Exhibit (g)(iii)
REINSURANCE AGREEMENT
(hereinafter called the Agreement)
Reference No. SEL01-YA
between
SECURITY EQUITY LIFE INSURANCE COMPANY
Armonk, New York
(hereinafter called CEDING COMPANY)
and
▇▇▇▇▇▇▇ GLOBAL LIFE INSURANCE CEDING COMPANY
U.S. Branch, Los Angeles, California
(hereinafter called REINSURER)
Effective: April 1, 1996
This Agreement consists of Articles, Schedules and Exhibits which must be read
in conjunction with each other to determine the respective rights and
obligations of parties to this Agreement.
March 27, 1996 Page 1
TABLE OF CONTENTS
COVER .......................................................................... 1
ARTICLE I - BASIS OF AGREEMENT ................................................. 2
ARTICLE II - AUTOMATIC REINSURANCE ............................................. 2
ARTICLE III - FACULTATIVE PROVISIONS ........................................... 3
ARTICLE IV - PROCEDURES......................................................... 4
ARTICLE V - NOTIFICATION OF REINSURANCE ........................................ 4
1. Automatic Reinsurance ............................................ 4
2. Facultative Reinsurance .......................................... 4
ARTICLE VI - REINSURANCE PREMIUMS, ALLOWANCES AND
PREMIUM TAXES ............................................................... 5
ARTICLE VII - REINSURANCE ADMINISTRATION AND REPORTS ........................... 5
ARTICLE VIII - CURRENCY ........................................................ 6
ARTICLE IX - DAC TAX ........................................................... 6
ARTICLE X - CHANGES ............................................................ 7
1. Reductions and Terminations....................................... 7
2. Reinstatements.................................................... 8
a. Automatic Coverage ....................................... 8
b. Facultative Coverage ..................................... 8
3. Continuations .................................................... 8
ARTICLE XI - RECAPTURE ......................................................... 9
ARTICLE XII - CLAIMS ........................................................... 10
ARTICLE XIII - EXTRA-CONTRACTUAL DAMAGES ....................................... 10
ARTICLE XIV - NAIC STATEMENT OF CREDIT ......................................... 11
ARTICLE XV - LETTER OF CREDIT OR DEPOSITS ...................................... 11
ARTICLE XVI - ERRORS AND OMISSIONS ............................................. 13
ARTICLE XVII - INSPECTION OF RECORDS ........................................... 14
ARTICLE XVIII - INSOLVENCY ..................................................... 14
ARTICLE XIX - OFFSET ........................................................... 15
ARTICLE XX - ARBITRATION ....................................................... 15
ARTICLE XXI - PARTIES TO AGREEMENT ............................................. 16
ARTICLE XXII - ASSIGNMENT AND TRANSFER ......................................... 16
ARTICLE XXIII - EFFECTIVE DATE AND DURATION OF THE AGREEMENT ................... 17
ARTICLE XXIV - MISCELLANEOUS PROVISIONS ........................................ 17
ARTICLE XXV - EXECUTION OF AGREEMENT ........................................... 18
SCHEDULE A - SPECIFICATIONS .................................................... 19
SCHEDULE B - METHOD OF REINSURANCE ............................................. 21
SCHEDULE C - RETENTION LIMITS OF THE CEDING COMPANY ............................ 22
SCHEDULE D - REINSURANCE PREMIUMS............................................... 23
ADMINISTRATION SCHEDULE ........................................................ 25
ARTICLE I - BASIS OF AGREEMENT
1. Reinsurance required by the CEDING COMPANY on the coverages described
in Schedule A will be accepted automatically by the REINSURER subject
to the provisions of Article II.
2. The CEDING COMPANY may choose to submit any coverage for facultative
review subject to the provisions described in Article III.
3. The method of reinsurance used for the various coverages will be as
stated in Schedule B.
4. This Agreement, together with all schedules and exhibits attached
hereto or referenced herein, represents the entire agreement between
the CEDING COMPANY and the REINSURER and supersedes, with respect to
its subject matter, any prior oral or written agreements between the
parties to this Agreement.
5. Any alteration to this Agreement shall be null and void unless made by
a written amendment to this Agreement and signed by both parties.
6. In no event shall reinsurance under this Agreement be in force and
binding unless (i) the underlying insurance is in force, (ii) the
marketing, issuance, and delivery of such insurance are in compliance
with the laws of all applicable jurisdictions and (iii) the CEDING
COMPANY is in compliance with all applicable terms, provisions and
conditions of this Agreement.
7. This Agreement shall not apply to any liability of the CEDING COMPANY
arising from its participation or membership in any insolvency or
insurance guaranty fund.
8. Nothing in this Agreement shall prevent the REINSURER from ceding all
or any portion of its liability hereunder to another reinsurer or
retrocessionaire.
ARTICLE II - AUTOMATIC REINSURANCE
1. The CEDING COMPANY shall cede and the REINSURER shall automatically
reinsure those risks described in Schedule A that meet the following
requirements:
a. The CEDING COMPANY will retain its maximum limit of retention
per life for the age and risk classification of the insured,
as shown in Schedule C. If the CEDING COMPANY has previous
retention on that particular life on a policy currently in
force, the maximum retention per life shall be reduced by that
amount.
b. The amount ceded to the REINSURER on the life does not exceed
the automatic binding limits shown in Schedule A.
March 27, 1996 Page 2
c. The issue age and mortality rating or its equivalent on a flat
extra premium basis of the life does not exceed the limits
stated in Schedule A.
d. The total insurance already in force on the life in any
insurance company plus the insurance currently being applied
for, as shown on the application does not exceed the Jumbo
Limit as shown in Schedule A.
e. The life has not been offered on a facultative basis to the
REINSURER or any other reinsurer.
2. The liability of the REINSURER for automatic reinsurance will be as
follows:
a. Once the policy has been placed, the liability of the
REINSURER will begin and end at the same time as that of the
CEDING COMPANY, subject to the terms, conditions and
limitations stated in this Agreement.
b. Prior to placement of the policy, and provided the risk meets
the automatic requirements, the liability of the REINSURER is
limited to:
l. the CEDING COMPANY's liability under the policy's
conditional receipt or temporary insurance agreement,
less
2. the CEDING COMPANY's maximum retention for the age
and sex of the insured had it been classified as a
standard risk.
3. In no case shall the REINSURER's liability exceed the
automatic binding limit as shown in Schedule A.
ARTICLE III - FACULTATIVE PROVISIONS
1. The CEDING COMPANY may submit for facultative consideration any of the
coverages described in Schedule A, that do not qualify for automatic
reinsurance, or that the CEDING COMPANY prefers to submit
facultatively.
2. To apply for reinsurance on a facultative basis, the CEDING COMPANY
will complete and send to the REINSURER the Reinsurance Application
Form attached as Exhibit 2, along with all underwriting papers relating
to the insurability of the risk. The REINSURER will immediately examine
the papers and promptly make a written offer to the CEDING COMPANY.
3. If the CEDING COMPANY accepts the offer from the REINSURER and the
policy is subsequently placed, the CEDING COMPANY shall advise the
REINSURER in accordance with Article - Notification of Reinsurance.
March 27, 1996 Page 3
4. All offers of reinsurance made by the REINSURER will automatically
terminate 120 days from the date on which the offer was made, unless
the REINSURER has extended the offer in writing for a further period.
5. The liability of the REINSURER on any facultative reinsurance shall
begin and end at the same time as that of the CEDING COMPANY, provided
that:
a. The REINSURER has given the CEDING COMPANY an unconditional
offer to reinsure, and
b. The CEDING COMPANY has notified the Reinsurer in writing of
its acceptance of such offer.
ARTICLE IV - PROCEDURES
1. The CEDING COMPANY shall submit to the REINSURER copies of the
application forms for life insurance, conditional receipt or temporary
insurance agreement, policy and rider forms, premium and non-forfeiture
value manuals, underwriting guidelines and practices, reserve and cash
value tables applicable to the life reinsured, and any other document
that might affect the liability of the REINSURER under this Agreement.
2. Any change to the above documents or the underlying insurance, such as
contractual provisions or options, premium rates, benefits,
underwriting guidelines and practices that have been described to the
REINSURER will be communicated to the REINSURER. The REINSURER shall
then confirm in writing its agreement with such changes and confirm
that it will continue the reinsurance at the same terms or at new
reinsurance terms subject to negotiation.
ARTICLE V - NOTIFICATION OF REINSURANCE
The CEDING COMPANY will advise the REINSURER that it is being bound as follows:
1. AUTOMATIC REINSURANCE
The CEDING COMPANY will send a report listing the new business with all
the relevant risk identification and reinsurance particulars as shown
in the Administration Schedule.
2. FACULTATIVE REINSURANCE
The CEDING COMPANY will complete and send to the REINSURER, within 30
days after the policy has been placed, a "Reinsurance Cession" as shown
in Exhibit 2, with all the relevant risk identification and reinsurance
particulars.
March 27, 1996 Page 4
ARTICLE VI - REINSURANCE PREMIUMS, ALLOWANCES AND PREMIUM TAXES
1. For each risk ceded the CEDING COMPANY will pay to the REINSURER
reinsurance premiums less allowances as stated in Schedule D.
2. The reinsurance premiums may be increased for any plan provided that
the REINSURER's experience shows a loss since inception of this
Agreement or over the prior two years, whichever is less. At least 180
days written notice is required of the proposed increase prior to the
effective date of the increase.
In the event the CEDING COMPANY is unwilling to accept the increase for
any reason, the CEDING COMPANY may, at their sole discretion, convey to
the REINSURER within 30 days of the effective date of this increase,
that it wishes to take one of the following actions, notwithstanding
anything to the contrary stated elsewhere in this Agreement:
a. Increase its retention for that plan and recapture business
under that plan up to the amount of the new retention and
accept the increased rates for the remainder.
b. Recapture all of the business under such plan from the
REINSURER.
c. Any other alternative, including the transfer of reinsurance
to another carrier.
3. If the insured's age or sex was misstated and the amount of insurance
on the CEDING COMPANY's policy is adjusted after death, the CEDING
COMPANY and the REINSURER will share the adjustment in proportion to
the amount of liability of each at the time of issue of the policy. The
reinsurance premiums will be recalculated for the correct age or sex
and new reinsured amount and adjusted without interest. If the insured
is still alive, the method above will be adjusted for the future to the
amount that would have been correct at issue.
4. Premium tax reimbursement shall be as stated in Schedule D.
ARTICLE VII - REINSURANCE ADMINISTRATION AND REPORTS
1. The reinsurance under this Agreement shall be administered as described
in the Administration Schedule attached hereto.
2. If any reinsurance premium is not paid when due as shown in the
Administration Schedule, the REINSURER may terminate the corresponding
reinsurance upon 60 days prior written notice to the CEDING COMPANY.
The unpaid premiums shall earn interest at the same rate as paid by the
CEDING COMPANY on delayed payment of claims, compounded annually, from
the due date to the date of payment. However, if all overdue premiums,
plus interest, are paid within the notice period, the reinsurance will
not terminate.
March 27, 1996 Page 5
3. Reinsurance terminated in accordance with the preceding paragraph, may
be reinstated by the CEDING COMPANY by paying all overdue premiums,
plus interest, within 60 days from the date of termination and provided
the policies in question are in force. The REINSURER, however shall not
be liable for any claims incurred while the reinsurance was terminated.
4. After termination the CEDING COMPANY shall continue to be liable to the
REINSURER for all unpaid reinsurance premiums earned by the REINSURER,
less the applicable allowances, plus interest.
ARTICLE VIII - CURRENCY
All transactions and payments under this Agreement shall be effected in U.S.
dollars.
ARTICLE IX - DAC TAX
1. Pursuant to Section 1.848-2(g)(8) of the Income Tax Regulations issued
December 29, 1992, under Section 848 of the Internal Revenue Code of
1986, as amended, the Party with the net positive consideration for the
Agreement for each taxable year will capitalize specified policy
acquisition expenses with respect to the Agreement without regard to
the general deductions limitation of Section 848(c)(1).
2. The parties agree to exchange information pertaining to the amount of
net consideration as determined for the Agreement each year to ensure
consistency or as may otherwise be required by the Internal Revenue
Service.
3. By April I of each tax year, the party administering the business under
the Agreement shall submit to the other party its calculation of the
net consideration for the preceding calendar year. This calculation
shall be accompanied by a statement signed by an officer of the
submitting party declaring that this party will report such net
consideration in its tax return for the previous calendar year.
4. The other party may contest said calculation by, within thirty (30)
days of its receipt of same, providing to the submitting party in
writing an alternative calculation. If the other party does not so
notify the submitting Party, the other party shall report in its tax
return for the previous year the net consideration as determined by the
submitting Party.
March 27, 1996 Page 6
5. If the other party contests said calculation, the parties shall act in
good faith to reach an agreement on the correct net consideration
within thirty (30) days of the date that the other party provides its
alternative calculation. If the parties reach an agreement on a net
consideration amount, each party shall report such amount in their
respective tax returns for the previous calendar year.
6. The parties each represents that it is subject to taxation under
subchapter L or subpart F of part III of subchapter N of Chapter l of
the Internal Revenue Code of 1986, as amended. The terms used herein
are defined by reference to Regulation Section 1.848-2 in effect as of
December 29, 1992.
ARTICLE X - CHANGES
1. REDUCTIONS AND TERMINATIONS
a. If the face amount of the insurance with the CEDING COMPANY is
reduced, the full amount-of the reduction will reduce the
reinsurance on the life. If the insurance is terminated, the
reinsurance will be terminated as of the same date.
b. If there is more than one policy on the life, the reinsurance
will be first reduced on the reduced or terminated policy and
the balance will then reduce the reinsurance on the other in
force policies on the life on a chronological basis, with the
oldest policy being reduced first.
c. If the reinsurance has been ceded to more than one reinsurer,
the reduction applied to the REINSURER's cession will be in
proportion to the reduction in the total reinsurance.
d. If reinsurance premiums have been paid for the period beyond
the reduction or cancellation date, the REINSURER will refund
those premiums, less allowances and premium taxes if
applicable.
e. Reductions in the amount of insurance resulting from the
application of a non-forfeiture provision, such as extended
term insurance (ETI) or reduced paid-up insurance (RPU) will
be allocated to the REINSURER in proportion to its share of
the amount of insurance prior to the reduction.
March 27, 1996 Page 7
2. REINSTATEMENTS
a. AUTOMATIC COVERAGE
The reinsurance of a policy reinstated by the CEDING COMPANY
in accordance with its terms and the CEDING COMPANY's usual
reinstatement practices and procedures, shall be automatically
reinstated as of the date of reinstatement.
b. FACULTATIVE COVERAGE
Reinstatement of the reinsurance on policies ceded to the
REINSURER on a facultative basis will require prior written
approval of the REINSURER.
Upon reinstatement the CEDING COMPANY shall pay to the REINSURER all
reinsurance premiums that would have been paid if such reinsurance had
not been terminated, plus interest at the same rate charged by the
CEDING COMPANY.
3. CONTINUATIONS
a. Continuation will be defined as a change to or a new policy
replacing a policy issued earlier by the CEDING COMPANY (the
original policy) that:
1. was issued in compliance with the terms of the
original policy, or
2. is not subject to new business underwriting, or
3. does not have a new suicide exclusion or contestable
period, or
4. on which the CEDING COMPANY does not pay a new
business commission.
b. Continuations will be reinsured under this Agreement only if
the original policy was reinsured with the REINSURER; the
amount of reinsurance for the new or changed policy shall not
exceed the amount of reinsurance of the original policy
immediately prior to the continuation.
c. If a new policy is issued, the liability of the REINSURER
under the new policy shall begin immediately after the
termination of the liability of the REINSURER under the
original policy.
March 27, 1996 Page 8
ARTICLE XI - RECAPTURE
1. If the CEDING COMPANY increases its regular retention limits, it has
the option of reducing reinsurance under this Agreement, provided it:
a. has applied the increase in retention in a consistent manner
to all categories of its regular retention limits;
b. notifies the REINSURER in writing of its intention to start
the recapture process within 90 days after the effective date
of the increase in retention; and
c. reduces all reinsurance eligible for recapture, including any
supplementary benefits.
2. If the CEDING COMPANY decides to recapture, then it can recapture those
risks where:
a. the CEDING COMPANY has kept its maximum retention limit on
that life for the plan, age and mortality rating at the time
the policy was issued; and
b. the reinsurance on that risk has been in force with the
REINSURER for at least the number of years stated in Schedule
D.
3. The CEDING COMPANY will effect the recapture as follows:
a. The CEDING COMPANY will reduce the reinsurance on the policy's
next anniversary.
b. The REINSURER's share of the reduction will be in proportion
to its share of the total reinsurance on the life.
c The CEDING COMPANY will reduce the reinsurance by an amount
equal to the difference between the CEDING COMPANY's new
retention per life and the retention in existence at the time
the policy was issued or last recaptured.
d. If waiver of premium disability is reinsured under this
Agreement and there is an active claim for waiver of premium
disability on that life, the life reinsurance will be
recaptured, but the claim will remain with the REINSURER until
it terminates, at which time the disability insurance will
also be recaptured.
4. If the CEDING COMPANY overlooks the recapture of any reinsurance and
the REINSURER subsequently accepts reinsurance premiums on such
reinsurance, the REINSURER will only be liable for the refund of
unearned premiums, less any allowances and premiums taxes if
applicable, without interest.
March 27, 1996 Page 9
ARTICLE XII - CLAIMS
l. In the case of a claim under a policy reinsured under this Agreement,
the settlement made by the CEDING COMPANY shall be binding on the
REINSURER; however, if fifty percent or more of any particular case is
reinsured by the REINSURER and is contestable, the REINSURER shall be
consulted before any admission of liability on the claim is made by the
CEDING COMPANY.
2. The CEDING COMPANY shall furnish the REINSURER with copies of the
proofs of loss and any information the REINSURER may request.
3. The REINSURER will pay its share in a lump sum to the CEDING COMPANY
without regard to the form of claim settlement of the CEDING COMPANY.
4. The REINSURER shall share in the expense of any contest or compromise
of a claim in the same proportion that the net amount at risk reinsured
with the REINSURER bears to the total net risk of the CEDING COMPANY
with respect to the claim and shall share in the total amount of any
savings in the same proportion.
5. The REINSURER may choose to participate in unusual expenses, defined as
all expenditures made by the CEDING COMPANY in disposition of claims,
including allocated investigation, adjustment and legal expenses, court
costs and accrued interest. Compensation of salaried officers and
employees of the CEDING COMPANY shall not be considered claims expense.
6. Participation in accrued interest by the REINSURER shall be in
accordance with the applicable state statutory regulations.
7. The REINSURER may choose to discharge its liability by payment of the
full amount of reinsurance to the CEDING COMPANY.
ARTICLE XIII - EXTRA-CONTRACTUAL DAMAGES
1. The REINSURER shall not be liable for punitive, exemplary, compensatory
or consequential damages or for any portion of noncontractual damages
assessed against the CEDING COMPANY assessed on the basis of fault or
wrongdoing on the part of the CEDING COMPANY, its agents or
representatives unless the REINSURER shall have been made aware of and
shall have concurred in writing to the acts or omissions giving rise to
such damages; in which case the REINSURER will pay its proportionate
share of such damages.
March 27, 1996 Page 10
2. Unless expressly concurred to in writing by the REINSURER, expenses of
any contest or compromise referred to in Paragraph 4 and 5 of Article
XII shall not include expenses incurred in defending against punitive
or noncontractual damages assessed against the CEDING COMPANY.
ARTICLE XIV - NAIC STATEMENT OF CREDIT
1. In the event the REINSURER is not licensed or otherwise accredited or
recognized in the CEDING COMPANY'S state of domicile, and where the
CEDING COMPANY is licensed to do business, the REINSURER agrees to
provide letters of credit or other methods of security which is or are
(i) authorized by the CEDING COMPANY's state of domicile insurance
department, and (ii) mutually acceptable to the CEDING COMPANY and the
REINSURER in favor of the CEDING COMPANY for the purpose of offsetting
ceded reinsurance policy reserves and outstanding losses.
2. Such letter of credit or other method of security shall be issued in
compliance with the statutes and/or policies of the state in which the
CEDING COMPANY is domiciled and shall be issued by a national bank
located in the United States chosen by the REINSURER.
ARTICLE XV - LETTER OF CREDIT OR DEPOSITS
l. Each year, the REINSURER shall deposit assets in trust or at its sole
option establish a clean, irrevocable Letter of Credit for a minimum
duration of one year for the benefit of the CEDING COMPANY in a form
and with a bank that has been deemed acceptable for such purpose by the
New York Insurance Department. The assets on deposit or the Letter of
Credit shall be equivalent to the REINSURER's share of statutory
reserves, plus claims and losses incurred under the Agreement but not
previously paid by the REINSURER.
2. If the REINSURER chooses to provide a Letter of Credit, the REINSURER
shall agree that the Letter of Credit provided to the CEDING COMPANY
pursuant to the provisions of this Agreement may be drawn upon at any
time, notwithstanding any other provisions in this Agreement, and shall
be utilized by the CEDING COMPANY or its successors in interest only
for one or more of the following:
a. to reimburse the CEDING COMPANY for the REINSURER's share of
premiums returned to the owners of policies reinsured under
this Agreement on account of cancellation of such policies;
b. to reimburse the CEDING COMPANY for the REINSURER's share of
benefits or losses paid by the CEDING COMPANY pursuant to the
provisions of the policies reinsured under this Agreement.
March 27, 1996 Page 1l
c. to fund an account with the CEDING COMPANY in an amount at
least equal to the deduction, for reinsurance ceded, from the
CEDING COMPANY's liabilities for policies reinsured under this
Agreement. Such amount shall include, but not be limited to,
amounts for policy reserves, and claims and losses incurred
under this Agreement but not previously paid by the REINSURER,
and
d. to pay any other amounts the CEDING COMPANY and the REINSURER
mutually agree are due under this Agreement.
3. All of the foregoing shall be applied without diminution because of
insolvency on the part of the CEDING COMPANY or the REINSURER.
4. The CEDING COMPANY agrees to return to the REINSURER any amounts
withdrawn from the Letter of Credit which are in excess of the actual
amounts required for (a), (b), and (c) or in the case of (d), above,
any amounts that are subsequently determined not to be due.
5. If the REINSURER chooses to deposit assets in a trust then the
REINSURER shall enter into a trust agreement and establish a trust
account for the benefit of the CEDING COMPANY for the REINSURER's share
of statutory reserves, plus claims and losses incurred under this
Agreement, but not paid by the REINSURER. The trust agreement and trust
account shall comply with all applicable requirements of Regulation 114
of the New York State Insurance Department (Part 126 of Title II of the
official compilation of codes, rules and regulations of the State of
New York). Assets deposited in the trust account shall be valued
according to current fair market value and shall consist of Interest
bearing U.S. Government obligations, marketable corporate obligations,
cash (United States legal tender), preferred or guaranteed stocks or
shares of the type, quality, and quantity permitted for a domestic life
insurance company under the provisions of applicable insurance law of
the State of New York.
6. The REINSURER, prior to depositing assets with the trustee, shall
execute assignments, endorsements in blank, or transfer legal title to
the trustee of all shares, obligations or any other assets requiring
assignments, in order that the CEDING COMPANY, or the trustee upon the
direction of the CEDING COMPANY, may whenever necessary negotiate any
such assets without consent or signature from the REINSURER or any
other entity.
March 27, 1996 Page 12
7. All settlements of account between the CEDING COMPANY and the REINSURER
shall be made in cash or its equivalent; and the REINSURER and the
CEDING COMPANY agree that the assets in the trust account, established
pursuant to the provisions of this Agreement, may be withdrawn by the
CEDING COMPANY at any time, notwithstanding any other provisions of
this Agreement, and shall be utilized and applied by the CEDING COMPANY
or any successor by operation of law of the CEDING COMPANY including,
liquidator, rehabilitator, receiver, or conservator of the CEDING
COMPANY, without limitation because of insolvency on the part of the
CEDING COMPANY or the REINSURER only for the following purposes:
a. to reimburse the CEDING COMPANY for the REINSURER's share of
premiums returned to the owners of policies reinsured under
this Agreement on account of cancellation of such policies;
b. to reimburse the CEDING COMPANY for the REINSURER's share of
benefits or losses paid by the CEDING COMPANY pursuant to the
provisions of the policies reinsured under this Agreement;
c. to fund an account with the CEDING COMPANY in an amount at
least equal to the deduction, for reinsurance ceded, from the
CEDING COMPANY's liabilities for policies ceded under this
Agreement. Such amount shall include, but not be limited to,
amounts for policy reserves, and reserves for claims and
losses incurred (including losses incurred but not reported),
and
d. to pay any other amounts the CEDING COMPANY and the REINSURER
mutually agree are due under this Agreement.
ARTICLE XVI - ERRORS AND OMISSIONS
1 Errors and omissions on the part of either party shall not invalidate
their rights and obligations arising from this Agreement, provided that
upon discovery, the other party is immediately notified and such errors
or omissions are corrected without delay to restore each party to the
position it would have occupied had no such error or omission occurred.
2. In the event, however, that a party cannot as a practical matter be
restored to the position it would have occupied had no such error or
omission occurred, the parties will attempt in good faith to find a
resolution to the situation created by the error or omission that is
fair and reasonable and most closely approximates the original intent
of the parties as evidenced by this Agreement.
March 27, 1996 Page 13
ARTICLE XVII - INSPECTION OF RECORDS
The REINSURER shall have the right, at any reasonable time, to inspect all
records, books and documents relating to or affecting reinsurance under this
Agreement, at the home office of the CEDING COMPANY.
ARTICLE XVIII - INSOLVENCY
1. In the event of the insolvency of the CEDING COMPANY, any sums due from
the REINSURER shall be payable directly to the CEDING COMPANY's
liquidator, receiver, conservator or statutory successor immediately
upon demand, with reasonable provision for verification, on the basis
of claims allowed against the CEDING COMPANY by any court of competent
jurisdiction or by any liquidator, receiver, conservator or statutory
successor, without diminution because of the insolvency of the CEDING
COMPANY or because the liquidator, receiver, conservator or statutory
successor of the CEDING COMPANY has failed to pay all or a portion of
any claim. It is agreed, however, that the liquidator, receiver,
conservator or statutory successor of the CEDING COMPANY shall give
written notice to the REINSURER of a pending claim against the CEDING
COMPANY on a policy or policies reinsured within a reasonable time
after such claim is filed in the insolvency proceedings. While the
claim is pending, the REINSURER may investigate and interpose, at its
own expense, in the proceedings where the claim is to be adjudicated,
any defenses which it may deem available to the CEDING COMPANY or its
liquidator, receiver, conservator or statutory successor. The expenses
thus incurred by the REINSURER shall be charged, subject to Court
approval, against the CEDING COMPANY as an expense of liquidation to
the extent of a proportionate share of the benefit that accrues to the
CEDING COMPANY as a result of the defense undertaken by the REINSURER.
Where two or more reinsurers are involved in the same claim and a
majority in interest elect to defend a claim, the expenses will be
apportioned in accordance with the terms of the reinsurance Agreement
as if the expenses had been incurred by the CEDING COMPANY.
2. If the REINSURER becomes insolvent, it shall immediately notify the
CEDING COMPANY and provide any relevant documentation. The CEDING
COMPANY shall have the right, at any time during such insolvency, to
recapture all reinsurance ceded to the REINSURER subject to a mutually
agreed recapture fee.
March 27, 1996 Page 14
ARTICLE XIX - OFFSET
The CEDING COMPANY or the REINSURER may offset any balance, whether on account
of premiums, commissions, claims or expenses due from one party to the other
under this Agreement or under any other agreement entered into between the
CEDING COMPANY and the REINSURER.
ARTICLE XX - ARBITRATION
l. If any dispute shall arise between the CEDING COMPANY and the
REINSURER, either before or after the termination of this Agreement,
with reference to the formation, interpretation, breach or enforcement
of this Agreement or the rights of either party with respect to any
transaction under this Agreement, the dispute shall be referred to and
resolved by three arbitrators as a condition precedent to any right of
action arising under this Agreement. The arbitrators shall be active or
retired disinterested officers, directors of life insurance or
reinsurance companies other than the parties or their affiliates,
unless otherwise agreed to by both parties in writing.
2. The party desiring arbitration ("Claimant") shall notify the other
party ("Respondent") in writing of the request to arbitrate, specifying
the dispute(s) to be arbitrated. An arbitrator shall be chosen by each
party and the third by the two so chosen. If either party refuses or
neglects to appoint an arbitrator within thirty (30) days of receipt of
written notice from the other party requesting it to do so, the
requesting party may choose the second arbitrator. Following selection
of the two arbitrators, the parties shall not contact the arbitrators
in any fashion concerning the facts or merits of the dispute, unless
such contact is joint, except as specified below.
3. In the event the two arbitrators do not agree on the selection of the
third arbitrator within thirty (30) days of when the second arbitrator
is appointed, or any other period mutually agreed to by the parties in
writing, each arbitrator shall name three candidates, of whom the other
shall decline two, and the decision shall be made by drawing lots. In
the event of the death, disability or incapacity of any arbitrator, a
replacement shall be named pursuant to the process which resulted in
the selection of the arbitrator to be replaced.
4. Within thirty (30) days following completion of the arbitration panel,
or any other time agreed upon by a majority of the arbitrators or
mutually agreed upon by the parties, the arbitrators shall select a
date for the hearing of the dispute, and the parties shall exchange all
documents then reasonably available which they intend to use at the
hearing and identify all witnesses they intend to call at the hearing.
If a document or witness is not timely disclosed it shall be within the
authority of the arbitrators to exclude use of such witness or document
from the arbitration proceedings. The Claimant shall file a brief with
the arbitrators no later than thirty (30) days prior to the hearing
date, the Respondent shall file
March 27, 1996 Page 15
its brief no later than fifteen (15) days prior to the hearing date,
and the Claimant may file a reply brief no later than seven (7) days
prior to the hearing date. The parties shall make a good faith effort
to agree upon a joint statement of agreed upon facts to be submitted to
the arbitration panel on the hearing date.
5. At the hearing, evidence may be introduced without following strict
rules of evidence but cross-examination and rebuttal shall be allowed.
The arbitrators shall make their decision with regard to the custom and
usage of the insurance and reinsurance business at the time of
contract, or amendment if the dispute involves an amendment. The panel
shall issue its decision in writing within sixty (60) days following
the termination of the hearing unless the parties mutually consent to
an extension. The majority decision shall be final and binding upon all
parties to the proceedings and no appeal shall be taken from it.
Judgement may be entered upon the award of the panel in any court
having jurisdiction. The jurisdiction of the arbitrators to make or
render any decision or award shall be limited by the limits of
liability expressly set forth in this Agreement.
6. Each party shall bear its own legal expenses and fees, the fee and
expense of the arbitrator it selected, one half of the fee and expenses
of the third arbitrator and one half of the other expenses of the
arbitration. The arbitration panel, by majority vote, may allocate any
or all of the winning party's costs and fees against the losing party.
7. Any such arbitration shall take place in Armonk, New York, unless some
other location is mutually agreed upon by the parties.
ARTICLE XXI - PARTIES TO AGREEMENT
This is an indemnity reinsurance agreement solely between the CEDING COMPANY and
the REINSURER. This Agreement shall be binding upon and shall inure only to the
benefit of the CEDING COMPANY, the REINSURER and their respective conservators,
liquidators and receivers. The acceptance of reinsurance hereunder shall not
create any right or legal relationship whatsoever between the REINSURER and the
insured, owner or beneficiary or any other party to or under any policy
reinsured hereunder.
ARTICLE XXII - ASSIGNMENT AND TRANSFER
Neither this Agreement nor any reinsurance under this Agreement shall be sold,
assigned or transferred by either party without prior written consent of the
other party.
March 27, 1996 Page 16
ARTICLE XXIII - EFFECTIVE DATE AND DURATION OF THE AGREEMENT
l. This Agreement is effective on April 1, 1996, once it has been executed
by both parties and is unlimited in duration. However, it may be
cancelled at any time, with respect to new reinsurance, by either party
giving ninety (90) days notice of termination in writing to the other.
The day the notice is deposited in the mail will be the first day of
the ninety (90) day period. During this period the REINSURER shall
continue to accept new reinsurance under the terms of this Agreement.
2. Existing reinsurance will remain in force until natural termination or
expiry of the policies, unless otherwise mutually agreed.
ARTICLE XXIV - MISCELLANEOUS PROVISIONS
1. Each of the CEDING COMPANY and the REINSURER shall execute and deliver
all further instruments, documents and papers, and shall perform any an
all acts necessary, to give full force and effect to all of the terms
and provisions of this Agreement.
2. A waiver by any party of any of the terms and conditions of this
Agreement in any one instance shall not be deemed or construed to be a
waiver of such term or condition for the future, or of any subsequent
breach thereof, nor shall it be deemed a waiver of performance of any
other obligation hereunder.
3. This Agreement shall be governed by and construed in accordance with
the laws of the state of New York, and accepted practices in the
reinsurance industry not in conflict with such laws.
4. The titles of the Articles and paragraphs of this Agreement are for
convenience only and shall not in any way affect the interpretation of
any provision or condition of this Agreement.
5 This Agreement is the result of mutual negotiation, compromise and
agreement between the CEDING COMPANY and the REINSURER. As such, in the
event of any disagreement between the CEDING COMPANY and the REINSURER
as to the meaning or intent of any term, condition or provision of this
Agreement, ambiguities in this Agreement shall not be construed against
or resolved to the detriment of either the CEDING COMPANY or the
REINSURER.
March 27, 1996 Page 17
ARTICLE XXV - EXECUTION OF AGREEMENT
In witness of the above, this Agreement has been signed and delivered in
duplicate on the dates indicated below.
SECURITY EQUITY LIFE INSURANCE COMPANY
By: /s/ ▇. ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------ ---------------------
Title: President Title: 2nd Vice President
Date: 3/29/96 Date: 3/29/96
▇▇▇▇▇▇▇ GLOBAL LIFE INSURANCE COMPANY
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇
------------------- ---------------------
Title: Vice President Title: Vice President and
Assistant Actuary
Date: 28th March 1996 Date: March 28, 1996
March 27, 1996 Page 18
SCHEDULE A
SPECIFICATIONS
1. BUSINESS COVERED
Single life insurance issued directly by the CEDING COMPANY on a fully
underwritten, simplified issue or guaranteed issue basis in accordance
with the CEDING COMPANY's applicable underwriting guidelines and
requirements.
2. RESIDENCY REQUIREMENTS
The insureds must be residents of the United States of America or its
territories at the time of issue of the policy.
3. BEGINNING DATE OF COVERAGE
Policies with issue dates beginning on April l, 1996.
4. PLANS OF INSURANCE
Variable Universal Life
Riders: Not covered
Supplementary Benefits Not covered
5. MINIMUM AMOUNTS: no minimum amounts
6. THE REINSURER'S AUTOMATIC PARTICIPATION AND BINDING LIMITS
a. FULLY UNDERWRITTEN BUSINESS
The REINSURER will accept a 1/3 quota share of excess amounts
of up to $1,875,000. If the CEDING COMPANY is fully retained
the REINSURER will participate in amounts of up to $2,000,000.
The maximum binding will be as follows:
Issue Ages Std-T10 T11-T16
20-70 670,000 670,000
71-75 670,000 500,000
76-85 500,000 0
Jumbo Limit: $30,000,000
March 27, 1996 Page 19
b. SIMPLIFIED ISSUE BUSINESS
The REINSURER will accept 100% of excess amounts of up to
$875,000. If the CEDING COMPANY is fully retained, the
REINSURER will participate in amounts of up to $1,000,000. The
maximum issue age is 65.
c. GUARANTEED ISSUE BUSINESS
The REINSURER will accept a 1/3 quota share of excess amounts of up to
$875,000. If the CEDING COMPANY is fully retained, the REINSURER will
participate in amounts of up to $1,000,000. The maximum issue age is
65.
Guaranteed Issue risks that exceed $1,000,000, and up to a maximum of
$2,000,000 at issue, will be submitted on a case by case basis to the
REINSURER for its consideration and acceptance.
d. Increasing Risks
On policies where the face amount at risk (or net amount at risk) may
increase, the increase in risk in excess of the CEDING COMPANY's
retention will be reinsured. Only coverages where the increase in net
amount at risk is beyond the control of the insured or is underwritten
at issue will be included. The original policy issue date will be used
to determine the appropriate binding limit. No amount in excess of the
maximum binding limit as stated above will be ceded to the REINSURER.
March 27, 1996 Page 20
SCHEDULE B
METHOD OF REINSURANCE
1. LIFE
Reinsurance shall be on the Yearly Renewable Term (YRT) basis for the
reinsured portion of the net amount at risk, therefore the REINSURER
does not participate in any policy loans or reimburse any dividend or
cash surrender payments made by the CEDING COMPANY.
The amount at risk shall be defined as the difference between the death
benefit and cash value, fund value or terminal reserve of the policy
and it shall be calculated annually at the policy anniversary.
March 27, 1996 Page 21
SCHEDULE C
RETENTION LIMITS OF THE CEDING COMPANY
All Ages and Ratings
$125,000
March 27, 1996 Page 22
SCHEDULE D
1. REINSURANCE PREMIUMS
a. Basic premiums
The reinsurance premiums shall be based on the following
percentages of the rates attached in Exhibit 1 applied to the
net amount at risk on the portion reinsured by the REINSURER:
Fully underwritten issues: 100%
Simplified issues*: 100%
Guaranteed issues: 145% up to the 20th duration of
the policy or age 65, whichever
is later, 100% thereafter.
*using the full underwriting non-medical form.
b. Substandard extra premiums:
The above reinsurance premiums will be increased by 25% for
each extra mortality table.
c. Rate Basis: Age Nearest Birthday (ANB)
d. Continuations
The reinsurance premiums will be based on the same percentage
of the rates shown in Exhibit 1 as the original policy, at the
attained age of the insured at the time of change and duration
measured from the original policy date to the time of change
(point-in-scale).
e. Automatic Increasing Amounts.
The attained age and duration rates based on the base policy
at the time of the increase would be payable on the increased
amount.
2. RATE GUARANTEE
While the REINSURER anticipates the indefinite continuation of the
reinsurance premiums at the YRT rates shown in Exhibit 1 for all
cessions to which these rates apply, for technical reasons, the YRT
premium rates cannot be guaranteed for more than one (1) year.
March 27, 1996 Page 23
3. FLAT EXTRA PREMIUMS
If flat extra premiums are charged under the policy, the CEDING COMPANY
will pay this premium applied to the amount initially reinsured less
these allowances:
FY RY
Temporary (5 years or less) 10% 10%
Permanent (more than 5 years) 75% 10%
4. PREMIUM TAXES: Reimbursable at the same rate paid by the CEDING
COMPANY.
5. RECAPTURE PERIOD: 10th anniversary.
March 27, 1996 Page 24
ADMINISTRATION SCHEDULE
Reinsurance ceded under this Agreement shall be on a self-administered basis.
The CEDING COMPANY shall have the responsibility of maintaining adequate records
for the administration of the reinsurance account and shall furnish the
REINSURER with periodic reports in substantial conformity to the following:
REPORTING PERIOD: Quarterly
1. Within thirty (30) days following the close of each reporting period,
the CEDING COMPANY will submit to the REINSURER the following reports:
a. NEW BUSINESS REPORT: Monthly listings of those policies issued
during the current reporting period, indicating:
i) Full name of insured
ii) Date of Birth
iii) Policy Number
iv) Policy Date/Issue Date
v) Issue Age
vi) Sex
vii) Risk classification, i.e. Smoker/Non-Smoker
viii) Plan reinsured
ix) Amount Issued
x) Amount Reinsured
xi) Table rating
xii) Net amount at risk
xiii) Reinsurance Flat Extra Premium
xiv) Reinsurance Premium (show separate premium for each
Benefit Type, i.e. Life, GIO, WP, ADB, etc)
b. REPORT OF TERMINATION AND CHANGES: A listing of those policies
which have been terminated, reinstated or changed during the
reporting period. The listing shall include the information
indicated in a) above, plus:
i) Paid-to-Date
ii) Type of Transaction
iii) Effective date of Transaction
iv) Cash adjustment
March 27, 1996 Page 25
c. BORDEREAU REPORT: For existing reinsurance with policy
anniversaries in the reporting period, the report will
furnish, in summary form:
i) Policy Exhibit Data
ii) Premium Calculation Figures
d. QUARTERLY RESERVE REPORT
2. At the end of each calendar year:
ANNUAL IN-FORCE LISTING: The COMPANY shall submit a listing of all
in-force risks reinsured under this Agreement, providing the same
information indicated under section (a).
The CEDING COMPANY agrees that it shall maintain its books and records relating
to the reinsured business pursuant to the CEDING COMPANY's customary accounting
and bookkeeping methods and in the ordinary course of its business.
ACCOUNT SETTLEMENT
A cheque in full payment of any balance due the REINSURER as shown on the
reports will be sent by the CEDING COMPANY to the REINSURER along with the
reports. If the balance is due to the CEDING COMPANY, the REINSURER will pay
such amount within thirty (30) days of receipt of the reports.
March 27, 1996 Page 26
SECURITY EQUITY LIFE INSURANCE
MORTALITY RATES
VARIABLE UNIVERSAL LIFE
FEMALE NON-SMOKER
Issue Age 20 - 85
SECURITY EQUITY LIFE INSURANCE
MORTALITY RATES
VARIABLE UNIVERSAL LIFE
FEMALE SMOKER
Issue Age 20 - 85
SECURITY EQUITY LIFE INSURANCE
MORTALITY RATES
VARIABLE UNIVERSAL LIFE
MALE SMOKER
Issue Age 20 - 85