AUTOMATIC AND FACULTATIVE
REINSURANCE AGREEMENT
(YEARLY RENEWABLE TERM)
Effective June 1, 1999
Between
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
(CEDING COMPANY)
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And
SECURITY LIFE OF DENVER INSURANCE COMPANY
(REINSURER)
Security Life Center
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Reinsurer Agreement No.: 0316-2133
AUTOMATIC AND FACULTATIVE
REINSURANCE AGREEMENT
(YEARLY RENEWABLE TERM)
This Agreement is between
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON, (CEDING COMPANY) ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
And
SECURITY LIFE OF DENVER INSURANCE COMPANY (REINSURER), Security Life Center,
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
The REINSURER agrees to reinsure certain portions of the CEDING COMPANY's
contract risks as described in the terms and conditions of this Agreement.
This reinsurance Agreement constitutes the entire Agreement between the parties
with respect to the business being reinsured hereunder and there are no
understandings between the parties other than as expressed in its Agreement.
Any change or modification to this Agreement is null and void unless made by
amendment to this Agreement and signed by both parties.
In witness of the above, the CEDING 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 June 1, 1999.
LIBERTY LIFE ASSURANCE COMPANY SECURITY LIFE OF DENVER INSURANCE
OF BOSTON COMPANY
By: By:
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Title: Title:
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Date: Date:
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By: By:
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Title: Title:
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Date: Date:
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AUTOMATIC AND FACULTATIVE REINSURANCE AGREEMENT
Table of Contents
1. PARTIES TO AGREEMENT 1
2. REINSURANCE BASIS 1
3. AUTOMATIC REINSUARNCE TERMS 1
a. RETENTION 1
b. AUTOMATIC ACCEPTANCE LIMITS 1
c. AUTOMATIC IN FORCE AND APPLIED FOR LIMIT 1
d. RESIDENCE 1
e. MINIMUM CESSION 1
f. FACULTATIVE QUOTES 1
4. AUTOMATICE REINSURANCE NOTICE PROCEDURE 2
5. FACULTATIVE REINSURANCE 2
6. COMMENCEMENT OF REINSURANCE COVERAGE 2
a. AUTOMATICE REINSURANCE 3
b. FACULTATIVE REINSURANCE 3
c. PRE-ISSUE COVERAGE 3
7. BASIS OF REINSURANCE AMOUNT AND REINSURANCE PREMIUM RATES 3
a. LIFE REINSURANCE 3
b. SUPPLEMENTAL BENEFITS 3
c. PRELIMINARY TERM INSURANCE 3
d. TERM INSURANCE RENEWALS 4
e. TABLE RATED SUBSTANDARD PREMIUMS 4
▇. ▇▇▇▇▇ EXTRA PREMIUMS 4
g. RATES NOT GUARNATEED 4
8. CASH VALUES OR LOANS 4
9. PAYMENT OF REINSURANCE PREMIUM 4
a. PREMIUM DUE 4
b. FAILURE TO PAY PREMIUMS 4
c. PREMIUM ADJUSTEMENT 5
10. PREMIUM TAX REIMBURSEMENT 5
11. DAC TAX AGREEMENT 5
12. REPORTS 6
13. RESERVES FOR REINSURANCE 6
14. CLAIMS 6
a. NOTICE 6
b. PROOFS 6
c. AMOUNT AND PAYMENT OF BENEFITS 6
d. CONTESTED CLAIMS 7
e. CLAIMS EXPENSES 7
f. EXTRACONTRACTUAL DAMAGES 7
15. MISREPRESENTATION, MISSTATEMENT AND SUICIDE 8
16. POLICY CHANGES 8
a. NOTICE 8
b. INCREASES 8
c. REDUCTION OR TERMINATION 8
d. OTHER POLICY CHANGES, CONVERSIONS, EXCHANGES, ETC 9
e. EXTENDED TERMS AND REDUCED PAID-UP INSURANCE 9
17. REINSTATEMENTS
a. AUTOMATICE REINSTATEMENT 9
b. FACULTATIVE REINSTATEMENT 9
c. PREMIUM ADJUSTEMENT 9
d. NONFORFEITURE REINSURANCE TERMINATION 9
18. INCREASE IN RETENTION 10
a. NEW BUSINESS 10
b. RECAPTURE 10
19. ERRORS AND OMISSIONS 10
20. INSOLVENCY 11
21. ARBITRATION 11
a. GENERAL 11
b. NOTICE 11
c. PROCEDURE 11
d. COSTS 12
22. GOOD FAITH; FINANCIAL SOLVENCY 12
23. TERM OF THIS AGREEMENT 12
24. MEDICAL INFORMATION BUREAU 13
Listing of Schedules:
SCHEDULE A
1. Plans Reinsured
2. Automatic Portion Reinsured
3. Automatic Retention Limits
4. Automatic Acceptance Limits
5. Automatic In Force and Applied for Limits
6. Premium Due
7. Recapture Period
8. Net Amount at Risk
9. Additional Underwriting requirements
SCHEDULE B - AUTOMATIC REINSURANCE PREMIUMS
1. Life Insurance
2. Supplemental Benefits
3. Age Basis
4. Other Policy Changes, Conversions, Exchanges, Etc.
5. Facultative Rate Limit
SCHEDULE C - REPORTING INFORMATION
Information on Risks Reinsured
Policy Exhibit Summary
Reserve Credit Summary
Accounting Summary
SCHEDULE D - FACULTATIVE FORMS
Application for Reinsurance
Notification of Reinsurance
AUTOMATIC AND FACULTATIVE
REINSURANCE AGREEMENT
1. PARTIES TO AGREEMENT.
This Agreement is solely between the REINSURER and the CEDING COMPANY.
There is no third party beneficiary to this Agreement. Reinsurance under
this Agreement will not create any right nor legal relationship between the
REINSURER and any other person, for example, any insured, policy owner,
agent, beneficiary, or assignee. The CEDING COMPANY agrees that it will not
make the REINSURER a party to any litigation between any such third party
and the CEDING COMPANY. The CEDING COMPANY shall not use the REINSURER's
name with regard to the CEDING COMPANY's agreements or transactions with
these third parties unless the REINSURER gives prior approval for the use
of its name.
2. REINSURANCE BASIS.
This Agreement, including the attached Schedules, states the terms and
conditions of automatic and facultative reinsurance which shall be on a
Yearly Renewable Term basis. This Agreement is applicable only to
reinsurance of policies directly written by the CEDING COMPANY. Any
policies acquired through merger of another company, reinsurance, or
purchase of another company's policies are not included under the terms of
this Agreement.
3. AUTOMATIC REINSURANCE TERMS.
The REINSURER agrees to automatically accept contractual risks on the life
insurance plans and supplemental benefits shown in Schedule A, subject to
the following requirements:
a. RETENTION.
The CEDING COMPANY will retain, and not otherwise reinsure, an amount
of insurance on each life equal to its retention shown in Schedule A.
If the CEDING COMPANY's scheduled retention is zero, automatic
reinsurance is not available.
b. AUTOMATIC ACCEPTANCE LIMITS.
On any one life, the amount automatically reinsured under all
agreements with all reinsurers shall not exceed the Automatic
Acceptance Limits shown in Schedule A.
c. AUTOMATIC IN FORCE AND APPLIED FOR LIMIT.
On any one life, the total life insurance in force and applied for
with all companies of which the CEDING COMPANY is aware, cannot exceed
the In Force and Applied For Limits as shown in Schedule A.
d. RESIDENCE.
Each insured must be a resident of the United States or Canada at the
time of issue.
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e. MINIMUM CESSION.
The minimum amount of reinsurance per cession that the REINSURER will
accept is [REDACTED].
f. FACULTATIVE QUOTES.
The risk shall not have been submitted on a facultative basis to the
REINSURER or any other reinsurer.
4. AUTOMATIC REINSURANCE NOTICE PROCEDURE.
After the policy has been paid for and delivered, the CEDING COMPANY shall
submit all relevant individual policy information, as defined in Schedule
C, in its next statement to the REINSURER.
5. FACULTATIVE REINSURANCE.
The CEDING COMPANY may apply for facultative reinsurance with the REINSURER
on a risk if the automatic reinsurance terms are not met, or if the terms
are met and it prefers to apply for facultative reinsurance. If the CEDING
COMPANY wishes to obtain a facultative quote from other reinsurers on a
case eligible for automatic reinsurance, the case shall also be submitted
to the REINSURER for a facultative offer. The following items must be
submitted to obtain a facultative quote:
a. A form substantially similar to the REINSURER's "Application for
Reinsurance" form shown in Schedule D.
b. Copies of the original insurance application, medical examiner's
reports, financial information, and all other papers and information
obtained by the CEDING COMPANY regarding the insurability of the risk.
After receipt of the CEDING COMPANY's application, the REINSURER will
promptly examine the materials and notify the CEDING COMPANY either of the
terms and conditions of the REINSURER's offer for facultative reinsurance
or that no offer will be made. The REINSURER's offer expires 120 days after
the offer is made, unless the written offer specifically states otherwise.
If the CEDING COMPANY accepts the REINSURER's offer, then the CEDING
COMPANY shall note its acceptance in its underwriting file and mail, as
soon as possible, a formal reinsurance cession to the REINSURER using a
form substantially similar to the "Notification of Reinsurance" form shown
in Schedule D. If the CEDING COMPANY does not accept the REINSURER's offer,
then the CEDING COMPANY shall notify the REINSURER in writing, as soon as
possible. Automatic reinsurance rates can be used for facultative business
up to the limits shown in Schedule B.
6. COMMENCEMENT OF REINSURANCE COVERAGE.
Commencement of the REINSURER's reinsurance coverage on any policy or
pre-issue risk under this Agreement is described below:
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a. AUTOMATIC REINSURANCE.
The REINSURER's reinsurance coverage for any policy that is ceded
automatically under this Agreement shall begin and end simultaneously
with the CEDING COMPANY's contractual liability for the policy
reinsured.
b. FACULTATIVE REINSURANCE.
The REINSURER's reinsurance coverage for any policy that is ceded
facultatively under this Agreement shall begin when the CEDING COMPANY
accepts the REINSURER's offer. If the CEDING COMPANY has submitted the
application for reinsurance to other reinsurers, the REINSURER's offer
shall be considered revoked when a better offer, as determined by
table rating, is made by another reinsurer, unless the CEDING COMPANY
has accepted the REINSURER's offer.
c. PRE-ISSUE COVERAGE.
The REINSURER will not be liable for benefits paid under the CEDING
COMPANY's conditional receipt, unless all the conditions for automatic
reinsurance coverage under Section 3 of this Agreement are met. The
REINSURER's liability under the CEDING COMPANY's conditional receipt
is limited to the lesser of i. or ii. below:
i. The Automatic Acceptance Limits with the REINSURER as shown in
Schedule A.
ii. The amount for which the CEDING COMPANY is liable less its
retention shown in Schedule A, less any amount of reinsurance
with other reinsurers.
The pre-issue liability applies only once on any given life regardless
of how many receipts were issued or initial premiums were accepted by
the CEDING COMPANY. After a policy has been issued, no reinsurance
benefits are payable under this preissue coverage provision.
7. BASIS OF REINSURANCE AMOUNT AND REINSURANCE PREMIUM RATES.
a. LIFE REINSURANCE.
The amount reinsured on a policy is the policy's net amount at risk
less the CEDING COMPANY's retention available on the policy less any
amount of reinsurance with other reinsurers. The retention on each
life, or both lives for joint policies, is shown in Schedule A. The
net amount at risk is shown in Schedule A. The reinsurance premiums
per $1000 are shown in Schedule B.
b. SUPPLEMENTAL BENEFITS.
Supplemental benefits are not reinsured under this Agreement.
c. PRELIMINARY TERM INSURANCE.
This coverage is not available under this Agreement.
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d. TERM INSURANCE RENEWALS.
Reinsurance premium rates for term renewals are calculated using the
original issue age, duration since issuance of the original policy,
and the original underwriting classification.
e. TABLE RATED SUBSTANDARD PREMIUMS.
If the CEDING COMPANY's policy is issued with a table rated
substandard premium, the reinsurance premiums shown in Schedule B will
apply.
f. FLAT EXTRA PREMIUMS.
If the CEDING COMPANY's policy is issued with a flat extra premium,
the reinsurance premiums shown in Schedule B will apply.
g. 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 CEDING COMPANY 90 days prior
written notice of the change. Any change applies only to reinsurance
premiums due after the expiration of the notice period.
8. CASH VALUES OR LOANS.
This Agreement does not provide reinsurance for cash surrender values. In
addition, the REINSURER will not participate in policy loans or other forms
of indebtedness on reinsured business.
9. PAYMENT OF REINSURANCE PREMIUMS
a. PREMIUM DUE.
Reinsurance premiums for each reinsurance cession are due as shown in
Schedule A. On any payment date, monies payable between the REINSURER
and the CEDING COMPANY may be netted to determine the payment due.
b. FAILURE TO PAY PREMIUMS.
If reinsurance premiums are 60 days past due, for reasons other than
those due to error or omission as defined below in Section 19, the
premiums will be considered in default and the REINSURER may terminate
the reinsurance upon 30 days prior written notice. The REINSURER will
have no further liability as of the termination date. The CEDING
COMPANY will be liable for the prorated reinsurance premiums to the
termination date. The CEDING 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.
c. PREMIUM ADJUSTMENT.
If the CEDING COMPANY overpays a reinsurance premium and the REINSURER
accepts the overpayment, the REINSURER's acceptance will not
constitute nor create a reinsurance liability nor result in any
additional reinsurance. Instead, the REINSURER will be liable to the
CEDING COMPANY for a credit in the amount of the overpayment. If a
reinsured policy terminates, the REINSURER will refund the 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.
10. PREMIUM TAX REIMBURSEMENT.
Premium taxes shall not be reimbursed.
11. DAC TAX AGREEMENT.
The CEDING 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) whereby:
a. For each taxable year under this Agreement, the party with the net
positive consideration, as defined in the regulations promulgated
under Treasury Code Section 848, will capitalize specified policy
acquisition expenses with respect to this Agreement without regard to
general deductions limitation of Section 848(c) (1);
b. The CEDING 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 CEDING COMPANY will submit to the REINSURER by May 1 of each year
its calculation of the net consideration for the preceding calendar
year. This schedule of calculations will be accompanied by a statement
signed by an officer of the CEDING COMPANY stating that the CEDING
COMPANY will report such net consideration in its tax return for the
preceding calendar year;
d. The REINSURER may contest such calculation by providing an alternative
calculation to the CEDING COMPANY in writing within 30 days of the
REINSURER's receipt of the CEDING COMPANY's calculation. If the
REINSURER does not so notify the CEDING COMPANY, the REINSURER will
report the net consideration as determined by the CEDING COMPANY in
the REINSURER's tax return for the previous calendar year;
e. If the REINSURER contests the CEDING 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 CEDING COMPANY
and the REINSURER reach agreement on
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the net amount of consideration, each party shall report such amount
in their respective tax returns for the previous calendar year.
Both Parties 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.
12. REPORTS.
The reporting period shall be monthly. The administrating party shall be
the CEDING COMPANY. For each reporting period, the CEDING COMPANY will
submit a statement to the REINSURER with information that is substantially
similar to the information displayed in Schedule C. The statement will
include information on the risks reinsured with the REINSURER, premiums
owed, policy exhibit activity, and an accounting summary. Within fifteen
days after the end of each calendar quarter, the CEDING COMPANY will submit
a reserve credit summary similar to that shown in Schedule C.
13. RESERVES FOR REINSURANCE.
The statutory reserve basis for the reinsurance will be shown on the
reserve credit summary provided each quarter.
14. CLAIMS.
a. NOTICE.
The CEDING COMPANY will notify the REINSURER, as soon as reasonably
possible, after it receives a claim request.
b. PROOFS.
The CEDING COMPANY will promptly provide the REINSURER with proper
claim proofs, all relevant information respecting the claim, and an
itemized statement of the benefits paid by the CEDING COMPANY.
c. AMOUNT AND PAYMENT OF BENEFITS.
As soon as the REINSURER receives proper claim notice and proof of the
claim, the REINSURER will promptly pay the reinsurance benefits due
the CEDING COMPANY. The CEDING COMPANY's contractual liability for
claims is binding on the REINSURER. The maximum benefit payable to the
CEDING COMPANY under each reinsured policy is the amount specifically
reinsured with the REINSURER. The total reinsurance in all companies
on a policy shall not exceed the CEDING COMPANY's total contractual
liability on the policy, less its retention used on the policy. The
excess, if any, of the total reinsurance in all companies plus the
CEDING COMPANY's retention used on the policy over its contractual
liability under the reinsured policy will first be applied to reduce
all reinsurance on the policy.
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This reduction in reinsurance will be shared among all the reinsurers
in proportion to their respective amounts of reinsurance prior to the
reduction.
d. CONTESTED CLAIMS.
The CEDING COMPANY will notify the REINSURER of its intention to
contest, compromise, or litigate a claim involving a reinsured policy.
If the CEDING COMPANY's contest, compromise, or litigation results in
a reduction in its liability, the REINSURER will share in the
reduction in the proportion that the REINSURER's net liability bears
to the sum of the net liability of all reinsurers on the insured's
date of death. If the REINSURER should decline to participate in the
contest, compromise or litigation, the REINSURER will then release all
of its liability by paying the CEDING COMPANY its full share of
reinsurance and not sharing in any subsequent reduction in liability.
e. CLAIM EXPENSES.
The REINSURER will pay its share of reasonable investigation and legal
expenses connected with the litigation or settlement of contractual
liability claims unless the REINSURER has released its liability, in
which case the REINSURER will not participate in any expenses after
the date of release. However, claim expenses do not include routine
claim and administration expenses, including the CEDING COMPANY's home
office expenses. Also, 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 are
not a claim expense under this Agreement.
f. EXTRACONTRACTUAL DAMAGES.
In no event will the REINSURER participate in punitive or compensatory
damages which are awarded against the CEDING COMPANY as a result of an
act, omission, or course of conduct committed by the CEDING COMPANY in
connection with the insurance under this Agreement. The REINSURER
will, however, pay its share of statutory penalties awarded against
the CEDING 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
directed, consented to, or ratified the act, omission, or course of
conduct of the CEDING COMPANY which ultimately resulted in the
assessment of punitive and/or compensatory damages. In such
situations, the CEDING COMPANY and the REINSURER would share such
damages assessed in equitable proportions.
Routine expenses incurred in the normal settlement of uncontested
claims and the salary of an officer or employee of the CEDING COMPANY
are excluded from this provision. For purposes of this provision, the
following definitions will apply:
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"Punitive Damages" are those damages awarded as penalties, the amounts
of which are not governed nor fixed by statute;
"Statutory Penalties" are those amounts awarded as penalties, and are
fixed in amount by statute;
"Compensatory Damages" are those amounts awarded to compensate for
actual damages sustained, and are not awarded as penalties, nor fixed
in amount by statute.
15. MISREPRESENTATION, MISSTATEMENT AND SUICIDE.
If a misrepresentation or misstatement on an application or a death of an
insured by suicide results in the CEDING COMPANY returning the policy
premiums to the policy owner rather than paying the policy benefits, the
REINSURER will refund all of the reinsurance premiums it received on that
policy to the CEDING COMPANY. This refund given by the REINSURER will be in
lieu of all other reinsurance benefits payable on that policy under this
Agreement. If there is an adjustment to the policy benefits due to a
misrepresentation or misstatement of age or sex, a corresponding adjustment
will be made to the reinsurance benefits.
16. POLICY CHANGES.
a. NOTICE.
If a reinsured policy is changed, a corresponding change will be made
in the reinsurance for that policy. The CEDING COMPANY will notify the
REINSURER of the change in the CEDING COMPANY's next accounting
statement.
b. INCREASES.
If life insurance on a reinsured policy is increased and the increase
is subject to new underwriting evidence, then the increase of life
insurance on the reinsured policy will be handled the same as the
issuance of a new policy. If the increase is not subject to new
underwriting evidence, then the increase shall be automatically
accepted by the REINSURER, but it is not to exceed the Automatic
Acceptance Limits shown in Schedule A. Reinsurance rates will be based
on the original issue age, duration since issuance of the original
policy and the original underwriting classification.
c. REDUCTION OR TERMINATION.
If life insurance on a reinsured policy is reduced, then reinsurance
will be reduced by the amount of the reduction on the date of such
change. If more than one reinsurer participates in the reinsurance,
the reinsurance with each reinsurer will be reduced proportionately.
If life insurance on a reinsured policy is terminated, then
reinsurance will cease on the date of such termination.
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d. OTHER POLICY CHANGES CONVERSIONS, EXCHANGES, ETC.
Exchanges, term conversions or other changes in the insurance
reinsured with the REINSURER, where not fully underwritten as a new
issue, will continue to be ceded to the REINSURER. Reinsurance rates
for these policies will the YRT conversion rates shown in Schedule B
or may be mutually agreed upon. Rates will be based on the original
issue age and duration since issuance of the original policy. When
these changes are fully underwritten, the policy will be handled the
same as issuance of a new policy.
e. EXTENDED TERM AND REDUCED PAID-UP INSURANCE.
When a reinsured policy changes to extended term or reduced paid-up
insurance, the CEDING COMPANY will notify the REINSURER of the new
amount of reinsurance. Reinsurance rates will remain the same as the
rates used for the original policy and will be based on the original
issue age, duration since issuance of the original policy and the
original underwriting classification.
17. REINSTATEMENTS.
a. AUTOMATIC REINSTATEMENT.
If the CEDING COMPANY reinstates a policy that was originally ceded to
the REINSURER as automatic reinsurance using conventional underwriting
practices, the REINSURER's reinsurance for that policy shall be
reinstated.
b. FACULTATIVE REINSTATEMENT.
If the CEDING COMPANY has been requested to reinstate a policy that
was originally ceded to the REINSURER as facultative reinsurance, then
the CEDING COMPANY will again submit the case to the REINSURER for
underwriting approval before the reinsurance can be reinstated.
c. PREMIUM ADJUSTMENT.
Reinsurance premiums for the interval during which the policy was
lapsed will be paid to the REINSURER on the same basis as the CEDING
COMPANY charged its policy owner for the reinstatement.
d. NONFORFEITURE REINSURANCE TERMINATION.
If the CEDING COMPANY has been requested to reinstate a policy that
was reinsured while on extended term or reduced paid-up then such
reinsurance will terminate and either automatic or facultative
reinstatement procedures shall be followed.
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18. INCREASE IN RETENTION.
a. NEW BUSINESS.
If the CEDING COMPANY increases its retention limits, then it may, at
its option and with written notice to the REINSURER, increase its
retention shown in Schedule A for policies issued after the effective
date of the retention increase.
b. RECAPTURE.
If the CEDING COMPANY increases its retention limits, then it may,
with 90 days written notice to the REINSURER, reduce or recapture the
reinsurance in force subject to the following requirements:
i. A cession is not eligible for recapture until it has been
reinsured for the minimum number of years shown in Schedule A.
The effective date of the reduction in reinsurance shall be the
later of the first policy anniversary following the expiration of
the 90 day notice period to recapture and the policy anniversary
date when the required minimum of years is attained.
ii. On all policies eligible for recapture, reinsurance will be
reduced by the amount necessary to increase the total insurance
retained up to the new retention limits.
iii. If more than one policy per life is eligible for recapture, then
the eligible policies may be recaptured beginning with the policy
with the earliest issue date and continuing in chronological
order according to the remaining policies' issue dates.
iv. Recapture of reinsurance will not be allowed on any policy for
which the CEDING COMPANY did not keep its maximum retention at
issue. The CEDING COMPANY's retention limits are stated in
Section 3 of Schedule A.
v. If any policy eligible for recapture is also eligible for
recapture from other reinsurers, the reduction in the REINSURER's
reinsurance on that policy shall be in proportion to the total
amount of reinsurance on the life with all reinsurers.
vi. Recapture will not be made on a basis that may result in any
anti-selection against the REINSURER as it, in its discretion,
may determine.
19. ERRORS AND OMISSIONS.
If either the REINSURER or the CEDING 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
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Agreement, both parties will be put back to the positions they would have
occupied if the failure to comply had not occurred.
20. INSOLVENCY.
In the event that the CEDING COMPANY is deemed insolvent, all reinsurance
claims payable hereunder shall be payable by the REINSURER directly to the
CEDING COMPANY, its liquidator, receiver or statutory successor, without
diminution because of the insolvency of the CEDING COMPANY. It is
understood, however, that in the event of such insolvency, the liquidator
or receiver or statutory successor of the CEDING COMPANY shall give written
notice to the REINSURER of the pendency of a claim against the REINSURER 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. During the pendency of such claim, the reinsurer may
investigate such claim and interpose, at their own expense, in the
proceeding where such claim is to be adjudicated, any defense or defenses
it may deem available to the CEDING 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 CEDING COMPANY as part of the expense of liquidation to the
extent of a proportionate share of the benefit which may accrue to the
CEDING COMPANY solely as a result of the defense undertaken by the
REINSURER.
21. ARBITRATION.
a. GENERAL.
All disputes and differences under this Agreement that cannot be amicably
agreed upon by the parties will 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 industries. The arbitrators will consider this Agreement 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 the law.
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 arbitrators. The
arbitrators will be executive officers of life insurance or reinsurance
companies; however, these companies will not be either party nor their
affiliates. Each party will appoint one
11
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 day of the mailing of the notification initiating the
arbitration, then select the third arbitrator. Should either party
fail to appoint an arbitrator or 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.
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. 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 which 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 equally in
the cost of the third arbitrator.
22. GOOD FAITH: FINANCIAL SOLVENCY.
The CEDING COMPANY agrees that all matters with respect to this Agreement
require its utmost good faith. The REINSURER or its representatives have
the right at any reasonable time to inspect the CEDING COMPANY's 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. The REINSURER has entered
into this Agreement in reliance upon the CEDING COMPANY's representations
and warranties. The CEDING COMPANY affirms that it has disclosed and will
continue to disclose to the REINSURER all matters material to this
Agreement and each reinsurance cession. Examples of such matters are a
change in underwriting or issue practices or philosophy, a change in
underwriting management personnel, or a change in the CEDING COMPANY's
ownership or control.
23. TERM OF THIS AGREEMENT.
The CEDING COMPANY will maintain and continue the reinsurance provided in
this Agreement as long as the policy to which it relates is in force or has
not been fully recaptured. This Agreement may be terminated, without cause,
for the acceptance of new reinsurance after 90 days written notice of
termination by either party to the other. The REINSURER will continue to
accept reinsurance during this 90 day period. The REINSURER's acceptance
will be subject to both the terms of this Agreement and the CEDING
COMPANY's payment of applicable reinsurance premiums. 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 or financially impaired.
12
24. MEDICAL INFORMATION BUREAU.
The REINSURER is required to strictly adhere to the Medical Information
Bureau Rules, and the CEDING COMPANY agrees to abide by these Rules, as
amended from time to time. The CEDING COMPANY will not submit a preliminary
notice, application for reinsurance, or reinsurance cession to the
REINSURER unless the CEDING COMPANY has an authentic, signed preliminary or
regular application for insurance in its home office and the current
required Medical Information Bureau authorization.
13
SCHEDULE A
COVERAGE AND LIMITS
1. PLANS REINSURED:
Policies reinsured under this Agreement are [REDACTED]. The policy forms
automatically and facultatively reinsured are:
[REDACTED]
2. AUTOMATIC PORTION REINSURED:
[REDACTED].
3. AUTOMATIC RETENTION LIMITS:
[REDACTED].
4. AUTOMATIC ACCEPTANCE LIMITS:
On each life, the amount automatically reinsured under all agreements with
all reinsurers must not exceed the following:
[REDACTED].
1
SCHEDULE A
1. PLANS REINSURED:
The policy plans and supplemental benefits automatically and facultatively
reinsured are:
[REDACTED]
2. AUTOMATIC PORTION REINSURED:
[REDACTED].
3. AUTOMATIC RETENTION LIMITS:
[REDACTED].
4. AUTOMATIC ACCEPTANCE LIMITS:
[REDACTED].
1
SCHEDULE A. CONTINUED
5. AUTOMATIC IN FORCE AND APPLIED FOR LIMITS:
[REDACTED].
6. PREMIUM DUE:
Reinsurance premiums are due annually in advance, on the issue date and
each subsequent policy anniversary date, regardless of the policy's payment
mode.
7. RECAPTURE PERIOD:
[REDACTED].
8. NET AMOUNT AT RISK:
[REDACTED].
9. ADDITIONAL UNDERWRITING REQUIREMENTS:
[REDACTED].
SCHEDULE B
AUTOMATIC REINSURANCE PREMIUMS - YEARLY RENEWABLE TERM BASIS
[REDACTED].
1
SCHEDULE B, CONTINUED
[REDACTED].
2. SUPPLEMENTAL BENEFITS:
[REDACTED].
3. AGE BASIS:
[REDACTED].
4. OTHER POLICY CHANGES, CONVERSIONS, EXCHANGES, ETC.:
Annual reinsurance premiums for conversions shall be the Security Life
Reinsurance Rates For After Conversion attached to this Schedule B.
Reinsurance rates shall be based on the original issue age, duration since
issuance of the original policy and the original underwriting
classification.
2
[REDACTED].
SCHEDULE B, CONTINUED
5.FACULTATIVE RATE LIMIT:
The automatic reinsurance rates in this Agreement can be used for facultative
reinsurance up to the limits shown below. If either limit would be exceeded,
then the reinsurance rates shall be mutually agreed upon.
SCHEDULE C
REPORTING INFORMATION
INFORMATION ON RISKS REINSURED
1. Type of Transaction
2. Effective Date of Transaction
3. Automatic/Facultative Indicator
4. Policy Number
5. Full Name of Insured
6. Date of Birth
7. Sex
8. Smoker/Nonsmoker
9. Policy Plan Code
10. Insured's State of Residence
11. Issue Age
12. Issue Date
13. Duration from Original Policy Date
14. Face Amount Issued
15. Reinsured Amount (Initial Amount)
16. Reinsured Amount (Current Amount at Risk)
17. Change in Amount at Risk Since Last Report
18. Death Benefit Option (For Universal Life Type Plans)
19. ADB Amount (If Applicable)
20. Substandard Rating
21. Flat Extra Amount Per Thousand
22. Duration of Flat Extra
23. ▇▇ ▇▇▇▇▇ (Yes or No)
24. Previous Policies (Yes or No)
25. Premiums
1
SCHEDULE C, CONTINUED
SAMPLE
POLICY EXHIBIT SUMMARY
(Life Reinsurance Only)
[REDACTED].
2
SCHEDULE C, CONTINUED
SAMPLE
RESERVE CREDIT SUMMARY
[REDACTED].
3
SCHEDULE C, CONTINUED
SAMPLE
ACCOUNTING SUMMARY
[REDACTED].
4
ING REINSURANCE
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone ▇▇▇.▇▇▇.▇▇▇▇
Fax ▇.▇▇▇.▇▇▇.▇▇▇▇
APPLICATION FOR REINSURANCE
[REDACTED].
INGREINSURANCE
NOTIFICATION OF REINSURANCE
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone ▇▇▇.▇▇▇.▇▇▇▇
Fax ▇.▇▇▇.▇▇▇.▇▇▇▇
[REDACTED].