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EXHIBIT 10.17
RESTATEMENT OF THE
AGGREGATE EXCESS OF LOSS
REINSURANCE AGREEMENT
(hereinafter referred to as the "Agreement")
between
METROPOLITAN LIFE INSURANCE COMPANY
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(hereinafter referred to as the "Company")
AND
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(hereinafter referred to as the "Reinsurer")
TYPE: Aggregate Excess of Loss Reinsurance.
EFFECTIVE DATE: The Effective Date of this Agreement shall be 12:01
a.m., New York City Time, December 31, 1998.
TERM: This Agreement shall remain in force and the Term of
this Agreement shall be from the Effective Date of this
Agreement until the earliest of (A) December 31, 2008;
(B) the exhaustion of the Overall Aggregate Limit; or
(C) the Effective Date of Commutation of this Agreement.
COVERAGE: Part A Coverage:
The Reinsurer shall indemnify the Company for Part A
Covered Losses.
Part B Coverage:
The Reinsurer shall indemnify the Company for Part B
Covered Losses.
BUSINESS Part A Business Covered:
COVERED:
Amounts paid or to be paid by the Company as life
insurance benefits, cash values or otherwise to its life
insurance policyholders and annuity contract holders, or
beneficiaries or proper assignees thereof, where such
amounts arise out of policies or contracts issued by the
Company but are in addition to the amounts anticipated
at the time the policies or contracts were issued; and,
where such amounts are payable pursuant to judgments in,
or settlements of, lawsuits or other proceedings
(including without limitation administrative
proceedings)
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alleging that the Company or its agents engaged in
improper sales practices.
Part B Business Covered:
Except as otherwise provided in this Article, Part B
Business Covered shall mean all death benefits for
policies listed in the Company's Notice Business Policy
Master File (NBPMF) that were issued and delivered in
the Part B Subject Territory prior to January 1, 1997,
and were in force as of the Effective Date with a policy
account code of: (1) premium paying (Policy Account Code
=1), (2) fully paid up (Policy Account Code =2), or (3)
single premium (Policy Account Code =9). Policies on (a)
the nonforfeiture reduced paid up option (Policy Account
Code =3) as of the Effective Date or on any other date
during the Term of this Agreement and (b) the
nonforfeiture extended term insurance option (Policy
Account Code =5) as of the Effective Date or on any
other date during the Term of this Agreement are
excluded from coverage under this Agreement. Policy
forms identified by the Company's plan code "Estate
Saver" are also excluded from coverage under this
Agreement. All other policy riders and benefits are
covered by this Agreement except for the Accidental
Death Benefit (ADB), Disability Waiver of Premium
Benefit (DW), Applicant's Waiver of Premium Benefit
(AWB), and Additional Insurance (AI).
SUBJECT
TERRITORY: Part A Subject Territory:
The Reinsurer's liability shall be limited to policies
or contracts issued for delivery in the fifty (50)
States of the United States of America, the District of
Columbia, or Canada for losses occurring in the fifty
(50) States of the United States of America, the
District of Columbia, or Canada.
Part B Subject Territory:
The Reinsurer's liability shall be limited to policies
issued for delivery in the fifty (50) States of the
United States of America and the District of Columbia
for losses occurring in the fifty (50) States of the
United States of America and the District of Columbia.
SUBJECT LOSSES: Part A Subject Losses:
Part A Subject Losses shall mean all Part A Ultimate Net
Loss with Claim Dates on or after the Effective Date of
this Agreement arising from claims made against the
Company on or prior to December 31, 1999 in respect of
the Part A Business Covered hereunder.
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Part B Subject Losses:
Part B Subject Losses shall mean all Part B Ultimate Net
Loss paid by the Company on or after the Effective Date
of this Agreement as a result of deaths occurring on or
after the Effective Date and on or prior to December 31,
1999 in respect of the Part B Business Covered
hereunder.
COVERED LOSSES: Part A Covered Losses:
Subject to the Overall Aggregate Limit and the Part A
Aggregate Sublimit, Part A Covered Losses shall mean
Fifty Percent (50%) of Part A Subject Losses in excess
of the Part A Aggregate Retention.
Part B Covered Losses:
Subject to the Overall Aggregate Limit and the Part B
Sublimit, Part B Covered Losses shall mean Fifty Percent
(50%) of Part B Subject Losses in excess of the Part B
Aggregate Retention.
RETENTIONS: Part A Aggregate Retention:
Three Hundred Eighty Five Million Dollars
($385,000,000) in the aggregate.
Part B Aggregate Retention:
Five Hundred Six Million Dollars ($506,000,000) plus the
Company's statutory policy reserves released upon death
of an insured or otherwise.
SUBLIMITS: Part A Aggregate Sublimit:
The maximum amount of all Part A Covered Losses
indemnified under this Agreement shall be limited to Two
Hundred Seventy Five Million Dollars ($275,000,000).
This Part A Aggregate Sublimit is the maximum amount
payable by the Reinsurer for Part A Covered Losses under
this Agreement. Under no circumstances will the
Reinsurer be obligated to pay more than this amount in
respect of Part A Covered Losses.
Part B Sublimit
The maximum amount of all Part B Covered Losses
indemnified under this Agreement shall be limited to Two
Million Five Hundred Thousand Dollars ($2,500,000) for
any individual insured.
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OVERALL AGGREGATE
LIMIT: The Overall Aggregate Limit for the sum of Part A
Covered Losses and Part B Covered Losses combined
under this Agreement shall equal Three Hundred Twenty
Five Million Dollars ($325,000,000).
This Overall Aggregate Limit is the maximum amount
payable by the Reinsurer under this Agreement, excluding
payments for commutation under this Agreement.
REINSURANCE
PREMIUM: The Reinsurance Premium shall equal Two Hundred Sixty
Four Million Five Hundred Thousand Dollars
($264,500,000) and shall be payable in full and
without deduction by the Company on or before
December 31, 1998. The date the Reinsurance Premium
is paid shall be referred to as the "Premium Payment
Date". The Reinsurance Premium shall be payable in
cash by federal wire transfer in immediately
available non-reversible United States Federal Funds
to an account specified by the Reinsurer.
The Reinsurance Premium shall be considered fully earned
when received in the account specified by the Reinsurer.
The Reinsurance Premium is a net amount and includes no
allowance for commissions, brokerage, taxes or any other
costs which may arise in connection with this Agreement
or the Business Covered hereunder. Any such amounts
shall remain the sole responsibility of the Company.
If the Company fails to pay the Reinsurance Premium in
full and in accordance with the terms of this
Reinsurance Premium Section, this Agreement shall not
come into effect and shall not in any way bind the
Reinsurer.
DEFFERED ACQUISITION
COST ("DAC") TAX
REIMBURSEMENT
AMOUNT: The initial DAC Tax Reimbursement Amount is Ten Million
Eight Hundred Forty Five Thousand Four Hundred Thirty
Three Dollars ($10,845,433) and all subsequent
settlements will be calculated on a similar basis to
that set forth hereafter.
For purposes of determining DAC Tax Reimbursement
Amounts, a Contract Payment shall be any payment (other
than a DAC Tax Reimbursement Amount) made under this
reinsurance agreement either by the Company to the
Reinsurer or by the Reinsurer to the Company in
accordance with the principles set forth in Treas. Reg.
Section 1.848 defining net consideration.
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SETTLEMENT
DATES: The first Settlement Date shall be the later of April
1, 2000, or if such day is not a Business Day, then
the first Business Day thereafter, or, the thirtieth
day after the Reinsurer's receipt of the Company's
Loss Report for the period from the Effective Date to
December 31, 1999 The Settlement Date for calendar
year after 2000 and each calendar year thereafter
shall be the later of April 1 of the following
calendar year or if such day is not a Business Day,
then the first Business Day thereafter, or, the
thirtieth day after the Reinsurer's receipt of the
Company's Loss Report for the prior calendar year, or
if such day is not Business Day, then the first
Business Day thereafter.
BUSINESS DAYS: Business Day shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in New
York, New York, or the Islands of Bermuda are authorized
or obligated by law, regulation or executive order to be
closed.
EXPERIENCE
BALANCE: The Reinsurer shall establish and maintain a notional
Experience Balance during the time that this Agreement
is in effect and whose balance shall be determined in
accordance with this Experience Balance section.
The Experience Balance at the Premium Payment Date shall
be equal to Two Hundred Sixty One Million Five Hundred
Thousand Dollars ($261,500,000).
The Experience Balance at the first Settlement Date
shall be equal to:
The Experience Balance at the Premium Payment Date
multiplied by (1.0 plus the annual compounded
yield on the one (1) year United States Treasury
▇▇▇▇ as of the close of business on the Premium
Payment Date) raised to the power of the actual
number of days from the Premium Payment Date to
and including the first Settlement Date divided by
the actual number of days in the current calendar
year, multiplied by (1.0 plus (the Federal Funds
rate divided by the actual number of days in the
current calendar year)) for each day between
April 1, 2000 and the first Settlement Date,
LESS
Covered Losses due from the Reinsurer from and
including the Premium Payment Date (through and
including the Settlement Date).
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The Experience Balance at each Settlement Date
thereafter shall be equal to:
The Experience Balance at the end of the prior
Settlement Date multiplied by (1.0 plus the annual
compounded yield on the one (1) year United States
Treasury ▇▇▇▇ maturing closest to April 1 of the
current calendar year) raised to the power of the
actual number of days from the prior Settlement
Date to April 1 of the current calendar year
divided by the actual number of days in the
current calendar year, multiplied by (1.0 plus
(the Federal Funds rate divided by the actual
number of days in the current calendar year)) for
each day between April 1 of the current calendar
year to and including the Settlement Date divided
by the actual number of days in the current
calendar year,
LESS
Covered Losses due from the Reinsurer from but not
including the prior Settlement Date through and
including the current Settlement Date.
ULTIMATE NET LOSS: (a) Part A Ultimate Net Loss:
Part A Ultimate Net Loss as used herein shall mean
the actual sum of all Claim Amounts with Claim
Dates on or after the Effective Date in settlement
of all losses arising in respect of the Part A
Business Covered after making deductions for all
recoveries, all salvage, and all claims upon other
reinsurances, which inure to the benefit of the
Reinsurer under this Agreement, whether
collectable or not,. and shall include Allocated
Loss Adjustment Expenses paid by the Company.
Part B Ultimate Net Loss:
Part B Ultimate Net Loss as used herein shall mean
the actual sum paid by the Company on or after the
Effective Date in settlement of all death claims
arising in respect of the Part B Business Covered
after making deductions for all recoveries, all
salvage, and all claims upon other reinsurances,
which inure to the benefit of the Reinsurer under
this Agreement, whether collectable or not.
(b) All salvages, recoveries, reinsurance or payments
recovered or received subsequent to a loss
settlement under this Agreement shall be applied
as if recovered or received prior to the aforesaid
settlement and all necessary adjustments shall be
made by the parties hereto.
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(c) Nothing in this definition shall be construed to
mean that losses are not recoverable hereunder
until the Part A Ultimate Net Loss and Part B
Ultimate Net Loss of the Company has been
ascertained.
CLAIM AMOUNT: Claim Amount as used herein shall mean for each
claim, the sum of the amount paid by the
Company on the Claim Date plus the amount
reserved by the Company on the Claim Date on
the basis of New York State statutorily
prescribed mortality, morbidity or interest
rates, arising in respect of the Part A
Business Covered.
CLAIM DATE: Claim Date as used herein shall mean the date of
judgment in, or settlement of, a lawsuit or other
proceeding (including without limitation
administrative proceedings) arising in respect of
the Part A Business Covered.
CLAIMS HANDLING: (a) The Company shall have the sole and absolute
authority with respect to the administration,
defense, settlement and payment of Part A
Covered Losses, subject to the terms and
conditions of this Agreement.
(b) The Company shall retain the sole and absolute
authority with respect to the administration,
defense, settlement and payment of Part B Covered
Losses.
(c) In furtherance of the commonality of interest
evidenced by the execution of this Agreement, the
Company agrees that the Company or the Company's
designated counsel shall provide the Reinsurer
with updated information concerning the present
and future handling of the Part A Covered Losses
on a quarterly basis to allow the Reinsurer to
properly reserve and project payments under this
Agreement and as otherwise reasonably required by
the Reinsurer.
ALLOCATED
LOSS ADJUSTMENT
EXPENSES: Allocated Loss Adjustment Expenses as used
herein shall mean all allocated expenses
incurred by the Company on or after the
Effective Date in connection with the
investigation, settlement, defense or
mitigation of any claim or loss which is the
subject matter of the Part A Business Covered,
and shall exclude salaries and fees of
adjusters, attorneys or other persons who are
employees of the Company, or its designated
claims adjusters, attorneys on permanent
retainer, office expenses, overhead or other
unallocated expenses.
COMMUTATION: This Agreement may be irrevocably commuted by
the Company on (i) December 31, 2008 or, (ii)
in the event that after December 31, 1999 the
Experience Balance exceeds the
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remaining Part A Aggregate Sublimit during the
calendar year ("Effective Date of Commutation"),
subject to ninety (90) days prior written notice
to the Reinsurer. Within ninety (90) days of such
Effective Date of Commutation, upon receipt from
the Company of a full release in form and
substance reasonably satisfactory to the
Reinsurer, then the Reinsurer shall pay to the
Company a Commutation Settlement equal to Ninety
Nine Percent (99%) multiplied by the positive
Experience Balance, if any, at the Settlement Date
following Commutation, less all amounts due and
payable by the Company to the Reinsurer, under
this or any related agreement and the Reinsurer
and the Company shall be fully and finally
released from all liability and obligations under
or in connection with this Agreement.
REPORTS AND
REMITTANCES: Within sixty (60) days after the end of each
calendar quarter during the Term of this
Agreement, the Company shall provide the
Reinsurer with copies of all loss reports
received or prepared by the Company in
connection with the Business Covered during
that calendar quarter. In addition to the
above, within sixty (60) days after the end of
each calendar quarter, the Company shall
provide to the Reinsurer a written Loss Report,
providing, in a format acceptable to the
Reinsurer and the Company, the following
information in respect of the Business Covered
hereunder for Part A Business Covered:
(1) The amount of Subject Losses paid by the
Company during that calendar quarter.
(2) The net amount of Subject Losses payable but
unpaid by the Company as at the end of the
calendar quarter (the "Net Subject Loss").
(3) The Company's estimate of reserves for Net
Subject Loss and Allocated Loss Adjustment
Expenses, as at the end of that calendar
quarter.
(4) Such other information as to be agreed upon
between the Company and the Reinsurer.
In addition to the above, within sixty (60) days after
the end of each calendar quarter, the Company shall
provide to the Reinsurer a written Loss Report,
providing, in a format acceptable to the Reinsurer, the
following information in respect of the Business Covered
hereunder for Part B Business Covered:
(1) The face amount of death claims paid during the
calendar quarter.
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(2) The face amount of death claims reported but not
paid as of the end of that calendar quarter.
(3) Statutory reserves released in the calendar quarter
on death claims paid.
(4) Statutory reserves released in the calendar quarter
on death claims reported but not paid.
(5) The face amount of death claims during the calendar
quarter ceded to other reinsurers.
(6) Statutory reserves released in the calendar quarter
on death claims ceded to other reinsurers.
(7) Policy level detail (as detailed in items (1)
through (6) above) for individual insureds with Subject
Losses in excess of Five Million Dollar ($5,000,000).
(8) The Company's estimate of IBNR losses as at the end
of that calendar quarter.
Each Loss Report shall provide both the cumulative
position from the Effective Date through the end of that
calendar quarter and the changes within the calendar
quarter. The first such quarterly Loss Report shall be
due by June 1, 1999 for the period from the Effective
Date through March 31, 1999.
Within sixty (60) days after the end of each calendar
year, the Company shall furnish the Reinsurer with a
written Annual Report, providing, in a format acceptable
to the Reinsurer, the Subject Losses paid by the Company
for that calendar year in respect of the Business
Covered hereunder separately for the Part A Business
Covered and Part B Business Covered.
Covered Losses from the Reinsurer shall be paid by the
Reinsurer to the Company on the Settlement Date for the
calendar year.
All remittances shall be made by federal wire transfer
in immediately available non-reversible United States
Federal Funds to an account specified by the receiving
party.
INSOLVENCY: 1. Reinsurer's Obligation:
In the event of the insolvency of the Company, the
reinsurance afforded by this Agreement shall be payable
by the Reinsurer on the basis of the liability of the
Company under the Business Covered, without diminution
because of such insolvency, directly to the Company or
its liquidator, receiver, conservator, or statutory
successor, except (a) where this Agreement specifically
provides
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another payee of such reinsurance in the event of the
insolvency of the Company and (b) where the Reinsurer,
with the consent of the direct insured or insureds, has
assumed such policy obligations of the Company as direct
obligations of the Reinsurer to the payees under such
policies and in substitution for the obligations of the
Company to such payees.
2. Reinsurer's Notice and Defense of Claims:
The Reinsurer shall be given written notice of the
pendency of each claim or loss which may involve the
reinsurance afforded by this Agreement within a
reasonable time after such claim or loss is filed in the
insolvency proceedings. The Reinsurer shall have the
right to investigate each such claim or loss and
interpose at its own expense, in the proceeding where
the claim or loss is to be adjudicated, any defense
which it may deem available to the Company or its
liquidator, receiver, conservator, or statutory
successor. If more than one Reinsurer is involved, they
may designate one Reinsurer to act for all.
3. Defense Expense:
The expense thus incurred by the Reinsurer shall be
chargeable, subject to court approval, against the
insolvent Company as part of the expense of liquidation
to the extent of a proportionate share of the benefit
which may accrue to the Company solely as a result of
the defense undertaken by the Reinsurer.
4. Offset:
Any debts or credits, liquidated or unliquidated, in
favor of or against either party under this Agreement on
the date of the receivership or liquidation order
(except where the obligation was purchased by or
transferred to be used as an offset) are deemed mutual
debts or credits and shall be set off with the balance
only to be allowed or paid. Although such claim on the
part of either party may be unliquidated or undetermined
in amount on the date of the entry of the receivership
or liquidation order, such claim will be regarded as
being in existence as of such date and any credits or
claims then in existence and held by the other party may
be offset against it.
5. Rights of Parties:
Nothing hereinabove set forth in this Insolvency Section
shall in any way change the relationship or status of
the parties hereto, nor enlarge the obligations of
either party to each other except as specifically
hereinabove provided, to wit, to pay the statutory
successor on the basis of the amount of liability
determined in the liquidation or receivership
proceeding, rather than on the basis of the actual
amount of loss (dividends) paid by the liquidator,
receiver, conservator, or statutory successor to allowed
claimants. Nor, except as hereinabove
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specifically provided, shall anything in this Insolvency
Section in any manner create any obligation or establish
any right against the Reinsurer in favor of any third
parties or any other persons not parties to this
Agreement.
ARBITRATION: Except as otherwise agreed upon by the parties:
1. Resolution of Disputes: Any dispute between the
Company and the Reinsurer arising out of the
provisions of this Agreement, or concerning its
interpretation or validity, whether arising before
or after termination of this Agreement, shall be
submitted to arbitration in the manner set forth
in this Article. Either party may initiate
arbitration of any such dispute by giving written
notice to the other party, by registered or
certified mail, return receipt requested, of its
intention to arbitrate and of its appointment of
an arbitrator in accordance with subsection (3) of
this Article.
2. Composition of Panel: Unless the parties agree
upon a single arbitrator within fifteen (15) days
after the receipt of a notice of intention to
arbitrate, all disputes shall be submitted to an
arbitration panel composed of two arbitrators and
an umpire, chosen in accordance with subsections
(3) and (4) of this Article.
3. Appointment of Arbitrators: The members of the
arbitration panel shall be chosen from
disinterested persons having knowledge of the
insurance, reinsurance and financial issues
relevant to the matters in dispute. The party
requesting arbitration (hereinafter referred to as
the "requesting party") shall appoint an
arbitrator and give written notice thereof, by
registered or certified mail, return receipt
requested, to the other party (hereinafter
referred to as the "respondent") together with its
notice of intention to arbitrate. Unless a single
arbitrator is agreed upon within fifteen (15) days
after the receipt of the notice of intention to
arbitrate, the respondent shall, within thirty
(30) days after receiving such notice, also
appoint an arbitrator and notify the requesting
party thereof in a like manner. Before instituting
a hearing, the two arbitrators so appointed shall
choose an umpire. If, within twenty (20) days
after they are both appointed, the arbitrators
fail to agree upon the appointment of an umpire,
the umpire shall be appointed by the President of
the American Arbitration Association.
4. Failure of Party to Appoint Arbitrator: If the
respondent fails to appoint an arbitrator within
thirty (30) days after receiving a notice of
intention to arbitrate, such arbitrator shall be
appointed by the President of the American
Arbitration Association, and shall then, together
with the arbitrator
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appointed by the requesting party, choose an
umpire as provided in subsection (3) of this
Article.
5. Involvement of Other Reinsurers: (a) If more than
one Reinsurer of this Agreement is involved in the
same dispute, all such Reinsurers shall constitute
and act as one party for purposes of this Article
and communication shall be made by the Company to
each of the Reinsurers constituting the one party;
provided, however, nothing herein shall impair the
right of such Reinsurers to assert several, rather
than joint, defenses or claims, nor be construed
as changing the liability of the Reinsurers under
the terms of this Agreement from several to joint.
(b) If the Company is involved in a dispute under
the terms of this Agreement and in one or more
separate disputes with one or more other insurers
or reinsurers in which common questions of law or
fact are in issue, the Company or Reinsurer, at
their option, may join with such other insurers or
reinsurers in a common arbitration proceeding
under the terms of this Article. If the Company
and such other insurers or reinsurers have
commenced arbitration, the Reinsurers may at its
option join such proceeding for the determination
of the dispute between the Company and Reinsurer.
6. Choice of Law and Forum: Any arbitration
instituted pursuant to this Article shall be held
in Wilmington, Delaware. Any action to enforce
any arbitration award or to compel arbitration
shall be brought only in the state courts of the
State of Delaware situated in New Castle County,
to the exclusion of all other courts. The
substantive laws of the State of Delaware,
without regard to its conflict of laws rules,
shall govern any action or suit brought to compel
any such arbitration or to enforce any award
rendered pursuant to such arbitration.
7. Submission of Dispute to Panel: Unless otherwise
extended by the arbitration panel, or agreed to by
the parties, each party shall submit its case to
the panel within thirty (30) days after the
selection of an umpire.
8. Procedure Governing Arbitration: All proceedings
before the panel shall be informal and the panel
shall not be bound by the formal rules of
evidence. The panel shall have the power to fix
all procedural rules relating to the arbitration
proceeding. In reaching any decision, the panel
shall give due consideration to the customs and
usage of the insurance, reinsurance and finance
business.
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9. Arbitration Award: The arbitration panel shall
render its decision within sixty (60) days after
termination of the proceeding, which decision
shall be in writing, stating the reasons therefor.
The decision of the majority of the panel shall be
final and binding on the parties to the proceeding
and their permitted successors and assigns.
Judgment on the award may be entered in any court
of competent jurisdiction and execution of any
monetary judgment may occur in any jurisdiction.
10. Cost of Arbitration: Unless otherwise allocated by
the panel, each party shall bear the expense of
its own arbitrator and its own witnesses and shall
jointly and equally bear with the other parties
the expense of the umpire and the arbitration.
11. Limit of Authority of Arbitration Panel: The
arbitration panel does not have the power to award
punitive, multiplied, or exemplary damages, other
similar damages or any extra contractual damages
of any nature or description whatsoever except to
the extent claimed as Subject Loss under this
Agreement, and each of the Company and the
Reinsurer expressly waives all rights to punitive,
multiplied, or exemplary damages, other similar
damages or any extra contractual damages of any
nature or description whatsoever except to the
extent claimed as a Subject Loss under this
Agreement.
WAIVER OF PUNITIVE
DAMAGES: The Company and the Reinsurer agree that in no
event shall either party be entitled to any
award against the other of punitive,
multiplied, or exemplary damages, other similar
damages or any extra contractual damages of any
nature or description whatsoever, and each of
the Company and the Reinsurer both expressly
waives all rights to punitive, multiplied, or
exemplary damages, other similar damages or any
extra contractual damages of any nature or
description whatsoever except to the extent
claimed as a Subject Loss under this Agreement.
EXCLUSIONS:
(A) Ex Gratia Payments: Part B Covered Losses under
this Agreement shall exclude any Ex Gratia
Payments except to the extent consented to by the
Reinsurer. "Ex Gratia Payments" as used herein
means a claim payment not required by the terms of
the underlying insurance policies covered by this
Agreement.
(B) Insolvency Funds: The Reinsurer shall not be
obligated to pay to the Company any share of any
liability of the Company
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arising, by contract, operation of law, or
otherwise, from participation or membership of the
Company or any of its affiliates, whether
voluntary or involuntary, in any insolvency fund
or from reimbursement of any person for any such
liability. "Insolvency Fund" includes any guaranty
or insolvency fund, plan, pool, association, or
other arrangement howsoever denominated,
established or governed, which provides for any
assessment of or payment or assumption by any
person of part or all of any claim, debt, charge,
fee, or other obligation of any insurer, or its
successors or assigns which has been declared to
be insolvent, or which is otherwise deemed unable
to meet any claim, debt, charge, fee or other
obligation in whole or in part.
(C) Assessments: This Agreement does not cover
assessments of any nature whatsoever levied
against the Company.
(D) Dividends: The Reinsurer shall not participate in
the determination of, nor reimburse the Company
for, any policyholder or other dividends paid by
the Company.
(E) Assumed Reinsurance: This Agreement does not cover
reinsurance assumed by the Company.
AMENDMENTS: This Agreement may be amended only by mutual consent of
the parties expressed in a written addendum executed by
the parties with the same formalities as this Agreement,
and such addendum shall be deemed to be an integral part
of this Agreement and binding on the parties hereto.
ACCESS TO RECORDS: The Reinsurer shall have the right to examine, at any
reasonable time, all papers, books, accounts,
documents and other records of the Company or any
agent or employee of the Company including any claims
adjuster or any other person acting on behalf of the
Company relating to the business covered hereunder.
Upon the Reinsurer's request, the Company shall
supply the Reinsurer, at the Reinsurer's expense,
with copies of the whole or any part of such papers,
books, accounts, documents and other records relating
to the business covered hereunder. The Reinsurer's
right of inspection under this Access to Records
section shall continue to exist after termination of
this Agreement as long as one of the parties hereto
has a claim against any other arising from this
Agreement.
CAPTIONS AND
CATCHLINES: Captions and catchlines used in this Agreement are
intended solely as aids to convenient reference. They
shall not be considered part of this Agreement nor limit
or otherwise affect its meaning, and no inference as to
the meaning or intent of any provision of this Agreement
may be drawn from them.
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OTHER REINSURANCES: The existence or collectibility of any other reinsurance
of the Company (past, present, or future) shall in no
way cause any liability of the Reinsurer hereunder to be
payable earlier or to be greater than would have been
the case in the absence of such reinsurance and the risk
of uncollectibility of reinsurance shall be with the
Company.
COUNTERPARTS: This Agreement may be executed in two or more
counterparts, each of which shall be deemed an
original, but all of which together shall constitute
one and the same instrument.
DISCLOSURES
AND APPROVALS: The Company represents and warrants with respect to
this Agreement and the transactions hereunder and
with respect to any insurance and reinsurance which
is covered by this Agreement and all transactions
thereunder, that all disclosures, approvals and
expiry of waiting periods which are necessary or
appropriate under any applicable law or regulation
have been made or obtained, or will be made or
obtained in a timely manner.
ERRORS AND
OMISSIONS: Inadvertent errors and omissions of any nature made
by either party shall neither increase nor reduce the
liability of either party from what that liability
would have been had no such error or omission taken
place. Upon discovery, the party committing an error
or omission shall correct such error or supply such
omission retroactively to the extent possible to the
time such error or omission occurred, and advise the
other party thereof as soon as possible.
NON TRANSFERABILITY: This Agreement confers no rights, powers, or
obligations on any person or organization other than
the Reinsurer and the Company. Neither this Agreement
nor any of the rights, powers, or obligations of the
Reinsurer or the Company under this Agreement may be
in any way transferred or assigned to any other
person or organization without the express written
consent of the Reinsurer and the Company. The
granting of such consent shall be at the sole and
absolute discretion of each of the parties.
PARTIES TO THIS
AGREEMENT: This is an Agreement for indemnity reinsurance solely
between the Company and the Reinsurer. The acceptance
of reinsurance hereunder shall not create any right or
legal relationship whatsoever between the Reinsurer and
the policyholder, the insured or the beneficiary under
any policy reinsured hereunder. The Company shall be
and remain solely liable to the policyholder, the
insured or the beneficiary under any policy reinsured
hereunder.
RIGHT OF OFFSET: Both the Company and the Reinsurer shall have, and
may exercise, at any time the right to offset any
balance or balances due the other.
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Such offset may only include balances due under this
Agreement and any other agreements heretofore or
hereafter entered into between the Company and the
Reinsurer, regardless of whether such balances are in
respect of premiums, or losses or otherwise, and
regardless of the capacity of any party, whether as
reinsurer or reinsured, under the various agreements
involved.
SALVAGE,
SUBROGATION,
AND OTHER
RECOVERIES: In the event of the payment of any indemnity by the
Reinsurer under this Agreement, the Reinsurer shall
be subrogated, to the extent of such payment, to all
of the rights of the Company against any person or
entity legally responsible for damages for the losses
paid by the Company. The Company agrees to enforce
such rights, but in case the Company refuses or
neglects to do so, the Reinsurer is hereby authorized
and empowered to bring any appropriate action in the
name of the Company or the Company's policyholders or
otherwise to enforce such rights. In determining the
amount of salvage, subrogation and other recoveries,
there shall first be deducted from any amount
recovered the expenses incurred in effecting the
recovery. The whole of the balance shall then be
applied in reduction of the original losses paid by
the Company and the Covered Losses and the Experience
Balance shall be determined or redetermined
accordingly. Any overpayment made by the Reinsurer
because of the computation of loss before the
application of such a recovery shall be refunded
promptly by the Company but no later than three (3)
Business Days after receipt of notice of such
overpayment.
TAXES: The Company shall be liable for all taxes, except income
and profit taxes of the Reinsurer, on amounts paid to
the Reinsurer under the terms of this Agreement, and
shall indemnify and hold the Reinsurer harmless for any
taxes which the Reinsurer may become obligated to pay on
the Company's behalf.
DAC TAXES: The Company and the Reinsurer agree to elect jointly
under Treas. Reg. Section 1.848-2(g)(8) that:
(a) The party with the net positive consideration under
this Agreement is required to capitalize specified
policy acquisition expenses without regard to the
general deductions limitation of Section 848(c)(1)
of the Internal Revenue Code of 1986, as amended.
The first year for which the joint election is
effective is 1998.
(b) This joint election shall be effective for all
taxable years under this Agreement.
The parties agree to exchange information pertaining to
the amount of net consideration as determined under
Treas. Reg. Sections 1.848-
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2(f) or 1.848-2(g)(2) and 1.848-3, whichever is
applicable, under this Agreement to insure consistency
or as is otherwise required by the Internal Revenue
Service.
The parties agree to take all items of net consideration
into account for the same taxable year as required under
Treas. Reg. Section 1.848-2(f)(4). The parties also
agree to exchange such information as may be necessary
to implement this requirement.
The parties represent and warrant that they are subject
to U.S. taxation under subchapter L of chapter 1 of the
Internal Revenue Code.
DAC TAX
REIMBURSEMENT
AMOUNT: In addition to and simultaneously with any Contract
Payment under this Agreement, the party making the
payment agrees to pay the party receiving the payment
an amount to compensate the party receiving the
payment on an after-tax basis for any DAC tax
incurred. Under the current tax law, the amount
shall be X divided by Y where
X = The product of the Contract Payment multiplied by
7.7% multiplied by 95% multiplied by 35%, and
Y = 65% minus the product of 7.7% multiplied by 95%
multiplied by 35%.
The initial DAC Tax Reimbursement Amount corresponding
to the Contract Payment consisting solely of the
Reinsurance Premium is $10,845,433. If the Internal
Revenue Code is amended to change the DAC tax, the
formula for determining DAC Tax Reimbursement shall be
appropriately adjusted.
Commencing one year after the payment of any DAC Tax
Reimbursement Amount generated by a Contract Payment as
described above, the party that received such payment
shall pay the other party an amount so that on an
after-tax basis the other party is compensated for the
tax cost of the DAC amortization. Under current law a
party that made payment of a DAC Tax Reimbursement
Amount generated by a Contract Payment will be entitled
to receive payments of DAC Tax Reimbursement Amounts
equal to the product of the original DAC Tax
Reimbursement Amount multiplied bv 10% divided by 95% in
each of the nine years following the Contract Payment
and by 5% divided by 95% in the tenth year following
Contract Payment.
FEDERAL EXCISE
TAX: In the event that any Federal Excise Tax is due with
respect to any amounts due under this Agreement, the
Company agrees to pay such
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tax in addition to any amounts due under this Agreement
and agrees to remit such tax to the United States
Internal Revenue Service and shall indemnify and hold
the Reinsurer harmless for any such taxes which the
Reinsurer may become obligated to pay.
NO WAIVER: No consent or waiver, express or implied, by any
other party to or of any breach or default by any
other party in the performance of its obligations
hereunder shall be construed to be a consent or
waiver to or of any other breach or default in the
performance of obligations by such other party
hereunder. Failure on the part of any party to
complain of any act or failure to act of any other
party or to declare any other party in default,
irrespective of how long such failure continues,
shall not constitute a waiver by such first party of
its rights hereunder.
GOVERNING LAW: It is agreed that, subject to the express provisions of
this Agreement to the contrary, this Agreement shall be
governed by the substantive laws of the State of
Delaware, without regard to its principles of conflict
of laws.
REPRESENTATIONS: The Company acknowledges that, at the Reinsurer's
request, it has provided the Reinsurer with the Company
Data described in Schedule 1 prior to the execution of
this Agreement by the Reinsurer. The Company represents
that all factual information contained in the Company
Data is substantially complete and accurate as of the
date the document containing the information was
prepared. The Company further represents that any
assumptions made in preparing the Company Data were
based upon informed judgment and are consistent with
sound actuarial principles. The Company further
represents that it is not aware of any omissions,
errors, changes or discrepancies which would materially
affect the Company Data. The Reinsurer has relied on
such data and the foregoing representations in entering
into this Agreement.
WARRANTIES: The Company warrants that the Business Covered and
all agreements relating thereto shall not be amended
in any manner whatsoever without the prior and
express written consent of the Reinsurer.
CURRENCY: All payments hereunder shall be made in United States
Dollars. All monetary amounts herein are in United
States Dollars. All reports and accounts hereunder
shall be rendered in United States Dollars. For the
purpose of this Agreement, where the Company pays
amounts in currencies other than United States
Dollars, such amounts shall be converted into United
States Dollars at the actual rate of exchange at
which such amounts are entered in the Company's books.
DATES AND TIMES: All dates and times contained in this Agreement, unless
otherwise specified, are New York, New York time.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives, effective as of the 31st day of
December, 1998.
METROPOLITAN LIFE INSURANCE COMPANY
BY:
------------------------------------
Name:
------------------------------------
Title:
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
BY:
------------------------------------
Name:
------------------------------------
Title:
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EXHIBIT A
SCHEDULE 1
The Company Data includes the following information:
(A) The following e-mails and attachments thereto:
December 14, 1998 e-mail from ▇▇▇▇▇▇ ▇▇▇▇ to ▇▇▇▇ ▇▇▇▇, "Re: Revised
Traditional Ordinary Calendar Year Exposure and Paid Death Claims"
December 15, 1998 e-mail from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to ▇▇▇▇ ▇▇▇▇, "Trad Ord
Exposure"
December 22, 1998 e-mail from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to ▇▇▇▇ ▇▇▇▇, "Net amount at
risk basis data"
December 23, 1998 e-mail from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to ▇▇▇▇ ▇▇▇▇, "MetLife
Business Definition"
December 23, 1998 e-mail from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to ▇▇▇▇ ▇▇▇▇, "Re:
MetLife Business Definition"
December 23, 1998 e-mail from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to ▇▇▇▇ ▇▇▇▇, "9 mos of
1998, exposure by attained age and sex"
December 28, 1998 e-mail from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to ▇▇▇▇ ▇▇▇▇, "Metromatic &
COLI"
December 28, 1998 e-mail from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to ▇▇▇▇ ▇▇▇▇, "9 mos 1998
exposure and death experience"
(B) The following facsimile transmission:
December 14, 1998 facsimile from ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ to ▇▇▇▇ ▇▇▇▇, "Re
Information on Traditional Ordinary Large-sized Policies