EXHIBIT 99(g)(1)
Variable Universal Life
Reinsurance Agreement
(No. 112-0104-VUL)
Between
COUNTRY INVESTORS
LIFE ASSURANCE COMPANY
of Bloomington, Illinois
(referred to as you, your or Reinsured)
and
EQUITRUST LIFE
INSURANCE COMPANY
Of
West Des Moines, Iowa
(referred to as we, us, our or Reinsurer)
(REFERRED TO JOINTLY AS THE CONTRACTING COMPANIES AND SEPARATELY AS EACH COMPANY
OR EITHER COMPANY)
CONTENTS
ARTICLES
I Automatic Reinsurance 3
II Liability 3
III Plan and Amount of Insurance 4
IV Payments to Reinsurer 4
V Payments by Reinsurer 4
VI Reporting 5
VII Deposits of the Reserve 5
VIII Interest Credit on Modified Coinsurance Reserve
and Modified Coinsurance Reserve Adjustment 6
IX Account Payable Liability and Reserve Basis 6
X Segregated Assets 6
XI General Provisions 7
XII Reinstatement 10
XIII Recapture 10
XIV Arbitration 10
XV Interest Credited on the Certificates 11
XVI Duration of Agreement 12
XVII Modification of Allowances and Product Design 13
XVIII Execution 14
SCHEDULES
Schedule A Business Reinsured 15
Schedule B Basis of Reinsurance 16
Schedule C Settlement Report 17
Schedule D Commission and Expense Allowances 19
Schedule E Financial Reporting 21
Schedule F Interest Credit on Modified Coinsurance Reserve 22
Schedule G Modified Coinsurance Reserve Adjustment and
Account Payable Liability 24
Schedule H Credited Interest Rate 25
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ARTICLE I
AUTOMATIC REINSURANCE
1. Insurance. You will cede and we will accept as reinsurance the certificates
written by you as shown in Schedule A.
2. Coverages. The certificates reinsured in Schedule A are the Individual
Flexible Premium Variable Universal Certificates issued on or after
January 1, 2004. Reinsurance will be limited in percentage as provided in
Schedule B.
ARTICLE II
LIABILITY
1. Liability. Our liability for any reinsurance under this Agreement begins
upon the effective date of this Agreement as set forth in Article XVIII,
Execution, and ends after all certificates reinsured have been terminated
or recaptured. Our liability to you under this Agreement will be coexisting
with your liability under the certificates reinsured.
2. Our liability will be settled and paid to you for each reporting period on
the basis of the quarterly reports you prepare in the form of Schedule C.
Payment of any amount due to be paid by either company will be determined
on a net basis and shall be paid within ten (10) business days after
receipt of the report.
3. This is a contract solely between the contracting parties. Our obligations
under this contract are solely to you and your obligations are solely to
us.
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ARTICLE III
PLAN AND AMOUNT OF INSURANCE
1. Plan. Reinsurance under this Agreement will be on the basis specified in
Schedule B, in accordance with the certificate forms you issue as listed in
Schedule A.
2. Reduction and Terminations. If any of the certificates reinsured under this
Agreement are reduced or terminated by payment of a death benefit,
withdrawal or surrender, the reinsurance will be reduced proportionately.
ARTICLE IV
PAYMENTS TO REINSURER
1. The premium to be paid to us by you with respect to each certificate
reinsured, as specified in Schedule A, will be our quota share percentage,
as specified in Schedule B, of the gross premium corresponding to the
portion of the certificate included under this reinsurance agreement.
2. You will pay to us our quota share percentage of the Administrative
Services Fees which are paid to you through the Administrative Services
Agreements with the underlying fund companies.
3. You will pay to us our quota share percentage of any gain due to
as-of-processing.
ARTICLE V
PAYMENTS BY REINSURER
1. Benefits
We will pay you our quota share of:
(a) the Death Benefits you pay,
(b) the Surrender Values you pay,
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(c) the Withdrawal Benefits you pay, and
(d) the Free-look refunds.
2. Commission and Expense Allowances. We will pay you our quota share of the
commission and expense allowances as outlined in Schedule D.
3. As-of-processing. We will pay to you our quota share percentage of any loss
due to as-of-processing.
4. Compliance and Accounting Fees. We will pay to you our quota share
percentage of the compliance and accounting fees as billed.
5. Other Expenses. We will pay to you our quota share percentage of the Other
Expenses as billed.
ARTICLE VI
REPORTING
1. You will provide us with information necessary to properly account for the
business reinsured. The reporting period shall be as specified in
Schedule E.
2. Not later than twenty (20) days after the end of each reporting period, you
will submit a report substantially in accordance with Schedule C. You agree
to provide or make available to us such documentation as may be necessary
to support the items reported.
3. Not later than twenty (20) days after the end of each reporting period, you
will submit reports substantially in accordance with Schedules F and G.
4. Not later than thirty (30) days after the end of each reporting period, you
will submit a report substantially in accordance with Schedule E.
ARTICLE VII
DEPOSITS OF THE RESERVE
1. We will deposit with you our quota share percentage of the reserves for the
business reinsured under this Agreement.
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2. For the purpose of this Article, reserves are defined to be the total
Accumulated Value of the certificates reinsured.
ARTICLE VIII
INTEREST CREDIT ON MODIFIED COINSURANCE RESERVE
AND MODIFIED COINSURANCE RESERVE ADJUSTMENT
1. We will receive an interest credit on the modified coinsurance reserve. The
amount of the credit will be determined as set forth in Schedule F.
2. You will receive a modified coinsurance reserve adjustment. The amount of
the adjustment will be determined as set forth in Schedule G.
3. Both the interest credit and the reserve adjustment will be made at the end
of each reporting period.
ARTICLE IX
ACCOUNT PAYABLE LIABILITY AND RESERVE BASIS
1. You will set up an Account Payable liability in your financial statements
equal to the difference between the total Accumulated Value of the
reinsured certificates and the total Statutory Reserve of the certificates.
The amount will be determined as set forth in Schedule G. We will set up an
Account Receivable asset equal to the Account Payable liability you set up.
2. For purposes of Section 1 of this Article, you will calculate the Statutory
Reserve according to the "Commissioner's Reserve Valuation Method" as
prescribed in the Standard Valuation Law as approved by applicable state
laws and regulations.
ARTICLE X
SEGREGATED ASSETS
1. The assets held in support of the DIO reserves shall be segregated in such
a way as to comply with applicable regulations.
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ARTICLE XI
GENERAL PROVISIONS
1. Reinsurance Conditions. The reinsurance is subject to the same terms,
limitations and conditions as the insurance under the certificate or
certificates written by you on which the reinsurance is based.
2. Obligations Created by Underlying Certificates. All claims made on the
underlying certificates, when settled by you in good faith will be binding
on us. We will be bound to pay our quota share percentage of such
settlements and our quota share percentage of expenses incurred in the
investigation and settlement of claims or suits. You will advise us
promptly of such obligations as they become known to you.
If you are required by applicable state law to pay interest from a
specified date, such as the date of death of an insured, on the contractual
benefit of an underlying certificate, we will be bound to pay our quota
share percentage of such interest.
You will give us prompt notice of any claim submitted on any underlying
certificate and prompt notice of any legal proceedings as they become known
to you. You will furnish to us copies of documents bearing on such claims
or legal proceedings upon request.
You must promptly notify us of your intent to contest insurance reinsured
under this Agreement or to assert defenses to a claim for such insurance.
If we agree to participate in and share the expenses of the contest or
assertion of defenses, and if your contest of such insurance results in the
reduction of liability, we will share in this reduction. Our percentage of
the reduction will be our quota share percentage. If we should decline to
participate in the contest or assertion of defenses, we will then be
released of all our liability by paying you the full amount of reinsurance
and not sharing in any subsequent reduction in liability.
3. Extra-Contractual Damages. In no event will we have any liability for any
Extra-Contractual Damages which are rendered against you as a result of
acts, omissions or course of conduct committed by you, unless we or one of
our affiliated companies were an active party in the act, omission or
course of conduct which ultimately resulted in the assessment of such
damage in connection with the insurance reinsured under this Agreement.
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We recognize that circumstances may arise under which we, in equity, should
share, to the extent permitted by law, in paying certain assessed damages.
Such circumstances are difficult to define in advance, but involve those
situations in which we were an active party in the act, omission or course
of conduct which ultimately resulted in the assessment of such damages. The
extent of such sharing is dependent on good faith assessment of culpability
in each case, but all factors being equal, the division of any such
assessment would be in proportion to what impact our action, omission, or
course of conduct had on such damages.
4. Errors and Omissions. Any inadvertent delay, omission or error will not
relieve either contracting company from any obligation which would attach
to it hereunder if such delay, omission or error is rectified immediately
upon discovery. Such rectification will include, but not be limited to, any
cost necessary to restore the non-erring company to the position it would
have occupied had the error not occurred.
5. Misstatement of Age or Sex. In the event that any obligation arising from
an underlying certificate is increased or reduced because of a misstatement
of age or sex of an insured, our liability with regard to that underlying
certificate will be increased or reduced accordingly. Any adjustment in
reinsurance premium will be made on the same basis as the underlying
certificate.
6. Inspection. At any reasonable time and with reasonable notice, the
contracting companies or their duly authorized representatives may inspect
the original papers and any other books or documents at the Home Office of
the other relating to or affecting reinsurance under this Agreement.
7. Confidentiality. It is mutually agreed by the contracting companies that
any information, documentation and reports that are made available for
inspection under this Agreement will be kept confidential and under no
circumstances may the information, documentation and reports be disclosed
to, or made available for inspection by any third party unless required by
law, regulation, a self-regulatory organization or mandated by court order,
without the prior consent of the other contracting company, which should
not be unreasonably withheld. In the event that confidential information is
required to be disclosed under one of the above circumstances, the
disclosing company will promptly give written notice of the disclosure to
the other company.
8. Choice of Law. If any provision of this Agreement is held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this
Agreement will not be affected
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thereby. This Agreement will be construed and enforced in accordance with
the applicable federal law and the laws of the state of
Iowa.
9. Insolvency of the Reinsured. In the event of your declared insolvency, and
the appointment of a domiciliary liquidator, receiver, conservator or
statutory successor for you, this reinsurance shall be payable immediately
upon demand, with reasonable provision for verification, directly to you or
your domiciliary liquidator, receiver, conservator or statutory successor,
on the basis of your liability without diminution because of your
insolvency or because your liquidator, receiver, conservator or statutory
successor has failed to pay all or a portion of any claim.
Every liquidator, receiver, conservator or statutory successor of yours
shall give us written notice of the pendency of a claim involving you
indicating which of the certificates would involve possible liability on
the part of us or to you or your domiciliary liquidator, receiver,
conservator or statutory successor, within a reasonable amount of time
after the claim is filed in the conservation, liquidation or other
proceeding.
During the pendency of any claim, we may investigate the same and
interpose, at our own expense, in the proceeding where that claim is to be
adjudicated, any defense or defenses that we may deem available to you, to
your certificate holder, or to any liquidator, receiver or statutory
successor of yours. The expenses thus incurred by us will be chargeable,
subject to approval of the applicable court, against you as part of the
expense of conservation or liquidation to the extent of a pro rata share of
the benefit which may accrue to you as a result of the defense undertaken
by us.
This reinsurance shall be payable directly by us to you or to your
domiciliary liquidator, receiver, conservator or statutory successor,
except as expressly required otherwise by applicable insurance law.
10. Insolvency of the Reinsurer. In the event of the insolvency, bankruptcy,
receivership, rehabilitation or dissolution of the Reinsurer, you may
retain all or any portion of any amount then due or which may become due to
the Reinsurer under this Agreement and use such amounts for the purposes of
paying any and all liabilities of the Reinsurer incurred under this
Agreement. When all such liability hereunder has been discharged, you shall
pay the Reinsurer, its successor or statutory receiver, the balance of such
amounts withheld as may remain.
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11. Offset. We and you shall consider any balance due and unpaid, whether on
account of premiums, allowances, losses or claims expenses, to be mutual
debts or credits under this Agreement and will offset, if permitted under
the applicable law. Only the balance will be considered in determining your
or our liability under this Agreement.
12. Entire Agreement; Modification. This Agreement constitutes the entire
agreement between the contracting companies regarding the subject matter of
this Agreement. This Agreement cannot be modified or amended except by
written instrument executed by both contracting companies.
ARTICLE XII
REINSTATEMENT
1. If a certificate lapses due to nonpayment of premiums and is reinstated
under your terms and rules, we will reinstate the reinsurance. You must pay
us any back reinsurance premiums in the same manner as you receive
insurance premiums under each reinstated certificate.
ARTICLE XIII
RECAPTURE
1. Business reinsured under this Agreement will not be eligible for recapture
before 20 years.
ARTICLE XIV
ARBITRATION
1. It is the intention of the contracting companies that the customs and
practices of the insurance and reinsurance industry will be given full
effect in the operation and interpretation of this Agreement. The
contracting companies agree to act in all things with the utmost good
faith. If the contracting companies cannot mutually resolve a dispute
arising out of or relating to this Agreement, however, the dispute will be
decided through arbitration, as set forth below. The arbitrators will base
their decision on the terms and conditions of this
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Agreement plus, as necessary, on the customs and practices of the insurance
and reinsurance industry rather than solely on a strict interpretation of
applicable law.
2. Any controversy or claim arising out of or relating to this Agreement will
be settled by arbitration.
3. There must be three arbitrators who will be active, former or retired
officers of life insurance companies other than the contracting companies
or their subsidiaries or affiliates. Each of the contracting companies will
appoint one of the arbitrators and these two arbitrators will select the
third.
In the event either company fails to choose an arbitrator within thirty
(30) days after the other company has given written notice of its
arbitrator appointment, the company which has given written notice may
choose two arbitrators who will, in turn, choose a third arbitrator before
entering arbitration. If the two arbitrators are unable to agree upon the
selection of a third arbitrator within thirty (30) days following
appointment, each arbitrator will nominate three candidates within ten days
thereafter. The final selection will be made by a court of competent
jurisdiction from among the six names submitted by the arbitrators.
4. With regard to (3) above, arbitration must be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association
that will be in effect on the date of delivery of demand for arbitration.
5. The contracting companies will pay their respective arbitrator and
arbitration expenses. The contracting companies will share the third
arbitrator's expenses equally.
6. The award agreed upon by the arbitrators will be final and binding upon the
contracting companies, with judgment entered in any court having
jurisdiction.
ARTICLE XV
INTEREST CREDITED ON THE CERTIFICATES
1. First year and renewal interest crediting rates for the Declared Interest
Option of the certificates shall be set in accordance with the provisions
of Schedule H.
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ARTICLE XVI
DURATION OF AGREEMENT
1. This Agreement shall be for an Initial Term of five years. Prior to the
completion of the Initial Term, this Agreement may be terminated with
respect to the submission or acceptance of new certificates if there has
been a breach or default in the performance of any material covenant or
obligation of this Agreement and failure to cure or remedy such breach or
default within one hundred and eighty (180) days of the date on which
notice of such breach or default and intent to terminate is received, or
such longer period as may be specified in such notice. Notice under this
provision will be made by certified mail, overnight delivery or hand
delivery with proof of receipt.
2. After the Initial Term, submission or acceptance of new business under this
Agreement may be terminated at any time by either company giving one
hundred and eighty (180) days written notice of termination. Notice under
this provision will be made by certified mail, overnight delivery or hand
delivery with proof of receipt.
3. During the one hundred and eighty (180) day period after notice of
termination pursuant to paragraphs 1 and 2 of this Article XVI, this
Agreement will continue to be in force.
4. After termination, the contracting companies are liable under the terms of
this Agreement for all underlying certificates that became effective prior
to termination of this Agreement. After termination, the contracting
companies are liable for reinsuring any underlying certificate that has an
application date on or before the effective date of the termination.
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ARTICLE XVII
MODIFICATION OF ALLOWANCES AND PRODUCT DESIGN
1. All reinsurance premium rates and reinsurance expense allowances specified
in this Agreement will be guaranteed until April 1, 2005
2. After April 1, 2005 the contracting parties shall annually review the
actual acquisition and maintenance expense experience to determine if any
modifications to the reinsurance expense allowances as shown on Schedule D
are required. Any such changes to the allowances would reflect the change
in the actual expense experience as consistently allocated. Also, any
changes would reflect the intention of the contracting parties to share the
expenses consistent with the quota share percentage shown in Schedule B.
The revised expense allowances would apply to all business.
3. Requested product modifications will be implemented only upon mutual
agreement. During the Initial Term of this Agreement, if new terms are not
mutually agreed to within one hundred and eighty (180) days after the date
the proposal of the new product design changes is made, the contracting
parties agree to resolve any dispute about proposed or requested
modifications of product design by arbitration pursuant to Article XIV of
this Agreement. After the Initial Term, if new terms are not mutually
agreed to within one hundred and eighty (180) days after the date any
product design changes are proposed, this Agreement will terminate.
4. Nothing in this Agreement will be construed as limiting the right of either
company to request the redesign of the products reinsured under this
treaty. Examples of reasons that might cause us to request such a redesign
include, but would not be limited to: adjusting pricing to take into
account emerging experience that is more favorable than that assumed in the
pricing; adjusting pricing to compensate for any adverse deviations from
pricing assumptions; or accommodating new financial objectives.
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ARTICLE XVIII
EXECUTION
In witness of the above, this Agreement is signed in duplicate at the dates and
places indicated and shall be effective as of January 1, 2004
EquiTrust Life Country Investors Life
Insurance Company Assurance Company
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on ___________________, 20__ on ___________________, 20__
By: By:
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SCHEDULE A
BUSINESS REINSURED
1. The insureds must be residents of the United States and issue age 80 or
under.
2. FORM NAME AND TYPE FORM NUMBER
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