6
First Allmerica Financial shall notify Connecticut General of its
intention to contest or deny a Claim which may involve the reinsurance
coverage under this Agreement before any notice of contest or denial is
provided to the claimant. Connecticut General shall then have thirty
(30) calendar days within which to advise First Allmerica Financial
whether it agrees that the claim should be contested or denied. If
Connecticut General does not agree that the claim should be contested
or denied, then it shall pay to First Allmerica Financial the full
amount of the reinsurance on the risk reinsured, as set forth in
ARTICLE 4, and Connecticut General shall have no further obligation in
respect to such claim. If Connecticut General agrees that the claim
should be contested or denied, then Connecticut General shall pay its
share of the following in accordance with its share of liability under
the Policy set forth in Paragraphs 2 and 3 of ARTICLE 4:
Expenses incurred by First Allmerica Financial in investigating,
contesting, litigating or otherwise resisting the Claim, excluding
salaries and expenses of employees, officers and agents of First
Allmerica Financial and ordinary overhead expenses of First
Allmerica Financial, and costs of third party administrators
acting on behalf of First Allmerica Financial; and
Interest which is paid by First Allmerica Financial in respect of
the Claim.
If the denial of a Claim results in an award verdict or judgment
against First Allmerica Financial, where Connecticut General has agreed
with the claim denial, and First Allmerica Financial intends to appeal
the verdict or judgment, written notice of the intention to appeal
shall be provided to Connecticut General. Connecticut General shall be
entitled at that time to pay its share of judgement, together with any
expenses and interest as set forth above, and to have no further
obligation in connection with such Claim. If Connecticut General does
not pay its share of the judgment and any expenses and interest due at
that time, Connecticut General shall pay its share of the expenses
associated with the appeal of the judgment or verdict, together with
its share of any additional interest charges that may accrue during the
appeal.
ARTICLE 6
REINSURANCE PREMIUMS AND PREMIUM ACCOUNTING
Prior to the last day of each month First Allmerica Financial shall
submit to Connecticut General a statement for the reinsurance premiums
due Connecticut General. Such premiums shall be based on the rate
schedule set forth on SCHEDULE C and shall include the following:
a. Premiums due on Policies issued since the last billing
statement.
b. Premiums due on renewing Policies with renewal dates from the
prior month.
c. Premium adjustments as further described in this ARTICLE.
7
First Allmerica Financial shall remit amounts due Connecticut General
with the monthly statement.
First Allmerica Financial agrees to provide information to Connecticut
General concerning each Insured Individual that was issued a Policy
subject to this Agreement and under which Connecticut General has
agreed to accept reinsurance. Such information shall be provided not
later than ninety (90) calendar days following the date on which the
policy is issued by First Allmerica Financial and may be on any form
acceptable to Connecticut General; provided, however that the following
information shall be provided on each Insured Individual.
Policy Number
Insured Name (Last, First and Middle Initial)
Date of Birth
Policy Date
Amount of Reinsurance
Amount of the Current Policy
Retention Amount
Plan Code or Plan of Insurance
Submission Basis (Automatic or Facultative)
Termination Date
Sex
Net Amount at Risk
Mortality Assessment
Flat Extra Rating
Smoker Code (Smoker or Non-Smoker)
Original Policy Date
If a discrepancy exists between records maintained by First Allmerica
Financial and Connecticut General, it shall be resolved within ninety
(90) calendar days following written notice delivered by the party
discovering such discrepancy to the other party. If the discrepancy is
not resolved, Connecticut General shall not be liable for any increased
liability attributable to the discrepancy.
First Allmerica Financial shall notify Connecticut General in writing
within ninety (90) calendar days of any adjustment from a change in a
Policy form including termination, reduction or increase in benefits.
Any adjustment shall be made during the next accounting statement.
Connecticut General shall refund to First Allmerica Financial the
unearned portion of the reinsurance premiums, with the exception of the
annual fee, which will not be subject to a pro rata refund, for the
period from the date of death, or change or termination of the policy
to the paid premium date.
8
First Allmerica Financial shall pay insurance premiums on any
reinstated Policy on the same basis that it collected premiums from the
Insured Individual.
Whenever reinsurance hereunder is reinstated, First Allmerica Financial
will pay Connecticut General the proportionate part of the reinsurance
premium, based on the premiums payable for the year of reinstatement,
for the period from the date of reinstatement to the policy anniversary
date next following. Thereafter, reinsurance premiums will be payable
in accordance with this Article.
The monthly payment of reinsurance premiums by First Allmerica
Financial shall be a condition precedent to any liability by
Connecticut General under the terms and conditions of the Agreement. If
the monthly reinsurance premium payment is not paid by First Allmerica
Financial pursuant to this ARTICLE, Connecticut General shall have the
right to terminate reinsurance under this Agreement. If Connecticut
General elects to exercise its right of termination, Connecticut
General shall provide written notice to First Allmerica Financial not
less than thirty (30) calendar days prior to termination. If all
monthly reinsurance premiums in arrears, including any which may fall
due within the thirty (30) calendar day period, are not received by
Connecticut General prior to the expiration date of such period,
Connecticut General shall be relieved of all liability incurred after
the termination date. The reinsurance so terminated may be reinstated
by Connecticut General at any time within sixty (60) calendar days
following such termination if First Allmerica Financial makes payment
of all reinsurance premiums due and payable up to the date of
reinstatement, it shall have no liability incurred between the date of
termination and the reinstatement date.
Connecticut General's right to terminate reinsurance pursuant to this
ARTICLE shall be without prejudice to its right to collect monthly
premiums for the period that reinsurance was in force prior to the
expiration of the thirty (30) calendar day notice. Pursuant to ARTICLE
10 of this Agreement, Connecticut General may set off against amounts
due First Allmerica Financial the amount of monthly reinsurance
premiums in arrears, up to and including the termination date.
First Allmerica Financial shall not force termination under the
provisions of Paragraph 9 above to transfer the reinsured block of
business to another reinsurer.
Premiums for reinsurance under this Agreement shall be computed based
on the rates contained on SCHEDULE C. The renewal rates which are
guaranteed for the life reinsurance are the greater of (a) the rates
contained in SCHEDULE C and (b) the premium calculated on the 1980 CSO
Table with the maximum valuation interest rate permitted for the
underlying contract under the National Association of Insurance
Commissioners' Standard Valuation Law.
9
ARTICLE 7
DAC TAX REGULATION
Connecticut General and First Allmerica Financial hereby make an
election pursuant to Treasury Regulation Section 1.848-2(g)(8). This
election shall be effective for the taxable year ending December 31,
1996 and for all subsequent taxable years for which the Agreement
remains in effect, and it is applicable only with respect to risks
reinsured under this Agreement that are assumed under a "specified
insurance contract" as defined in Treasury Regulation Section
1.848-1(b).
The terms used in this ARTICLE are defined by reference to Regulation
Section 1.848-2 promulgated on December 28, 1992.
The Party with net positive consideration for the Agreement for each
taxable year will capitalize specified policy acquisition expenses with
respect to the Agreement without regard to the general deductions
limitation of Section 848(c)(1) of the Internal Revenue Code of 1986,
as amended.
The parties agree to exchange information pertaining to the amount of
net consideration under the Agreement each year to ensure consistency.
To achieve this First Allmerica Financial shall provide Connecticut
General with a schedule of its calculation of the net considerations
for all reinsurance agreements in force between them for a taxable year
by no later than May 1 of the succeeding year. Connecticut General
shall advise First Allmerica Financial if it disagrees with the amounts
provided by First Allmerica Financial no later than May 31, otherwise
the amounts will be presumed correct and shall be reported by both
parties in their respective tax returns for such tax year. If
Connecticut General contests First Allmerica Financial's calculation of
the net consideration, the Parties agree to act in good faith to
resolve any differences within thirty (30) days of the date Connecticut
General submits its alternative calculation and report the amounts
agreed upon in their respective tax returns for such year.
The Parties shall attach to their respective federal income tax returns
a schedule specifying that the joint election herein has been made for
this Agreement.
Connecticut General represents and warrants that it is subject to
United States taxation under either Subchapter 1 or Subpart F or Part
III of Subchapter N of the Internal Revenue Code of 1986, as amended.
10
ARTICLE 8
RETENTION AND RECAPTURE
First Allmerica Financial shall have the right to increase or decrease
the Retention Unit under this Agreement by providing thirty (30) days
written notice to Connecticut General. Such increase or decrease shall
be applicable only to new Policies issued on or after the effective
date of such increase or decrease.
First Allmerica Financial shall have no right to recapture existing
reinsurance in the event of its increase in Retention Limit.
Whenever a policy reinsured under this Agreement is reduced or
terminated, the reinsurance will be reduced proportionately as of the
date of such reduction or termination. If reinsurance has been affected
in more than one company, the reduction in the reinsurance provided by
Connecticut General will be that proportion of the total amount of the
reduction which the reinsurance provided by Connecticut General is of
the total amount reinsured. Reinsurance will be terminated on a last
in, first out basis and facultative amounts should be reduced first.
Reinsurance under this Agreement will not be affected by reductions or
terminations in other insurance or reinsurance.
ARTICLE 9
EXTRA CONTRACTUAL OBLIGATIONS AND PAYMENTS IN EXCESS OF POLICY LIMITS
In no event will Connecticut General have liability for any payment by
First Allmerica Financial in excess of the limits of the Policy, or any
damages, fees or expenses, or portion thereof, which have been assessed
against First Allmerica Financial by any court on the basis of
negligence, oppression, malice, fraud, fault, wrongdoing, or bad faith
by First Allmerica Financial in connection with any Claim, nor any act
or omission not consistent with the generally accepted practices and
standards of the life insurance industry applicable at the time of such
act or omission, unless Connecticut General shall have received notice
of and concurred with the actions taken or not taken by First Allmerica
Financial which led to the payment or assessments, in which case
Connecticut General shall pay its share of such payment or assessment.
Said notice and concurrence will be deemed to exist where, pursuant to
Article 5, First Allmerica Financial notified Connecticut General of
its intention to contest or deny the claim and Connecticut General
agreed with First Allmerica Financial that the claim should be
contested or denied. Connecticut General's "share" of any expenses,
damages and fees, as described in this ARTICLE, will be the
proportional amount of these items determined by the ratio of
reinsurance held by Connecticut General to the total limit of liability
of the Policy.
11
ARTICLE 10
OFFSET
First Allmerica Financial and Connecticut General shall have, and may
exercise at any time, the right to offset any balance or balances,
whether on account of premiums or on account of losses or otherwise,
due from one party to the other under the terms of this Agreement.
ARTICLE 11
ACCESS TO RECORDS
Connecticut General, or its duly authorized representative, shall have
reasonable access to all books and records of First Allmerica Financial
relating to the terms and conditions of this Agreement and the business
that is the subject matter of this Agreement.
ARTICLE 12
DELAYS, ERRORS OR OMISSIONS
No accidental delays, errors or omissions on the part of First
Allmerica Financial shall relieve Connecticut General of liability
provided such delays, errors or omissions are rectified as soon as
possible after discovery. However, Connecticut General shall not be
liable with respect to any reinsurance which may have been
inadvertently included in the premium computation but which ought not
to have been included by reason of the terms and conditions of this
Agreement. Such inadvertent premium payments shall be returned.
ARTICLE 13
CURRENCY
All retentions and limits hereunder are expressed in United States
dollars and all premium and loss payments shall be made in United
States currency. For the purposes of this Agreement, amounts paid or
received by Connecticut General in any other currency shall be
converted into United States dollars at the rates of exchange on the
date such transactions are entered on the books of Connecticut General.
12
ARTICLE 14
INSOLVENCY
In the event of insolvency of First Allmerica Financial, the
reinsurance under this Agreement shall be payable directly by
Connecticut General to First Allmerica Financial or to its liquidator,
receiver, conservator or statutory successor on the basis of
Connecticut General's liability to First Allmerica Financial without
diminution because of the insolvency of First Allmerica Financial or
because the liquidator, receiver, conservator or statutory successor of
First Allmerica Financial has failed to pay all or a portion of any
Claim. It is agreed, however, that the liquidator, receiver,
conservator or statutory successor of First Allmerica Financial shall
give written notice to Connecticut General of the pendency of a Claim
against First Allmerica Financial within a reasonable time after such
Claim is filed in the receivership, conservation, insolvency or
liquidation proceeding and that during the pendency of such Claim,
Connecticut General may investigate such Claim and interpose, at its
own expense, in the proceeding where such Claim is to be adjudicated,
and defense or defenses that it may deem available to First Allmerica
Financial or its liquidator, receiver, conservator, or statutory
successor. The expense thus incurred by Connecticut General shall be
chargeable, subject to the approval of the Court, against First
Allmerica Financial.
Where two or more reinsurers are involved in the same Claim and a
majority in interest elect to impose defense to such Claim, the expense
shall be apportioned in accordance with the terms of this Agreement as
though such expense had been incurred by First Allmerica Financial.
ARTICLE 15
ARBITRATION
Should a disagreement arise between the two companies regarding the
rights or liabilities of either company under any transaction under
this agreement, the issue will be referred to arbitrators, one to be
chosen by each company from among officers of other life insurance
companies, who are familiar with reinsurance transactions, and a third
to be chosen by the said two arbitrators before entering into
arbitration. An arbitrator may not be a present or former officer,
attorney, or consultant of First Allmerica Financial or Connecticut
General or either's affiliates. If the arbitrators appointed by the two
parties cannot agree on a third person, then either party may apply to
the court, pursuant to Section 52-411 of the General Statutes of the
State of Connecticut, for appointment of a third arbitrator. The
arbitrators will regard this document as an honorable agreement and not
merely as a legal obligation as they will consider practical business
and equity principles. The arbitrators' decision will be final and
binding upon both companies.
12
The place of meeting of the arbitrators will be decided by a majority
vote of the members thereof. All expenses and fees of the arbitrators
will be borne equally by First Allmerica Financial and Connecticut
General (unless the arbitrators decide otherwise).
ARTICLE 16
EFFECTIVE DATE; TERM AND TERMINATION
The Effective Date of this Agreement is March 1, 1996 and shall be
unlimited in duration except as noted below and in ARTICLE 6 above.
This Agreement may be terminated for new business by either party with
ninety (90) calendar days written notice to the other party.
Connecticut General shall have the option of terminating this Agreement
for new business at any time, upon delivery of written notice to First
Allmerica Financial at least thirty (30) calendar days prior to such
termination, upon the happening of any of the following events:
A. First Allmerica Financial's rating by A.M. Best is reduced
from the rating which existed at the time this Agreement
became effective to a Best's Rating of B or less;
B. First Allmerica Financial is placed upon a "watch list" by its
domiciliary state's insurance regulators;
C. The regulatory authorities of any state in which First
Allmerica Financial is authorized to do business revokes First
Allmerica Financial's right to continue conducting business in
that state for financial reasons;
D. An order appointing a receiver, conservator or trustee for
management of First Allmerica Financial is entered or a
proceeding is commenced for rehabilitation, liquidation,
supervision or conservation of First Allmerica Financial;
E. First Allmerica Financial is merged, purchased or in any
manner has new ownership.
Following termination of this Agreement, the obligations and
liabilities of both First Allmerica Financial and Connecticut General
under this Agreement shall remain in full force and effect for each
Policy issued by First Allmerica Financial prior to the termination
date until the termination or cancellation of such Policy, whichever
occurs first.
14
The parties may mutually agree to terminate this Agreement for new
business at any time and cancel the reinsurance hereunder to be
effective on a mutually agreed upon date for a mutually agreed upon
recapture charge.
ARTICLE 17
NOTICES
All notices required to be given hereunder shall be in writing and
shall be deemed delivered if personally delivered, sent via facsimile,
or dispatched by certified or registered mail, return receipt
requested, postage prepaid, or by such other means that provide
documentation of the date of delivery, addressed to the parties
identified below or to such other persons as identified from time to
time by notice by either party:
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. FSA
ASSISTANT VICE PRESIDENT AND ACTUARY
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ASSISTANT DIRECTOR
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
CIGNA REINSURANCE, R-26
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Notice shall be deemed given on the date of delivery as documented by a
record of delivery in accordance with the modes of delivery set forth
above.
ARTICLE 18
INTEGRATION
This Agreement constitutes the entire contract between the parties. Any
amendment or modification hereto shall be in writing, endorsed upon or
attached hereto and signed by both First Allmerica Financial and
Connecticut General.
15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
in duplicate to be effective as of the date specified in ARTICLE 16.
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
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Date: December 16, 1996
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CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By /s/
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Date: November 27, 1996
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SCHEDULE A
Connecticut General Life Insurance Company
Policy forms subject to Reinsurance under this Agreement
POLICY NAME POLICY FORM NUMBER
Group Flexible Premium Variable Life 1029P-94 (Employer)
1029C-94 (Employee)
Individual Flexible Premium Variable Life 1023-93
Note: Same policy form numbers apply for both First Allmerica Financial Life
Insurance Company and Allmerica Financial Life Insurance and Annuity
Company.
RIDER NAME RIDER FORM NUMBER
None
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SCHEDULE B
JUMBO RISK LIMITS
INSURANCE AGE TOTAL LINE
0 - 80 $10,000,000
FIRST ALLMERICA FINANCIAL RETENTION SCHEDULE
LIFE INSURANCE
STANDARD RISKS
SPECIAL CLASSES SPECIAL CLASSES
A THROUGH H AND J, L & P, AND
ISSUE FLAT EXTRAS OF FLAT EXTRAS OF
AGES $20.00 OR LESS $20.01 AND OVER
---- -------------- ---------------
- 0 - $ 500,000 $ 250,000
1 - 60 2,000,000 1,000,000
61 - 70 1,000,000 500,000
71 - 80 500,000 250,000
Notes: (1) The above maximum limits are also the maximums on any one life
for all plans and riders combined.
(2) There is no minimum size reinsurance case.
(3) Any Other Insured Rider or Children's Insurance Rider attached to
any of the policy forms on Schedule A will not be reinsured under
this reinsurance agreement.
(4) Disability Waiver of Premium and Accidental Death Benefits are
Fully Retained by First Allmerica Financial.
Any situation involving Aviation will use a $500,000 retention
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SCHEDULE B (continued)
MAXIMUM LIMITS OF RETENTION OF FIRST ALLMERICA FINANCIAL
A. Twenty percent (20%) of Policy Forms shown on SCHEDULE A for Guaranteed
Issue Only. For Retention purposes, this business is treated
separately.
B. Twenty percent (20%) of Policy Forms shown on SCHEDULE A for any life
fully underwritten above the Guaranteed Issue Limit that does not
involve facultative underwriting. For Retention purposes, this business
is treated separately. Cases of 10 - 24 lives will be considered to
have a Guaranteed Issue limit of zero (0).
C. For Policy Forms shown on Schedule A, any life involving facultative
underwriting for amounts above the Guaranteed Issue Limit will be
retained for twenty percent (20%) of the total facultative amount, but
not to exceed, on a per life basis, First Allmerica Financial's normal
retention schedule, which is shown above. Cases of 10 - 24 lives will
be considered to have a Guaranteed Issue limit of zero (0).
MAXIMUM LIMITS OF REINSURANCE IN CONNECTICUT GENERAL
1. Connecticut General will assume sixty percent (60%) of the lives
covered in A. and B. above and seventy-five percent (75%) of any
facultative amount ceded by First Allmerica Financial from C. above.
This program involves a second reinsurer and, therefore, the percentage
assumed by Connecticut General on the lives covered in C. above may be
greater than seventy-five percent (75%) in cases where the second
reinsurer has reached their full retention.
2. Each group will have the Guaranteed Issue Limit determined at the time
the employer involved accepts First Allmerica Financial's proposal. The
following are the general guidelines:
a. Where the coverage is being replaced:
NUMBER OF GUARANTEED ISSUE
PARTICIPANTS IF ACTIVELY AT WORK
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25 - 49 $ 500,000
50 - 99 1,000,000
100 - 149 1,500,000
150+ 2,000,000
(1) Maximum issue of five (5) times salary
(2) Formula determined amount subject to a $50,000 minimum
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b. Where the coverage is not being replaced:
NUMBER OF GUARANTEED ISSUE
PARTICIPANTS IF ACTIVELY AT WORK
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25 - 49 $ 300,000
50 - 99 500,000
100 - 149 1,000,000
150 - 249 1,500,000
250+ 2,000,000
(1) Maximum issue of five (5) times salary (2) Formula
determined amount subject to a $50,000 minimum
c. Where the coverage is optional (supplemental) to the employee:
GUARANTEED ISSUE
ELIGIBLE IF ACTIVELY AT WORK
LIVES AND DREAD DISEASE QUESTIONS
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25 - 99 $ 150,000
100 - 249 250,000
250 - 499 500,000
500+ 1,000,000
(1) Maximum issue of five (5) times salary
(2) Formula determined amount subject to a $50,000 minimum
(3) Dread Disease questions are as follows:
(a) Has the proposed insured ever had any of the
following conditions?
Heart Disease
Kidney Disorder
Cancer
Diabetes
(b) In the past ten (10) years, has a member of the
medical profession diagnosed or treated the proposed
insured for immune system disorder, including
acquired immune deficiency syndrome (AIDS) or
AIDS-related complex (ARC)?
3. Additional general guidelines are as follows:
a. The Guaranteed Issue Limits noted above may be slightly increased,
if necessary for a few selected individuals. Connecticut General
will be notified of this during First Allmerica Financial's
proposal stage.
b. In determining the number of eligible lives for option plans, any
member of the group earning $30,000 or more will be used. For
example, in a group of three hundred (300) lives of which two
hundred (200) earn less than $30,000 and one hundred (100) earn
$30,000 or more, First Allmerica Financial would look to the
100-249 category for the maximum Guaranteed Issue amount, not to
exceed five (5) times salary.
c. When a tiered case is proposed, First Allmerica will look to the
entire group to determine maximum guaranteed issue amounts. For
example, an employer wants to provide fifty (50) senior partners
with $1,000,000 of coverage and seventy-five (75) junior partners
with $500,000 of coverage. First Allmerica Financial will look at
the 125-participant category in determining the maximum guaranteed
issue amount.
d. If a multiple of salary plan is being replaced on an at work
basis, First Allmerica Financial will offer additional multiples
of salary (not to exceed the lesser of the dollar cap for the
given category or five (5) times salary) on a dread disease basis.
For example, if a three (3) times salary plan is being replaced
and there is no supplemental coverage currently in place, First
Allmerica Financial will offer another two (2) times salary on a
dread disease basis.
e. Coverage will be replaced on an at work basis in carve-out
situations (2a above) if the employee is age 70 or under. In
situations when there are a few employees over age 70, First
Allmerica Financial has the right to offer coverage on an at work
basis if the coverage is $1,500,000 or less. Connecticut General
will be notified of this during First Allmerica Financial's
proposal stage.
f. A nonqualified 401(k)-type plan that is offered to all eligible
employees who want to defer a portion of their income will make up
a distinct group. This group will be categorized as full
participation where coverage is not being replaced.
g. For nonqualified plans, other than group term carve-outs, such as
SERP's, nonqualified 401(k) type plans, or Split Dollar Plans, the
five (5) times salary cap should not necessarily apply. For
example, when the product is used to fund lost benefits, etc.,
there are factors that determine the death benefit other than a
multiple of salary. For example, an employer wants the minimum
death benefit to fund for a cash value equal to X at age 60. The
minimum death benefit may be more than five (5) times the
insured's salary. The five (5) times salary cap should apply only
to group term carve-out and optional plans.
h. Increases up to ten percent (10%) per year on a cumulative basis
are available on an actively at work basis. Annual increases of
greater than ten percent (10%) and less than twenty percent (20%)
will be considered based upon actively at work and dread disease.
Any annual increase of twenty percent (20%) or more in one (1)
year will require full evidence of insurability. (Maximum cap not
to exceed $500,000 of applicable category.)
i. Only fully underwritten amounts over $1,000,000 need to be
submitted facultatively.
j. Cases of ten (10) to twenty-four (24) lives will be fully
underwritten and are considered to have a Guaranteed Issue limit
of zero (0).
SCHEDULE C
Yearly Renewable Term Rate Program
Special First Allmerica Financial Rate Program, Non-Experience Rated Basis
Life Reinsurance: Premium rates are shown on pages 2, 3 and 4 of this schedule.
The total life reinsurance premium on standard cessions and on those substandard
cessions with a percentage rating consists of seventy-five percent (75%) of the
appropriate rate per $1,000 applied to the amount at risk up to attained age 54
and eighty percent (80%) for attained ages 55 and over. Substandard premiums are
direct multiples of the standard life premium. On substandard cessions involving
flat extra premiums payable for more than five years, the reinsurance flat extra
premium is 20% of the reinsured portion of the gross flat extra premium charged
on the original policy in the first year and 75% in renewal years. When the flat
extra premium is payable for five years or less, the reinsurance flat extra
premium is 75% in all years. Reinsurance premiums on substandard risks will
revert to the standard risk basis on the policy anniversary on which the insured
attains age 65 or on the 20th policy anniversary, whichever is later.
Premium Tax Reimbursement: Connecticut General shall reimburse First Allmerica
Financial for Connecticut General's share of premium taxes paid by First
Allmerica Financial to those states and provinces which do not allow reinsurance
premiums paid by First Allmerica Financial to Connecticut General to be deducted
from First Allmerica Financial's taxable premiums. By mutual consent of the two
companies, such tax reimbursements may be taken as a uniform percentage of paid
reinsurance premiums.
SCHEDULE C
Annual Mortality Charges per $1,000
Omitted 4 Pages
AMENDMENT NO. 1
to the Yearly Renewable Term Reinsurance Agreement Effective March 1, 1996
between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
and
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
It is agreed by the two companies that reinsurance on the case known as "Toys R
Us" will be reinsured under this Agreement and will be subject to the provisions
hereof with the following exceptions and modifications:
1. Although the case is only eligible for $1,000,000 of Guaranteed Issue,
$2,000,000 of Guaranteed Issue will be issued.
2. First Allmerica Financial will retain twenty percent (20%) of the first
$1,000,000 of Guaranteed Issue, Connecticut General will reinsure sixty
percent (60%) and the remaining twenty percent (20%) will be reinsured
elsewhere.
3. Connecticut General will not reinsure any excess between $1,000,000 and
$2,000,000 of Guaranteed Issue.
4. Any amounts above the $2,000,000 Guaranteed Issue will be fully
underwritten by First Allmerica Financial and those amounts which
qualify for Automatic Reinsurance will be reinsured in accordance with
the Maximum Limits of Reinsurance for Connecticut General as defined on
Schedule B of this Agreement.
5. Any amounts above the $2,000,000 Guaranteed Issue which does not
qualify for Automatic Reinsurance will be facultatively underwritten by
Connecticut General and, once approved by Connecticut General, twenty
percent (20%) will be retained by First Allmerica Financial, sixty
percent (60%) will be reinsured in Connecticut General and the
remaining twenty percent (20%) will be reinsured elsewhere. The maximum
that can be reinsured elsewhere, including Guaranteed Issue, is
$2,500,000. Where this maximum is reached elsewhere, Connecticut
General will also reinsure the excess over this maximum. Such
Facultative Reinsurance amounts will be limited by First Allmerica
Financial retaining up to its normal retention limit as shown in
Schedule B of this Agreement. Examples of facultative cases are as
follows:
A. No prior insurance with First Allmerica Financial. The application is
for $4,000,000 and let's assume the Guaranteed Issue amount is
$1,000,000. The amount submitted facultatively is $3,000,000. The
amount submitted facultatively will be split twenty percent/sixty
percent/twenty percent (20%/60%/20%) which means $600,000 retained by
First Allmerica Financial and ceded to the other insurer and $1,800,000
to Connecticut General.
B. $1,500,000 of prior insurance with First Allmerica Financial. Under the
same scenario as A. above, First Allmerica Financial would only retain
$300,000 of the $3,000,000 as the $1,500,000 plus First Allmerica
Financial's $200,000 share of the twenty percent (20%) of the
Guaranteed Issue amount of $1,000,000 only leaves $300,000 to reach its
$2,000,000 normal retention. This means Connecticut General will take
seventy-five percent (75%) of the $2,700,000 of the $3,000,000 amount
above the Guaranteed Issue amount and the other reinsurer will take
twenty-five percent (25%) of the $2,700,000.
C. No prior insurance with First Allmerica Financial. The application is
for $16,000,000 and let's assume the Guaranteed Issue amount is
$1,000,000. The amount submitted facultatively is $14,000,000. The
amount submitted facultatively is split as follows:
(1) $1,600,000 as First Allmerica is retaining $200,000 of the
first $1,000,000 and $200,000 of the second $1,000,000 as the
other reinsurer is taking $800,000 of the second $1,000,000 in
addition to $200,000 of the first $1,000,000.
(2) $1,500,000 to the other reinsurer to reach its maximum of
$2,500,000.
(3) $10,900,000 to Connecticut General.
This amendment will be effective for policies issued with policy dates of April
1, 1996 or later.
In witness whereof, this amendment is signed in duplicate on the dates indicated
at the home office of each company.
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
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Date December 16, 1996
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CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Date November 26, 1996
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AMENDMENT NO. 2
To The Yearly Renewable Term Reinsurance Agreement, Effective March 1, 1996
between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
and
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
It is agreed by the two companies to amend the Agreement retroactive to May 1,
1996, as follows:
1. The following paragraphs of ARTICLE 4 will be substituted for the
corresponding paragraphs:
ARTICLE 4
LIABILITY OF CONNECTICUT GENERAL
Connecticut General's liability shall follow that of First Allmerica
Financial in every case, and be subject in all respects to the general
stipulations, terms, clauses, conditions, waivers and modifications of
the Policy forms issued by First Allmerica Financial and identified on
SCHEDULE A.
Connecticut General's liability to First Allmerica Financial for the
amount of reinsurance due and payable shall be based on the net amount
at risk at the time of the Insured Individual's death.
The reinsurance net amount at risk is defined to be the reinsurance
face amount less an appropriate percentage of the policy's total
account value (certificate value) at the end of the prior policy year.
The appropriate percentage is sixty percent (60%) for Connecticut
General. The other reinsurer shall reinsure twenty (20%) percent but
not more than two million ($2,000,000) dollars on any one life.
2. It is further agreed to substitute the following paragraph with the
corresponding paragraph
in SCHEDULE B under MAXIMUM LIMITS OF REINSURANCE IN CONNECTICUT
GENERAL .
1. Connecticut General will assume sixty percent (60%) of the
lives covered in A and B. above and seventy-five percent (75%)
of any facultative amount ceded by First Allmerica Financial
from C. above. This program involves a second reinsurer and,
therefore, the percentage assumed by Connecticut General on
the lives covered in C. above may be greater than seventy-five
percent (75%) in cases where the second reinsurer has reached
their full retention of two million ($2,000,000) dollars on
any one life.
All other terms and conditions of the Agreement will remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be signed
in duplicate on the dates indicated at the home office of each company.
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
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Date May 27, 1997
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CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By /s/
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Date May 20, 1997
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AMENDMENT NO. 3
To The Yearly Renewable Term Reinsurance Agreement, Effective March 1, 1996
between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
and
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
It is agreed by the two companies to amend SCHEDULE B of the Agreement effective
May 1, 1997, as follows:
1. Under MAXIMUM LIMITS OF RETENTION OF FIRST ALLMERICA FINANCIAL, the
following paragraphs will be substituted for the corresponding
paragraphs:
B. Twenty percent (20%) of Policy Forms shown on SCHEDULE A for
any life fully underwritten above the Guaranteed Issue Limit
that does not involve facultative underwriting. For Retention
purposes, this business is treated separately. Cases of 5 - 24
lives will be considered to have a Guaranteed Issue Limit of
zero (0).
C. For Policy Forms shown on Schedule A, any life involving
facultative underwriting for amounts above the Guaranteed
Issue Limit will be retained for twenty percent (20%) of the
total facultative amount, but not to exceed, on a per life
basis, First Allmerica Financial's normal retention schedule,
which is shown above. Cases of 5 - 24 lives will be considered
to have a Guaranteed Issue limit of zero (0).
2. Under MAXIMUM LIMITS OF REINSURANCE IN CONNECTICUT GENERAL, the
following paragraphs will be substituted for the corresponding
paragraphs:
3. j. Cases of five (5) to twenty-four (24) lives will be fully
underwritten and are considered to have a Guaranteed Issue
limit of zero (0).
All other terms and conditions of the Agreement will remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be signed
in duplicate on the dates indicated at the home office of each company.
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
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Date 5/27/97
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CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By /s/
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Date 5/20/97
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AMENDMENT NO. 4
To The Yearly Renewable Term Reinsurance Agreement, Effective March 1, 1996
between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
and
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
It is agreed by the two companies to amend the Agreement effective December 30,
1996, as follows:
1. That reinsurance of the case known as Alabama Power, also known as
Southern Company, hereinafter referred to as "Employer" will be
reinsured under this Agreement and will be subject to the provisions
hereof with the following exceptions and modifications:
A. First Allmerica Financial will retain twenty percent (20%) of
the first $1,000,000 of Guaranteed Issue, Connecticut General
will reinsure sixty percent (60%), and the remaining twenty
percent (20%) will be reinsured elsewhere.
B. Special pricing using blended rates shown in SCHEDULE C,
attached hereto and made a part of this Agreement, shall be
applicable to this Employer.
All other terms and conditions of the Agreement will remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be signed
in duplicate on the dates indicated at the home office of each company.
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
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Date May 27, 1997
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CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By /s/
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Date May 20, 1997
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