AUTOMATIC YEARLY
RENEWABLE TERM
REINSURANCE AGREEMENT
EFFECTIVE ▇▇▇▇▇ ▇, ▇▇▇▇
▇▇▇▇▇ LIFE INSURANCE COMPANY OF NEW JERSEY
(hereinafter referred to as "THE COMPANY")
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
And
SCOTTISH RE (U.S.), INC.
(hereinafter referred to as "THE REINSURER")
▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Table of Contents
1. PARTIES TO THE AGREEMENT............................................................................... 4
2. EFFECTIVE DATE OF THE AGREEMENT........................................................................ 4
3. SCOPE OF THE AGREEMENT................................................................................. 4
4. DURATION OF THE AGREEMENT.............................................................................. 4
5. BASIS OF REINSURANCE................................................................................... 4
6. AUTOMATIC REINSURANCE TERMS............................................................................ 5
a. CONVENTIONAL UNDERWRITING........................................................................ 5
b. RESIDENCE........................................................................................ 5
c. OCCUPATION....................................................................................... 5
d. AUTOMATIC ACCEPTANCE LIMIT....................................................................... 5
e. JUMBO LIMIT...................................................................................... 5
f. MINIMUM CESSION.................................................................................. 5
g. FACULTATIVE QUOTES............................................................................... 5
7. PORTION REINSURED AND RETAINEDUNDER AUTOMATIC REINSURANCE........................................ 5
a. AUTOMATIC PORTION REINSURED...................................................................... 5
b. AUTOMATIC PORTION RETAINED....................................................................... 5
8. AUTOMATIC REINSURANCE NOTICE PROCEDURE........................................................... 5
9. COMMENCEMENT OF REINSURANCE COVERAGE................................................................. 6
a. AUTOMATIC REINSURANCE............................................................................ 6
b. PRE-ISSUE COVERAGE............................................................................... 6
10. REINSURANCE PREMIUM RATES......................................................................... 6
a. LIFE REINSURANCE................................................................................. 6
b. RATES NOT GUARANTEED............................................................................. 6
11. PAYMENT OF REINSURANCE PREMIUMS...................................................................... 6
a. PREMIUM DUE...................................................................................... 6
b. DELAYED PAYMENT.................................................................................. 7
c. FAILURE TO PAY PREMIUMS.......................................................................... 7
d. PREMIUM ADJUSTMENT............................................................................... 7
12. PREMIUM TAX REIMBURSEMENT............................................................................ 7
13. DAC TAX AGREEMENT.................................................................................... 7
14. REPORTS.............................................................................................. 8
15. RESERVES FOR REINSURANCE.............................................................................. 8
16. CLAIMS............................................................................................... 8
a. NOTIFICATION OF CLAIMS........................................................................... 8
b. AMOUNT AND PAYMENT OF BENEFITS................................................................... 8
c. CLAIM SETTLEMENTS................................................................................ 9
d. CLAIM EXPENSES................................................................................... 9
e. EXTRACONTRACTUAL DAMAGES......................................................................... 9
17. MISREPRESENTATION, SUICIDE, AND MISSTATEMENT......................................................... 10
18. POLICY CHANGES....................................................................................... 10
a. NOTICE........................................................................................... 10
b. INCREASES........................................................................................ 10
c. REDUCTION OR TERMINATION......................................................................... 10
d. PLAN CHANGES..................................................................................... 10
e. DEATH BENEFIT OPTION CHANGES..................................................................... 11
f. POLICY SPLIT..................................................................................... 11
g. REDUCED PAID-UP INSURANCE........................................................................ 11
19. RECAPTURE............................................................................................ 11
20. REINSTATEMENTS....................................................................................... 12
a. AUTOMATIC REINSTATEMENT.......................................................................... 12
b. PREMIUM ADJUSTMENT............................................................................... 12
21. ERRORS AND OMISSIONS................................................................................. 12
22. INSOLVENCY........................................................................................... 12
23. ARBITRATION......................................................................................... 13
a. GENERAL.......................................................................................... 13
b. NOTICE............................................................................................13
c. PROCEDURE........................................................................................ 13
d. COSTS............................................................................................ 14
24. GOOD FAITH.......................................................................................... 14
25. REPRESENTATIONS AND WARRANTIES...................................................................... 14
26. CONFIDENTIALITY..................................................................................... 15
27. MEDICAL INFORMATION BUREAU.......................................................................... 15
28. GOVERNING LAW....................................................................................... 15
29. ASSIGNMENT.......................................................................................... 15
30. ACCESS TO RECORDS................................................................................... 16
31. SEVERABILITY........................................................................................ 16
32. OFFSET.............................................................................................. 16
ATTACHMENTS:
SCHEDULE A - REINSURANCE COVERAGE
SCHEDULE B - AUTOMATIC REINSURANCE PREMIUMS
SCHEDULE C - REPORTING INFORMATION
SCHEDULE D - MONTHLY BILLING AND ACCOUNTING SUMMARY
SCHEDULE E - CARRIER FACT SHEET
AUTOMATIC YEARLY RENEWABLE TERM
REINSURANCE AGREEMENT
1. PARTIES TO THE AGREEMENT
This Agreement is solely between THE REINSURER and THE COMPANY, a life insurance company domiciled in the State
of New Jersey. There is no third party beneficiary to this Agreement. Reinsurance under this Agreement will not
create any right or legal relationship between THE REINSURER and any other person, for example, any insured,
policyowner, agent, beneficiary, or assignee. THE COMPANY agrees that it will not make THE REINSURER a party to
any litigation between any such third party and THE COMPANY. THE COMPANY will not use or disclose THE
REINSURER's name with regard to THE COMPANY's agreements or transactions with these third parties unless THE
REINSURER gives prior written approval for the use or disclosure of its name or unless THE COMPANY is compelled
by law to do so.
The terms of this Agreement are binding upon the parties, their representatives, successors, and assigns. The
parties to this Agreement are bound by ongoing and continuing obligations and liabilities until the later of (1)
when this Agreement terminates and (2) when the underlying policies are no longer in force. This Agreement shall
not be bifurcated, partially assigned, or partially assumed.
2. EFFECTIVE DATE OF THE AGREEMENT
This Agreement will be effective as of 12:01 A.M., March 1, 2003. It will cover policies effective on and after
January 1, 2000.
3. SCOPE OF THE AGREEMENT
The text of this Agreement and all Exhibits, Schedules and Amendments are considered to be the entire agreement
between the parties. There are no other understandings or agreements between the parties regarding the policies
reinsured other than as expressed in this Agreement. The parties may make changes or additions to this
Agreement, but they will not be considered to be in effect unless they are made by means of a written amendment
that has been signed and dated by both parties.
4. DURATION OF THE AGREEMENT
The duration of this Agreement will be unlimited. However, either party may terminate the Agreement for new
business at any time by giving the other a 90-day prior written notice. THE REINSURER will continue to accept
new reinsurance during the 90-day period.
In addition, this Agreement may be terminated immediately for the acceptance of new reinsurance by either party
if one of the parties materially breaches this Agreement or becomes insolvent.
Existing reinsurance will not be affected by the termination of this Agreement with respect to new reinsurance.
Existing reinsurance will remain in force until the termination or expiry of the underlying policies on which the
reinsurance is based as long as THE COMPANY continues to pay reinsurance premiums as described in Section 11.
However, existing reinsurance may be terminated in accordance with the recapture provision described in
Section 19.
5. BASIS OF REINSURANCE
Reinsurance under this Agreement will be on the Yearly Renewable Term basis for the net amount at risk on the
portion of each policy that is reinsured as described in Schedule A.
6. AUTOMATIC REINSURANCE TERMS
THE REINSURER agrees to automatically accept contractual risks on the life insurance plans shown in Schedule A,
provided that the issuance of the insurance by THE COMPANY constitutes the transaction of business in a
jurisdiction in which THE COMPANY is properly licensed, subject to the following requirements:
a. CONVENTIONAL UNDERWRITING. Automatic reinsurance applies only to insurance applications underwritten by THE
COMPANY according to THE COMPANY's conventional underwriting and issue practices. Upon request, THE
COMPANY shall provide THE REINSURER with a copy of its current underwriting and issue practices and
guidelines.
In the event of significant changes in underwriting practices in the industry, it may be appropriate for THE
COMPANY or THE REINSURER to request of the other party changes in the underwriting requirements. The party
requesting the change must provide a 120-day advance written notice to the other party before the effective
date of such change. Recognition of reinsurance premium rates related to these changes must be determined
within the 120-day period. If the underwriting change or rate change is unacceptable to either party, this
Agreement may be unilaterally terminated for acceptance of new business with a 90-day written termination
notice to the other party.
b. RESIDENCE. To be eligible for automatic reinsurance, each insured must either be a resident of the United States
or Canada at the time of issue.
c. OCCUPATION. To be eligible for automatic reinsurance, the insured must not be employed in an occupation as shown
in the Occupation Exclusion List in Schedule A.
d. AUTOMATIC ACCEPTANCE LIMIT. For any policy to be reinsured under automatic reinsurance, the face amount shall
not exceed the Automatic Acceptance Limit as shown in Schedule A.
e. JUMBO LIMIT. For any policy to be reinsured under automatic reinsurance, the total amount of insurance in force
and applied for in all companies shall not exceed the Jumbo Limit as shown in Schedule A.
f. MINIMUM CESSION. The minimum amount of reinsurance per cession that THE REINSURER will accept is shown in
Schedule A.
g. FACULTATIVE QUOTES. The risk shall not have been submitted on a facultative basis to THE REINSURER or any other
reinsurer.
7. PORTIONS REINSURED AND RETAINED UNDER AUTOMATIC REINSURANCE
a. AUTOMATIC PORTION REINSURED. For any policy reinsured under automatic reinsurance, the portion reinsured is
shown in Schedule A.
b. AUTOMATIC PORTION RETAINED. THE COMPANY will retain, and not otherwise reinsure, an amount of insurance on each
life equal to its retention shown in Schedule A.
8. AUTOMATIC REINSURANCE NOTICE PROCEDURE
After the policy has been paid for and delivered, THE COMPANY will submit all relevant individual policy
information, as defined in Schedule C, in its next statement to THE REINSURER.
9. COMMENCEMENT OF REINSURANCE COVERAGE
Commencement of THE REINSURER's reinsurance coverage on any policy or pre-issue risk under this Agreement is
described below:
a. AUTOMATIC REINSURANCE. THE REINSURER's reinsurance coverage for any policy that is issued on or after March 1,
2003 that is ceded automatically under this Agreement will begin simultaneously with THE COMPANY's
contractual liability for the policy reinsured. THE REINSURER's reinsurance coverage for any policy that is
issued prior to March 1, 2003 that is ceded automatically under this Agreement, will begin on March 1,
2003. In either instance, no coverage will begin prior to March 1, 2003. Reinsurance coverage for all
policies that are ceded automatically under this Agreement will end simultaneously with THE COMPANY's
contractual liability for the policy reinsured.
In addition, THE REINSURER will be liable for benefits paid under THE COMPANY's conditional receipt or
temporary insurance agreement if all of the conditions for automatic reinsurance coverage under Section 6 of
this Agreement are met. THE REINSURER's liability under THE COMPANY's conditional receipt or temporary
insurance agreement is limited to the lesser of (1) THE REINSURER's reinsured portion of the face amount of
the policy and (2) $100,000.
b. PRE-ISSUE COVERAGE. The pre-issue coverage for benefits paid under THE COMPANY's conditional receipt or
temporary insurance agreement will be effective once all initial medical exams and tests have been
completed. The pre-issue liability applies only once on any given life at one time no matter how many
conditional receipts or temporary insurance agreements are in effect. After a policy has been issued, no
reinsurance benefits are payable under this pre-issue coverage provision.
10. REINSURANCE PREMIUM RATES
a. LIFE REINSURANCE. The reinsurance premiums per $1000 are shown in Schedule B. Reinsurance premiums for renewals
are calculated using (1) the issue age, (2) the duration since issuance and (3) the current underwriting
classification.
b. RATES NOT GUARANTEED. The reinsurance premium rates are not guaranteed. THE REINSURER reserves the right
to change the rates at any time. If THE REINSURER changes the rates, it will give THE COMPANY a 90-day
prior written notice of the change. Any change applies only to reinsurance premiums due after the
expiration of the notice period.
11. PAYMENT OF REINSURANCE PREMIUMS
a. PREMIUM DUE. For each policy reinsured under this Agreement, reinsurance premiums are payable annually in
advance. These premiums are due on the issue date and each subsequent policy anniversary. Within 30 days
after the close of each reporting period, THE COMPANY will send THE REINSURER a statement of account for
that period along with payment of the full balance due. On any payment date, monies payable between THE
REINSURER and THE COMPANY under this Agreement may be netted to determine the payment due. This offset will
apply regardless of the insolvency of either party as described in Section 22. If the statement of account
shows a balance due THE COMPANY, THE REINSURER will remit that amount to THE COMPANY within 30 days of
receipt of the statement of account. All financial transactions under this Agreement will be in United
States dollars. If the reinsurance premium amounts cannot be determined on an exact basis by the dates
described below, such payments will be paid in accordance with a mutually agreed upon formula which will
approximate the actual payments. Adjustments will then be made to reflect actual amounts when such
information is available.
b. DELAYED PAYMENT. If reinsurance premiums are 90 days past due, THE REINSURER may charge interest on the amount
due at an interest rate not to exceed the London Interbank Offer Rate, U.S. Denomination-Fixed Three-month,
(LIBOR), as of when the payment was due.
c. FAILURE TO PAY PREMIUMS. The Payment of reinsurance premiums is a condition precedent to the liability of THE
REINSURER for reinsurance covered under this Agreement. If reinsurance premiums are 90 days past due, for
reasons other than those due to error or omission as defined below in Section 21, the premiums will be
considered in default and THE REINSURER may terminate the reinsurance by providing a 30-day prior written
notice, provided payment is not received within that 30-day period. THE REINSURER will have no further
liability as of the termination date. THE COMPANY will be liable for the prorated reinsurance premiums to
the termination date. THE COMPANY agrees that it will not force termination under the provisions of this
paragraph solely to avoid the recapture requirements or to transfer the block of business reinsured to
another reinsurer.
At the end of this 30-day period, THE REINSURER's liability will automatically terminate for all reinsurance
on which balances remain due and unpaid, including reinsurance on which balances became due and unpaid
during and after the 30-day notice period.
Subject to Section 20, THE COMPANY may reinstate reinsurance terminated for non-payment of balances due at
any time within 60 days following the date of termination. However, THE REINSURER will have no liability
for claims incurred between the termination date and the reinstatement date.
d. PREMIUM ADJUSTMENT. If THE COMPANY overpays a reinsurance premium and THE REINSURER accepts the overpayment, THE
REINSURER's acceptance will not constitute or create a reinsurance liability or increase in any existing
reinsurance liability. Instead, THE REINSURER will be liable to THE COMPANY for a credit in the amount of
the overpayment. If a reinsured policy terminates, THE REINSURER will refund the excess reinsurance
premium. This refund will be on a prorated basis without interest from the date of termination of the
policy to the date to which a reinsurance premium has been paid.
12. PREMIUM TAX REIMBURSEMENT
See Schedule B.
13. DAC TAX AGREEMENT
THE COMPANY and THE REINSURER, herein collectively called the "Parties", or singularly the "Party", hereby enter
into an election under Treasury Regulations Section 1.848-2(g) (8) as promulgated under the Internal Revenue
Code, as found in Title 26 of the United States Code, hereinafter referred to as the Regulations and the IRC.
Both parties agree to make the election contemplated by this Section 13 by timely attaching to their U.S. tax
returns the schedule contemplated by Section 1.848-2(g)(8)(ii) of the Regulations. Furthermore, the parties
agree to the following:
a. For each taxable year under this Agreement, the party with the net positive consideration, as defined in the
Regulations, will capitalize specified policy acquisition expenses with respect to this Agreement without
regard to the general deductions limitation of Section 848 (c) (1);
b. THE COMPANY and THE REINSURER agree to exchange information pertaining to the net consideration under this
Agreement each year to insure consistency or as otherwise required by the Internal Revenue Service;
c. THE COMPANY will submit to THE REINSURER by May 1 of each year its calculation of the net consideration for the
preceding calendar year.
d. THE REINSURER may contest such calculation by providing an alternative calculation to THE COMPANY in writing
within 30 days of THE REINSURER's receipt of THE COMPANY's calculation. If THE REINSURER does not so notify
THE COMPANY, THE REINSURER will report the net consideration as determined by THE COMPANY in THE REINSURER's
tax return for the previous calendar year;
e. If THE REINSURER contests THE COMPANY's calculation of the net consideration, the parties will act in good faith
to reach an agreement as to the correct amount within 30 days of the date THE REINSURER submits its
alternative calculation. If THE COMPANY and THE REINSURER do not reach agreement on the net amount of
consideration within such 30-day period, then the net amount of consideration for such year shall be
determined by an independent accounting firm acceptable to both THE COMPANY and THE REINSURER within 20 days
after the expiration of such 30-day period.
f. THE COMPANY and THE REINSURER agree that this election shall first be effective for the 2003 calendar tax year
and will be effective for all subsequent taxable years for which this Agreement remains in effect.
THE REINSURER and THE COMPANY represent and warrant that they are subject to U.S. taxation under either
Subchapter L of Chapter 1, or Subpart F of Subchapter N of Chapter 1 of the Internal Revenue Code of 1986, as
amended.
14. REPORTS
The reporting period is shown in Schedule A. For each reporting period, THE COMPANY will submit reports to THE
REINSURER with information that is substantially similar to the information displayed in Schedule C.
In addition, the reports will include a billing and accounting summary and a policy exhibit summary similar to
the reports shown in Schedule D.
Within 15 business days after the end of each calendar year, THE COMPANY will submit a reserve credit summary
similar to that shown in Schedule D. THE COMPANY will also submit this reserve credit summary within 10 business
days after the end of each other calendar quarter.
15. RESERVES FOR REINSURANCE
See Schedule A.
16. CLAIMS
a. NOTIFICATION OF CLAIMS. THE COMPANY will notify THE REINSURER as soon as reasonably possible after THE COMPANY
receives a claim for a policy reinsured under this Agreement. After THE COMPANY has received all proper
claim proofs and paid the claim, THE COMPANY will send THE REINSURER an itemized statement of amounts due
THE COMPANY under this Agreement along with all relevant information with respect to the claim including the
claim proofs. However, claim proofs will not be required by THE REINSURER on non-contestable claims if THE
REINSURER's net amount at risk is less than or equal to $100,000 and THE COMPANY has paid the claim in
full. In such cases, THE COMPANY will provide THE REINSURER with the cause of death.
b. AMOUNT AND PAYMENT OF BENEFITS. As soon as THE REINSURER receives proper claim notice and any required proof of
the claim, reinsurance benefits are due and payable to THE COMPANY. THE COMPANY's contractual liability for
claims is binding on THE REINSURER. The maximum benefit payable to THE COMPANY for each reinsured policy is
the amount specifically reinsured with THE REINSURER. In the event that reinsurance benefits are sixty days
past due, THE COMPANY may recapture the reinsurance as described in Section 19. If THE REINSURER intends to
dispute its liability with respect to a claim, THE REINSURER shall promptly notify THE COMPANY in writing of
its intention.
c. CLAIM SETTLEMENTS. THE COMPANY will use its standard claim practices and guidelines in the adjudication of all
claims on policies reinsured under this Agreement. THE COMPANY will advise THE REINSURER of its intention
to contest a claim involving a policy reinsured hereunder and provide THE REINSURER with copies of all
relevant documents. THE REINSURER may choose not to participate in such a contested claim. THE REINSURER
will have 10 business days to communicate to THE COMPANY its decision whether to participate in the
contested claim. If THE REINSURER chooses not to participate, it will fulfill its obligation by immediately
paying to THE COMPANY the full amount of THE REINSURER's liability on the portion of the policy reinsured
under this Agreement, and will be relieved of all future liability on the claim and will not share in any
subsequent reduction on liability. If THE REINSURER chooses to participate, and THE COMPANY's contest
results in a reduction or increase in liability, THE REINSURER will share in any such reduction or increase
in proportion to its share of the risk on the contested policy. THE COMPANY will promptly notify THE
REINSURER of any legal proceedings against THE COMPANY.
d. CLAIM EXPENSES. THE REINSURER will pay its share of any interest paid by THE COMPANY on any claim payment. THE
REINSURER will not reimburse THE COMPANY for the routine expenses and compensation of officers and employees
of the COMPANY. In addition, except as stated in the previous sentence, if THE REINSURER has chosen to
participate in a contest, THE REINSURER will pay its share of the unusual expense of adjudicating
contestable claims, which expense was incurred by THE COMPANY, including investigation expenses and
compensation expenses charged by THE COMPANY's Special Investigation Unit. Such Special Investigation Unit
expenses will not increase more than 5% per year of the current hourly rate ($39 for 2003) of contestable
claim investigation. The term "unusual expense" shall mean all expenses of THE COMPANY associated with the
contestable claim other than normal and customary claim administration expenses that are commonly incurred
with the normal and customary settlement of non-contestable claims. Notwithstanding the above, THE
REINSURER will be liable for any portion of interest or unusual expenses until such time as THE REINSURER
notifies THE COMPANY of its decision not to participate in the contest. THE REINSURER will not be liable
for any portion of interest or unusual expenses for any period of time after THE REINSURER has notified THE
COMPANY of its decision not to participate in a contested, compromised or litigated claim. THE REINSURER
will not reimburse expenses incurred by THE COMPANY in connection with a dispute or contest arising out of
conflicting claims of entitlement to policy proceeds or benefits.
e. EXTRACONTRACTUAL DAMAGES. In no event will THE REINSURER participate in punitive or compensatory damages which
are awarded against THE COMPANY as a result of an act, omission or course of conduct committed by THE
COMPANY in connection with the insurance under this Agreement. THE REINSURER will, however, pay its share
of statutory penalties awarded against THE COMPANY in connection with the insurance reinsured under this
Agreement. The parties recognize that circumstances may arise in which equity would require THE REINSURER,
to the extent permitted by law, to share proportionately in certain assessed damages. Such circumstances
are difficult to define in advance, but generally would be those situations in which THE REINSURER was an
active party and in writing either directed, consented to, or ratified the act, omission, or course of
conduct of THE COMPANY which ultimately results in the assessment of punitive and/or compensatory damages.
In such situations, THE COMPANY and THE REINSURER would share such damages assessed in equitable proportions.
For purposes of the provision, the following definitions will apply:
"Punitive Damages" are those damages awarded as a penalty, the amounts of which are not governed or fixed by
statute;
"Statutory Penalties" are those amounts that are awarded as a penalty, but are fixed in amount by statute;
"Compensatory Damages" are those amounts awarded to compensate for actual damages sustained, and are not
awarded as a penalty, nor fixed in amount by statute.
17. MISREPRESENTATION, SUICIDE, AND MISSTATEMENT
If either a misrepresentation on an application or a death of an insured by suicide results in the return of
policy premiums by THE COMPANY under the policy rather than payment of policy benefits, THE REINSURER will, in
lieu of any other reinsurance benefit, refund all of the reinsurance premiums paid for that policy to THE
COMPANY. If there is an adjustment for a misrepresentation or misstatement of age or sex, a corresponding
adjustment to the reinsurance benefit will be made.
18. POLICY CHANGES
a. NOTICE. If a reinsured policy is changed as described below, a corresponding change will be made in the
reinsurance for that policy. THE COMPANY will notify THE REINSURER of the change in THE COMPANY's next
report as stated in Section 14.
b. INCREASES. If a request for an increase in the amount of insurance is made for a reinsured policy and the
insured meets THE COMPANY's underwriting requirements and THE COMPANY approves the increase under the
policy, then the amount of reinsurance under this Agreement will be adjusted as of the effective date of the
increase, not to exceed the Automatic Acceptance Limits and the Jumbo Limits shown in Schedule A.
If a request for an increase is made for a reinsured policy and the insured meets THE COMPANY's underwriting
requirements and a new policy is issued for the higher amount, then reinsurance under the old policy will
cease as of the effective date of the change, and reinsurance under the new policy will commence as of the
policy date of the new policy.
If a request for an increase in a reinsured policy is granted without the insured meeting THE COMPANY's
underwriting requirements, then reinsurance on the increase will not be allowed.
If a reinsured policy is increased as a result of a conversion from term insurance and the increase is
granted without both insureds meeting THE COMPANY's underwriting requirements, then reinsurance will cease
as of the effective date of the change.
c. REDUCTION OR TERMINATION. If the amount of insurance on a reinsured policy is reduced, the reinsurance will be
reduced proportionately as of the effective date of the reduction.
If a reinsured policy is terminated, the reinsurance will cease on the date of such termination.
d. PLAN CHANGES. If a reinsured policy is changed to another plan of insurance that is not currently reinsured
under this Agreement as defined in Schedule A, then THE COMPANY will recapture in full the coverage
reinsured under this Agreement, and the reinsurance will cease with respect to the policy as of the
effective date of the change.
If a policy that is not reinsured under this Agreement is changed to a plan that is reinsured under this
Agreement as defined in Schedule A and the insured has met THE COMPANY's underwriting requirements for the
plan change, then reinsurance will commence as of the policy date of the new plan.
e. DEATH BENEFIT OPTION CHANGES. If the death benefit option under a reinsured policy is changed and the face
amount of insurance is either increased or decreased, the net amount at risk reinsured under this Agreement
after the change will be the same as before the change.
f. POLICY SPLIT. If a reinsured policy is split into two separate policies as a result of an event specified in the
Divorce and Tax Law Change Rider, then reinsurance will cease as of the effective date of the change.
g. REDUCED PAID-UP INSURANCE. If any policy reinsured under this Agreement is changed to Reduced Paid-Up Insurance,
the net amount at risk reinsured will be adjusted as appropriate and reinsurance will be continued in
accordance with the provisions of the underlying policy. Reinsurance payments for the adjusted policy will
be calculated using (1) the issue age of the original policy, (2) the duration since issuance of the
original policy and (3) the underwriting classification immediately prior to the change to Reduced Paid-Up
Insurance.
19. RECAPTURE
At any time during the term of the Agreement, THE COMPANY may elect to recapture in full the coverage reinsured
under this Agreement following the occurrence of any of the following events:
a. Non-payment of undisputed reinsurance claims that are sixty days past due from THE REINSURER.
b. Material breach of any term and condition of this Agreement if such breach is not cured within a period of at
least sixty calendar days following the delivery of notice of such failure from THE COMPANY to THE REINSURER.
c. THE REINSURER is deemed insolvent as described in Section 22.
d. The occurrence of a "Risk Trigger Event" as defined in Schedule A of this Agreement.
e. A change in premium rates on existing business that is unacceptable to THE COMPANY.
f. A change in ownership or control of THE REINSURER if the change results in the new owner of THE REINSURER not
having a Qualified Rating from at least one of the Major Rating Agencies (shown in the chart in Schedule A,
Section 10), which is at least as high as the Qualified Rating of THE REINSURER.
g. Any representation or warranty made by THE REINSURER under this Agreement proves to be untrue in any material
respect.
In addition, after the twentieth policy anniversary, THE COMPANY may elect to recapture all or an appropriate
portion of the coverage reinsured under this Agreement to reflect increases in the maximum retention limits for
THE COMPANY and all of its affiliates, collectively, subsequent to the date of policy issue. These maximum
retention limits as of the effective date of this Agreement are equal to the amounts shown in the Risk Retention
Limits table shown in Schedule A. The portion of the coverage that may be recaptured would be directly related
to the increase in the limits. To illustrate, if the maximum retention limits are increased by 100%, then the
portion that may be recaptured from all reinsurers of the policies reinsured under this Agreement would be equal
to 100% of the portion of each reinsured policy that is retained by THE COMPANY. Furthermore, the portion that
may be recaptured from THE REINSURER would be determined as THE REINSURER's prorata share of the total portion
reinsured with all reinsurers.
If THE COMPANY elects to recapture the risks ceded to THE REINSURER under this Agreement as stated above, it will
do so by giving written notice to THE REINSURER. Upon the delivery of such notice, all of the risks previously
ceded under each of the policies subject to this Agreement shall be recaptured, effective as of the date
specified in THE COMPANY's notice. If THE COMPANY does not specify in the written notice the date that such
recapture is to be effective, then the recapture shall be effective immediately upon THE REINSURER's receipt of
the notice.
If a policy is recaptured, THE REINSURER will pay THE COMPANY the unearned reinsurance premium within 30 days
following the date of recapture. THE REINSURER shall not be liable, under this Agreement, for any claims
incurred on or after the date of recapture, but shall remain liable for all claims incurred prior to the date of
recapture.
No exercise by THE COMPANY of any recapture right will give rise to any claims for damages, lost profits, or
other form of compensation to THE REINSURER, other than payment of a prorated sum for any amount that might be
due and owing under the reinsurance treaty up to the effective date of the recapture.
20. REINSTATEMENTS
a. AUTOMATIC REINSTATEMENT. If THE COMPANY reinstates a policy that was originally ceded to THE REINSURER as
automatic reinsurance using conventional underwriting practices, THE REINSURER's reinsurance for the
policy shall be reinstated.
b. PREMIUM ADJUSTMENT. Reinsurance premiums for the interval during which the policy was lapsed will be paid
to THE REINSURER on a YRT basis by THE COMPANY.
21. ERRORS AND OMISSIONS
If either THE REINSURER or THE COMPANY fails to comply with any of the terms of this Agreement and it is shown
that the failure was unintentional or the result of a misunderstanding or an administrative oversight on the part
of either party, this Agreement will remain in effect. If the failure to comply changes the operation or effect
of this Agreement, both parties will be put back to the positions they would have occupied if the failure to
comply had not occurred.
THE REINSURER will not, however, be responsible for THE COMPANY's errors in administering the reinsurance, if
such errors arise from gross negligent or deliberate, wrongful acts in administration by THE COMPANY. If either
party discovers that THE COMPANY has failed to cede reinsurance as provided in this Agreement, or failed to
comply with reporting requirements, THE REINURER may require THE COMPANY to audit its records for similar errors
and to take the actions necessary to avoid similar errors in the future.
22. INSOLVENCY
For the purpose of this Agreement, THE COMPANY or THE REINSURER shall be deemed "insolvent" if it does one or
more of the following:
a. A court-appointed receiver, trustee, custodian, conservator, liquidator, government official or similar officer
takes possession of the property or assets of either THE COMPANY or THE REINSURER; or
b. Either THE COMPANY or THE REINSURER is placed in receivership, rehabilitation, liquidation, conservation,
bankruptcy or similar status pursuant to the laws of any state or of the United States; or
c. Either THE COMPANY or THE REINSURER becomes subject to an order to rehabilitate or an order to liquidate as
defined by the insurance code of the jurisdiction of the domicile of THE COMPANY or THE REINSURER, as the
case may be.
In the event that THE COMPANY is deemed insolvent, all reinsurance claims payable hereunder shall be payable by
THE REINSURER on the basis of THE COMPANY's liability under the policies reinsured without diminution because of
the insolvency of THE COMPANY. Such claims shall be payable by THE REINSURER directly to THE COMPANY, its
liquidator or statutory successor. It is understood, however, that in the event of such insolvency, the
liquidator or receiver or statutory successor of THE COMPANY shall give written notice to THE REINSURER of the
pendency of a claim against THE COMPANY on a risk reinsured hereunder within a reasonable time after such claim
is filed in the insolvency proceeding. Such notice shall indicate the policy reinsured and whether the claim
could involve a possible liability on the part of THE REINSURER. Failure to give such notice of the pendency of
a claim shall not excuse the obligation of THE REINSURER unless it is substantially prejudiced thereby. During
the pendency of such claim, THE REINSURER may investigate such claim and interpose, at its own expense, in the
proceeding where such claim is to be adjudicated, any defense or defenses it may deem available to THE COMPANY,
its liquidator, receiver or statutory successor. It is further understood that the expense thus incurred by THE
REINSURER shall be chargeable, subject to court approval, against THE COMPANY as part of the expense of
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.
In the event THE REINSURER is deemed insolvent, THE REINSURER will be bound by any legal directions imposed by
its liquidator, conservator, or statutory successor. However, and if not in conflict with such legal directions,
THE COMPANY shall have the right to cancel this Agreement with respect to occurrences taking place on or after
the date THE REINSURER first evidences insolvency. Such right to cancel shall be exercised by providing THE
REINSURER (or its liquidator, conservator, receiver or statutory successor) with a written notice of THE
COMPANY's intent to recapture ceded business. If THE COMPANY exercises such right to cancel and recapture ceded
business, such election shall be in lieu of any premature recapture fee. Upon such election, THE COMPANY shall
be under no obligation to THE REINSURER, its liquidator, receiver or statutory successor; however, THE REINSURER,
its liquidator, receiver or statutory successor shall be liable for all claims incurred prior to the date of
recapture.
23. ARBITRATION
a. GENERAL. All disputes and differences under this Agreement that cannot be amicably agreed upon by the parties
shall be decided by arbitration. The arbitrators will have the authority to interpret this Agreement and,
in doing so, will consider the customs and practices of the life insurance and life reinsurance industry.
The arbitrators will consider this Agreement as an honorable engagement rather than merely a legal
obligation, and they are relieved of all judicial formalities and may abstain from following the strict
rules of law. The arbitration shall take place within the United States.
b. NOTICE. To initiate arbitration, one of the parties will notify the other, in writing, of its desire to
arbitrate. The notice will state the nature of the dispute and the desired remedies. The party to which
the notice is sent will respond to the notification in writing within 10 days of receipt of the notice. At
that time, the responding party will state any additional dispute it may have regarding the subject of
arbitration.
c. PROCEDURE. Arbitration will be heard before a panel of three disinterested arbitrators. The arbitrators will be
current or former executive officers or employees of life insurance or life reinsurance companies; however,
these companies will not be either party to this Agreement or any of their reinsurers or affiliates. Each
party will appoint one arbitrator. Notice of the appointment of these arbitrators will be given by each
party to the other party within 30 days of the date of mailing of the notification initiating the
arbitration. These two arbitrators will, as soon as possible, but no longer than 45 days after the date of
the mailing of the notification initiating the arbitration, then select the third arbitrator.
Should either party fail to appoint an arbitrator within 30 days after the other party has given written
notice of its arbitrator appointment, the party that has given notice may appoint the second arbitrator.
Should the two initial arbitrators be unable to agree on the choice of a third arbitrator, each arbitrator
will nominate three candidates, two of whom the other will decline, and the decision will be made by drawing
lots on the final selection. If this candidate declines to serve as the arbitrator, then 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. Once chosen, the three arbitrators will have the authority to decide all
substantive and procedural issues by a majority vote. The arbitration hearing will be held on the date
fixed by the arbitrators at a location agreed upon by the parties. In no event will this date be later than
6 months after the appointment of the third arbitrator. The arbitrators will issue a written decision from
which there will be no appeal. Either party may reduce this decision to a judgment before any court that
has jurisdiction of the subject of the arbitration.
d. COSTS. Each party will pay the fees of its own attorneys, the arbitrator appointed by that party, and all other
expenses connected with the presentation of its own case. The two parties will share equal cost of the
third arbitrator, unless the arbitrators decide otherwise.
24. GOOD FAITH
Each party agrees that all matters with respect to this Agreement require its utmost good faith.
25. REPRESENTATIONS AND WARRANTIES
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 agrees to promptly notify the other if it is subsequently
financially impaired. Each party affirms that it has and will continue to disclose all matters material to this
Agreement and each cession. Examples of such matters are a material change in underwriting or issue practices or
philosophy, or a change in each party's ownership or control.
THE COMPANY represents and warrants the following:
a. It is a corporation duly organized, existing and in good standing under the laws of New Jersey.
b. It is empowered under applicable laws and by its charter and bylaws to enter into and perform the duties
contemplated in this Agreement.
c. It has taken all requisite corporate proceedings to authorize it to enter into and perform the duties
contemplated in this Agreement.
d. It has obtained any and all regulatory approvals as may be required for THE COMPANY to cede the Policies covered
hereunder.
e. It will take no unauthorized action that would encourage the policyholders whose policies are reinsured under
this Agreement to surrender, reduce or otherwise terminate their existing coverages either through direct or
indirect acts, including but not limited to, a plan of internal replacement, without the consent of THE
REINSURER.
f. THE COMPANY acknowledges that THE REINSURER is entering into this Agreement in reliance upon these
representations and warranties of THE COMPANY.
THE REINSURER represents and warrants the following:
a. It is a corporation duly organized, existing and in good standing under the laws of Delaware.
b. It is empowered under applicable laws and by its charter and bylaws to enter into and perform the duties
contemplated in this Agreement.
c. It has taken all requisite corporate proceedings to authorize it to enter into and perform the duties
contemplated in this Agreement.
d. It has obtained any and all regulatory approvals as may be required for THE REINSURER to provide the reinsurance
covered hereunder.
e. As part of THE COMPANY's due diligence process, THE REINSURER has provided a completed copy of the Reinsurance
Carrier Fact Sheet, a copy of which is attached in Schedule E. THE REINSURER will, from time to time,
update the information included in The Reinsurance Carrier Fact Sheet. The information included in the
Reinsurance Carrier Fact Sheet is true and accurate as of the date shown on the Fact Sheet.
f. THE REINSURER acknowledges that THE COMPANY is entering into this Agreement in reliance upon these
representations and warranties of THE REINSURER, and THE REINSURER agrees that THE COMPANY's right of
recapture under Section 19 of this Agreement will be triggered if, at any point in the future during the
term of this Agreement, these representations and warranties are no longer true and correct.
26. CONFIDENTIALITY
THE REINSURER and THE COMPANY agree to regard and preserve as confidential all information and material which is
related to the reinsured business and/or customers that may be obtained by the other party from any source as a
result of this Agreement. Neither party will, without first obtaining the other party's prior written consent,
disclose to any person, firm or enterprise, or use for its own benefit or for the benefit of any third party any
Confidential Information or Customer Information. "Confidential Information" includes, but is not limited to any
and all financial data, statistics, programs, research, developments, information relating to insurance and
financial products, planned or existing computer systems architecture and software, data, and information of
either party as well as third party confidential information to which the other party has access. "Customer
Information" includes all information provided by or at the direction of THE COMPANY about a customer of THE
COMPANY or any affiliates of THE COMPANY, including but not limited to name, address, telephone number, email
address, account or policy information, and any list or grouping of customers.
Notwithstanding the foregoing, the provisions of Section 26 shall not apply with respect to disclosing of the
Product, the Specifications and/or Confidential Information which is or becomes publicly known through no
wrongful act of either party; or is received from a third party without similar restriction and without breach of
this Agreement; or is independently developed by either party; or is approved for release by written
authorization of the other party; or is placed in or becomes party of the public domain pursuant to or by reason
of operation of law. The foregoing exceptions do not apply to the disclosure of Customer Information, which may
not be disclosed without THE COMPANY's prior written consent.
27. MEDICAL INFORMATION BUREAU
THE REINSURER is required to strictly adhere to the Medical Information Bureau Rules, and THE COMPANY agrees to
abide by these Rules, as amended from time to time. THE COMPANY will not submit a preliminary notice,
application for reinsurance, or reinsurance cession to THE REINSURER unless THE COMPANY has a signed, currently
required Medical Information Bureau authorization.
28. GOVERNING LAW
This Agreement shall be governed by the laws of the State of New Jersey without giving effect to the principles
of conflicts of laws thereof.
29. ASSIGNMENT
This Agreement is not assignable by either party except by the express written consent of the other.
30. ACCESS TO RECORDS
THE REINSURER and THE COMPANY, or their duly authorized representatives, will have the right to inspect original
papers, records, and all documents relating to the business reinsured under this Agreement including
underwriting, claims processing, and administration. Such access will be provided during regular business hours
at the office of the inspected party.
31. SEVERABILITY
If any provision of this Agreement is determined to be invalid or unenforceable, such determination will not
impair or affect the validity or the enforceability of the remaining provisions of this Agreement.
32. OFFSET
Any debts or credits, in favor of or against either THE REINSURER or THE COMPANY with respect to this Agreement
are deemed mutual debts or credits and may be offset and only the balance will be allowed or paid.
The right of offset will not be affected or diminished because of the insolvency of either party.
In witness of the above, THE COMPANY and THE REINSURER have by their respective officers executed and delivered this
Agreement in duplicate on the dates indicated below, with an effective date of March 1, 2003.
----------------------------------------------------------- --------------------------------------------------------
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY SCOTTISH RE (U.S.), INC.
----------------------------------------------------------- --------------------------------------------------------
----------------------------------------------------------- --------------------------------------------------------
By:_/s/_______________________________ By:_/s/_____________________________
----------------------------------------------------------- --------------------------------------------------------
----------------------------------------------------------- --------------------------------------------------------
Title:_______________________________ Title:_____________________________
----------------------------------------------------------- --------------------------------------------------------
----------------------------------------------------------- --------------------------------------------------------
Date:_______________________________ Date:_____________________________
----------------------------------------------------------- --------------------------------------------------------
----------------------------------------------------------- --------------------------------------------------------
By:_/s/_______________________________ By:_/s/_____________________________
----------------------------------------------------------- --------------------------------------------------------
----------------------------------------------------------- --------------------------------------------------------
Title:_______________________________ Title:_____________________________
----------------------------------------------------------- --------------------------------------------------------
----------------------------------------------------------- --------------------------------------------------------
Date:_______________________________ Date:_____________________________
----------------------------------------------------------- --------------------------------------------------------
SCHEDULE A
REINSURANCE COVERAGE
---------------------------------------------------------------------------------------------------------------------------
1. PLANS REINSURED:
This Agreement covers the following plans:
o SVUL II Policies issued by THE COMPANY (Form Number SVUL-2000 and all state variations), including in force
policies with issue dates back to January 1, 2000.
2. AUTOMATIC PORTION REINSURED:
US/Canadian Residents
THE REINSURER will automatically reinsure an amount equal to 10% of the net amount at risk related to the face
amount of insurance up to the First Layer of Coverage amounts shown in Schedule A, Section 4.B, below.
The net amount of risk is determined as of the issue date and each subsequent policy anniversary and is defined
as the death benefit minus the contract fund.
3. AUTOMATIC RETENTION LIMIT:
THE COMPANY will retain at least 10% of the net amount at risk related to the face amount of insurance of each
policy in the First Layer of Coverage, as defined in Schedule A, Section 4B. THE COMPANY may cede up to 80% of
the net amount at risk related to the face amount of insurance of each policy on a first-dollar quota share basis
to other reinsurers. In addition, THE COMPANY will retain 100% of the net amount at risk related to the face
amount of insurance of each policy, in excess of the First Layer of Coverage.
4. AUTOMATIC ACCEPTANCE LIMIT:
A. For any policy to be reinsured under automatic reinsurance, the face amount will not exceed the Automatic
Issue Limits shown in the following tables:
US/Canadian Residents - No Foreign Travel - Non-Smoker
====================================================================================
Rating Class of Higher Rated Life
=========================== ====================================================================================
=========================== ========================= ============================= ============================
Issue Age of Older No Substandard Rating Class A - D Class E - H
Insured
--------------------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
Ages: 18 - 65 $ 70,000,000 $ 70,000,000 $ 53,000,000
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
66 - 70 $ 63,000,000 $ 50,000,000 $ 30,000,000
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
71 - 75 $ 41,000,000 $ 34,000,000 $ 20,500,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
76 - 77 $ 25,500,000 $ 20,500,000 $ 14,000,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
78 - 80 $ 25,500,000 $ 20,500,000 $ 14,000,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
81 - 85 $ 13,500,000 $ 11,500,000 $ 6,750,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
86 - 90 $ 6,750,000 $ 5,750,000 $ 3,600,000
=========== =============== ========================= ============================= ============================
---------------------------------------------------------------------------------------------------------------------------
US/Canadian Residents - No Foreign Travel - One Smoker
====================================================================================
Rating Class of Higher Rated Life
=========================== ------------------------------------------------------------------------------------
=========================== ========================= ============================= ============================
Issue Age of Older No Substandard Rating Class A - D Class E - H
Insured
--------------------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
Ages: 18 - 65 $ 70,000,000 $ 60,000,000 $ 45,000,000
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
66 - 70 $ 53,000,000 $ 48,000,000 $ 27,000,000
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
71 - 75 $ 36,000,000 $ 33,000,000 $ 20,500,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
76 - 77 $ 23,500,000 $ 20,500,000 $ 14,000,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
78 - 80 $ 23,500,000 $ 20,500,000 $ 14,000,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
81 - 85 $ 12,500,000 $ 10,500,000 $ 6,750,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
86 - 90 $ 5,750,000 $ 4,750,000 $ 2,600,000
=========== =============== ========================= ============================= ============================
US/Canadian Residents - No Foreign Travel - Two Smokers
====================================================================================
Rating Class of Higher Rated Life
=========================== ------------------------------------------------------------------------------------
=========================== ========================= ============================= ============================
Issue Age of Older No Substandard Rating Class A - D Class E - H
Insured
--------------------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
Ages: 18 - 65 $ 60,000,000 $ 55,000,000 $ 43,000,000
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
66 - 70 $ 48,000,000 $ 43,000,000 $ 26,000,000
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
71 - 75 $ 32,000,000 $ 31,000,000 $ 20,500,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
76 - 77 $ 20,500,000 $ 20,500,000 $ 13,000,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
78 - 80 $ 20,500,000 $ 20,500,000 $ 13,000,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
81 - 85 $ 10,500,000 $ 9,500,000 $ 5,750,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
86 - 90 $ 4,750,000 $ 3,750,000 $ 2,600,000
=========== =============== ========================= ============================= ============================
If both lives exceed Class H, there will be no automatic issue amount.
If one life is ratable over Class H, then the following individual policy limits for the lesser impaired life's
mortality classification apply:
US/Canadian Residents - No Foreign Travel - Non-Smoker
====================================================================================
Rating Class of Less Impaired Insured
=========================== ====================================================================================
=========================== ========================= ============================= ============================
Issue Age of Older No Substandard Rating Class A - D Class E - H
Insured
--------------------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
Ages: 18 - 65 $ 41,000,000 $ 41,000,000 $ 34,000,000
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
66 - 70 $ 29,000,000 $ 29,000,000 $ 23,500,000
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
71 - 75 $ 19,500,000 $ 19,500,000 $ 15,000,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
76 - 77 $ 12,000,000 $ 12,000,000 $ 8,500,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
78 - 80 $ 8,500,000 $ 8,500,000 $ 6,750,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
81 - 85 $ 4,750,000 $ 4,750,000 None
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
86 - 90 $ 2,700,000 $ 2,700,000 None
=========== =============== ========================= ============================= ============================
US/Canadian Residents - No Foreign Travel - One Smoker
====================================================================================
Rating Class of Less Impaired Insured
=========================== ------------------------------------------------------------------------------------
=========================== ========================= ============================= ============================
Issue Age of Older No Substandard Rating Class A - D Class E - H
Insured
--------------------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
Ages: 18 - 65 $ 35,000,000 $ 35,000,000 $ 28,000,000
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
66 - 70 $ 26,000,000 $ 26,000,000 $ 20,500,000
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
71 - 75 $ 19,500,000 $ 19,500,000 $ 13,000,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
76 - 77 $ 11,000,000 $ 11,000,000 $ 7,500,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
78 - 80 $ 7,500,000 $ 7,500,000 $ 5,750,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
81 - 85 $ 4,750,000 $ 4,750,000 None
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
86 - 90 $ 1,700,000 $ 1,700,000 None
=========== =============== ========================= ============================= ============================
US/Canadian Residents - No Foreign Travel - Two Smokers
====================================================================================
Rating Class of Less Impaired Insured
=========================== ------------------------------------------------------------------------------------
=========================== ========================= ============================= ============================
Issue Age of Older No Substandard Rating Class A - D Class E - H
Insured
--------------------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
Ages: 18 - 65 $ 31,000,000 $ 31,000,000 $ 24,000,000
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
66 - 70 $ 25,000,000 $ 25,000,000 $ 18,500,000
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
71 - 75 $ 19,000,000 $ 19,000,000 $ 12,000,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
76 - 77 $ 11,000,000 $ 11,000,000 $ 7,500,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
78 - 80 $ 7,500,000 $ 7,500,000 $ 5,750,000
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
81 - 85 $ 4,750,000 $ 4,750,000 None
----------- --------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
86 - 90 $ 1,700,000 $ 1,700,000 None
=========== =============== ========================= ============================= ============================
US/Canadian Residents - Foreign Travel
====================================================================================
Rating Class of Higher Rated Life
=========================== ------------------------------------------------------------------------------------
=========================== ========================= ============================= ============================
Issue Age of Older Preferred Best - Class C Class D - E Greater than Class E
Insured
--------------------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
Ages: 18 - 65 $ 10,000,000 $ 7,500,000 None
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
66 - 70 $ 7,500,000 $ 5,000,000 None
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
▇▇ - ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
----------- --------------- ------------------------- ----------------------------- ----------------------------
B. For any policy to be reinsured under automatic reinsurance, the amounts subject to reinsurance are the First
Layer of Coverage amounts shown in the following tables:
US/Canadian Residents - No Foreign Travel
=======================================================
Rating Class of Higher Rated Life
=========================== -------------------------------------------------------
=========================== ========================= =============================
Issue Age of Older Pref. Best - Class D Class E - H
Insured
--------------------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
Ages: 18 - 65 $ 50,000,000 $ 40,000,000
--------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
66 - 70 $ 40,000,000 $ 20,000,000
--------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
71 - 75 $ 30,000,000 $ 15,000,000
----------- --------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
76 - 80 $ 15,000,000 $ 10,000,000
----------- --------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
81 - 85 $ 5,000,000 $ 2,500,000
----------- --------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
86 - 90 $ 2,500,000 $ 1,000,000
=========== =============== ========================= =============================
If both lives exceed Class H, there will be no automatic acceptance amount.
If one life is ratable over Class H, then the following individual policy limits for the lesser impaired life's
mortality classification apply:
=======================================================
Rating Class of Lesser Impaired Insured
=========================== -------------------------------------------------------
=========================== ========================= =============================
Issue Age of Lesser Pref. Best - Class D Class E - H
Impaired Life
--------------------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
Ages: 18 - 65 $ 30,000,000 $ 20,000,000
--------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
66 - 70 $ 25,000,000 $ 15,000,000
--------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
71 - 75 $ 20,000,000 $ 10,000,000
----------- --------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
76 - 77 $ 10,000,000 $ 5,000,000
----------- --------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
78 - 80 $ 5,000,000 $ 2,500,000
----------- --------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
81 - 85 $ 2,500,000 None
----------- --------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
86 - 90 $ 1,000,000 None
=========== =============== ========================= =============================
US/Canadian Residents - Foreign Travel
====================================================================================
Rating Class of Higher Rated Life
=========================== ------------------------------------------------------------------------------------
=========================== ========================= ============================= ============================
Issue Age of Older Preferred Best - Class C Class D - E Greater than Class E
Insured
--------------------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
Ages: 18 - 65 $ 10,000,000 $ 7,500,000 None
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
66 - 70 $ 7,500,000 $ 5,000,000 None
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
▇▇ - ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
----------- --------------- ------------------------- ----------------------------- ----------------------------
C. For any policy to be reinsured under automatic reinsurance, the amounts reinsured with THE REINSURER on that
life will not exceed the amounts in the following tables:
US/Canadian Residents - No Foreign Travel
=======================================================
Rating Class of Higher Rated Life
=========================== -------------------------------------------------------
=========================== ========================= =============================
Issue Age of Older Pref. Best - Class D Class E - H
Insured
--------------------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
Ages: 18 - 65 $ 5,000,000 $ 4,000,000
--------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
66 - 70 $ 4,000,000 $ 2,000,000
--------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
71 - 75 $ 3,000,000 $ 1,500,000
----------- --------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
76 - 80 $ 1,500,000 $ 1,000,000
----------- --------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
81 - 85 $ 500,000 $ 250,000
----------- --------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
86 - 90 $ 250,000 None *
=========== =============== ========================= =============================
*The percentage ceded on the higher rated life for ages 86 - 90 on rating classes E - H is 0%.
If both lives exceed Class H, there will be no automatic acceptance amount.
If one life is ratable over Class H, then the following individual policy limits for the lesser impaired life's
mortality classification apply:
=======================================================
Rating Class of Less Impaired Insured
=========================== -------------------------------------------------------
=========================== ========================= =============================
Issue Age of Lesser Pref. Best - Class D Class E - H
Impaired Life
--------------------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
Ages: 18 - 65 $ 3,000,000 $ 2,000,000
--------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
66 - 70 $ 2,500,000 $ 1,500,000
--------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
71 - 75 $ 2,000,000 $ 1,000,000
----------- --------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
76 - 77 $ 1,000,000 $ 500,000
----------- --------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
78 - 80 $ 500,000 $ 250,000
----------- --------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
81 - 85 $ 250,000 None
----------- --------------- ------------------------- -----------------------------
----------- --------------- ------------------------- -----------------------------
86 - 90 $ 100,000 None
=========== =============== ========================= =============================
US/Canadian Residents - Foreign Travel
====================================================================================
Rating Class of Higher Rated Life
=========================== ------------------------------------------------------------------------------------
=========================== ========================= ============================= ============================
Issue Age of Older Preferred Best - Class C Class D - E Greater than Class E
Insured
--------------------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
Ages: 18 - 65 $ 1,000,000 $ 750,000 None
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
66 - 70 $ 750,000 $ 500,000 None
--------------- ------------------------- ----------------------------- ----------------------------
----------- --------------- ------------------------- ----------------------------- ----------------------------
▇▇ - ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
----------- --------------- ------------------------- ----------------------------- ----------------------------
5. JUMBO LIMIT:
For any policy to be reinsured under automatic reinsurance, the total amount of insurance in force and applied
for in all companies will not exceed the following amounts:
US/Canadian Residents- No Foreign Travel
===================== ======================== =============== ====================
No Substandard Rating Class A - E Greater than Class
E
===================== ======================== =============== ====================
=========== ========= ======================== =============== ====================
Ages: 18 - 90 $75,000,000 $75,000,000 $75,000,000
=========== ========= ======================== =============== ====================
Note: When a policy is reinsured under automatic reinsurance and the total amount in force and applied for in
all companies exceeds $50,000,000, THE REINSURER must be notified.
US/Canadian Residents - Foreign Travel
===================== ======================== =============== ====================
No Substandard Rating Class A - E Greater than Class
E
===================== ======================== =============== ====================
=========== ========= ======================== =============== ====================
Ages: 18 - 75 $35,000,000 $35,000,000 None
=========== ========= ======================== =============== ====================
=========== ========= ======================== =============== ====================
▇▇ - ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
=========== ========= ======================== =============== ====================
6. OCCUPATION EXCLUSION LIST FOR AUTOMATIC REINSURANCE
o Entertainers
o High Profile Athletes
7. REPORTING PERIOD:
The reporting period will be monthly.
8. MINIMUM CESSION:
The minimum amount per cession that can be reinsured with THE REINSURER is $25,000.
9. RESERVES FOR REINSURANCE:
The reinsurance reserve is the one-year term reserve on the portion of each policy reinsured. This reserve will
be calculated using 1980 CSO ultimate mortality and 4 ½ % interest.
10. RISK TRIGGER EVENT:
A "Risk Trigger Event" means that any of the following has occurred:
(1) THE REINSURER's Adjusted Capital, at any point in the future, falls to a dollar amount that is more than fifteen
percent (15%) lower than the dollar amount of Adjusted Capital held by THE REINSURER as of the date of its
financial statements most recently published prior to the date of this Agreement;
(2) THE REINSURER does not maintain its status as a licensed or accredited reinsurer under the applicable laws and
regulations of New Jersey and has not provided THE COMPANY with alternative security (such as a trust or
letter of credit) that satisfies THE COMPANY's specific requirements and the current, applicable legal and
regulatory requirements in New Jersey necessary to entitle THE COMPANY to take the maximum permissible
credit on its statutory financial statements.
(3) THE REINSURER no longer has in effect a Qualified Rating (as defined below) from at least one of the Major Rating
Agencies shown in the chart below, which is at least as high as the minimum levels shown:
------------------------------------ -----------------------------------
Major Rating Agency Minimum Applicable Rating:
==================================== ===================================
------------------------------------ -----------------------------------
▇▇▇▇▇ Investor Services, Inc. A rating of "Baa2" or higher.
------------------------------------ -----------------------------------
------------------------------------ -----------------------------------
Standard & Poors Corporation A rating of "BBB" or higher.
------------------------------------ -----------------------------------
Definitions:
"Adjusted Capital" shall mean the following, as applicable: (i) statutory surplus for Reinsurers that report on a
U.S. statutory reporting basis; (ii) GAAP equity minus deferred acquisition costs (DAC) for Reinsurers that
report on a U.S. GAAP or Canadian GAAP basis; and (iii) "capital and surplus" for Reinsurers that report on any
other accounting basis (including the International Accounting Standards (IAS) reporting basis).
"Qualified Rating" shall mean the issuance of an insurance company long-term, financial strength rating from one
or more of the Major Rating Agencies that remains in effect, that has not been suspended or withdrawn, and that
was issued as a result of the full interactive ratings review process (including interviews with senior
management) by the Major Rating Agency in question. (Use of the modifiers "Q" or "Pi" by S&P or any similar
indication that a rating is a "qualified" or "limited" rating by any other of the Major Rating Agencies means
that the rating does not constitute a "Qualified Rating" for purposes of this Agreement.)
a. If at any point in the future during the term of this Agreement, either THE REINSURER's Adjusted Capital falls
below the amount specified in clause (1) above, or THE REINSURER no longer has in effect a Qualified
Rating as specified in clause (3) above, then THE COMPANY's right of recapture will be triggered unless
THE REINSURER elects to, and does, provide, on a timely basis, security in the form of a Trust, for the
benefit of THE COMPANY, that meets the requirements set forth in the 'Trust Agreement Provisions' in the
next Section of this Schedule A. The Trustee of the Trust shall be a "qualified financial institution" as
defined in NJSA 17:51B-1. Definitions.
11. TRUST AGREEMENT PROVISIONS:
b. Under the circumstances described in the last paragraph of Section 10 of this Schedule A, THE REINSURER may enter
into, and maintain during the entire term of this Agreement, a Trust Agreement securing the Credit Amount,
so as to avoid triggering THE COMPANY's right of recapture under Section 19. If THE REINSURER enters into
a Trust Agreement to establish a trust account securing the Credit Amount, the Trust Agreement must
satisfy the requirements of subsections b., c., d., e., f., g., h. and i. below. The Trustee of the Trust
shall be a "qualified financial institution" as defined in NJSA 17:51B-1. Definitions.
c. Fifteen days prior to the end of each calendar quarter or at any other time , THE COMPANY will determine and
communicate the Credit Amount to THE REINSURER The Credit Amount shall be an amount at least equal to
the deduction for reinsurance ceded from THE COMPANY's liabilities for policies ceded under this
Agreement. Such amount shall include, but not be limited to, amounts for policy reserves, reserves for
claims and losses incurred (including losses incurred but not reported), loss adjustment expenses, and
unearned premiums. THE COMPANY will communicate this amount to THE REINSURER in order to enable THE
REINSURER to ensure that the Trust is maintained with a sufficient balance. All costs and expenses of
maintaining the trust will be borne by THE REINSURER and will not be paid by any of the assets held in the
Trust.
d. THE REINSURER will deposit into the trust on or before a date agreed to by the parties Assets that cause the
market value of the trust to meet or exceed 103% of the most recently communicated Credit Amount
immediately prior to the date for the deposit of Assets into the Trust. In addition, as provided by the
Trust Agreement, THE REINSURER shall make future additional deposits into the Trust so as to cause the
market value of the trust Assets at all times to meet or exceed 103% of the Credit Amount. THE REINSURER
shall make such deposit(s) within fifteen days of receiving notification of the Credit Amount.
e. The assets deposited in the trust account shall be valued according to their current fair market value, and shall
consist of only those instruments detailed within the Trust Agreement, provided that such investments are
issued by an institution that is not a parent, subsidiary, or an affiliate of either THE COMPANY or THE
REINSURER. Within 3 days of a request from THE COMPANY, THE REINSURER shall provide a report setting
forth the current fair market value of the trust assets.
f. THE REINSURER shall, prior to depositing assets with the Trustee, execute assignments, endorsements in blank, or
transfer legal title to the Trustee of all shares, obligations or any other assets requiring assignments,
in order that THE COMPANY, may, whenever necessary, negotiate any such assets without consent or signature
from THE REINSURER or any other entity.
g. All settlements of account between THE COMPANY and THE REINSURER shall be made in cash or its equivalent.
h. THE REINSURER and THE COMPANY agree that the assets in the trust account may be drawn upon at any time,
notwithstanding any other provisions in this Agreement, and be utilized and applied by THE COMPANY or any
successor by operation of law of THE COMPANY including, without limitation, any liquidator, rehabilitator,
receiver or conservator of THE COMPANY, for the following purposes:
i. To reimburse THE COMPANY for THE REINSURER's share of premiums returned to the owners of policies reinsured under
this Agreement on account of cancellation of such policies;
ii. To reimburse THE COMPANY for THE REINSURER's share of benefits or losses paid by THE COMPANY under the terms and
provisions of the policies reinsured under this Agreement;
iii. To fund an account with THE COMPANY in an amount at least equal to the deduction for reinsurance ceded from THE
COMPANY's liabilities for policies ceded under this Agreement. Such amount shall include, but not be
limited to, amounts for policy reserves, reserves for claims and losses incurred (including losses
incurred but not reported), loss adjustment expenses, and unearned premiums;
iv. To pay any other amounts THE COMPANY claims are due under this Agreement.
All of the foregoing will be applied without diminution because of insolvency on the part of THE COMPANY or
THE REINSURER or the inability of THE COMPANY to pay all or any part of a claim.
THE COMPANY agrees to return to THE REINSURER any amounts withdrawn which are in excess of the actual
amounts required for i, ii and iii above, or in the case of iv, such amounts that are in excess of the
amounts ultimately determined to be due under this Agreement. In addition, THE COMPANY shall make interest
payments to THE REINSURER on amounts withdrawn pursuant to item (iii) above, to the extent such interest is
not needed to be retained to maintain the account at the Credit Amount. The rate of interest charged will be
equal to MOODY's 30-Day AAA Rate, but no greater than the Prime Rate of interest as published in Federal
Reserve Bulletin. The ▇▇▇▇▇'▇ 30-Day AAA Rate and the Prime Rate shall be determined on the first business
day of each month in which interest is payable.
Following the receipt of a new Credit Amount, but prior to the start of the new calendar quarter, THE
REINSURER shall have the right to seek approval from THE COMPANY to withdraw from the trust account a
portion of the assets contained therein and to transfer such assets to THE REINSURER, provided that after
such withdrawal and transfer, the market value of the trust account is no less than one hundred and three
percent (103%) of the Credit Amount most recently communicated by THE COMPANY to THE REINSURER.
i. The Trust shall remain in effect until the later of the termination of this Reinsurance Agreement or the full
satisfaction and discharge of any and all liabilities and obligations owed by THE REINSURER to THE COMPANY,
unless THE REINSURER and THE COMPANY mutually agree in writing to terminate the Trust at an earlier date.
Notwithstanding any provision contained in the Trust Agreement, THE REINSURER shall not seek to terminate
the trust unless it has written permission from THE COMPANY. THE COMPANY shall not arbitrarily or
unreasonably withhold such permission if another form of collateral acceptable to THE COMPANY is provided by
THE REINSURER for the Credit Amount.
j. Prior to THE REINSURER's establishing or funding the Trust, THE COMPANY shall submit the Trust Agreement to
applicable state regulatory authorities for approval, if any such approvals are required by state insurance
law or regulations. THE COMPANY shall promptly inform THE REINSURER of such approval or of any changes to
such documents required by regulatory authorities.
12. RISK RETENTION LIMITS:
The total amount of insurance retained on both lives for THE COMPANY and its affiliates will not exceed the risk
retention limits in the following table.
No Smokers
============================================================================
Highest Rating Class
================== ============================================================================
================== ================ =================== ================== ====================
Oldest Issue Age No Substandard Class A - D Class E - H Greater than Class
of Insured Rating H
------------------ ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
Ages: 18 - 65 $50,000,000 $35,000,000 $25,000,000 $20,000,000
-------- ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
66 - 70 $35,000,000 $22,000,000 $16,000,000 $13,000,000
--------- -------- ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
71 - 75 $20,000,000 $13,000,000 $10,000,000 $ 8,000,000
--------- -------- ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
76 - 80 $15,000,000 $10,000,000 $ 7,000,000 $ 5,000,000
--------- -------- ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
81 - 85 $10,000,000 $ 8,000,000 $ 5,000,000 $ 3,000,000
--------- -------- ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
86 - 90 $ 5,000,000 $ 4,000,000 $ 3,000,000 $ 2,000,000
========= ======== ================ =================== ================== ====================
One Smoker
============================================================================
Highest Rating Class
================== ============================================================================
================== ================ =================== ================== ====================
Oldest Issue Age No Substandard Class A - D Class E - H Greater than Class
of Insured Rating H
------------------ ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
Ages: 18 - 65 $35,000,000 $25,000,000 $17,000,000 $14,000,000
-------- ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
66 - 70 $25,000,000 $20,000,000 $13,000,000 $10,000,000
--------- -------- ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
71 - 75 $15,000,000 $12,000,000 $10,000,000 $ 6,000,000
--------- -------- ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
76 - 80 $13,000,000 $10,000,000 $ 7,000,000 $ 4,000,000
--------- -------- ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
81 - 85 $ 9,000,000 $ 7,000,000 $ 5,000,000 $ 3,000,000
--------- -------- ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
86 - 90 $ 4,000,000 $ 3,000,000 $ 2,000,000 $ 2,000,000
========= ======== ================ =================== ================== ====================
Two Smokers
============================================================================
Highest Rating Class
================== ============================================================================
================== ================ =================== ================== ====================
Oldest Issue Age No Substandard Class A - D Class E - H Greater than Class
of Insured Rating H
------------------ ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
Ages: 18 - 65 $25,000,000 $20,000,000 $15,000,000 $10,000,000
-------- ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
66 - 70 $20,000,000 $15,000,000 $12,000,000 $ 8,000,000
--------- -------- ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
71 - 75 $11,000,000 $10,000,000 $10,000,000 $ 5,000,000
--------- -------- ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
76 - 80 $10,000,000 $10,000,000 $ 6,000,000 $ 4,000,000
--------- -------- ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
81 - 85 $ 7,000,000 $ 6,000,000 $ 4,000,000 $ 3,000,000
--------- -------- ---------------- ------------------- ------------------ --------------------
--------- -------- ---------------- ------------------- ------------------ --------------------
86 - 90 $ 3,000,000 $ 2,000,000 $ 2,000,000 $ 2,000,000
========= ======== ================ =================== ================== ====================
SCHEDULE B
AUTOMATIC REINSURANCE PREMIUMS
---------------------------------------------------------------------------------------------------------------------------
1. STANDARD ANNUAL REINSURANCE PREMIUMS
The standard annual reinsurance premiums per $1,000 of net amount at risk for (1) all cessions of automatic
reinsurance will be the frasierized values of the product of the single life rates in the table attached to this
Schedule B and the following factors:
==================== =============================================
Rating Class Factor
-------------------- ---------------------------------------------
1 .315
-------------------- ---------------------------------------------
-------------------- ---------------------------------------------
2 .385
-------------------- ---------------------------------------------
-------------------- ---------------------------------------------
3 .520
-------------------- ---------------------------------------------
-------------------- ---------------------------------------------
4 .630
-------------------- ---------------------------------------------
-------------------- ---------------------------------------------
5 1.030
-------------------- ---------------------------------------------
-------------------- ---------------------------------------------
6 1.290
==================== =============================================
---------------------------------------------------------------------------------------------------------------------------
The frasierized method is described as follows:
Definition of Terms:
(a) Qx,n = single life rate per thousand in duration n for an insured whose policy was issued at issue age x
(b) Qx,y,n = joint last survivor rate per thousand in duration n for two insureds whose policy was issued at
issue ages x and y
Step 1
Calculate qx,n for each insured for durations 1 to n.
qx,n = Qx,n divided by 1000.
Step 2
Calculate px,n for each insured for durations (n-1) and n.
px,n = (1-qx,1) x (1-qx,2) x (1-qx,n).
Step 3
Calculate px,y,n for durations (n-1) and n.
px,y,n = px,n + py,n - ((px,n) x (py,n))
Step 4
Calculate qx,y,n for duration n. Let px,y,0 = 1.
qx,y,n = 1 - px,y,n
px,y,n-1
Step 5
Qx,y,n = 1000 x qx,y,n
A minimum premium of $0.13 per $1000 will be applied.
2. SUBSTANDARD ANNUAL REINSURANCE PREMIUMS
Substandard extra premiums are available on classes 4 and 6 (Non-Smoker and Smoker). For substandard issues, the
substandard reinsurance premium (plus any flat extra) is payable for 20 years. After this period, the base
reinsurance premium (plus any flat extra) is payable until the end of the premium paying period.
The annual reinsurance premiums per $1,000 for substandard issues will be the product of the annual single life
base reinsurance premiums per $1,000 and the factor for the appropriate rating class. These are the single life
substandard rates prior to frasierization. These rates are capped at $1,000 per $1,000. The minimum after
frasierization is $0.13 per $1,000.
The factors are as follows:
============== ========== ============== ==========
Rating Class Factor Rating Class Factor
-------------- ---------- -------------- ----------
-------------- ---------- -------------- ----------
A 1.40 K 10.00
-------------- ---------- -------------- ----------
-------------- ---------- -------------- ----------
B 1.65 L 12.50
-------------- ---------- -------------- ----------
-------------- ---------- -------------- ----------
C 1.90 M 15.00
-------------- ---------- -------------- ----------
-------------- ---------- -------------- ----------
D 2.25 N 17.50
-------------- ---------- -------------- ----------
-------------- ---------- -------------- ----------
E 2.75 O 20.00
-------------- ---------- -------------- ----------
-------------- ---------- -------------- ----------
F 3.25 P 25.00
-------------- ---------- -------------- ----------
-------------- ---------- -------------- ----------
G 3.75 Q 30.00
-------------- ---------- -------------- ----------
-------------- ---------- -------------- ----------
H 4.50 R 40.00
-------------- ---------- -------------- ----------
-------------- ---------- -------------- ----------
I 5.00 S 50.00
-------------- ---------- -------------- ----------
-------------- ---------- -------------- ----------
J 7.50 T 50.00
============== ========== ============== ==========
3. FLAT EXTRA REINSURANCE PREMIUMS
Each single life flat extra premium will be converted to THE COMPANY's flat extra premium for survivorship
insurance.
The flat extra reinsurance premium will be the product of THE COMPANY's flat extra for survivorship insurance and
the factors in the following table:
===================================================
Permanent Flat Extra Premiums (i.e., for
more than 5 years duration)
---------------------------------------------------
First year .25
----------------------------- ---------------------
----------------------------- ---------------------
Renewal year .90
============================= =====================
===================================================
Temporary Flat Extra Premiums (i.e., for 5
years duration or less)
---------------------------------------------------
All years .90
============================= =====================
4. AGE BASIS
Age Last Birthday.
5. PREMIUM TAXES
Premium taxes are not reimbursed.