EX-99.7.a
VARIABLE ANNUITY GMIB REINSURANCE AGREEMENT
This Agreement is effective January 1, 2003
Between
▇▇▇▇▇▇▇ NATIONAL LIFE INSURANCE COMPANY
(Hereinafter called the "CEDING COMPANY")
Purchase, New York
and
ACE TEMPEST LIFE REINSURANCE LTD.
(Hereinafter called the "REINSURER")
▇▇▇▇▇▇▇▇, Bermuda
TABLE OF CONTENTS
ARTICLE PAGE
Access to Records IX 13
Arbitration XIII 15
Automatic Provisions IV 8
Currency XI 14
Definitions I 3
Effective Date, Term and Termination III 6
Insolvency XII 14
Litigation VIII 12
Miscellaneous XV 16
Notices XVI 17
Offset XIV 16
Parties to the Agreement II 5
Premium Accounting V 9
Reinsurance Claim Settlement VI 10
Reserves VII 11
Unintentional Errors, Misunderstandings, or Omissions X 14
SCHEDULES
A Description of Guaranteed Minimum Income Benefits (GMIBs)
B-1 Contracts Subject to this Reinsurance Agreement
B-2 Investment Funds Subject to this Reinsurance Agreement
C-1 Limits and Rules of the CEDING COMPANY
C-2 Limits and Rules of the REINSURER
D QUARTERLY Re Premium Rates by CONTRACT TYPE and GMIB TYPE
E-1 Dollar Claim Limit Rate by Contract Type and GMIB Type
E-2 FORMULA Claim Limit Rate by Contract Type and GMIB Type
F REINSURER Share of Risk by CONTRACT TYPE and GMIB TYPE
G CEDING COMPANY Reporting Format and Data Requirements
H Surplus Position of the REINSURER
I Calculation of ADJUSTED GMIB CLAIM
J-1 Letter of Credit Requirements
J-2 Trust Account Requirements
ARTICLE I - DEFINITIONS
A. DURATION OF AGREEMENT: EFFECTIVE DATE means January 1, 2003
BUSINESS DAY means any day that securities are traded on the New York Stock
Exchange
Monthly Valuation Date means the last BUSINESS DAY of each month
REINSURANCE TERM means, for each ACTIVE CONTRACT, 25 years measured from the
MONTHLY VALUATION DATE following each ACTIVE CONTRACT'S inclusion in the
Agreement according to Article IV, paragraph A, B, C, or G as applicable.
TERMINATION DATE means the end of the REINSURANCE TERM for the last contract
accepted under this Agreement.
B. CONTRACT DEFINITIONS:
ANNUITY CONTRACT means an individual variable annuity contract issued by the
CEDING COMPANY to a contract owner in accordance with which CEDING COMPANY
agrees to provide specified benefits in accordance with specified terms and
conditions and that is reinsured under this Agreement, as specified in Article
III, Paragraph A.
ACTIVE CONTRACT means an ANNUITY CONTRACT that remains in effect and has not
been terminated due to death, lapse, surrender or some other valid contingency
and has not been annuitized and includes one of the Guaranteed Minimum Income
Benefits specified in Schedule A.
RETAIL ANNUITY PREMIUMS means contributions made to the ANNUITY CONTRACT by or
on behalf of the contract owner, commonly referred to as purchase payments,
premiums, or deposits.
CONTRACT TYPE means one of the ANNUITY CONTRACT forms specified in Schedule B-1.
GMIB TYPE means one of the Guaranteed Minimum Income Benefits specified in
Schedule A, applicable to ANNUITY CONTRACTS.
GMIB EXERCISE means an annuitization of an ACTIVE CONTRACT, where the monthly
income is determined in accordance with a GMIB TYPE.
C. REINSURANCE PREMIUM DEFINITIONS:
REINSURED Account Value means, for each ACTIVE CONTRACT, the sum of the invested
assets in the investment funds shown in Schedule B-2 as it appears in the
records of CEDING COMPANY, times the REINSURER's quota share of risk, as shown
in Schedule F.
REINSURED GMIB INCOME BASE means, for each ACTIVE CONTRACT, the contractually
determined Guaranteed Income Base value, subject to the CONTRACT TYPE and GMIB
TYPE, times the REINSURER's quota share of risk, as shown in Schedule F.
MONTHLY INCOME BASE means the sum of the REINSURED GMIB INCOME BASE, calculated
on each MONTHLY VALUATION DATE, for all ACTIVE CONTRACTS covered by this
Agreement.
QUARTERLY RE PREMIUM RATE means the numerical value provided in Schedule D, for
each CONTRACT TYPE and GMIB TYPE.
QUARTERLY REINSURANCE PREMIUM means the QUARTERLY RE PREMIUM RATE times the
MONTHLY INCOME BASE calculated in March, June, September, and December of each
calendar year.
REINSURANCE PREMIUM DUE DATE means the MONTHLY VALUATION DATE in March, June,
September, and December of each calendar year.
REMITTANCE DATE means the last BUSINESS DAY of the month following the
REINSURANCE PREMIUM DUE DATE.
D. REINSURANCE CLAIM DEFINITIONS:
ADJUSTED GMIB CLAIM means, for each ACTIVE CONTRACT that terminates through a
GMIB EXERCISE, a calculated value in accordance with the formula provided in
Schedule I.
REIMBURSEMENT DATE means the REMITTANCE DATE immediately following the date the
REINSURER receives a request from the CEDING COMPANY for claim reimbursement.
AGGREGATE GMIB CLAIM means the sum of all ADJUSTED GMIB CLAIMS calculated on
each MONTHLY VALUATION DATE.
FORMULA CLAIM LIMIT RATE means a value provided in Schedule E-2 for each
CONTRACT TYPE and GMIB TYPE combination.
FORMULA CLAIM LIMIT means the FORMULA CLAIM LIMIT RATE times the MONTHLY INCOME
BASE for each CONTRACT TYPE and GMIB TYPE. The FORMULA CLAIM LIMIT is calculated
on each ACTIVE CONTRACT's first 120 MONTHLY VALUATION DATES.
AGGREGATE FORMULA CLAIM LIMIT means the sum of the FORMULA CLAIM LIMITS for all
CONTRACT TYPES and GMIB TYPES through the current MONTHLY VALUATION DATE.
DOLLAR CLAIM LIMIT RATE means a value provided in Schedule E-1 for each CONTRACT
TYPE and GMIB TYPE combination.
DOLLAR CLAIM LIMIT means the DOLLAR CLAIM LIMIT RATE times the total RETAIL
ANNUITY PREMIUMS attributable to each CONTRACT TYPE and GMIB TYPE combination,
times the quota share percentage in Schedule F.
AGGREGATE DOLLAR CLAIM LIMIT means the sum of the DOLLAR CLAIM LIMITS for each
of the CONTRACT TYPE and GMIB TYPE combinations as calculated on the current
MONTHLY VALUATION DATE.
ARTICLE II - PARTIES TO THE AGREEMENT
This Agreement shall be binding upon, and shall inure solely to the benefit of,
the CEDING COMPANY and the REINSURER. This Agreement shall not and is not
intended to create any legal relationship between the REINSURER and any third
party, including without limitation, annuitants, contract owners, certificate
owners, beneficiaries, applicants or assignees under any ACTIVE CONTRACT.
ARTICLE III - EFFECTIVE DATE, TERM AND TERMINATION
A. This Agreement covers individual ANNUITY CONTRACTs issued by the CEDING
COMPANY that:
(i) are among the CONTRACT TYPES identified by form in Schedule B-1;
(ii) have accounts invested in the investment funds listed in Schedule
B-2;
(iii) are issued on and after the EFFECTIVE DATE and prior to the date this
Agreement terminates for new ACTIVE CONTRACTS;
(iv) are issued within the limits and rules described in Schedule C-1 and
C-2;
(v) are in compliance with all of the other terms and provisions of this
Agreement; and
(vi) are ACTIVE CONTRACTS.
The Agreement remains effective for ACTIVE CONTRACTS subject to the terms
and conditions of this Agreement, through the TERMINATION DATE, unless
terminated pursuant to the paragraphs listed below.
B. This Agreement will terminate for new ACTIVE CONTRACTS issued by the CEDING
COMPANY on the earlier of (i) [REDACTED] or (ii) the date that cumulative
RETAIL ANNUITY PREMIUMS exceed the limits provided in Schedule C-2,
Paragraph 4.
C. This Agreement will terminate with respect to each ACTIVE CONTRACT subject
to it, as of the last date of the REINSURANCE TERM for each ACTIVE
CONTRACT.
D. The CEDING COMPANY shall have the option of terminating this Agreement for
new business, existing business, or both, by giving ninety (90) days
advance notice to the REINSURER, after the occurrence of any of the
following:
1. REINSURER's Standard and Poor's Rating is reduced to a "BBB" or lower.
REINSURER must report any adverse change in Standard and Poor's Rating
to CEDING COMPANY within fifteen (15) days of the change. Any notice of
termination given by the CEDING COMPANY due to such rating reduction
shall be deemed withdrawn if REINSURER'S Standard and Poor's Rating is
restored to a level higher than "BBB" during the 90 day notice period.;
2. An order is entered appointing a receiver, conservator or trustee for
management of REINSURER or a proceeding is commenced for
rehabilitation, liquidation, supervision or conservation of REINSURER;
3. REINSURER's U.S. GAAP surplus position is reduced to 75% or less of its
U.S. GAAP surplus position as of December 31, 2002. The REINSURER must
report such a reduction within fifteen (15) days after it occurs. The
REINSURER's surplus position as of December 31, 2000 is provided in
Schedule H. Any notice of termination given by the CEDING COMPANY due
to such surplus reduction shall be deemed withdrawn if REINSURER'S U.S.
GAAP surplus position is restored to a level higher than 75% of its
U.S. GAAP surplus position as of December 31, 2002 during the 90 day
notice period.
E. The REINSURER shall have the option of terminating this Agreement for new
business, existing business or both by giving ninety (90) days advance
written notice to the CEDING COMPANY after the occurrence of any of the
following:
1. The CEDING COMPANY fails to provide timely submissions of all material
data required to be provided in accordance with Schedule G, provided
that the REINSURER's notice of termination identifies whether new
contracts, existing contracts or both will be terminated and provided
further that the REINSURER's notice of termination shall be deemed
withdrawn if the CEDING COMPANY, within 90 days after the date the
REINSURER's notice of termination is given, provides to the REINSURER
all data submissions then in arrears.
2. The CEDING COMPANY fails to pay a premium due on or before the
REMITTANCE DATE. In the event that a premium due is not paid by the
REMITTANCE DATE, the REINSURER shall have the right to terminate this
agreement by giving ninety (90) days advance notice of termination to
the CEDING COMPANY. If all premiums in default and interest in
accordance with Article III, Paragraph F are received by the REINSURER
within the ninety (90) day notice period, the Agreement will remain in
effect and the notice of termination deemed withdrawn. As of the close
of the last day of the ninety (90) day notice period, the REINSURER'S
liability for all risks reinsured associated with the defaulted
premiums under this Agreement will terminate.
F. Except as otherwise provided herein, upon termination of this Agreement for
existing business, REINSURER shall have no reinsurance liability with
respect to any ANNUITY CONTRACT. Notwithstanding termination of reinsurance
as provided herein, the REINSURER shall continue to be liable to the CEDING
COMPANY for all unpaid ADJUSTED GMIB CLAIMS arising as a result of a GMIB
EXERCISE of an ACTIVE CONTRACT made prior to the date this Agreement is
terminated, and the CEDING COMPANY shall continue to be liable to the
REINSURER for all unpaid QUARTERLY REINSURANCE PREMIUMS earned by the
REINSURER, under this Agreement until the date the Agreement is terminated.
Any net amounts due from either party after termination are subject to a
daily interest charge from the REMITTANCE DATE until the date paid. The
daily interest rate is equal to 1/365 times the sum of (1) the 3 month
LIBOR rate on the preceding MONTHLY VALUATION DATE, as published in the
Wall Street Journal, and (2) 1.00%.
ARTICLE IV - AUTOMATIC PROVISIONS
A. Subject to Article III, on or after the EFFECTIVE DATE of this Agreement,
the CEDING COMPANY shall automatically cede and the REINSURER shall
automatically accept the ANNUITY CONTRACTS that are covered by this
Agreement.
B. This Agreement covers only the liability for ADJUSTED GMIB CLAIMS paid
under ANNUITY CONTRACT forms or benefit rider forms that are listed on
Schedule B-1 as attached hereto and as may be revised by the parties as
provided herein. If the CEDING COMPANY intends to cede to the REINSURER a
liability with respect to a new or revised contract form or benefit rider
form, it must provide written notice to the REINSURER of such intention
together with a copy of the new or revised contract form or rider form, and
a revised Schedule B-1. The REINSURER may approve any new or revised
contract forms or benefit rider form within thirty (30) working days of the
date it receives notification and a copy thereof, and any such form shall
be deemed disapproved if not so approved.
C. This Agreement covers only the liability for ADJUSTED GMIB CLAIMS paid
under ACTIVE CONTRACTS invested in investment funds listed on Schedule B-2
as attached hereto and as may be revised by the CEDING COMPANY as provided
herein. If the CEDING COMPANY intends to cede to the REINSURER a liability
with respect to a new or revised investment fund it must provide written
notice to the REINSURER of such intention together with a copy of the new
or revised investment fund, and a revised Schedule B-2, within thirty (30)
days of the fund's initial availability. The CEDING COMPANY may add new or
revise investment funds without REINSURER approval. The effective date of
reinsurance hereunder shall be the date REINSURER receives notice of the
new or revised fund, or such other earlier date as designated by REINSURER.
D. The CEDING COMPANY also intends that each variable investment option meet
the additional diversification requirements that are applicable to
insurance company separate accounts under Subchapter L of the Internal
Revenue Code.
E. If a variable investment option fails to qualify under Subchapter L of the
Internal Revenue Code and the CEDING COMPANY does not take appropriate
steps to bring the variable investment option in compliance with these
regulations, the REINSURER's liability with respect to the variable
investment option can be terminated as to future ADJUSTED GMIB CLAIMS, with
180 days written notice to the CEDING COMPANY. The REINSURER's liability
with respect to any variable investment option will be determined by
multiplying the ADJUSTED GMIB CLAIM by the proportion of the RETAIL ANNUITY
PREMIUMS allocated to the variable investment option to the total RETAIL
ANNUITY PREMIUMS. If the REINSURER's liability is terminated with respect
to any variable investment option, future QUARTERLY REINSURANCE PREMIUM
will be calculated ignoring any investment in said variable investment
option. Furthermore, subsequent transfers from any variable subaccount that
is not in compliance with these regulations, to any fixed account option or
variable subaccount that is in compliance with these regulations will be
considered subsequent RETAIL ANNUITY PREMIUM for the purposes of this
Agreement to the extent that any investments in such variable investment
option were made after such termination date.
F. If the CEDING COMPANY brings the variable investment option in compliance
with Subchapter L either within the 180-day notice period or after the
180-day notice period, the REINSURER's liability in respect to such
variable investment option will be reinstated from the date the variable
investment option qualifies with the regulation. The QUARTERLY REINSURANCE
PREMIUM will be determined using any investment in the variable investment
account, beginning with investments as of the date the variable investment
account qualifies with the regulation.
G. The issue age limits and the total RETAIL ANNUITY PREMIUMS per life must
fall within the automatic limits as shown in Schedule C-1, unless an
exception is permitted by mutual written agreement. The CEDING COMPANY
shall provide written notice to the REINSURER of any changes in its
published limits and rules identified on Schedule C-1, and the REINSURER
shall have no liability pursuant to revised limits and rules unless and
until the REINSURER, within fifteen (15) working days after the date it
receives such notice from the CEDING COMPANY, provides written notice to
the CEDING COMPANY that such revised limits and rules are acceptable.
ARTICLE V - PREMIUM ACCOUNTING
A. If reinsurance premiums are not paid by the REMITTANCE DATE, interest in
accordance with Article III, paragraph F will be assessed from the
REMITTANCE DATE.
B. On or before the REMITTANCE DATE, the CEDING COMPANY shall forward to the
REINSURER its statement of account and data requirements as set forth in
Schedule G together with its remittance for the QUARTERLY REINSURANCE
PREMIUM as shown therein as well as any premium adjustments from the prior
period.
C. If the amounts due cannot be determined by the REMITTANCE DATE, the CEDING
COMPANY shall have ninety (90) days to determine the appropriate premium
and remit with interest in accordance with Article III, paragraph F.
ARTICLE VI - REINSURANCE CLAIM SETTLEMENT
A. The REINSURER shall not be responsible for any obligation of the CEDING
COMPANY to any party under any ANNUITY CONTRACT issued by the CEDING
COMPANY under any ANNUITY CONTRACT forms and benefit rider forms, including
those identified on Schedule B-1. The CEDING COMPANY is solely responsible
for payment of claims under the ANNUITY CONTRACT. The CEDING COMPANY shall
provide the REINSURER with proof of claim, proof of claim payment and any
other claim documentation requested by the REINSURER in accordance with
Schedule G.
B. On or before the REMITTANCE DATE, the CEDING COMPANY shall forward to the
REINSURER its statement of account and data requirements as set forth in
Schedule G, together with its request for reimbursement for ADJUSTED GMIB
CLAIMS as shown therein. If AGGREGATE GMIB CLAIMS exceed the lesser of the
AGGREGATE DOLLAR CLAIM LIMIT or the AGGREGATE FORMULA CLAIM LIMIT, the
request for reimbursement for ADJUSTED GMIB CLAIMS shall be reduced so that
AGGREGATE GMIB CLAIMS do not exceed the lesser of the AGGREGATE DOLLAR
CLAIM LIMIT or the AGGREGATE FORMULA CLAIM LIMIT. If requested by the
REINSURER, the CEDING COMPANY shall provide the REINSURER with proof of
claim, proof of claim payment and any other claim documentation identified
by the REINSURER, in accordance with Schedule G.
C. If ADJUSTED GMIB CLAIMS are not paid by the REIMBURSEMENT DATE, interest in
accordance with Article III, paragraph F will be assessed from the
REIMBURSEMENT DATE.
D. The CEDING COMPANY shall have six (6) months after the TERMINATION DATE to
submit to REINSURER a final statement of account. Any amounts owed by
either the CEDING COMPANY or the REINSURER, based on the final statement of
account, must be paid within thirty (30) days of receipt of the final
statement. If the amount owed is not paid within thirty (30) days of
receiving the statement of account, the amount owed is subject to an
interest charge in accordance with Article III, Paragraph F.
ARTICLE VII - RESERVES
It is the intention of both the REINSURER and the CEDING COMPANY that the CEDING
COMPANY qualifies for reinsurance credit in the state of New York for
reinsurance ceded hereunder. As a non-authorized reinsurer in New York,
REINSURER will comply with New York Insurance Law relating to reinsurance credit
for non-authorized reinsurers, as promulgated in New York's statutes on the
EFFECTIVE DATE of this Agreement.
A. It is agreed that when the CEDING COMPANY establishes statutorily required
reserves for future ADJUSTED GMIB CLAIMS covered hereunder, as required by
law, the CEDING COMPANY will forward to the REINSURER a statement showing
such reserves. The REINSURER agrees to secure its share of such reserves
with:
1. Clean, irrevocable and unconditional letters of credit meeting the
requirements of New York Insurance Department Regulation 133 (N.Y.
▇▇▇▇.▇▇▇▇▇ R. & REGS. tit. 11 section 79.5 (2003) ("Letters of Credit"
or, in the singular, "Letter of Credit"); and/or
2. A trust account established pursuant to a trust agreement meeting the
requirements of New York Insurance Department Regulation 114 (N.Y.
▇▇▇▇.▇▇▇▇▇ R. & REGS. tit.11 section 126 (2003) (the "Trust Account").
B. At regular intervals, at least annually but never more frequently than
quarterly, the CEDING COMPANY shall prepare a specific statement of the
REINSURER's obligations in respect of future ADJUSTED GMIB CLAIMS, for the
purpose of amending the Letter(s) of Credit and/or adjusting the amount
held in the Trust Account, as applicable. The purpose of any such amendment
is to ensure that the aggregate security provided by Letter(s) of Credit
and/or the Trust Account, as applicable, is not less than the amount
required to fund the REINSURER'S share of obligations in respect of future
ADJUSTED GMIB CLAIMS.
C. If the statement described in Paragraph B of this Article shows that an
amount equal to 95% of the REINSURER's obligations in respect of future
ADJUSTED GMIB CLAIMS exceeds the sum of the balance of credit available
under the Letter(s) of Credit as of the statement date plus the value of
the Trust Account as of such date, the REINSURER shall, within thirty (30)
calendar days after receipt of notice of such excess, secure delivery to
the CEDING COMPANY of an amendment to the Letter(s) of Credit increasing
the amount of credit, and/or deposit additional assets into the Trust
Account, by an aggregate amount of such difference.
D. If the statement described in Paragraph B of this Article shows that an
amount equal to 105% of the REINSURER's obligations in respect of future
ADJUSTED GMIB CLAIMS is less than the sum of the balance of credit
available under the Letter(s) of Credit as of the statement date plus the
value of the Trust Account as of such date, the CEDING COMPANY shall,
within thirty (30) calendar days after receipt of written request from the
REINSURER, release such excess security by agreeing to secure an amendment
to the Letter(s) of Credit reducing the amount of credit available, and/or
arrange for a release of assets from the Trust Account, by an aggregate
amount of such excess amount.
ARTICLE VIII - LITIGATION
In the event any legal action is brought against the CEDING COMPANY relating to
payment of the income benefit due under an ANNUITY CONTRACT, the CEDING COMPANY
shall provide to the REINSURER written notice thereof, including a copy of the
complaint, within ten (10) BUSINESS DAYS after the CEDING COMPANY is served with
the Complaint.
ARTICLE IX - ACCESS TO RECORDS
A. The REINSURER, or its duly authorized representatives, shall have access at
any reasonable time during regular business hours, to all records of the
CEDING COMPANY, including the right to photocopy and retain copies of
documents that reasonably pertain in any way to this Agreement. Books and
records shall be maintained in accordance with prudent standards of
insurance company record keeping and must be retained for a period of at
least three (3) years after the final settlement date. Within one hundred
and fifty (150) days following the end of each calendar year, the CEDING
COMPANY and the REINSURER shall provide each other with copies of their
respective audited financial statements.
B. The CEDING COMPANY and the REINSURER may come into the possession or
knowledge of Confidential Information of the other in fulfilling
obligations under this Agreement. Each party agrees to hold such
Confidential Information in the strictest confidence and to take all
reasonable steps to ensure that Confidential Information is not disclosed
in any form by any means by each of them or by any of their employees to
third parties of any kind, other than attorneys, accountants, reinsurance
intermediaries, consultants or retrocessionaires having an interest in such
information, except by advance written authorization by an officer of the
authorizing party; provided, however, that either party will be deemed to
have satisfied its obligations as to the Confidential Information by
protecting its confidentiality in the same manner that the party protects
its own proprietary or confidential information of like kind, which shall
be at least a reasonable manner. Subject to the exclusion provided in
Paragraph C, below, "Confidential Information" means:
(1.) any information or knowledge about each party's products, processes,
services, finances, customers, research, computer programs, marketing and
business plans and/or claims management practices; and (2.) any medical or
other personal, individually identifiable information about people or
business entities with whom each party does business, including customers,
prospective customers, vendors, suppliers, individuals covered by insurance
plans, and each party's producers and employees; and (3.) records provided
pursuant to Paragraph A, above.
C. Notwithstanding the definition of "Confidential Information" provided in
Paragraph B, above, Confidential Information does not include information
that (1.) is generally available to or known by the public; or (2.) is
disclosed pursuant to written authorization of an officer of the disclosing
party; or (3.) is disclosed pursuant to operation of law (including without
limitation the lawful requirement of a governmental agency), provided (a)
the non-disclosing party is given reasonable prior notice to enable it to
seek a protective order, and (b) the disclosing party discloses only that
information which, in the reasonable judgment of its counsel, is required
to be disclosed; or (4.) has been lawfully obtained or developed by either
party (a) independently or from any source other than the other party
(provided that such source is not bound by a duty of confidentiality to
such other party), and (b) not in violation of this Agreement.
D. If either the CEDING COMPANY or the REINSURER discloses Confidential
Information to interested parties such as, but not limited to, attorneys,
accountants, reinsurance intermediaries, consultants or retrocessionaires
having an interest in such information, such interested parties shall also
be bound by this Article's provisions on disclosing Confidential
Information. The CEDING COMPANY or the REINSURER must inform the interested
party of the provisions of this Article and agree to ensure that the
interested parties honor the provisions.
E. This Article expires 3 year after the TERMINATION DATE.
ARTICLE X - UNINTENTIONAL ERRORS, MISUNDERSTANDINGS OR OMISSIONS
If failure to comply with any of the terms of this Agreement is shown to be the
result of an unintentional error, misunderstanding or omission on the part of
either the CEDING COMPANY or the REINSURER, the party adversely affected thereby
will be restored to the position it would have occupied had no such error,
misunderstanding or omission occurred, subject always to the correction of the
error, misunderstanding or omission.
ARTICLE XI - CURRENCY
All retentions and limits hereunder are expressed in United States dollars and
all premium and loss payments shall be made in United States currency.
ARTICLE XII - INSOLVENCY
A. In the event of insolvency of the CEDING COMPANY, all reinsurance payments
due under this Agreement from the REINSURER to the CEDING COMPANY shall be
payable directly by the REINSURER to the CEDING COMPANY or to its
liquidator, receiver, conservator or statutory successor on the basis of
the REINSURER'S liability to the CEDING COMPANY 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.
B. In the event of insolvency of the CEDING COMPANY, the liquidator, receiver,
or statutory successor will immediately give written notice to the
REINSURER of all pending claims against the CEDING COMPANY on any contracts
reinsured. While a claim is pending, the REINSURER may investigate and
interpose, at its own expense, in the proceedings where the claim is
adjudicated, any defense or defenses that it may deem available to the
CEDING COMPANY or its liquidator, receiver, or statutory successor. The
expense incurred by the REINSURER will be chargeable, subject to court
approval, against the CEDING COMPANY as part of the expense of liquidation
to the extent of a proportionate share of the benefit that may accrue to
the CEDING COMPANY solely as a result of the defense undertaken by the
REINSURER. Where two or more REINSURERS are participating in the same claim
and a majority in interest elect to interpose a defense or defenses to any
such claim, the expense will be apportioned in accordance with the terms of
the reinsurance agreement as though such expense had been incurred by the
CEDING COMPANY.
ARTICLE XIII - ARBITRATION
A. As a condition precedent to any right of action hereunder, any dispute
between the parties with respect to the interpretation of this Agreement or
any right, obligation or liability of either party, whether such dispute
arises before or after termination of this Agreement, shall be submitted to
arbitration upon the written request of either party. Each party shall
select an arbitrator within thirty (30) days after the written request for
arbitration. If either party refuses or neglects to appoint an arbitrator
within thirty (30) days after the written request for arbitration, the
other party may appoint the second arbitrator. The two arbitrators shall
select an umpire within thirty (30) days after the appointment of the
second arbitrator. If the two arbitrators fail to agree on the selection of
the umpire within thirty (30) days after the appointment of the second
arbitrator, either party may submit a request to the American Arbitration
Association to select an umpire, subject to the requirements for such
arbitrator set forth below.
B. The arbitrators and the umpire all shall be active or retired,
disinterested executive officers of insurance or reinsurance companies. The
umpire shall preside at all hearings and meetings of the panel and shall
announce the decision of the panel. The majority vote of the arbitrators
and the umpire shall be the decision of the panel. The decision shall be in
writing signed by the majority in favor thereof.
C. The arbitration panel shall interpret this Agreement as an agreement
entered into in the highest good faith in keeping with the commercially
recognized customs and practices of the insurance business and shall make
its decision considering said customs and practices. The arbitration panel
is released from judicial formalities and shall not be bound by strict
rules of procedure and evidence. Interpreting this Agreement, should it
become necessary to refer to the laws of any particular jurisdiction, the
arbitration panel shall apply the laws of the state of New York without
regard to the conflicts of laws provision thereof.
D. The decision of the arbitration panel shall be final and binding on both
parties. The arbitration panel may, at its discretion, award costs and
expenses as it deems appropriate, including, but not limited to, attorneys'
fees, interest and compensatory damages. Judgment may be entered upon the
final decision of the arbitration panel in any court of competent
jurisdiction.
E. All meetings and hearings before the arbitration panel shall take place in
Purchase, New York unless some other place is mutually agreed upon by both
parties or ordered by the panel.
F. In the absence of a decision to the contrary by the arbitration panel, each
party shall bear the expense of the arbitrator chosen by or for it and
shall jointly and equally bear with the other party the expense of the
umpire and of the arbitration.
ARTICLE XIV - OFFSET
A. Either party shall have, and may exercise at any time and from time to
time, the right to offset any balance or amounts whether on account of
premiums, or on account of losses or otherwise, due from one party to the
other under the terms of this Agreement.
B. If this Agreement terminates early, both parties shall continue to be
entitled to all offset credits up to the effective date of termination.
ARTICLE XV - MISCELLANEOUS
A. The CEDING COMPANY and REINSURER shall not have the right to assign or
transfer any portion of the rights, duties and obligations of the other
party under the terms and conditions of this Agreement without the written
approval of the other party.
B. CEDING COMPANY and REINSURER agree to review the reinsurance agreement on
an annual basis, including discussion of results to date, possible
expansion of the reinsurance program for additional business, restructuring
or recapturing the treaty, and other topics. Both parties understand that
circumstances that lead to a decision to recapture or restructure will be
rare and generally unforeseen at the time that the treaty is signed.
C. The REINSURER will pay the CEDING COMPANY a Federal Excise Tax allowance on
each MONTHLY VALUATION DATE equal to the amount of any Federal Excise Tax
paid by the CEDING COMPANY during the prior month, with the prior approval
of the REINSURER, in connection with the annuities reinsured hereunder. The
CEDING COMPANY will be responsible for the timely payment of Federal Excise
Tax and for the filing of all required tax, information returns or filings
with the Internal Revenue Service with respect to this Agreement.
D. This Agreement means the text hereof and all Exhibits, Schedules and
Amendments effected in accordance herewith. The Agreement constitutes the
entire statement of agreement between the parties with regard to the
subject matter hereof. There are no other understandings or agreements
between the parties regarding the contracts reinsured other than as
expressed in this Agreement. Any changes or additions to this Agreement
must be effected by means of a written amendment that has been signed by
both parties.
E. Notwithstanding the termination of this Agreement as provided herein, its
provisions will continue to apply hereunder to the end that all obligations
and liabilities incurred by each party hereunder will be fully performed
and discharged.
F. If any provision of this Agreement should be rendered invalid, illegal, or
unenforceable, the parties will renegotiate the Agreement in good faith to
cure such invalid, illegal, or unenforceable provision. If such
negotiations are unsuccessful to resolve the matter, then (i) such invalid,
illegal, or unenforceable provision will be deleted from the Agreement,
(ii) to the maximum extent permitted by law, such invalidity, illegality,
or unenforceability will not affect any other provisions of this Agreement,
and (iii) this Agreement will be construed to give effect to the remaining
provisions hereof to carry out its original intent.
ARTICLE XVI - NOTICES
A. All notices required to be given hereunder shall be in writing and shall be
deemed delivered if personally delivered, sent via reputable overnight
carrier, sent via facsimile with evidence of successful transmission, or
dispatched by certified or registered mail, return receipt requested,
postage prepaid, addressed to the parties as follows:
▇▇▇▇ ▇. ▇▇▇▇▇, FSA
Senior Vice President and Chief Actuary
▇▇▇▇▇▇▇ National Life Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Chief Financial Officer
ACE Tempest Life Reinsurance Ltd.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
B. Notice shall be deemed given on the date it is received in accordance with
the foregoing. Any party may change the person and/or the address to which
notices are to be sent by notifying the other party of such change of
address in writing in accordance with the foregoing.
In witness whereof, the parties hereto have caused this Agreement to be signed
in duplicate on the dates indicated to be effective as of the date specified
above.
ACE Tempest Life Reinsurance Ltd. ▇▇▇▇▇▇▇ National Life Insurance Company of New York
By /s/ ▇▇▇ ▇▇▇▇▇▇▇ By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------- ---------------------------------
Name ▇▇▇ ▇▇▇▇▇▇▇ Name ▇▇▇▇ ▇. ▇▇▇▇▇
Title SVP and Chief Life Officer Title SVP and Chief Actuary
Date Sept. 30, 2003 Date October 6, 2003
SCHEDULE A
Description of Guaranteed Minimum Income Benefits (GMIBs)
The Guaranteed Minimum Income Benefits are completely described in the ANNUITY
CONTRACTS or riders, referenced by form number in Schedule B-1.
SCHEDULE B-1
Contracts Subject to this Reinsurance Agreement
Perspective II
o VA202 is an individual flexible Premium variable and fixed
annuity o VA250G is a group flexible premium variable and fixed
annuity
o This product has two Contract options:
o Separate Account Investment Division option; and
o Fixed Account Option.
A) Separate Account Investment Division Option
o This option allows the Owner to allocate Premiums and earnings to
one or more Investment Divisions of the Separate Account.
o JNL/NY Separate Account I is used for this Contract.
o The Separate Account invests in shares of one of the
corresponding Funds of the underlying fund of the JNL Series
Trust and JNL/NY Variable Fund I LLC (see Schedule B-2).
B) Optional Benefits
Form Number Policy Description
7340NY Death Benefit Option (MAV)
7349NY Additional Free Withdrawal
7343NY Shortened W/D Charge Period (5 yr)
7346NY Premium Credit (4%)
7348NY Premium Credit (2%)
7352NY Premium Credit (3%)
7344NY 0303 Guaranteed Minimum Income Benefit
Perspective Focus
o VA260NY is an individual flexible Premium variable and fixed
annuity
o VA260G is a group flexible premium variable and fixed annuity
o This product has two Contract options:
o Separate Account Investment Division option; and
o Fixed Account Option
A. Separate Account Investment Division Option
This option allows the Owner to allocate Premiums and earnings to one
or more Investment Divisions of the Separate Account. JNL/NY Separate
Account I is used for this Contract.
The Separate Account invests in shares of one of the corresponding
Funds of the underlying fund of the JNL Series Trust and JNL/NY
Variable Fund I LLC (see Schedule B-2).
B. Optional Benefits
Form Number Policy Description
7362NY Death Benefit Option (MAV)
7364NY Premium Credit (2%)
7365NY 0303 Guaranteed Minimum Income Benefit
SCHEDULE B-2
Subaccounts Subject to this Reinsurance Agreement
JNL SERIES TRUST
▇▇▇▇▇/JNL Growth Fund
Alliance Capital/JNL Growth Fund
Eagle/JNL Core Equity Fund
Eagle/JNL SmallCap Equity Fund
Janus/JNL Aggressive Growth Fund
Janus/JNL Balanced Fund
Janus/JNL Capital Growth Fund
▇▇▇▇▇▇/JNL Equity Fund
▇▇▇▇▇▇/JNL International Equity Fund
▇▇▇▇▇▇/JNL ▇▇▇▇▇▇ Growth Fund
▇▇▇▇▇▇/JNL Value Equity Fund
S&P/JNL Conservative Growth Fund I
S&P/JNL Moderate Growth Fund I
S&P/JNL Aggressive Growth Fund I
S&P/JNL Very Aggressive Growth Fund I
S&P/JNL Equity Growth Fund I
S&P/JNL Equity Aggressive Growth Fund I
PPM America/JNL Balanced Fund
PPM America/JNL High Yield Bond Fund
PPM America/JNL Money Market Fund
PPM America/JNL Value Fund
Salomon Brothers/JNL Global Bond Fund
Salomon Brothers/JNL U.S. Govt. & Quality Bond Fund
▇. ▇▇▇▇ Price/JNL Established Growth Fund
▇. ▇▇▇▇ Price/JNL Mid-Cap Growth Fund
▇. ▇▇▇▇ Price/JNL Value Fund
▇▇▇▇▇▇▇▇▇▇▇/JNL Global Growth Fund
▇▇▇▇▇▇▇▇▇▇▇/JNL Growth Fund
AIM/JNL Premier Equity II Fund
AIM/JNL Small Cap Growth Fund
AIM/JNL Large Cap Growth Fund
PIMCO/JNL Total Return Bond Fund
Lazard/JNL Small Cap Value Fund
Lazard/JNL Mid Cap Value Fund
Mellon Capital Management/JNL S&P 500 Index Fund
Mellon Capital Management/JNL S&P 400 Mid Cap Index Fund
Mellon Capital Management/JNL Small Cap Index Fund
Mellon Capital Management/JNL International Index Fund
Mellon Capital Management/JNL Bond Index Fund
JPMorgan/JNL Enhanced S&P 500 Stock Index Fund
JPMorgan/JNL International Value Fund
S&P/JNL Core Index 100 Fund *
S&P/JNL Core Index 50 Fund *
S&P/JNL Core Index 75 Fund *
*These will not be offered as underlying funds to the S&P/JNL I Fund.
Janus/JNL Global Equities Fund (the "Fund") is not available as an investment
option, but is available as an underlying fund to the S&P/JNL I Fund. In
addition, the Fund is not available to the S&P/JNL Core Index 50 Fund and the
S&P/JNL Core 75 Fund.
JNL VARIABLE FUND LLC
First Trust/JNL The Dowsm Target 10 Fund
First Trust/JNL S&P Target (R) 10 Fund
First Trust/JNL Global Target 15 Fund
First Trust/JNL Target Small Cap Fund
First Trust/JNL Target 25 Fund
FIXED SUBACCOUNTS
▇▇▇▇▇▇▇ National Life Insurance Company General Account:
Perspective II
Guaranteed One Year Fixed
Guaranteed Three Year Fixed
Guaranteed Five Year Fixed
Guaranteed Seven Year Fixed
One Year Fixed - DCA
One Year Fixed - DCA+
Perspective Focus
Guaranteed One Year Fixed
Guaranteed Three Year Fixed
One Year Fixed - DCA
One Year Fixed - DCA+
SCHEDULE C-1
Limits and Rules of the CEDING COMPANY
1) The CEDING COMPANY will determine the Guaranteed Minimum Income Benefits
for each qualified annuitization within seven (7) working days of receipt
of election to annuitize under the GMIB.
2) The CEDING COMPANY reserves the right to limit cumulative RETAIL ANNUITY
PREMIUMS on ANNUITY CONTRACTS to a maximum of [REDACTED].
3) The minimum annuity purchase is $5,000 for non-qualified contracts and
$2,000 for qualified contracts.
4) Valid issue ages for GMIB are 0 to 75, age last birthday.
SCHEDULE C-2
Limits and Rules of the REINSURER
1) The maximum RETAIL ANNUITY PREMIUM made under any ANNUITY CONTRACT
without REINSURER approval is [REDACTED].
2) REINSURER'S liability cannot be increased as a result of CEDING COMPANY'S
actions with respect to contested claims.
3) The REINSURER will not be liable for extracontractual damages (whether
they constitute compensatory damages, statutory penalties, exemplary or
punitive damages) which are awarded against the CEDING COMPANY.
4) The REINSURER's liability to accept new business hereunder could end
before [REDACTED]. The REINSURER'S liability to accept new business
hereunder will end on the BUSINESS DAY when the cumulative RETAIL ANNUITY
PREMIUMS for the ACTIVE CONTRACTS exceed [REDACTED], unless extended by
mutual written agreement. RETAIL ANNUITY PREMIUMS paid on an ACTIVE
CONTRACTS subsequent to the date on which the REINSURER'S liability to
accept new business ends are not included when calculating the limits
provided in this Paragraph.
5) A contract where a spousal continuation occurs will be subject to this
Agreement and not characterized as new business as described in paragraph
4 of this section.
SCHEDULE D
QUARTERLY RE PREMIUM RATE by CONTRACT TYPE and GMIB TYPE
The Premium rate for reinsurance, subject to the terms and conditions of this
Agreement, are guaranteed while the reinsurance coverage is in effect. Issue
ages are based on age last birthday.
CONTRACT TYPES:
Perspective II, Perspective Focus
GMIB TYPES:
Form numbers 7344NY 0303 and 7365NY 0303
Issue Age Rate
All [REDACTED]
SCHEDULE E-1
DOLLAR CLAIM LIMIT RATE by CONTRACT TYPE and GMIB TYPE
CONTRACT TYPES:
Perspective II, Perspective Focus
GMIB TYPES:
Form numbers 7344NY 0303 and 7365NY 0303
Issue Age Rate
All [REDACTED]
SCHEDULE E-2
FORMULA CLAIM LIMIT RATE by CONTRACT TYPE and GMIB TYPE
The FORMULA CLAIM LIMIT RATE is calculated for each ANNUITY CONTRACT on all
MONTHLY VALUATION DATES prior to the ANNUITY CONTRACT's eligibility to annuitize
under the GMIB TYPE.
CONTRACT TYPES:
Perspective II, Perspective Focus
GMIB TYPES:
Form numbers 7344NY and 7365NY
Issue Age Rate
All [REDACTED]
SCHEDULE F
REINSURER Share of Risk by CONTRACT TYPE & GMIB TYPE
For each ANNUITY CONTRACT with RETAIL ANNUITY PREMIUM no greater than
[REDACTED], the REINSURER liability will be based on the share of risk from the
tables below.
For each ANNUITY CONTRACT with aggregate RETAIL ANNUITY PREMIUM in excess of
[REDACTED], the REINSURER's liability equals {[REDACTED] divided by aggregate
retail annuity premiums}, times the share of risk from the tables below.
GMIB TYPES:
Form numbers 7344NY 0303 and 7365NY 0303
CONTRACT TYPE Share of Risk
Perspective II [REDACTED]
Perspective Focus [REDACTED]
SCHEDULE G
Reporting Format and Data Requirements
Monthly Reporting Data Requirements (prepared by CEDING COMPANY) ACTIVE
CONTRACTS and those terminating during the month only:
Insured Life (annuitant) SSN
Contract Identifier
Insured Life Indicator (Annuitant, Owner, or Other)
Insured Life Date of Birth
Insured Life Sex
Second Life Date of Birth (if joint contract)
Second Life Sex (if joint contract)
Issue Date
Qualified Status
Contract Type
Initial Retail Premium
Cumulative Retail Premium
Cumulative Withdrawals
Account value by subaccount
GMIB Income Base
Termination Date
Termination Reason (surrender, death, annuitization)
Optional benefit indicators
Spousal Continuation Indicator
Quarterly Reporting Requirements (prepared by REINSURER)
GAAP Surplus position
Standard and Poors Ratings
GMIB Annual Seriatim Claim Reporting (prepared by CEDING COMPANY)
This includes Monthly Reporting Data Requirements above as of the Date of
Notification (the date that annuitization related paperwork is submitted in
full), plus the following:
Date of Annuitization
Guaranteed Purchase Rate
Current Purchase Rate based on treaty definition
GMIB Income Base
ADJUSTED GMIB CLAIM
Quarterly Statement of Account (prepared by CEDING COMPANY) (prepared for each
CONTRACT TYPE and GMIB TYPE combination and in aggregate)
1. Calculated value of MONTHLY INCOME BASE
2. Calculated value of QUARTERLY REINSURANCE PREMIUM
3. Calculated value of FORMULA CLAIM LIMIT, AGGREGATE FORMULA CLAIM
LIMIT, DOLLAR CLAIM LIMIT and AGGREGATE DOLLAR CLAIM LIMIT 4. ADJUSTED GMIB
CLAIMS reported during the current quarter
SCHEDULE H
Surplus Position of the REINSURER
U.S. GAAP Surplus for the REINSURER as of December 31, 2002: $1,962,770,000 USD
SCHEDULE I
Calculation of ADJUSTED GMIB CLAIM
A. Income Benefit Net Amount at Risk (IBNARt)
The IBNARt for each ANNUITY CONTRACT reinsured hereunder in calendar year t
shall be equal to the following:
IBNARt = Maximum (RGIBt * Minimum (CAPRt / GAPRt, 0.8) - RAVt, 0)
where:
RGIBt is the REINSURED GMIB INCOME BASE, and RAVt is the REINSURED ACCOUNT
VALUE, both as defined in Article I, calculated on the ANNUITY CONTRACT's
anniversary in calendar year t.
GAPRt is the Guaranteed Annuity Purchase Rate (single premium required to purchase lifetime income), calculated
on the ANNUITY CONTRACT's anniversary in year t, using the following assumptions:
Mortality Table Annuity2000
Age Setback 10 years
Mortality Improvement: None
Interest Rate: 2.5% all years
Age: Age Last Birthday on exercise date
Annuity Form: Life contingent, not to exceed 10-year certain
CAPRt is the Current Annuity Purchase Rate (single premium required to purchase lifetime income), calculated on
the ANNUITY CONTRACT's anniversary in calendar year t, using the following assumptions:
Mortality Table Annuity2000
Age Setback None
Mortality Improvement: Scale G (1995TSA)
Interest Rate: The yield on the most recently auctioned 10-year Treasury Security, as posted in
the Wall Street Journal, at the beginning of the month in which exercise occurs,
plus 75 bps
Age: Age Last Birthday on exercise date
Annuity Form: Life contingent, not to exceed 10-year certain
The impact of premium taxes, commissions, other expenses, and gender on the
calculation of GAPRt and CAPRt will be applied on a consistent basis.
The monthly income calculated from CAPRt is for reinsurance purposes only, and
the CEDING COMPANY may use other approaches with retail customers.
B. Annual Annuitization Limit Ratio (AALRatiot)
The AALRatiot for calendar year t shall be equal to the following:
AALRatiot = ExercisedRGIBt / EligibleRGIBt
where:
ExercisedRGIBt is the sum of the REINSURED GMIB INCOME BASE for each ACTIVE
CONTRACT that terminates in calendar year t through a GMIB EXERCISE, measured on
the ACTIVE CONTRACT's anniversary during calendar year t.
EligibleRGIBt is the sum of the REINSURED GMIB INCOME BASE for each ACTIVE
CONTRACT that has been reinsured hereunder for at least 120 months, measured on
the earlier of the ACTIVE CONTRACT's anniversary during calendar year t, or the
date that the ACTIVE CONTRACT terminates during calendar year t.
C. ADJUSTED GMIB CLAIM (AdjGMIBt)
The ADJUSTED GMIB CLAIM for each ANNUITY CONTRACT that terminates in calendar
year t through a GMIB EXERCISE shall be equal to the following:
AdjGMIBt = IBNARt * (Minimum (AALRatiot, 0.20) / AALRatiot)
SCHEDULE J-1
Letter of Credit Requirements
A. With regard to funding by Letter of Credit, the REINSURER hereby agrees to
apply for and secure delivery to the CEDING COMPANY within thirty (30) days
of receipt of any such statement as described in Paragraph B of Article
VII, a clean, irrevocable and unconditional Letter of Credit issued by a
qualified United States financial institution, and in a form, acceptable to
the New York Insurance Department and any additional applicable state
insurance departments in an amount equal to the REINSURER's proportion of
the reserves for future ADJUSTED GMIB CLAIMS, less the fair market value of
any amounts held in trust pursuant to Schedule J-2. The CEDING COMPANY and
the REINSURER agree that the Letter of Credit provided by the REINSURER
under this provision may be drawn upon at any time, notwithstanding any
other provisions in this Agreement, and be utilized by the CEDING COMPANY
or any successor by operation of law of the CEDING COMPANY, including,
without limitation, any liquidator, rehabilitator, receiver or conservator
of the CEDING COMPANY, only for one or more of the following purposes:
1. To reimburse the CEDING COMPANY for the REINSURER's share of benefits
paid by the CEDING COMPANY under the terms and provisions of the
ANNUITY CONTRACTS reinsured under this Agreement;
2. 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 future ADJUSTED GMIB CLAIMS; and
3. To pay any other amounts the CEDING COMPANY claims are due under this
Agreement.
B. All of the foregoing shall be applied without diminution because of
insolvency on the part of the CEDING COMPANY or the REINSURER.
C. The designated qualified United States financial institution shall have no
responsibility whatsoever in connection with the propriety of withdrawals
made by the CEDING COMPANY or the disposition of funds withdrawn, except to
see that withdrawals are made upon the order of the properly authorized
representatives of the CEDING COMPANY.
SCHEDULE J-2
Trust Account Requirements
A. With regard to funding by the Trust Account, the REINSURER shall enter into
a trust agreement (the "Trust Agreement") and establish the Trust Account
for the benefit of the CEDING COMPANY with respect to the REINSURER's
proportion of the reserves for future ADJUSTED GMIB CLAIMS with a bank and
in a form acceptable to the New York Insurance Department and additional
applicable state insurance departments in an amount equal to REINSURER'S
proportion of the reserves for future ADJUSTED GMIB CLAIMS, less the amount
of the Letter of Credit established pursuant to Schedule J-1.
B. The REINSURER agrees to deposit, and maintain in the Trust Account, assets
to be held in trust by the trustee thereunder (the "Trustee") for the
benefit of the CEDING COMPANY as security for the payment of the
REINSURER's obligations to the CEDING COMPANY under this Agreement.
C. The REINSURER agrees that the assets so deposited shall be valued according
to their current fair market value and shall consist only of cash (United
States legal tender), certificates of deposit (issued by a United States
bank and payable in United States legal tender), and assets of the type
specified in paragraphs (1), (2), (3), (8), and (10) of subsection (a) of
section 1404 of the New York Insurance Laws, provided that such assets are
issued by an institution that is not the parent, subsidiary or affiliate of
either the CEDING COMPANY or the REINSURER.
D. The REINSURER, prior to depositing assets with the Trustee, shall execute
all 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
direction of the CEDING COMPANY, may whenever necessary negotiate any such
assets without consent or signature from the REINSURER or any other entity.
E. All settlements of account under the Trust Agreement between the CEDING
COMPANY and the REINSURER shall be made in cash or its equivalent.
F. The REINSURER and the CEDING COMPANY agree that the assets in the Trust
Account may be withdrawn by the CEDING COMPANY at any time, notwithstanding
any other provisions in this Agreement, provided such assets are applied
and utilized by the CEDING COMPANY (or any successor in interest of the
CEDING COMPANY by operation of law, including, without limitation, any
liquidator, rehabilitator, receiver or conservator of the CEDING COMPANY),
without diminution because of the insolvency of the CEDING COMPANY or the
REINSURER, only for the following purposes:
1. to reimburse the CEDING COMPANY for the REINSURER's share of benefits
paid by the CEDING COMPANY pursuant to the provisions of the ANNUITY
CONTRACTS;
2. to fund an account specifically established by the CEDING COMPANY in an
amount at least equal to the deduction, for reinsurance ceded, from the
CEDING COMPANY's liabilities for future ADJUSTED GMIB CLAIMS; and
3. to pay any other amount which the CEDING COMPANY claims are due under
this Agreement.
G. The REINSURER shall have the right to seek the CEDING COMPANY's approval to
withdraw all or any part of the assets from the Trust Account and transfer
such assets to the REINSURER, provided that:
1. the REINSURER shall, at the time of withdrawal, replace the withdrawn
assets with other assets of a type permitted hereunder having a market
value equal to the market value of the assets withdrawn, so as to
maintain the Trust Account in the required amount, or
2. after such withdrawal and transfer, the market value of the Trust
Account is no less than 102% of the required amount.
H. In the event that the REINSURER seeks the CEDING COMPANY's approval in
accordance with Paragraph G of Schedule J-2, the CEDING COMPANY shall be
the sole judge as to the application of this provision, but the CEDING
COMPANY shall not unreasonably or arbitrarily withhold its approval.
I. In the event that the CEDING COMPANY withdraws assets from the Trust
Account for the purposes set forth in Paragraph F of Schedule J-2 in excess
of actual amounts required to meet the REINSURER's obligations of the
CEDING COMPANY, or in excess of amounts determined to be due under
Paragraph G of Schedule J-2, the CEDING COMPANY will return such excess to
the REINSURER, plus interest at the average prime rate of interest
applicable to the period during which the amounts were held pursuant to
Paragraph F of Schedule J-2. In the event of a dispute arising under
Article VII, the arbitration panel established pursuant to Article XIII of
this Agreement shall have the right to award interest at a rate different
from that provided above, and may award attorney's fees, arbitration costs
and other reasonable expenses.