AUTOMATIC YRT REINSURANCE AGREEMENT NO. 3138
EFFECTIVE SEPTEMBER 1, 2008
between
PHOENIX LIFE INSURANCE COMPANY
and
PHL VARIABLE INSURANCE COMPANY
Collectively as Ceding Company
and
RGA REINSURANCE COMPANY
as Reinsurer
TABLE OF CONTENTS
Article I Scope of the Agreement Page 1
Article II Reinsurance Coverage Page 2
Article III Procedures Page 3
Article IV Commencement of Reinsurance Page 4
Article V Reinsurance Premium Rates and Payments Page 5
Article VI Changes to the Reinsurance Page 8
Article VII Recapture Page 11
Article VIII Claims Page 12
Article IX Arbitration Page 14
Article X Insolvency Page 16
Article XI Offset Page 17
Article XII Inspection of Records Page 17
Article XIII Letter of Credit Page 17
Article XIV Confidentiality Page 19
Article XV Financial Solvency Page 20
Article XVI Severability Page 20
Article XVII Maintaining Authorization Page 21
Article XVIII Miscellaneous Page 21
Article XIX Execution of the Agreement Page 23
EXHIBITS
Exhibit A Reinsurance Coverage
Exhibit B Reinsurance Administration
Exhibit C Reinsurance Rates and Allowances
ARTICLE I - SCOPE OF THE AGREEMENT
1. Parties to the Agreement
The parties to this Agreement are Phoenix Life Insurance Company and PHL
Variable Insurance Company (collectively referred to as ceding company, we,
us and our) and RGA Reinsurance Company (as reinsurer, referred to as you
and your). The parties mutually agree to transact reinsurance according to
the terms of this Agreement. This Agreement is for indemnity reinsurance and
you and we are the only parties to the Agreement. There will be no right or
legal relationship whatsoever created by this Agreement in any other person
having an interest of any kind in policies that are reinsured under this
Agreement.
We agree that we will not make you a party to any litigation between any
such third party and us. Neither party will disclose the other's name to
these third parties with regard to the agreements or transactions that are
between our companies, unless prior written approval is obtained from the
other party.
2. Effective Date of the Agreement
This Agreement will go into effect at 12:00 A.M., September 1, 2008, and
will cover policies with issue dates on and after that date.
3. Entire Agreement
The text of this Agreement and all Exhibits, Schedules and Amendments
appended hereto constitute the entire agreement between the parties. There
are no other understandings or agreements between us regarding the policies
reinsured other than as expressed in this Agreement.
4. Modification of the Agreement
The parties may modify this Agreement, only by means of a written amendment
to this Agreement which has been signed by all parties.
5. Duration of the Agreement
The duration of this Agreement will be unlimited. However, either party may
terminate the Agreement for new issues at any time by giving the other
ninety calendar days' prior written notice. You will continue to accept new
reinsurance during the ninety-day period.
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Existing reinsurance will not be affected by the termination of this
Agreement for new reinsurance. Existing reinsurance will remain in force
until the termination or expiry of the policy on which reinsurance is based,
as long as we continue to pay reinsurance premiums as shown in Article V
(Reinsurance Premium Rates and Payments), unless otherwise terminated in
accordance with the terms of this Agreement. However, you will not be held
liable for any claims or premium refunds which are not reported to you
within one hundred eighty days following the termination or expiry of the
last cession remaining reinsured under this Agreement.
6. Compliance
This Agreement applies only to the issuance of insurance by us in a
jurisdiction in which we are properly licensed.
The parties represent that, to the best of their knowledge, they are in
compliance with all state and federal laws and regulations applicable to the
business reinsured under this Agreement. In the event that either party is
found to be in non-compliance with any such law or regulation, the Agreement
will remain in effect and the parties will seek to remedy the non-compliance
and will indemnify each other for any direct loss suffered as a result of
the non-compliance.
7. Waiver
Either party may choose not to enforce nor insist upon the strict adherence
to any provision or right under this Agreement. If either party so elects,
it will not be considered to be a permanent waiver of such provision nor in
any way affect the validity of this Agreement. The applicable party will
still have the right to insist upon the strict adherence to that provision
or any other provision of this Agreement in the future. Any waiver of
provisions by a party under this Agreement must be in writing and signed by
a duly authorized representative of the party.
ARTICLE II - REINSURANCE COVERAGE
1. Automatic Reinsurance
You will accept automatically reinsurance of death benefits on the company's
individually underwritten Corporate Owned Life Insurance (COLI) policies on
any permanent resident of the United States or Canada, in agreement with the
provisions and limitations shown in Exhibit A (Reinsurance Coverage). The
individual risk must be underwritten in accordance with the guidelines
established for Guaranteed Issue and Simplified Issue COLI by the Company.
You will also accept automatically reinsurance of riders and supplementary
benefits written with the covered death benefits, but only to the extent
that we specifically list the riders and supplementary benefits in Exhibit
A, Part I.
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We have the right to modify our retention shown in Exhibit A, at any time.
If our retention limits are reduced as a result of the modification, we will
notify you in writing before you are required to reinsure on the basis of
the reduced retention limits for new business issued after the effective
date of the retention change. We will prepare a treaty amendment which both
parties will sign as evidence of your agreement to the reduction in
retention limits.
You have the right to amend the Automatic Acceptance Limits shown in Exhibit
A, if we modify our retention limits. You also may reserve the right to
modify the Automatic Acceptance Limits if we elect to participate in any
other arrangement(s) to secure additional automatic binding capacity.
2. Facultative Reinsurance
If we wish to submit a risk not covered automatically under this Agreement,
or if we wish your advice on any application, we may submit and you will
consider the risk on a facultative basis.
3. Basis of Reinsurance
Reinsurance under this Agreement will be on a Yearly Renewable Term basis
for the net amount at risk on the portion of the original policy that is
reinsured with you. The net amount at risk for any policy period will be
calculated according to Exhibit C.
Riders or supplementary benefits ceded with death benefits will be reinsured
as shown in Exhibit C.
ARTICLE III - PROCEDURES
1. Automatic Reinsurance
Individual notification for the placement of automatic reinsurance will not
be necessary. Subject to Article V (Reinsurance Premium Rates and Payments)
and Exhibit B (Reinsurance Administration), new business or changes to
existing reinsurance will be shown on our periodic billing report.
2. Facultative Reinsurance
When we wish to submit a risk for facultative consideration, we will send
you a reinsurance application form along with copies of all the information
we have regarding the insurability of the risk. You will review the
information and notify us of your decision promptly.
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After you have given us your unconditional offer to reinsure a risk, we will
confirm in writing our acceptance of your offer and the placement of the
reinsurance. Our confirmation must be sent on or before the expiration date
you specify in your offer to reinsure.
We may request an extension of the expiration period shown in your offer, by
written request. If you agree, you will give us written confirmation of the
extension. Any such extension will terminate automatically, if not
previously accepted by us, on the expiration date shown on the extension.
3. Policy Expenses
We will bear the expenses of all medical examinations, inspection fees and
other charges incurred in connection with reinstatements or reentries.
4. Reference Materials
Upon request we will provide you with any reference materials which you may
require for proper administration of cessions under this Agreement. All
information will be subject to the confidentiality and privacy requirements
set forth in Article XIV (Confidentiality).
5. Retained Amounts
The Ceding Company may not reinsure on any basis, the amount it has retained
on the business covered under this Agreement without prior notification to
the Reinsurer. The Ceding Company may only cede up to 50% of its retention
once the policy has reached its fourth anniversary. Notwithstanding the
preceding, the Ceding company may cede its retention to one or more
affiliated company(ies) of the Ceding Company or an agent owned reinsurance
company at any time.
ARTICLE IV - COMMENCEMENT OF REINSURANCE
1. Automatic Reinsurance
Your liability for cessions ceded automatically under this Agreement will
begin and end simultaneously with our contractual liability for the policy
on which reinsurance is based, unless otherwise terminated in accordance
with this agreement, subject to the Agreement effective date shown in
Article I (Scope of the Agreement), Section 2.
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2. Facultative Reinsurance
Your liability for facultative reinsurance which you offer and which we
accept will begin and end simultaneously with our liability for the policy
on which reinsurance is based.
3. Continuation of Liability
Continuation of your liability is conditioned on our payment of reinsurance
premiums as provided in Article V (Reinsurance Premium Rates and Payments)
and is subject to Article VI (Changes to the Reinsurance) and Article VII
(Recapture), and Article I (Scope of the Agreement).
4. Temporary Insurance Receipt Liability
You will not be liable for losses under the terms of a Temporary Insurance
Receipt.
ARTICLE V - REINSURANCE PREMIUM RATES AND PAYMENTS
1. Reinsurance Rates
Reinsurance premium rates that we will pay you for business reinsured under
this Agreement are shown in Exhibit C. The reinsurance premium rate payable
for any cession for any accounting period will be calculated on the basis of
the net amount at risk reinsured as of that period.
For reasons relating to deficiency reserve requirements by the various state
insurance departments, the rates shown in Exhibit C cannot be guaranteed for
more than one year. While you anticipate that the reinsurance rates shown in
Exhibit C will continue to be charged, it may become necessary for you to
charge a rate that is the greater of the rate from Exhibit C or the
corresponding statutory net premium rate based on the 2001 Valuation Basic
Table at 4.5% interest for the applicable mortality rating. If you choose to
increase the rates in Exhibit C, we reserve the right to terminate
reinsurance and recapture all business reinsured under this Agreement as of
the date the rates were increased. The recapture will be without penalty.
Procedures and details of the reinsurance rate calculation for any benefits
or riders ceded under this Agreement are shown in Exhibit C.
All financial transactions under this Agreement will be in United States
dollars, unless we mutually agree in writing to use other currencies.
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2. Payments
We will self-administer the periodic reporting of our statements of account
and payment of balances due to you as shown in Exhibit B.
Within thirty days after the close of each reporting period, we will send
you a statement of account for that period along with payment of the premium
due. The Reinsurer will pay any balance due the Ceding Company within thirty
(30) days after receipt of the statement of account. Should the Reinsurer
dispute any portion of the statement of account, the Reinsurer agrees to pay
the undisputed portion immediately, and to provide written notice to the
Ceding company of the dispute within thirty (30) days after receipt of such
statement. Both parties agree to use their best efforts to resolve the
disputed portion of the statement of account within sixty (60) days.
Our timely payment of reinsurance premiums is a condition precedent to your
continued liability. If we have not paid the balance due you by the
thirty-first day following the close of the reporting period, you have the
right to give us thirty days' written notice of your intention to terminate
the reinsurance on which the balance is due and unpaid. At the end of this
thirty-day period, your liability will automatically terminate for all
reinsurance on which balances remain due and unpaid, (the "termination
date"). Even though you have terminated the reinsurance, we will continue to
be liable for the payment of unpaid premium balances through the termination
date, along with interest charges calculated from the due date shown above
to the date of payment. If premium balances remain unpaid for more than
sixty (60) days after they are due, the party due the payments reserves the
right to charge interest from the end of the reporting period. Interest will
be calculated at the prime rate plus two percent (2%) as stated in the Wall
Street Journal on the first business day in the month immediately prior to
the due date of the premium, when renewal premiums are not paid within sixty
(60) days of the due date.
We agree that we will not force termination under the provisions of this
paragraph to avoid the recapture requirements, or to transfer the block of
business reinsured to another reinsurer.
If we overpay a reinsurance premium and you accept the overpayment, your
acceptance will not constitute nor create a reinsurance liability nor result
in any additional reinsurance. Instead, you will be liable to us for a
credit in the amount of the overpayment, without interest.
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If we fail to make a full premium payment for a policy or policies reinsured
hereunder, due to an error or omission as defined in Article VI, the amount
of reinsurance coverage provided by you shall not be reduced. However, once
the underpayment is discovered, we will be required to pay you the
difference between the full premium amount and the amount actually paid,
without interest. If payment of the full premium is not made within 60 days
after the discovery of the underpayment, the underpayment shall be treated
as a failure to pay premiums and subject to the conditions above.
Unearned premiums will be returned on deaths, surrenders and other
terminations. 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.
We may reinstate reinsurance terminated for non-payment of premium at any
time within sixty days of the termination date, by paying you all premium in
full. However, you will have no liability for claims incurred between the
termination date and the reinstatement date, subject to requirements of
Article VI.
3. Tax Reimbursements
A. Premium Tax
Details of any reimbursement of premium taxes that we pay on behalf of
reinsurance payments to you are shown in Exhibit C, Section VIII (Premium
Taxes).
B. DAC Tax
The following will be effective where applicable:
1. The parties mutually agree to the following pursuant to Section 1.848-2
(g) (8) of the Income Tax Regulation issued December 29, 1992 under
Section 848 of the Internal Revenue Code of 1986, as amended. This
election will be effective for all taxable years for which this
Agreement remains in effect.
The terms used in this Section are defined in Regulation Section 1.848-2
in effect as of December 29, 1992. The term "net consideration" will
refer to either net consideration as defined in Section 1.848-2 (f) or
"gross premium and other consideration" as defined in Section 1.848-3
(b), as appropriate.
a) The party with the net positive consideration for this Agreement for
each taxable year will capitalize specified policy acquisition expenses
with respect to this Agreement without regard to the General Deductions
Limitation of IRC Section 848 (c) (1).
b) The parties mutually agree to exchange information pertaining to the
amount of net consideration under this Agreement each year to ensure
consistency. The parties also mutually agree to exchange information
otherwise required by the Internal Revenue Service.
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4. Experience Refund
Details of any Experience Refund payable to us will be shown in Exhibit C,
Section XI (Experience Refund).
ARTICLE VI - CHANGES TO THE REINSURANCE
1. Errors and Oversights
If either party fails to comply with any of the provisions of this Agreement
because of an unintentional oversight or misunderstanding relating to
clerical errors in the administration of this Agreement, the underlying
status of this Agreement will not be changed. The parties will be restored
to the position they would have occupied had no such oversight nor
misunderstanding occurred.
2. Misstatement of Age or Sex
If the misstatement of the age or sex of a reinsured life causes an increase
or reduction in the amount of insurance in the policy, the parties will
share in the change in proportion to the original liabilities as of the time
the policy was issued.
3. Changes to the Policy
a) All changes - If any change is made to the policy, the reinsurance will
change accordingly. We will notify you of the change if it affects the
reinsurance of this policy and the appropriate premium adjustment, on
our periodic statement of account.
b) Non-contractual Increases - If the initial death benefit is increased as
a result of a non-contractual change, the increase will be underwritten
by the Ceding Company in accordance with it's standard underwriting
guidelines, practices, and procedures for risk selection, as
communicated to the Reinsurer at the time of pricing, as well as any
material changes to these guidelines, practices, and procedures that
have been consented to in writing by the Reinsurer.
Such increases will be considered new reinsurance under this Agreement.
The Reinsurer's approval is required if the original policy was
reinsured on a facultative basis or if the new amount will cause the
reinsurance death benefit on the life to exceed either the automatic
binding limits or the jumbo limits shown in Exhibit C.
Both parties will share the increased amount proportionately. If the
reinsurance is automatic, the amount of reinsurance must not exceed the
automatic binding limits or jumbo limits shown in Exhibit C. If
reinsurance is facultative, the ultimate amount of reinsurance must not
exceed the amount included in the facultative offer.
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Premiums for the additional reinsurance will be based on the issue age,
mortality rating, underwriting class and duration since the time of
underwriting of the increase.
c) Contractual and Regulatory Increases - Reinsurance of increases in
amounts resulting from contractual policy provisions will be based on
the issue age, mortality rating, underwriting class and duration from
issue of the original policy.
Both parties will share the increased amount proportionately. If the
reinsurance is automatic, the amount of reinsurance must not exceed the
automatic binding limits or jumbo limits shown in Exhibit C. If the
reinsurance is facultative, the amount of reinsurance must not exceed
the ultimate amount included in the facultative offer.
Any change in the initial death benefit due to changes in the policy's
cash value or account value will be shared proportionately between the
Ceding Company and all reinsurers.
d) Extended Term and Reduced Paid-Up Insurance - If any policy reinsured
under this Agreement converts to Extended Term Insurance or Reduced
Paid-Up Insurance, the net amount at risk reinsured will be adjusted as
appropriate and reinsurance will be continued in accordance with the
continuing provisions of the policy. Reinsurance payments for the
adjusted policy will be calculated on the basis of the original issue
age of the insured and the duration of the original policy at the time
the adjustment became effective, i.e. point-in-scale basis.
4. Reductions, Terminations and Reinstatements
If any part of the coverage on a life reinsured under this Agreement is
reduced or terminated, the amount reinsured will also be reduced or
terminated to the extent that we will continue to maintain our appropriate
retention limit based on issue age and table rating of insured as shown in
Exhibit A. We will not be required to assume amounts in excess of the
retention limit that was in force when the affected policy or policies were
issued.
Reductions and terminations are permitted only when the underlying
policyholder directs such a reduction or termination of the issuing company
policy that is in force at the time that the reductions and terminations
take place, or by operation of the policy's terms.
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If a policy reinsured under this Agreement is lapsed or terminated, the
reinsurance of such policy will also terminate. If a policy automatically
reinsured lapses and is reinstated in accordance with our standard rules and
procedures, reinsurance for the amount at risk effective at the time of the
lapse will be reinstated automatically at the date of reinstatement of the
policy. We will send you copies of our reinstatement papers only upon
request.
We have the authority to reinstate a policy reinsured under this Agreement
on a facultative basis without your prior approval when:
a) we have kept our maintained our maximum available retention as shown in
Exhibit A, at the time reinsurance was required.
b) the reinsured amount falls within the automatic acceptance limits shown
in Exhibit A.
c) a facultative policy which has been in a lapsed status for more than
ninety (90) days must be submitted with underwriting requirements and
approved by the Reinsurer before it is reinstated.
Otherwise, we will need your prior review and approval for reinstatement of
any facultative reinsurance. We will send you prompt written notice of our
intention to reinstate the policy along with copies of the reinstatement
papers required by our standard rules and procedures. The reinsurance will
be reinstated at the same time as the policy, subject to your written
approval of the reinstatement.
We will notify you of all reinstatements on our periodic statement of
account and we will pay all reinsurance payments due from the date of
reinstatement to the date of the current statement of account. Thereafter,
reinsurance payments will be in accordance with Article V (Reinsurance
Premium Rates and Payments).
5. Risk Classification Changes
If the policyholder requests a substandard table rating reduction or removal
of a flat extra, such change will be underwritten by us in accordance with
our standard underwriting guidelines, practices, and procedures for risk
selection, as communicated to you at the time of pricing, as well as any
subsequent material changes to these guidelines, practices, and procedures
that have been consented to in writing by you.
6. Policy Loans
You do not participate in policy loans nor other forms of indebtedness on
policies reinsured under this Agreement; therefore, policy loans do not
affect the reinsurance death benefit.
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ARTICLE VII - RECAPTURE
1. Basis of Recapture
Recapture will be allowed under this Agreement only as specifically stated
under Articles V and X, or under the following circumstances:
a) You elect to increase the premium rates shown in Exhibit C, on in force
business: or
b) We increase the retention limits shown in Exhibit A.
Policies will be eligible for recapture under paragraph b) above when the
policy has been in force under this Agreement for the Recapture Period shown
in Exhibit C, Section VI (Recapture Period). The recapture period will
always be measured from the original policy issue date. Policies will be
eligible for recapture under paragraph a) above as of the effective date of
the rate increase, regardless of issue date. The recapture will be without
penalty.
2. Method of Recapture
If we elect to recapture because you have increased reinsurance rates, the
recapture will be effective as of the effective date of the rate increase,
regardless of issue date.
If we elect to recapture due to an increase in our retention limits, we will
give you written notice of our intention to recapture within ninety days of
the effective date of our retention increase.
When we have given you written notice of our intent to recapture, and the
date that we will begin the process of recapture, the following procedures
as applicable to the Basis of Recapture undertaken will apply:
a) All eligible policies will be recaptured;
b) The effective date of the recapture will be the next anniversary date of
each eligible policy;
c) Reinsurance on each eligible policy will be reduced by an amount that
will increase our retention to the current limit set forth in Exhibit A;
d) Recapture will not be made on a basis that may result in any
anti-selection against the Reinsurer.
If we increase our retention limits shown in Exhibit A, the percentage of
the risk reinsured will reduce proportionately. If reinsurance was placed
with more than one reinsurer, each reinsurer's percentage will be reduced in
the same proportion that each reinsurer's original percentage bore to the
total percentage reinsured.
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If we omit or overlook the recapture of any eligible policy or policies,
your acceptance of reinsurance premiums after the date the recapture would
have taken place will not cause you to be liable for the amount of the risk
that would have been recaptured. You will be liable only to refund any such
reinsurance premiums received, without interest.
If our retention limits increase is due to our purchase by or purchase of
another company, or our merger, assumption or any other affiliation with
another company, no immediate recapture will be allowed. However, we may
recapture eligible policies once the Recapture Period set out in Exhibit C
has expired.
ARTICLE VIII - CLAIMS
1. Notice of Claim
Claims will be reported and administered on a bulk basis. We will give you
notification of all incurred and settled claims on our monthly statement of
account. Notification of rescission of policies where the insured is still
alive will be provided in writing. You may request, and we will send,
documents on any claim reinsured under this Agreement.
2. Settlement of Claims
Claim payments will be applied against premium payments. If the amount of
claims payment due us exceeds the amount of premium payment due you, you
will remit the balance due us within forty-five (45) days of your receipt of
the statement of account. You will accept our good faith decision in
settling any claim except as specified in this Article and You will pay your
proportionate share of all claims eligible for coverage under this Agreement
except as specified in this Article. If payments remain unpaid for more than
sixty (60) days after they are due, the party due the payment reserves the
right to charge interest from the end of the reporting period. Interest will
be calculated as follows: at prime rate plus two percent (2%) as stated in
the Wall Street Journal on the first business day in the month immediately
prior to the due date of the balance due.
We will provide you with claim documentation, for all contestable claims
with face amounts in excess of $1,000,000 and for contestable claims with
face amounts of $1,000,000 and under where we elect to deny, rescind or
reduce the claim payment. Your consultation privileges will not impair our
freedom to determine the proper action on and settlement of the claim. It is
our sole decision to determine the proper action on and settlement of a
claim.
Our claim settlements will be administered according to the standard
procedures we apply to all claims, whether reinsured or not.
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3. Claim Expenses
Except as provided in Article VIII, Section 4, you will pay your
proportionate share of any interest paid to the claimant on death benefit
proceeds according to our practices and either at the same rate that we use,
or at the rate prescribed by state law in connection with the settlement of
a claim.
Your share of claim expenses will be in the same proportion that your
original liability bears to our original liability. These expenses include,
but are not limited to, investigative expenses, attorney's fees, penalties
and interest imposed automatically by statute and rising solely out of a
judgement rendered against us in a suit for policy benefits, reasonable
claim investigation and legal expenses incurred in connection with the
litigation or settlement of claims payable under this Agreement.
We will be responsible for and shall not hold you responsible for payment of
the following claim expenses:
a) routine administrative expenses for the home office or elsewhere,
including our employees' salaries;
b) expenses incurred in connection with any dispute or contest arising out
of a conflict in claims of entitlement to policy proceeds or benefits
which we admit are payable.
4. Disputed Claims
We will promptly notify you of any contest, compromise or litigation as a
result of a denial of a claim involving a policy reinsured under this
Agreement or as a result of rescission of a policy reinsured under this
Agreement.
a) If you prefer not to participate in the contest, you will notify us of
your decision within fifteen days of your receipt of all documents
requested, and you will immediately pay us the full amount of
reinsurance due. Once you have paid your reinsurance liability, you will
not be liable for any legal and/or investigative expenses and you will
have no further liability for those expenses described in subparagraph
b, below, which are associated with the contest, compromise or
litigation of a claim.
b) When you agree to participate in a contest, compromise or litigation
involving reinsurance, we will give you prompt notice of the beginning
of any legal proceedings involving the contested policy. We will
promptly furnish you with copies of all documents pertaining to a
lawsuit or notice of intent to file a lawsuit by any of the claimants or
parties to the policy.
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c) You will share in the payment of reasonable investigative and attorneys'
fees in the same proportion as your original liability bears to our
original liability prior to the contest of the claim. In addition you
will share in payment of any penalties and interest imposed
automatically against us by statute and arising solely out of a
judgement rendered against us in a suit or a settlement for policy
benefits relating to a contested claim, in the same proportion as your
original liability bears to our original liability prior to the contest
of the claim. You will not reimburse expenses associated with non
reinsured policies.
d) If our contest, compromise or litigation results in a reduction in the
liability of the contested policy, you will share in the reduction in
the same proportion that the amount of reinsurance bore to the amount
payable under the terms of the policy on the date of death of the
insured.
5. Extra Contractual Damages
You will not participate in punitive or compensatory damages. You will
however pay your share of statutory penalties awarded against us in
connection with claims covered under this Agreement if you have joined in
the contest of the coverage in question. You will participate in your
proportionate share of any penalties and interest imposed automatically
against us by statute to the extent such penalties and interest are derived
solely from our decision to deny the claim, but only to the extent that such
penalties are not covered under any policy of insurance. You will not share
in payment of any penalties or interest from any fraudulent and/or criminal
act, omission or course of conduct committed solely by us or our agent or
representative.
The parties recognize that circumstances may arise in which equity would
require you to the extent permitted by law, to share proportionately in
punitive and compensatory damages. Such circumstances are difficult to
define in advance, but would generally be those situations in which you were
an active party, and in writing, recommended, consented to, or ratified our
act or course that ultimately resulted in the assessment of the extra
contractual damages. In such situations, both parties will share such
damages so assessed, in equitable proportions.
ARTICLE IX - ARBITRATION
1. Basis for Arbitration
The parties to this Agreement understand and agree that the wording and
interpretation of this Agreement is based on the usual customs and practices
of the insurance and reinsurance industry. While the parties agree to act in
good faith in our dealings with each other, it is understood and recognized
that situations may arise in which agreement cannot be reached.
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In the event that the parties cannot resolve any dispute to their mutual
satisfaction, the dispute will first be subject to good-faith negotiation as
described below in an attempt to resolve the dispute without the need to
institute formal arbitration proceedings.
2. Negotiation
Within ten days after one of the parties has given the other the first
written notification of the specific dispute, each party will appoint a
designated officer to attempt to resolve the dispute. The officers will meet
at a mutually agreeable location as early as possible and as often as
necessary, in order to gather and furnish the other with all appropriate and
relevant information concerning the dispute. The officers will discuss the
problem and will negotiate in good faith without the necessity of any formal
arbitration proceedings. During the negotiation process, all reasonable
requests made by one officer to the other for information will be honored.
The specific format for such discussions will be decided by the designated
officers.
If the officers cannot resolve the dispute within thirty days of their first
meeting, it is agreed that the dispute will be submitted to formal
arbitration. However, the parties may agree in writing to extend the
negotiation period.
3. Arbitration Proceedings
No later than fifteen days after the final negotiation meeting, the officers
taking part in the negotiation will give written confirmation that they are
unable to resolve the dispute and that they recommend establishment of
formal arbitration.
An arbitration panel consisting of three past or present officers of life
insurance or reinsurance companies not affiliated with any of the parties in
any way will settle the dispute. The party seeking arbitration will appoint
one arbitrator and give notice of such appointment to the other party, who
must appoint its arbitrator within 30 days of receiving such notice. If the
notified party does not select an arbitrator within thirty (30) days after
the other party has given notice of appointing an arbitrator, then the
American Arbitration Association will appoint an arbitrator for the party
that has failed to do so. The party that has failed to appoint an arbitrator
will be responsible for all expenses levied by the American Arbitration
Association for such appointment. The two arbitrators will select a third.
If the two arbitrators cannot agree on the choice of a third within 30 days
of their appointment, each arbitrator shall nominate three candidates within
10 days thereafter, two of whom the other shall decline, and the decision
shall be made by drawing lots.
-15-
The arbitration proceedings will be conducted according to the Commercial
Arbitration Rules of the American Arbitration Association which are in
effect at the time the arbitration begins.
The arbitration will take place in Hartford, Connecticut unless mutually
agreed otherwise.
The parties to this Agreement may agree to extend any of the negotiation or
arbitration periods.
Within sixty days after the beginning of the arbitration proceedings the
arbitrators will issue a written decision on the dispute and a statement of
any award to be paid as a result. The decision will be based on the terms
and conditions of this Agreement as well as the usual customs and practices
of the insurance and reinsurance industry, rather than on strict
interpretation of the law. The decision will be final and binding and there
will be no further appeal, except that either party may petition any court
having jurisdiction regarding the award rendered by the arbitrators.
Each party will pay the fees of its own attorneys, the arbitrator appointed
by the party, and all other expenses connected with the presentation of its
own case. The two parties will share equally in the cost of the third
arbitrator. The arbitrators shall operate in a fair but cost efficient
manner. For example, the arbitrators are not bound by technical rules of
evidence and may limit the use of depositions and discovery.
ARTICLE X - INSOLVENCY
1. If we are judged insolvent, you will pay all reinsurance death benefits due
under this Agreement directly to us, our liquidator, receiver or statutory
successor on the basis of your liability under the policy or policies
reinsured without diminution because of our insolvency. It is understood,
however, that in the event of our insolvency the liquidator, receiver or
statutory successor will give you written notice of a pending claim on a
policy reinsured within a reasonable time after the claim is filed in the
insolvency proceedings. While the claim is pending, you may investigate and
interpose at your own expense in the proceedings where the claim is to be
adjudicated, any defense which you may deem available to us, our liquidator,
receiver or statutory successor. It is further understood that the expense
you incur will be chargeable, subject to court approval, against us as part
of the expense of liquidation to the extent of a proportionate share of the
benefit which may accrue to us solely as a result of the defense you have
undertaken. Where two or more reinsurers are involved in the same claim and
a majority in interest, determined in proportion to each reinsurers' share
of the risk, elect to interpose defense to the claim, the expenses will be
apportioned in accordance with the terms of the reinsurance agreement as
though we had incurred the expense.
-16-
2. If you are deemed insolvent by the Insurance Commissioner of your state of
domicile, you will be bound by any legal directions imposed by your
liquidator, receiver or statutory successor. However, if not in conflict
with such legal directions, at our option and with prior written notice we
may terminate your rights and duties under this Agreement, in which case we
will be under no obligation to make future premium payments to you, your
liquidator, receiver or statutory successor. However, you, your liquidator,
receiver or statutory successor will be liable for any claim payments or
refunds of premiums which remain outstanding.
ARTICLE XI - OFFSET
Either party to this Agreement may offset any balances, whether on account
of premiums, allowances, claims or expenses due from one party to the other
as respects business reinsured under this Agreement and only the balance
will be allowed or paid provided the party that seeks to avail itself of
this right of offset is not in breach of any provision of this Agreement.
The right of offset will not be affected or diminished because of the
insolvency of either party.
ARTICLE XII - INSPECTION OF RECORDS
Either party to this Agreement will have the right at any reasonable time to
inspect the original papers, records, books, files or other documents
relating directly or indirectly to the reinsurance coverage under this
Agreement. These documents will be made available during normal office hours
to a representative of either company who will be named in advance;
notification of such visits will normally be given two (2) weeks in advance
and even in urgent cases at least forty-eight (48) hours in advance.
ARTICLE XIII - LETTER OF CREDIT
In the event that we are not permitted in our state of domicile to take
credit on our Annual Statement for all or a part of the coverage we cede to
you for reason that you have failed to maintain your certificate of
authority in our state of domicile or failed to qualify as an accredited
reinsurer in our state of domicile, then unless you arrange to secure your
own obligation under this Agreement in some other manner which meets the
requirements established in the insurance laws or regulations of our state
of domicile regarding credit for reinsurance, you shall either promptly
obtain a clean, unconditional, irrevocable Letter of Credit for our benefit
or permit recapture of this business in accordance with the last paragraph
of this Article XIII. In the event that you elect to establish a Letter of
Credit, such Letter of Credit will be issued by a qualified financial
institution within the meaning
-17-
of the insurance laws and regulations of our state of domicile in an amount
equal to the reserves ceded to you and will be in a form acceptable under
the laws and regulations of our state of domicile. You will bear the cost of
any letter(s) of credit you establish under this provision.
It is understood that we may draw on the Letter of Credit at any time,
notwithstanding any other provisions in this Agreement.
We undertake to use and apply any amount which we may draw upon the Letter
of Credit pursuant to the terms of this Agreement under which the Letter of
Credit is held, and only for the following purposes:
a) To pay your share or to reimburse us for your share of unearned premium
or any liability for loss ceded by this Agreement;
b) To make refund of any sum which is in excess of the actual amount
required to pay your share of any unearned premium or liability ceded
under this Agreement;
c) To pay other amounts due us under this Agreement.
We agree to return to you any amounts drawn on Letters of Credit which are
in excess of the actual amounts required for a) or b) above, or in the case
of c) above, any amounts as are subsequently determined not to be due.
The amounts drawn under any Letter of Credit will be applied without
diminution because of the insolvency of either party. The financial
institution shall have no responsibility whatsoever in connection with the
propriety of withdrawals we make or the disposition of funds withdrawn,
except to see that withdrawals are made only upon the order of our properly
authorized representatives.
If you have established a Letter of Credit or other security for our benefit
under this Article XIII and subsequently obtain a certificate of authority
or other accreditation so to become an authorized reinsurer in our state of
domicile, we will promptly return the Letter of Credit or other security to
you so that it may be cancelled.
In the event you elect not to provide a Letter of Credit or other security
under the circumstance described above, then we have the option to recapture
the business ceded under this Agreement subject to (1) thirty (30) days
prior written notice and (2) payment of a recapture charge determined as
follows:
((XX%) (1-((n-1)/R))) (P) (RNAR), where
. n is the policy year in which the recapture occurs.
. P is the gross reinsurance premium rate per $1,000 in policy year n.
. XX% is the applicable YRT reinsurance percentage for policy year
n. (or 100 minus the applicable coinsurance allowance for policy year
n.)
. R is the recapture period in years. For level term plans, R will be
the greater of the normal recapture period or the length in years of
the level premium period.
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. RNAR is the reinsured net amount at risk (in thousands) for policy
year n.
No fee is payable after a policy has been in force for R years.
ARTICLE XIV - CONFIDENTIALITY
1. You will hold in trust for us except as necessary for retrocession purposes,
and will not disclose or cause to be disclosed to any non-party to this
Agreement any of our confidential information. Confidential information is
information which relates to policy owner data, experience information
(including but not limited to mortality and/or lapse information), and any
other information considered nonpublic personal information as defined under
statute or state law, risk selection guidelines, any and all information
contained in our current and future underwriting manuals, trade secrets,
research, products and business affairs, but does not include:
a) Information which is generally known or easily ascertainable by
non-parties of ordinary skill.
b) Information acquired from non-parties who have no confidential
commitment to either party to this Agreement.
c) Information which was independently developed without violating any
known confidentiality obligations and without the use of any
Confidential Information.
You will take all necessary and appropriate measures to ensure that your
employees and agents abide by the terms of this Article
2. Confidential information as defined above may be shared or used by you
within your organization and with a third party only if required to
administer or perform services under this agreement. If required by law, you
agree that you will enter into a written agreement with such third parties
not to disclose our confidential information, before you share confidential
information with such third parties. You will take all necessary and
appropriate measures to ensure that your employees and representatives abide
by the terms of this agreement.
3. Upon termination of service for the Phoenix, all confidential information
must be disposed of in a responsible manner. You agree to return all records
and copies of confidential information, in whatever form then existing, to
the appropriate officers of the Company or to destroy such records in a
responsible manner once the need for their retention expires. Upon request
you will provide in writing, written certification that destruction of such
records has occurred. In the event you are requested or required by law,
regulation, or order, subpoena or civil process to disclose any confidential
information, you agree that you provide Phoenix with an opportunity to take
appropriate action.
-19-
4. Notwithstanding the foregoing, we agree that you may aggregate our data with
that of other companies reinsured, on the condition that our data not be
identified by our corporate name, logo or any other means. We also agree
that you may make available any necessary data or information to your
auditors, retrocessionaires, affiliates, or any governmental or
administrative agencies in the course of their examination of your records,
systems and procedures provided that they are (1) made aware by you that
this is Confidential Information; and (2) agree to abide by the restrictions
of this Agreement on further dissemination of said Confidential Information.
ARTICLE XV - FINANCIAL SOLVENCY
This Agreement is entered into in reliance on the utmost good faith of the
parties including, for example, their representations and disclosures. It
requires the continuing utmost good faith of the parties; their
representatives, successors, and assigns. This includes a duty of full and
fair disclosure of all information respecting the formation and continuation
of this contract, the business reinsured, the underwriting and policy issues
(rules, practices, and staff), the financial condition of the parties,
studies and reports on the business reinsured, and the solvency of the
parties.
You or your representatives have the right at any reasonable time to inspect
our records relating to this Agreement. 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. You have entered into
this Agreement in reliance upon our representatives and warranties. We
affirm that we have disclosed and will continue to disclose to you all
matters material to this Agreement.
ARTICLE XVI - SEVERABILITY
In the event that any provision or term of this Agreement shall be held by
any court, arbitrator, or administrative agency to be invalid, illegal or
unenforceable, all of the other terms and provisions shall remain in full
force and effect to the extent that their continuance is practicable and
consistent with the original intent of the parties. In addition, if any
provision or term is held invalid, illegal or unenforceable, the parties
will attempt in good faith to renegotiate the Agreement to carry out the
original intent of the parties.
-20-
ARTICLE XVII - MAINTAINING AUTHORIZATION
If you cease for any reason to be considered to be an admitted reinsurer in
the state of Connecticut and/or New York then we shall have the right to
immediate recapture of all business, without a recapture fee or other
penalty, under this Agreement.
ARTICLE XVIII - MISCELLANEOUS
1. Assignment
If the reinsurance under this Agreement is to be novated, transferred, or
assigned by you, then you agree to notify us of the intent and you agree to
waive any notice period requirement for the termination of new business
should we elect to terminate new business as a result of the novation,
assignment or transfer. We will not unreasonably withhold permission for you
to novate, transfer or assign the reinsurance under this Agreement. The
provisions of this section are not intended to preclude you from retroceding
the reinsurance.
We must notify you of a change of control or ownership and you agree to
waive any notice period requirement for the termination of new business
should we elect to terminate new business as a result of the change in
control or ownership.
Rights and obligations of this Agreement cannot be assigned by either party
unless mutually agreed to by all parties. 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: this Agreement terminates;
or the underlying policies are no longer in force. This Agreement shall not
be bifurcated, partially assigned, or partially assumed.
2. Notices And Communications
Notices and other communications required or permitted to be given under
this Agreement shall be deemed to have been duly given if communicated, or
confirmed, between the parties by facsimile, electronic mail or regular mail
and/or telephone for the following:
. the submission (including medical reports and exchange of information)
for facultative review
. administration issues, including but not limited to, payment of premiums
. routine administration and electronic reporting format policy
. claims notices, proofs, claim contests
. actuarial and material changes regarding pricing
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. document drafting and review
. taxes
. auditing
. all general and routine communications
Notices and other communications related to other matters than included
above, especially legal matters, required to be given under this Agreement
shall be effective if in writing and (i) mailed by United States registered
or certified mail, return receipt requested, or (ii) delivered by overnight
express mail, or (iii) sent by facsimile transmission followed by a
confirmation mailed by first class or overnight mail to:
If to Ceding Company:
Phoenix Life Insurance Company
PHL Variable Insurance Company
βββ ββββββββ βββ
ββββββββ, ββ βββββ-ββββ
Attention: Reinsurance/Actuarial Financial H-9
Facsimile: (βββ) βββ-ββββ
Telephone: (βββ) βββ-ββββ
If to Reinsurer:
RGA Reinsurance Company
ββββ ββββββββββ βββββ βββββββ
ββββββββββββ, ββββββββ βββββ
Facsimile: (βββ) βββ-ββββ
Telephone: (βββ) βββ-ββββ
3. Applicable Law
This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of New York without giving effect to the conflict
of laws provisions thereof.
4. Counterparts
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same Agreement.
5. Anti-Money Laundering
Both parties have established and maintain policies and procedures to comply
with applicable laws and regulations relating to anti-money laundering and
anti-terrorism financing activities including, without limitation, the
U.S.A. Patriot Act, the lists promulgated or maintained by the United States
Department of Treasury naming specially designated nationals or blocked
persons, and any other laws, regulations, executive orders or similar
actions that impose sanctions or prohibit or restrict transactions or
relations with designated persons, entities, organizations or governments.
-22-
ARTICLE XIX - EXECUTION OF THE AGREEMENT
In witness whereof, we have caused this Agreement to be executed in duplicate
at the dates shown below, by the respective officers duly authorized to do so.
PHOENIX LIFE INSURANCE COMPANY
PHL VARIABLE INSURANCE COMPANY
------------------------------
Signature
------------------------------
Title
------------------------------
Date of Signature
RGA REINSURANCE COMPANY
------------------------------------ -----------------------------------
Signature Signature
------------------------------------ -----------------------------------
Title Title
------------------------------------ -----------------------------------
Date of Signature Date of Signature
-23-
EXHIBIT A
(Effective September 1, 2008)
REINSURANCE COVERAGE
I. REINSURANCE COVERAGE
This is a first dollar quota share agreement for COLI policies that we issue
directly, using Guarantee Issue (GI) or Simplified Issue (SI) guidelines on
the plans listed below. We will retain 20% of the Death Benefit on each
policy and cede to you 40% of the Death Benefit on each policy up to the
Automatic Acceptance Limit shown in Section III below.
Plans covered are Phoenix Executive VUL II, Phoenix Executive UL III,
Phoenix Indexed UL II.
Riders covered are Term Riders, Exchange of Insured Riders.
Reinsurance will be placed automatically under this Agreement provided that:
. The policies are issued on the Effective Date of Coverage of this
Agreement or later.
. Each insured life is a permanent resident of the United States or Canada.
. We have maintained our percentage of risk up to the Maximum Dollar
Retention Limit on the life of the insured as shown below, at the time
reinsurance is required.
. The live covered are not employed within any geographical boundary that
the Reinsurer has notified the company that it is unable to accept
reinsurance from.
. Insured's must be actively at work and provide written consent to be
insured under the program.
. External directors/board members do not comprise more than 20% of the
face amount and must be actively at work somewhere.
. The Average age group (weighted by face amount) must be less than or
equal to 55.
. The top 1 or 2 risks must be less than or equal to 10% of the total risk.
Reinsurance coverage will not provide cash surrender values or loan values.
II.RETENTION LIMITS
A. DEATH BENEFIT
For policies issued by us and ceded to you on an automatic basis, the
Company will retain 20% of each policy up to a Maximum Dollar Retention
Limit per life as shown below:
Issue Age Standard
--------- -----------
0-14 $10,000,000
15-70 $10,000,000
71-80 $10,000,000
81-85 $ 4,000,000
86-90 $ 0
B. WAIVER OF PREMIUM DISABILITY
Not reinsured under this Agreement.
C. ACCIDENTAL DEATH BENEFITS
Not reinsured under this Agreement.
III. AUTOMATIC ACCEPTANCE LIMITS
A. DEATH BENEFIT
For policies issued by us and ceded to you on an automatic basis, you
will accept automatically 40% of each risk up to a maximum of:
For Guaranteed Issue:
# Lives Issue Ages Maximum Face Amount Per Policy
------- ---------- ------------------------------
10 - 20 18 - 65 $20,000 x Number of Lives
21 - 24 18 - 65 $25,000 x Number of Lives
25+ 18 - 65 The lesser of:
* $30,000 x Number of Lives
* $3,000,000
* 4 x Avg. Case Face Amount
For Simplified Issue:
Issue Age Maximum Face Amount Per Policy
--------- ------------------------------
18 - 45 $1,000,000
46 - 60 $500,000
61 - 70 $300,000
B. PER LOCATION LIMITS
Up to $100,000,000 per zip code except New York City; all NYC risks to
be submitted facultatively; risk in Los Angeles is $100,000,000 per
one-half mile radius.
IV.RESERVES
The Reinsurer will hold their share of basic and deficiency reserves.
V. EXCLUSIONS TO AUTOMATIC REINSURANCE COVERAGE
Automatic reinsurance will not be available in the following situations:
A. The policy has been submitted on a facultative, facultative obligatory
or initial inquiry basis to you or to any other reinsurer within the
last three (3) years
B. Professional athletes that are a member of a team that is part of Major
League Baseball, the National Football League, the National Basketball
Association, or the National Hockey League will not be reinsured on an
automatic basis.
C. Military applicants serving in hazardous areas, alerted for or on orders
to, or volunteering for service in hazardous areas.
EXHIBIT B
(Effective September 1, 2008)
REINSURANCE ADMINISTRATION
Reinsurance administration and premium accounting will be on a
self-administered basis. Premiums will be paid Annually.
For each Monthly reporting period, we will submit to you reports, via
electronic media, containing information in general compliance with the
following:
. BILLING REPORT
Policy Number, Sequence, Name of Insured, Date of Birth, Sex, Original Issue
Date, Issue Date, Issue Age, Underwriting Class, Automatic/Facultative
Indicator, Substandard Rating, Premium Information, Allowance Information,
First Year/Renewal Year Distinction, Net Amount At Risk, Transaction code,
Transaction Effective Date.
. POLICY EXHIBIT
Case
Count Volume
----- ------
Beginning In Force
New Business
Reinstatements
Other Increases
Lapses
Deaths
Other Terminations
Recaptures
Other Decreases
Natural Variance
Ending In Force
On a Quarterly basis we will submit to you, via electronic media, an in force
listing containing information in general compliance with the following:
. IN FORCE LISTING
Policy Number, Sequence, Name of Insured, Date of Birth, Sex, Original Issue
Date, Issue Date, issue Age, Underwriting Class, Automatic/Facultative
Indicator, Substandard Rating, Net Amount At Risk.
EXHIBIT C
(September 1, 2008)
REINSURANCE RATES AND ALLOWANCES
I. RATES AND ALLOWANCES FOR LIFE REINSURANCE
The single life YRT Rates shown in this Exhibit are a percentage of the 2001
Valuation Basic Table (VBT), NS/SM, ALB. These are annual rates for standard
risks and are per $1,000 of the Net Amount at Risk reinsured. We will pay
you these rates multiplied by the following percentages:
Smoking
Underwriting Class
------------ ---------
Guaranteed Issue (GI) Nonsmoker 66%
Guaranteed Issue (GI) Smoker 84%
Simplified Issue (SI) Nonsmoker 60%
Simplified Issue (SI) Smoker 76%
II. POLICY FEE
No policy fee will be charged.
III. RATES FOR SUBSTANDARD TABLE RATINGS
Substandard risks will not be ceded under this Agreement.
IV. RATES AND ALLOWANCES FOR FLAT EXTRA RATINGS
Substandard risks will not be ceded under this Agreement.
V. PREMIUM TAXES
You will not reimburse us for premium taxes for reinsurance ceded under this
Agreement.
VI. RECAPTURE PERIOD
Recapture will be allowed after 10 years and must be proportional to an
increase in Phoenix Life's maximum published retention. Recapture is not
available due to any change in the financial condition of the Reinsurer.
VII. EXPERIENCE REFUND
Reinsurance under this Agreement is not eligible for an Experience Refund.