[LOGO OF MUNICH AMERICAN REASSURANCE COMPANY]
Automatic Reinsurance Agreement
effective March 1, 2002
between
MONY LIFE INSURANCE COMPANY
New York, New York
and
MONY LIFE INSURANCE COMPANY OF AMERICA
Phoenix, Arizona
(hereinafter called the Ceding Company)
and
MUNICH AMERICAN REASSURANCE COMPANY
Atlanta, Georgia
(hereinafter called MARC)
Treaty ID: 2623
TABLE OF CONTENTS
Article I Basis of Reinsurance 1
Article II Mode of Notification and Cession 2
Article III Liability of MARC 2
Article IV Plan of Reinsurance 2
Article V Reinsurance Premiums 3
Article VI Tax Procedures 3
Article VII Claims 4
Article VIII Policy Changes 5
Article IX Accounting 6
Article X Expenses of Original Policy 6
Article XI Errors and Omissions 7
Article XII Retention Limit Changes (Recapture) 7
Article XIII Inspection of Records 7
Article XIV Insolvency 7
Article XV Arbitration 8
Article XVI Parties to Agreement; Entire Agreement 9
Article XVII Duration of Agreement; Termination 9
Article XVIII Confidentiality 11
Article XIX Effective Date; Execution 13
Exhibit I Underwriting Guidelines
Exhibit II Limits and Special Conditions for the First Excess
Exhibit III Retention Limits of the Ceding Company
Exhibit IV Life Reinsurance Premiums
Exhibit V Accidental Death Reinsurance Premiums
Exhibit VI List of Risks Reinsured
Exhibit VII List of Amendments
Exhibit VIII In-Force Summary Form
[LOGO OF MARC MUNICH RE GROUP]
ARTICLE I BASIS OF REINSURANCE
1. On and after the effective date of this agreement, the
Ceding Company will automatically cede to MARC a share
of the risk as defined in Exhibit II. MARC will
automatically accept such share of the risk within the
limits shown in Exhibit II, provided the Ceding Company
keeps its retention share and applies its agreed upon
underwriting standards. The Ceding Company's regular
retention limits are shown in Exhibit III. The
underwriting standards are explained in paragraph 7 of
this article.
2. If the Ceding Company is already on the risk for its
regular retention under previously issued policies, MARC
will automatically accept reinsurance up to the limits
shown in Exhibit II, provided the Ceding Company has
applied the same underwriting rules it would have
applied if the new policy had fallen completely within
its regular retention.
3. If the Ceding Company retains less than its regular
retention on a risk, MARC will automatically accept an
amount not exceeding the amount retained by the Ceding
Company on the current application.
Facultative Submissions
4. The Ceding Company may submit any risk that is eligible
for automatic reinsurance to MARC for its underwriting
opinion. If such risk is acceptable, it will be
reinsured automatically under this agreement.
5. In addition, the Ceding Company may apply to MARC for
facultative reinsurance of any individual life risk that
is issued on a policy plan covered under this agreement.
An application may include waiver of premium disability
or accidental death benefits with life.
6. The Ceding Company will make such facultative
submissions by sending MARC copies of all papers
relating to the insurability of the risk, together with
a Reinsurance Submission Form (Exhibit I). MARC will
examine the papers and notify the Ceding Company of its
underwriting action promptly. Any offer made by MARC
will expire as indicated in the offer unless the Ceding
Company withdraws its application earlier. If no
expiration date is shown in the offer, the offer will
expire after 120 days from the date of the offer. The
Ceding Company must notify MARC of its acceptance of an
offer before the expiration of the offer and during the
lifetime of the insured.
[LOGO OF MARC MUNICH RE GROUP]
Underwriting Standards
7. The Ceding Company will use the agreed upon underwriting
guidelines in Exhibit I Underwriting Guidelines and
their normal underwriting guidelines for fully
underwritten risks to determine underwriting risk
classifications. The Ceding Company should discuss any
proposed changes in underwriting standards,
requirements, or other criteria with MARC before
implementation.
ARTICLE II MODE OF NOTIFICATION AND CESSION
1. There will be no individual cessions for risks reinsured
hereunder. Instead, each month the Ceding Company will
supply MARC with three lists containing the information
shown in Exhibit VI, "List of Risks Reinsured," Exhibit
VII, "List of Amendments," and Exhibit VIII, "In-Force
Summary." The Ceding Company will submit all monthly
lists to MARC no later than the tenth day of the
following month.
2. If the Ceding Company chooses to report its reinsurance
transactions via electronic media, it will consult with
MARC to determine the appropriate format. The Ceding
Company will notify MARC before making any changes in
the data format or code structure of any such reports.
ARTICLE III LIABILITY OF MARC
For automatic reinsurances, MARC's liability will begin
at the same time as the Ceding Company's liability. For
facultative submissions, MARC's liability will begin at
the same time as the Ceding Company's liability if all
the requirements of Articles I and II have been met.
ARTICLE IV PLAN OF REINSURANCE
1. Life reinsurance will be ceded on a monthly renewable
term basis for the Reinsurance Death Benefit.
Reinsurance Death Benefit
2. The Reinsurance Death Benefit will be rounded to the
nearest dollar and will equal the Proportion of the
Policy Reinsured multiplied by the difference between
the death benefit and the cash value included in the
death benefit. Proportion of the Policy Reinsured
3. The Proportion of the Policy Reinsured will be the First
Excess divided by the sum of the First Excess and the
Ceding Company's retention.
[LOGO OF MARC MUNICH RE GROUP]
Increases and Decreases
4. Any increase or decrease in the death benefit will be
shared proportionately by the Ceding Company and MARC
until the Ceding Company has reached its retention
limit. Additional increases will be assumed by MARC
subject to the provisions for increased amounts
specified in Article VIII and Exhibit II.
Additional Benefits
5. Reinsurance of waiver of premium disability and
accidental death benefits will agree with the Ceding
Company's original policy forms. The Ceding Company must
▇▇▇▇▇▇▇ ▇▇▇▇ with copies of its waiver of premium
disability and accidental death riders and keep MARC
informed of any changes.
6. MARC will not participate in gross annual premiums and
policy fees paid by the policyholder, expense charges,
cash values, accumulation fund amounts, dividends, nor
any benefits not expressly referred to herein.
ARTICLE V REINSURANCE PREMIUMS
1. The reinsurance premium rates for life insurance are in
Exhibit IV. Any annual rates in Exhibits IV will be
divided by twelve to determine monthly rates. Such
monthly rates will be rounded to four decimal places.
2. The Ceding Company will pay the reinsurance premiums on
a monthly basis at the beginning of each calendar month
following the date of issue. No premium will be due for
the calendar month of issue, nor will there be any
adjustment for unearned premiums for any month in which
any reinsurance is reduced or terminated. Any scheduled
change in reinsurance premiums effective on a policy
anniversary will be deemed effective on the first day of
the calendar month following such anniversary.
3. MARC cannot guarantee the life reinsurance premium rates
for more than one year; however, MARC expects to
continue accepting premiums on these rates indefinitely.
ARTICLE VI TAX PROCEDURES
1. MARC will not reimburse the Ceding Company for a share
of any such state premium taxes the Ceding Company has
to pay.
2. Both companies hereby enter into an election under
Treasury Regulations Section 1.848-2(g)(8) whereby:
[LOGO OF MARC MUNICH RE GROUP]
a. For each taxable year under this agreement, the
party with net positive consideration, as
defined in Treasury Code Section 848, will
capitalize specified policy acquisition expenses
with respect to this reinsurance agreement
without regard to the general deductions
limitation of Section 848(c)(1).
b. Both companies agree to exchange information
about the amount of net consideration for all
reinsurance agreements in force between them to
ensure consistency for purposes of computing
specified policy acquisition expenses.
c. This election will be effective as of the
beginning of the taxable year that includes the
effective date of this agreement. This election
will remain in effect for all future taxable
years for which this agreement remains in
effect.
ARTICLE VII CLAIMS
1. If the Ceding Company pays a claim in full, MARC will
pay the Ceding Company the full Reinsurance Death
Benefit. If the Ceding Company pays less than the full
amount of a claim, MARC and the Ceding Company will
share proportionately in the reduction.
2. If any special expenses are involved in the settlement
of a claim, MARC and the Ceding Company will share the
expenses proportionately. Such special expenses include,
but are not limited to, court and arbitration costs,
special investigations, etc. The following will not be
considered special expenses:
a. Salaries of the Ceding Company's and MARC's
employees
b. Expenses incurred in connection with a dispute
or contest arising out of conflicting claims of
entitlement to policy proceeds or benefits that
the Ceding Company admits are payable
c. Expenses, fees, settlements, or judgements
arising out of or in connection with claims made
against the Ceding Company for extra-contractual
damages, such as punitive damages, bad faith
damages, or compensatory damages that may arise
from acts or omissions of the Ceding Company in
its conduct with its own insured, policy owner,
beneficiary or assignee of the policy, or
others; provided, however, that MARC will pay
its
[LOGO OF MARC MUNICH RE GROUP]
proportionate part of any such expenses, fees,
settlements, and judgements solely to the extent
that such expenses, fees, settlements, and
judgements result directly from acts or
omissions of MARC, or acts or omissions of the
Ceding Company to which MARC affirmatively
consented in writing or that were directed,
ratified, or agreed to by MARC in writing
3. Both companies will share proportionately in any
increase or reduction resulting from an insured's
misstatement of age or sex.
4. In every case of loss, any proofs acceptable to the
Ceding Company will be sufficient for MARC. However, the
Ceding Company must ▇▇▇▇▇▇▇ ▇▇▇▇ with copies of the
proofs.
Contestable Claims
5. The Ceding Company must give MARC advance notice of any
contestable claim if fifty percent or more of the life
or waiver of premium disability risk is reinsured by
MARC. The Ceding Company must also give MARC advance
notice of any contestable accidental death claim if the
accidental death benefit is reinsured hereunder. On
request, the Ceding Company will submit all papers
relating to any such claim to MARC for its opinion
before making any commitment or payment to the claimant.
ARTICLE VIII POLICY CHANGES
1. The Ceding Company will include any changes in the List
of Amendments described in Exhibit VII.
2. If the face amount or death benefit is increased
according to procedures in the policy, the Reinsurance
Death Benefit and the Proportion of the Policy Reinsured
will be recalculated. Such increases are subject to the
submission of satisfactory evidence of insurability and
will therefore be treated as new issues, subject to the
provisions of Article I and the limitations shown in
Exhibit II. Reinsurance premiums for such increased
amounts will be calculated as for other new issues.
3. If any portion of the total insurance retained by the
Ceding Company on any life is reduced or terminated, the
amount of reinsurance carried by the Ceding Company on
that life will be reduced by a like amount. The
reinsurance on the policy or policies reduced or
terminated will be the first to be reduced. If further
reduction in reinsurance is required, the cessions to be
reduced or terminated will be determined by the order in
which they were reinsured. The first to be
[LOGO OF MARC MUNICH RE GROUP]
reinsured would be the first to be reduced or
terminated, and so on. If the reinsurance is shared by
two or more reinsurers, the reduction will be prorated
among all the reinsurers.
4. If a policy is reinstated in accordance with its terms
and the Ceding Company's regular reinstatement rules,
MARC will restore the reinsurance coverage as if no
change had occurred. However, MARC's approval will be
required prior to reinstatement of the reinsurance if
the policy was facultatively reinsured hereunder and the
Ceding Company's regular reinstatement rules require
more evidence of insurability than a Statement of Good
Health. Upon reinstatement of the reinsurance coverage,
the Ceding Company will pay the reinsurance premiums
that would have accrued had the policy not lapsed,
together with interest at the same rate as the Ceding
Company receives under its policy.
ARTICLE IX ACCOUNTING
1. Within the first ten days of each calendar month, the
Ceding Company will send MARC the List of Risks
Reinsured, the List of Amendments, and the In-Force
Summary, including all the information required by
Exhibits VI, VII and VIII.
2. If the Ceding Company owes MARC, it will remit the
amount owed with the statement. MARC will remit any
amount it owes the Ceding Company within twenty working
days after receiving the statement.
3. Claim payments will be settled individually when they
are due.
4. Any debts or credits, in favor of or against either MARC
or the Ceding Company with respect to this agreement or
any other reinsurance agreement between the Ceding
Company and MARC, are deemed mutual debts or credits and
will 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.
ARTICLE X EXPENSES OF ORIGINAL POLICY
The Ceding Company will pay for all medical
examinations, inspection fees, and other charges
incurred in issuing policies.
[LOGO OF MARC MUNICH RE GROUP]
ARTICLE XI ERRORS AND OMISSIONS
1. Errors and omissions on any statement or reinsurance
record will not affect MARC's liability for any
reinsurance under this agreement. Any error affecting
reinsurance premiums will be rectified as soon as
possible after discovery.
2. If the failure of either party to comply with any
provision of this agreement is unintentional or the
result of a misunderstanding or oversight, both parties
will be restored as closely as possible to the positions
they would have occupied if no error or oversight had
occurred.
3. This article will not apply to any facultative
submission until the Ceding Company has notified MARC of
its acceptance of MARC's offer in accordance with
Article I.
ARTICLE XII RETENTION LIMIT CHANGES (RECAPTURE)
After 10 years, if the Ceding Company increases its
maximum retention, the Ceding Company may recapture a
portion of the risk ceded. The portion to be recaptured
shall be in proportion to the Ceding Company's increase
in maximum retention. The portion of risk that can be
recaptured shall be:
The New Maximum Retention less
The Current Maximum Retention divided by
The Current Maximum Retention times
The Initial Proportion Retained
ARTICLE XIII INSPECTION OF RECORDS
Both MARC and the Ceding Company will have the right to
inspect all books, records, and documents relating to
the reinsurance under this agreement. Both parties will
have the right to make such inspections at any
reasonable time at the office of the other party.
ARTICLE XIV INSOLVENCY
1. If the Ceding Company becomes insolvent, MARC will pay
all reinsurance directly to the liquidator, receiver or
statutory successor without reduction because of the
insolvency. The liquidator, receiver, or statutory
successor will give MARC written notice of any pending
claims on policies reinsured hereunder. Such notice will
be given within a reasonable time after a claim is filed
in the insolvency proceeding.
2. While any such claim is pending, MARC may investigate
the
[LOGO OF MARC MUNICH RE GROUP]
claim and interpose in the name of the Ceding Company
(its liquidator, receiver, or statutory successor) at
its own expense in the proceeding where such claim is to
be adjudicated. Any expense thus incurred by MARC will
be chargeable, subject to court approval, against the
Ceding Company as part of the expense of liquidation.
Where two or more reinsurers are participating in the
same claim and a majority in interest elects to
interpose a defense or defenses to any such claim, the
expense will be apportioned in accordance with the terms
of the reinsurance agreements as though the Ceding
Company had incurred such expense.
ARTICLE XV ARBITRATION
1. The Ceding Company and MARC specifically agree that,
even if this reinsurance agreement has been terminated
for new business, any dispute or difference of opinion
arising out of or concerning the validity of this
agreement will be submitted to and settled by a Panel of
Arbitration.
2. Either party may initiate arbitration by notifying the
other party.
3. The Panel of Arbitration will consist of three members
unless the parties agree in writing to appoint and abide
by the decision of a single arbitrator.
a. The two parties will name the single arbitrator
within thirty days of their mutual agreement to
use a single arbitrator.
b. Under a three-member Panel of Arbitration, each
of the two parties will appoint an arbitrator.
The arbitrators must be appointed within thirty
days after receipt of the written notice
initiating arbitration.
c. An arbitrator must be an active or retired
executive from the life insurance industry. Each
arbitrator must be knowledgeable about life
insurance and life reinsurance and the aspect
thereof that is the basis of the dispute or
difference of opinion.
d. Within thirty days after the second of the
appointments is made, the two arbitrators will
appoint a third arbitrator. If the two
arbitrators cannot agree on a third arbitrator
within such time, the two arbitrators will
obtain a list of at least five qualified and
available arbitrators from the American
Arbitration Association (AAA) or its successor
organization. Within fifteen days, the two
appointed arbitrators will select the third
arbitrator from the list. If mutual agreement is
again not reached within the
[LOGO OF MARC MUNICH RE GROUP]
prescribed time, the AAA will appoint the third
arbitrator as soon as possible.
4. The Panel of Arbitration will not be bound by formal
rules of legal procedure and will regard this agreement
in accordance with equity and the customary practices of
the life insurance and life reinsurance industries
rather than from a strict interpretation of the law.
5. The Panel of Arbitration will decide the issue by
majority vote and render a written decision within sixty
days after completion of the Panel of Arbitration unless
MARC and the Ceding Company both agree to extend the
period of deliberation. The arbitration proceedings will
be held in New York, New York. The decision of the Panel
of Arbitration will be accepted by MARC and the Ceding
Company without right of appeal.
6. Expenses of the individually selected arbitrators will
be the responsibility of the appointing party. The
expenses of the single or third arbitrator and all other
costs of arbitration, including any fees due the
American Arbitration Association, will be shared equally
by MARC and the Ceding Company.
ARTICLE XVI PARTIES TO AGREEMENT; ENTIRE AGREEMENT
1. This is an agreement solely between the Ceding Company
and MARC. MARC's acceptance of reinsurance hereunder
will not create any right or legal relationship
whatsoever between MARC and the insured or beneficiary
under any policy that may be reinsured hereunder.
2. This agreement represents the entire agreement between
MARC and the Ceding Company concerning the business
reinsured hereunder. There are no understandings between
MARC and the Ceding Company other than as expressed in
this agreement.
3. Any change or modification of this agreement will be
null and void unless made by an amendment to the
agreement and signed by both MARC and the Ceding
Company.
ARTICLE XVII DURATION OF AGREEMENT; TERMINATION
1. The duration of this agreement will be unlimited.
However, either party to this agreement may terminate it
at any time, for new business only, by giving thirty
days' notice in writing to the other party. MARC will
continue to accept reinsurance during the thirty-day
period and will remain liable on all reinsurance already
placed in force under the terms of this agreement until
such contracts are terminated between the
[LOGO OF MARC MUNICH RE GROUP]
original insured and the Ceding Company.
2. The payment of reinsurance premiums is a condition
precedent to the liability of MARC for reinsurance under
this agreement. In the event reinsurance premiums are
not paid when due, MARC will have the right to terminate
all reinsurance coverage of all policies on which
reinsurance premiums are in arrears. If MARC elects to
exercise this right of termination, it will give the
Ceding Company thirty days' written notice of its
intention to terminate said reinsurance. Such notice
will be sent by certified mail, return receipt
requested. The Ceding Company will have until the end of
the thirty-day period to pay any premiums that are in
arrears. If all the reinsurance premiums that are in
arrears are not paid by the end of the thirty-day
period, including any that came to be in arrears during
the thirty-day period, MARC will be relieved of all
liability under those policies as of the last date for
which premiums have been paid for each policy. The
reinsurance of policies on which reinsurance premiums
subsequently become due will automatically terminate as
of the last date for which premiums have been paid for
each policy, unless the reinsurance premiums on those
policies are paid when due. Terminated reinsurance may
be reinstated, subject to MARC's approval, within thirty
days of the date of termination, upon payment of all
reinsurance premiums in arrears. MARC will have no
liability for any claims incurred between the date of
termination and the date of reinstatement of the
reinsurance. The right to terminate reinsurance will not
prejudice MARC's right to collect premiums for the
period during which reinsurance was in force.
ARTICLE XVIII CONFIDENTIALITY
1. Privacy.
MARC agrees to treat Customer Information provided by
the Ceding Company as confidential, as prescribed under
Federal and State laws and regulations related to
privacy. Customer Information includes, but is not
limited to, medical, financial, and other personal
information about proposed, current, and former
policyowners, insureds, applicants, and beneficiaries of
policies issued by the Ceding Company. MARC may disclose
such information to its retrocessionaires as necessary
to perform its internal risk-management functions and to
comply with retrocessionaire requirements. MARC may also
disclose such information to its external auditors as
necessary to comply with audit requirements. MARC will
take reasonable steps to assure such outside parties
maintain the confidentiality of Customer Information.
[LOGO OF MARC MUNICH RE GROUP]
MARC will furnish to the Ceding Company a copy of MARC's
privacy policy upon request.
2. Proprietary Information.
a. The Ceding Company and MARC acknowledge that
compliance with the terms of this agreement
requires that they exchange Proprietary
Information with each other.
b. Proprietary Information includes, but is not
limited to, business plans, trade secrets,
experience studies, underwriting manuals,
guidelines and decisions, applications, policy
forms, quote terms, actuarial data and
assumptions, valuations, financial condition,
and the specific terms and conditions of this
agreement.
c. Proprietary Information will not include
information that:
i) is or becomes available to the general
public other than as a result of
disclosure by the party receiving the
information (hereinafter the
"Recipient");
ii) is developed independently by the
Recipient;
iii) is acquired by the Recipient from a
third party that is not known by the
Recipient to be bound to keep the
information confidential; or
iv) was already within the possession of the
Recipient, and not subject to a
confidentiality agreement, prior to
being furnished by the other party.
d. MARC and the Ceding Company shall hold all
Proprietary Information received from the Ceding
Company in confidence and will not disclose such
information except to their own directors,
officers, employees, affiliates, and advisors
(collectively the "Representatives") who need to
know such information in connection with the
proper execution of this agreement. MARC and the
Ceding Company shall inform all Representatives
of the confidentiality of the Proprietary
Information and will direct such Representatives
to treat the information accordingly.
e. MARC may disclose Proprietary Information to its
retrocessionaires as necessary to perform its
internal risk-management functions and to comply
with retrocessionaire requirements. The Ceding
Company or MARC may disclose Proprietary
Information to its external auditors as
necessary to comply with audit
[LOGO OF MARC MUNICH RE GROUP]
requirements. The parties will take reasonable
steps to assure such outside parties maintain
the confidentiality of such Proprietary
Information
f. Either party may disclose Proprietary
Information when legally compelled to do so. In
such event, the party so compelled will provide
the other party with prompt notice prior to
disclosure so that the other party may seek an
appropriate remedy.
[LOGO OF MARC MUNICH RE GROUP]
ARTICLE XVIII EFFECTIVE DATE; EXECUTION
The said MONY Life Insurance Company, New York, New
York, MONY Life Insurance Company of America, Phoenix,
Arizona, and the said Munich American Reassurance
Company, Atlanta, Georgia, declare that this agreement
and all its terms will be effective as of March 1, 2002,
and will apply to all eligible policies applied for on
and after such date, even though such policies may have
been backdated for up to six months to save age. In
witness whereof they have by their officers executed and
delivered this agreement in duplicate.
MONY LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Title: VP
Attest /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Date 10/22/02
---------------------- -----------------------------------------
Assistant Secretary
MONY LIFE INSURANCE COMPANY OF AMERICA
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Title: asst VP
Attest /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Date 10/22/02
---------------------- -----------------------------------------
Secretary
MUNICH AMERICAN REASSURANCE COMPANY
By /s/ [to come in]
-----------------------------------------
Title: 2nd VP
Attest /s/ [to come in] Date 14 OCT 2002
--------------------- -----------------------------------------
[LOGO OF MARC MUNICH RE GROUP]