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AUTOMATIC AND FACULTATIVE
YEARLY RENEWABLE TERM REINSURANCE
AGREEMENT
EFFECTIVE April 30, 2000
PRUCO LIFE INSURANCE COMPANY
(hereinafter referred to as "PRUCO")
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And
ANNUITY & LIFE REASSURANCE, LTD
(hereinafter referred to as "ANNUITY & LIFE RE")
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Bermuda
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Table of Contents
1. PARTIES TO THE AGREEMENT..................................................3
2. EFFECTIVE DATE OF THE AGREEMENT...........................................3
3. SCOPE OF THE AGREEMENT....................................................3
4. DURATION OF THE AGREEMENT.................................................3
5. BASIS OF REINSURANCE......................................................4
6. AUTOMATIC REINSURANCE TERMS...............................................4
a. CONVENTIONAL UNDERWRITING............................................4
b. RESIDENCE............................................................4
c. OCCUPATION...........................................................4
d. AUTOMATIC PORTION REINSURED..........................................4
e. RETENTION............................................................4
f. AUTOMATIC ACCEPTANCE LIMIT...........................................4
g. JUMBO LIMIT..........................................................4
h. MINIMUM CESSION......................................................4
i. FACULTATIVE QUOTES...................................................4
7. AUTOMATIC REINSURANCE NOTICE PROCEDURE....................................4
8. FACULTATIVE OBLIGATORY REINSURANCE........................................5
9. FACULTATIVE REINSURANCE...................................................5
10. COMMENCEMENT OF REINSURANCE COVERAGE......................................5
a. AUTOMATIC REINSURANCE................................................5
b. FACULTATIVE OBLIGATORY REINSURANCE...................................5
c. FACULTATIVE REINSURANCE..............................................6
d. PRE-ISSUE COVERAGE...................................................6
11. REINSURANCE PREMIUM RATES.................................................6
a. LIFE REINSURANCE.....................................................6
b. RATES NOT GUARANTEED.................................................6
12. PAYMENT OF REINSURANCE PREMIUMS...........................................6
a. PREMIUM DUE..........................................................6
b. FAILURE TO PAY PREMIUMS..............................................7
c. PREMIUM ADJUSTMENT...................................................7
13. PREMIUM TAX REIMBURSEMENT.................................................7
14. DAC TAX AGREEMENT.........................................................7
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15. REPORTS...................................................................8
16. RESERVES FOR REINSURANCE..................................................8
17. CLAIMS...............................................................8
a. NOTICE...............................................................8
b. AMOUNT AND PAYMENT OF BENEFITS.......................................8
c. CLAIM SETTLEMENTS....................................................8
d. CLAIM EXPENSES.......................................................9
e. EXTRACONTRACTUAL DAMAGES.............................................9
18. MISREPRESENTATION, SUICIDE, AND MISSTATEMENT..............................9
19. POLICY CHANGES............................................................9
a. NOTICE...............................................................9
b. INCREASES............................................................9
c. REDUCTION OR TERMINATION.............................................10
d. PLAN CHANGES.........................................................10
e. DEATH BENEFIT OPTION CHANGES.........................................10
f. REDUCED PAID-UP INSURANCE............................................10
20. RECAPTURE.................................................................10
21. REINSTATEMENTS............................................................11
a. AUTOMATIC REINSTATEMENT..............................................11
b. FACULTATIVE REINSTATEMENT............................................11
c. PREMIUM ADJUSTMENT...................................................11
22. ERRORS AND OMISSIONS......................................................11
23. INSOLVENCY................................................................11
24. ARBITRATION...............................................................12
a. GENERAL..............................................................12
b. NOTICE...............................................................12
c. PROCEDURE............................................................13
d. COSTS................................................................13
25. GOOD FAITH; FINANCIAL SOLVENCY............................................13
26. MEDICAL INFORMATION BUREAU................................................14
27. GOVERNING LAW.............................................................14
28. ASSIGNMENT................................................................14
29. PROVISION FOR BERMUDA DOMICILED ANNUITY & LIFE RE.........................14
30. LETTER OF CREDIT PROVISIONS...............................................14
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AUTOMATIC AND FACULTATIVE YEARLY RENEWABLE TERM
REINSURANCE AGREEMENT
1. PARTIES TO THE AGREEMENT
This Agreement is solely between ANNUITY & LIFE RE and PRUCO, a life
insurance company domiciled in the State of Arizona. There is no third
party beneficiary to this Agreement. Reinsurance under this Agreement will
not create any right or legal relationship between ANNUITY & LIFE RE and
any other person, for example, any insured, policyowner, agent,
beneficiary, or assignee. PRUCO agrees that it will not make ANNUITY &
LIFE RE a party to any litigation between any such third party and PRUCO.
PRUCO will not use or disclose ANNUITY & LIFE RE's name with regard to
PRUCO's agreements or transactions with these third parties unless ANNUITY
& LIFE RE gives prior written approval for the use or disclosure of its
name or unless PRUCO is compelled by law to do so.
The terms of this Agreement are binding upon the parties, their
representatives, successors, and assigns. The parties to this Agreement
are bound by ongoing and continuing obligations and liabilities until the
later of (1) when this Agreement terminates and (2) when the underlying
policies are no longer in force. This Agreement shall not be bifurcated,
partially assigned, or partially assumed.
2. EFFECTIVE DATE OF THE AGREEMENT
This Agreement will be effective as of 12:01 A.M., April 30, 2000, and
will cover policies effective on and after that date.
3. SCOPE OF THE AGREEMENT
The text of this Agreement and all Exhibits, Schedules and Amendments are
considered to be the entire agreement between the parties. There are no
other understandings or agreements between the parties regarding the
policies reinsured other than as expressed in this Agreement. The parties
may make changes or additions to this Agreement, but they will not be
considered to be in effect unless they are made by means of a written
amendment that has been signed and dated by both parties.
4. DURATION OF THE AGREEMENT
The duration of this Agreement will be unlimited. However, either party
may terminate the Agreement for new business at any time by giving the
other a 90-day prior written notice. ANNUITY & LIFE RE will continue to
accept new reinsurance during the 90-day period.
In addition, this Agreement may be terminated immediately for the
acceptance of new reinsurance by either party if one of the parties
materially breaches this Agreement or becomes insolvent.
Existing reinsurance will not be affected by the termination of this
Agreement with respect to new reinsurance. Existing reinsurance will
remain in force until the termination or expiry of the underlying policies
on which the reinsurance is based as long as PRUCO continues to pay
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reinsurance premiums as described in Section 12. However, existing
reinsurance may be terminated in accordance with the recapture provision
described in Section 20.
5. BASIS OF REINSURANCE
Reinsurance under this Agreement will be on the Yearly Renewable Term
basis for the net amount at risk on the portion of each policy that is
reinsured as described in Schedule A.
6. AUTOMATIC REINSURANCE TERMS
ANNUITY & LIFE RE agrees to automatically accept contractual risks on the
life insurance plans shown in Schedule A, subject to the following
requirements:
a. CONVENTIONAL UNDERWRITING. Automatic reinsurance applies only to
insurance applications underwritten by PRUCO according to PRUCO's
conventional underwriting and issue practices. Upon request, PRUCO
shall provide ANNUITY & LIFE RE with a copy of its current
underwriting and issue practices and guidelines.
In the event of significant changes in underwriting practices in the
industry, it may be appropriate for PRUCO or ANNUITY & LIFE RE to
request of the other party changes in the underwriting requirements.
The party requesting the change must provide a 120-day advance
written notice to the other party before the effective date of such
change. Recognition of reinsurance premium rates related to these
changes must be determined within the 120-day period. If the
underwriting change or rate change is unacceptable to either party,
this Agreement may be unilaterally terminated for acceptance of new
business with a 90-day written termination notice to the other
party.
b. RESIDENCE. To be eligible for automatic reinsurance, each insured
must either be a resident of the United States or Canada at the time
of issue or be a resident of another country that meets PRUCO's
special underwriting requirements pertaining to foreign residence.
c. OCCUPATION. To be eligible for automatic reinsurance, the insured
must not be employed in an occupation as shown in the Occupation
Exclusion List in Schedule A.
d. AUTOMATIC PORTION REINSURED. For any policy reinsured under
automatic reinsurance, the portion reinsured is shown in Schedule A.
e. RETENTION. PRUCO will retain, and not otherwise reinsure, an amount
of insurance on each life equal to its retention shown in Schedule
A.
f. AUTOMATIC ACCEPTANCE LIMIT. For any policy to be reinsured under
automatic reinsurance, the face amount shall not exceed the
Automatic Acceptance Limit as shown in Schedule A.
g. JUMBO LIMIT. For any policy to be reinsured under automatic
reinsurance, the total amount of insurance in force and applied for
in all companies shall not exceed the Jumbo Limit as shown in
Schedule A.
h. MINIMUM CESSION. The minimum amount of reinsurance per cession that
ANNUITY & LIFE RE will accept is shown in Schedule A.
i. FACULTATIVE QUOTES. The risk shall not have been submitted on a
facultative basis to ANNUITY & LIFE RE or any other reinsurer.
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7. AUTOMATIC REINSURANCE NOTICE PROCEDURE
After the policy has been paid for and delivered, PRUCO will submit all
relevant individual policy information, as defined in Schedule C, in its
next statement to ANNUITY & LIFE RE.
8. FACULTATIVE OBLIGATORY REINSURANCE
When a policy does not qualify for automatic reinsurance because (1) the
Automatic Acceptance Limit is exceeded, (2) the Jumbo Limit is exceeded or
(3) the applicant is employed in an occupation included in the Occupation
Exclusion List in Schedule A, PRUCO may make a request to reserve capacity
through facultative obligatory reinsurance by contacting ANNUITY & LIFE RE
by telephone. If PRUCO reserves capacity and the policy is issued, PRUCO
must submit a form substantially similar to the "Notification of
Reinsurance" form shown in Schedule F.
9. FACULTATIVE REINSURANCE
PRUCO may apply for facultative reinsurance with ANNUITY & LIFE RE on a
risk if the automatic reinsurance terms are not met or if the terms are
met and it prefers to apply for facultative reinsurance. To obtain a
facultative reinsurance quote, PRUCO must submit the following:
a. A form substantially similar to the "Application for Reinsurance"
form shown in Schedule E.
b. Copies of the original insurance application, medical examiner's
reports, financial information, and all other papers and information
obtained by PRUCO regarding the insurability of the risk.
After receipt of PRUCO's application, ANNUITY & LIFE RE will promptly
examine the material and notify PRUCO either of the terms and conditions
of ANNUITY & LIFE RE's offer for facultative reinsurance or that no offer
will be made. ANNUITY & LIFE RE's offer expires 120 days after the offer
is made unless the written offer specifically states otherwise. If PRUCO
accepts ANNUITY & LIFE RE's offer, then PRUCO will make a dated notation
of its acceptance in its underwriting file and mail as soon as possible a
formal reinsurance cession to ANNUITY & LIFE RE using a form substantially
similar to the Notification of Reinsurance form shown in Schedule F. If
PRUCO does not accept ANNUITY & LIFE RE's offer, then PRUCO will notify
ANNUITY & LIFE RE in writing as soon as possible.
10. COMMENCEMENT OF REINSURANCE COVERAGE
Commencement of ANNUITY & LIFE RE's reinsurance coverage on any policy or
pre-issue risk under this Agreement is described below:
a. AUTOMATIC REINSURANCE. ANNUITY & LIFE RE's reinsurance coverage for
any policy that is ceded automatically under this Agreement will
begin and end simultaneously with PRUCO's contractual liability for
the policy reinsured.
In addition, ANNUITY & LIFE RE will be liable for benefits paid
under PRUCO's conditional receipt or temporary insurance agreement
if all of the conditions for automatic reinsurance coverage under
Section 6 of this Agreement are met. ANNUITY & LIFE RE's liability
under PRUCO's conditional receipt or temporary insurance agreement
is limited to the lesser of (1) ANNUITY & LIFE RE's reinsured
portion of the face amount of the policy and (2) $200,000.
b. FACULTATIVE OBLIGATORY REINSURANCE. ANNUITY & LIFE RE's reinsurance
coverage for any policy that is ceded under the terms of facultative
obligatory reinsurance in this Agreement will begin when (1) PRUCO
accepts ANNUITY & LIFE RE's offer by
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making a dated notation of its acceptance in its underwriting file
and mailing the "Notification of Reinsurance" form to ANNUITY & LIFE
RE and (2) the policy has been issued.
In addition, ANNUITY & LIFE RE will be liable for benefits paid
under PRUCO's conditional receipt or temporary insurance agreement
if the conditions for automatic reinsurance stated in Section 6a, b,
e, h, and i of this Agreement are met. ANNUITY & LIFE RE's liability
under PRUCO's conditional receipt or temporary insurance agreement
will be limited to the portion of $1,000,000 that is derived as the
amount of capacity reserved by PRUCO from ANNUITY & LIFE RE divided
by the total amount of capacity reserved by PRUCO from all
reinsurers.
c. FACULTATIVE REINSURANCE. ANNUITY & LIFE RE's reinsurance coverage
for any policy that is ceded facultatively under this Agreement
shall begin when (1) PRUCO accepts ANNUITY & LIFE RE's offer by
making a dated notation of its acceptance in its underwriting file
and mailing the "Notification of Reinsurance" form to ANNUITY & LIFE
RE and (2) the policy has been issued.
In addition, ANNUITY & LIFE RE will be liable for benefits paid
under PRUCO's conditional receipt or temporary insurance agreement.
ANNUITY & LIFE RE's liability under PRUCO's conditional receipt or
temporary insurance agreement will be limited to the portion of
$1,000,000 that is derived as the amount of capacity reserved by
PRUCO from ANNUITY & LIFE RE divided by the total amount of capacity
reserved by PRUCO from all reinsurers.
d. PRE-ISSUE COVERAGE. The pre-issue coverage for benefits paid under
PRUCO's conditional receipt or temporary insurance agreement will be
effective once all initial medical exams and tests have been
completed. The pre-issue liability applies only once on any given
life at one time no matter how many conditional receipts or
temporary insurance agreements are in effect. After a policy has
been issued, no reinsurance benefits are payable under this
pre-issue coverage provision.
11. REINSURANCE PREMIUM RATES
a. LIFE REINSURANCE. The reinsurance premiums per $1000 are shown in
Schedule B. Reinsurance premiums for renewals are calculated using
(1) the issue ages, (2) the duration since issuance and (3) the
current underwriting classification.
b. RATES NOT GUARANTEED. The reinsurance premium rates are not
guaranteed. ANNUITY & LIFE RE reserves the right to change the rates
at any time. If ANNUITY & LIFE RE changes the rates, it will give
PRUCO a 90-day prior written notice of the change. Any change
applies only to reinsurance premiums due after the expiration of the
notice period.
ANNUITY & LIFE RE further agrees that PRUCO's right of recapture
under Section 20 of this Agreement will be triggered if Prudential
deems a rate change unacceptable.
12. PAYMENT OF REINSURANCE PREMIUMS
a. PREMIUM DUE. For each policy reinsured under this Agreement,
reinsurance premiums are payable annually in advance. These premiums
are due on the issue date and each subsequent policy anniversary.
Within 30 days after the close of each reporting period, PRUCO will
send ANNUITY & LIFE RE a statement of account for that period along
with payment of the full balance due. On any payment date, monies
payable between ANNUITY & LIFE RE and PRUCO under this Agreement may
be netted to determine the payment due. This offset will apply
regardless of the insolvency of either party as described in Section
23. If the statement of account shows a balance due PRUCO,
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ANNUITY & LIFE RE will remit that amount to PRUCO within 30 days of
receipt of the statement of account. All financial transactions
under this Agreement will be in United States dollars. If the
reinsurance premium amounts cannot be determined on an exact basis
by the dates described below, such payments will be paid in
accordance with a mutually agreed upon formula which will
approximate the actual payments. Adjustments will then be made to
reflect actual amounts when such information is available.
b. FAILURE TO PAY PREMIUMS. If reinsurance premiums are 90 days past
due, for reasons other than those due to error or omission as
defined below in Section 22, the premiums will be considered in
default and ANNUITY & LIFE RE may terminate the reinsurance by
providing a 30-day prior written notice, provided payment is not
received within that 30-day period. ANNUITY & LIFE RE will have no
further liability as of the termination date. PRUCO will be liable
for the prorated reinsurance premiums to the termination date. PRUCO
agrees that it will not force termination under the provisions of
this paragraph solely to avoid the recapture requirements or to
transfer the block of business reinsured to another reinsurer.
At the end of this 30-day period, ANNUITY & LIFE RE's liability will
automatically terminate for all reinsurance on which balances remain
due and unpaid, including reinsurance on which balances became due
and unpaid during and after the 30-day notice period.
PRUCO may reinstate reinsurance terminated for non-payment of
balances due at any time within 60 days following the date of
termination. However, ANNUITY & LIFE RE will have no liability for
claims incurred between the termination date and the reinstatement
date.
c. PREMIUM ADJUSTMENT. If PRUCO overpays a reinsurance premium and
ANNUITY & LIFE RE accepts the overpayment, ANNUITY & LIFE RE's
acceptance will not constitute or create a reinsurance liability or
increase in any existing reinsurance liability. Instead, ANNUITY &
LIFE RE will be liable to PRUCO for a credit in the amount of the
overpayment. If a reinsured policy terminates, ANNUITY & LIFE RE
will refund the excess reinsurance premium. This refund will be on a
prorated basis without interest from the date of termination of the
policy to the date to which a reinsurance premium has been paid.
13. PREMIUM TAX REIMBURSEMENT
See Schedule B.
14. DAC TAX AGREEMENT
PRUCO and ANNUITY & LIFE RE, herein collectively called the "Parties", or
singularly the "Party", hereby enter into an election under Treasury
Regulations Section 1.848-2(g) (8) whereby:
a. For each taxable year under this Agreement, the party with the net
positive consideration, as defined in the regulations promulgated
under Internal Revenue Code Section 848, will capitalize specified
policy acquisition expenses with respect to this Agreement without
regard to the general deductions limitation of Section 848 (c) (1);
b. PRUCO and ANNUITY & LIFE RE agree to exchange information pertaining
to the net consideration under this Agreement each year to insure
consistency or as otherwise required by the Internal Revenue
Service;
c. PRUCO will submit to ANNUITY & LIFE RE by May 1 of each year its
calculation of the net consideration for the preceding calendar
year.
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d. ANNUITY & LIFE RE may contest such calculation by providing an
alternative calculation to PRUCO in writing within 30 days of
ANNUITY & LIFE RE 's receipt of PRUCO's calculation. If ANNUITY &
LIFE RE does not so notify PRUCO, ANNUITY & LIFE RE will report the
net consideration as determined by PRUCO in ANNUITY & LIFE RE's tax
return for the previous calendar year;
e. If ANNUITY & LIFE RE contests PRUCO's calculation of the net
consideration, the parties will act in good faith to reach an
agreement as to the correct amount within 30 days of the date
ANNUITY & LIFE RE submits its alternative calculation. If PRUCO and
ANNUITY & LIFE RE do not reach agreement on the net amount of
consideration within such 30-day period, then the net amount of
consideration for such year shall be determined by an independent
accounting firm acceptable to both PRUCO and ANNUITY & LIFE RE
within 20 days after the expiration of such 30-day period.
f. PRUCO and ANNUITY & LIFE RE agree that this election shall first be
effective for the 2000 calendar tax year and will be effective for
all subsequent taxable years for which this Agreement remains in
effect.
ANNUITY & LIFE RE and PRUCO represent and warrant that they are
subject to U.S. taxation under either Subchapter L of Chapter 1, or
Subpart F of Subchapter N of Chapter 1 of the Internal Revenue Code
of 1986, as amended.
15. REPORTS
The reporting period is shown in Schedule A. For each reporting period,
PRUCO will submit reports to ANNUITY & LIFE RE with information that is
substantially similar to the information displayed in Schedule C.
In addition, the reports will include a billing and accounting summary and
a policy exhibit summary similar to the reports shown in Schedule D.
Within 15 business days after the end of each calendar year, PRUCO will
submit a reserve credit summary similar to that shown in Schedule D. PRUCO
will also submit this reserve credit summary within 10 business days after
the end of each other calendar quarter.
16. RESERVES FOR REINSURANCE
See Schedule A.
17. CLAIMS
a. NOTICE. PRUCO will notify ANNUITY & LIFE RE as soon as reasonably
possible after PRUCO receives a claim for a policy reinsured under
this Agreement. After PRUCO has received all proper claim proofs and
paid the claim, PRUCO will send ANNUITY & LIFE RE an itemized
statement of the benefits paid by PRUCO and all relevant information
with respect to the claim including the claim proofs. However, claim
proofs will not be required by ANNUITY & LIFE RE if ANNUITY & LIFE
RE's net amount at risk is less than or equal to $500,000 and PRUCO
has paid the claim in full. In such cases, PRUCO will provide
ANNUITY & LIFE RE with the cause of death.
b. AMOUNT AND PAYMENT OF BENEFITS. As soon as ANNUITY & LIFE RE
receives proper claim notice and any required proof of the claim,
ANNUITY & LIFE RE will promptly pay the reinsurance benefits due
PRUCO. PRUCO's contractual liability for claims is binding on
ANNUITY & LIFE RE. The maximum benefit payable to PRUCO under each
reinsured policy is the amount specifically reinsured with ANNUITY &
LIFE RE.
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c. CLAIM SETTLEMENTS. PRUCO will use its standard claim practice and
guidelines in the adjudication of all claims on policies reinsured
under this Agreement. Until such time as PRUCO has systems
capability to administer the right of ANNUITY & LIFE RE to opt out
of contested claims, claim settlements made by PRUCO, including
compromises, shall be unconditionally binding on ANNUITY & LIFE RE.
ANNUITY & LIFE RE will share in any reduced amount in proportion to
its share of the liability.
d. CLAIM EXPENSES. ANNUITY & LIFE RE will pay its share of reasonable
investigation and legal expenses connected with the litigation or
settlement of policy claims. ANNUITY & LIFE RE will also pay its
share of any interest paid by PRUCO on any claim payment. However,
claim expenses do not include routine claim and administration
expenses, including PRUCO's home office expenses. Also, expenses
incurred in connection with a dispute or contest arising out of
conflicting claims of entitlement to policy proceeds or benefits
that PRUCO admits are payable are not a claim expense under this
Agreement.
e. EXTRACONTRACTUAL DAMAGES. In no event will ANNUITY & LIFE RE
participate in punitive or compensatory damages which are awarded
against PRUCO as a result of an act, omission or course of conduct
committed by PRUCO in connection with the insurance under this
Agreement. ANNUITY & LIFE RE will, however, pay its share of
statutory penalties awarded against PRUCO in connection with the
insurance reinsured under this Agreement. The parties recognize that
circumstances may arise in which equity would require ANNUITY & LIFE
RE, to the extent permitted by law, to share proportionately in
certain assessed damages. Such circumstances are difficult to define
in advance, but generally would be those situations in which ANNUITY
& LIFE RE was an active party and in writing either directed,
consented to, or ratified the act, omission, or course of conduct of
PRUCO which ultimately results in the assessment of punitive and/or
compensatory damages. In such situations, PRUCO and ANNUITY & LIFE
RE would share such damages assessed in equitable proportions.
Routine expenses incurred in the normal settlement of uncontested
claims and the salary of an officer or employee of PRUCO are
excluded from this provision. For purposes of the provision, the
following definitions will apply:
"Punitive Damages" are those damages awarded as a penalty, the
amounts of which are not governed or fixed by statute;
"Statutory Penalties" are those amounts that are awarded as a
penalty, but are fixed in amount by statute;
"Compensatory Damages" are those amounts awarded to compensate for
actual damages sustained, and are not awarded as a penalty, nor
fixed in amount by statute.
18. MISREPRESENTATION, SUICIDE, AND MISSTATEMENT
If either a misrepresentation on an application or a death of an insured
by suicide results in the return of policy premiums by PRUCO under the
policy rather than payment of policy benefits, ANNUITY & LIFE RE will
refund all of the reinsurance premiums paid for that policy to PRUCO. If
there is an adjustment for a misrepresentation or misstatement of age or
sex, a corresponding adjustment to the reinsurance benefit will be made.
19. POLICY CHANGES
a. NOTICE. If a reinsured policy is changed as described below, a
corresponding change will be made in the reinsurance for that
policy. PRUCO will notify ANNUITY & LIFE RE of the change in PRUCO's
next report as stated in Section 15.
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b. INCREASES. If a request for an increase in the amount of insurance
is made for a reinsured policy and the insured meets PRUCO's
underwriting requirements and PRUCO approves the increase under the
policy, then the amount of reinsurance under this Agreement will be
adjusted as of the effective date of the increase.
If a request for an increase is made for a reinsured policy and the
insured meets PRUCO's underwriting requirements and a new policy is
issued for the higher amount, then reinsurance under the old policy
will cease as of the effective date of the change, and reinsurance
under the new policy will commence as of the policy date of the new
policy.
If a request for an increase in a reinsured policy is granted
without the insured meeting PRUCO's underwriting requirements, then
reinsurance on the increase will not be allowed.
If a request for an increase does not meet all of the terms of
automatic reinsurance, then PRUCO may apply for facultative
obligatory reinsurance or facultative reinsurance as stated in
Section 8 and Section 9, respectively. When this happens, it is the
intent of PRUCO to reinsure the entire policy, i.e. the amount
before the increase and the amount of increase. If the facultative
increase is allowed, the automatic reinsurance on the amount before
the increase will be discontinued.
If a reinsured policy is increased as a result of a conversion from
term insurance and the increase is granted without the insured
meeting PRUCO's underwriting requirements, then reinsurance will
cease as of the effective date of the change.
c. REDUCTION OR TERMINATION. If the amount of insurance on a reinsured
policy is reduced, the reinsurance will be reduced proportionately
as of the effective date of the reduction.
If a reinsured policy is terminated, the reinsurance will cease on
the date of such termination.
d. PLAN CHANGES. If a reinsured policy is changed to another plan of
insurance that is not currently reinsured under this Agreement as
defined in Schedule A, then PRUCO will recapture in full the
coverage reinsured under this Agreement, and the reinsurance will
cease with respect to the policy as of the effective date of the
change.
If a policy that is not reinsured under this Agreement is changed to
a plan that is reinsured under this Agreement as defined in Schedule
A and the insured has met PRUCO's underwriting requirements for the
plan change, then reinsurance will commence as of the policy date of
the new plan.
e. DEATH BENEFIT OPTION CHANGES. If the death benefit option under a
reinsured policy is changed and the face amount of insurance is
either increased or decreased, the net amount at risk reinsured
under this Agreement after the change will be the same as before the
change.
f. REDUCED PAID-UP INSURANCE. If any policy reinsured under this
Agreement is changed to Reduced Paid-Up Insurance, the net amount at
risk reinsured will be adjusted as appropriate and reinsurance will
be continued in accordance with the provisions of the underlying
policy. Reinsurance payments for the adjusted policy will be
calculated using (1) the issue age of the original policy, (2) the
duration since issuance of the original policy and (3) the
underwriting classification immediately prior to the change to
Reduced Paid-Up Insurance.
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20. RECAPTURE
At any time during the term of the Agreement, PRUCO may elect to recapture
in full the coverage reinsured under this Agreement following the
occurrence of either of the following events: (1) a "Risk Trigger Event"
as defined in Schedule A of this Agreement; or (2) a Plan Change as
described in Section 19 d. above: or (3) the Reinsurance Premium rates are
increased.
In addition, after the twentieth policy anniversary, PRUCO may elect to
recapture all or an appropriate portion of the coverage reinsured under
this Agreement to reflect increases in the maximum retention limits for
PRUCO and all of its affiliates, collectively, subsequent to the date of
policy issue. These maximum retention limits as of the effective date of
this Agreement are equal to the amounts shown in the Risk Retention Limits
table shown in Schedule A. The portion of the coverage that may be
recaptured would be directly related to the increase in the limits. To
illustrate, if the maximum retention limits are increased by 100%, then
the portion that may be recaptured from all reinsurers of the policies
reinsured under this Agreement would be equal to 100% of the portion of
each reinsured policy that is retained by PRUCO. Furthermore, the portion
that may be recaptured from ANNUITY & LIFE RE would be determined as
ANNUITY & LIFE RE's prorata share of the total portion reinsured with all
reinsurers.
If PRUCO elects to recapture the risks ceded to ANNUITY & LIFE RE under
this Agreement as stated above, it will do so by giving written notice to
ANNUITY & LIFE RE. Upon the delivery of such notice, all of the risks
previously ceded under each of the policies subject to this Agreement
shall be recaptured, effective as of the date specified in PRUCO's notice.
If PRUCO does not specify in the written notice the date that such
recapture is to be effective, then the recapture shall be effective
immediately upon ANNUITY & LIFE RE's receipt of the notice.
If a policy is recaptured, ANNUITY & LIFE RE will pay PRUCO the unearned
reinsurance premium as of the date of recapture. ANNUITY & LIFE RE shall
not be liable, under this Agreement, for any claims incurred after the
date of recapture.
21. REINSTATEMENTS
a. AUTOMATIC REINSTATEMENT. If PRUCO reinstates a policy that was
originally ceded to ANNUITY & LIFE RE as either automatic
reinsurance or facultative obligatory reinsurance using conventional
underwriting practices, ANNUITY & LIFE RE's reinsurance for the
policy shall be reinstated.
b. FACULTATIVE REINSTATEMENT. If PRUCO has been requested to reinstate
a policy that was originally ceded to ANNUITY & LIFE RE as
facultative reinsurance and the reinstatement is processed under
PRUCO's Long Form Reinstatement Process, then PRUCO will re-submit
the appropriate evidence for the case to ANNUITY & LIFE RE for
underwriting approval before the reinsurance can be reinstated.
c. PREMIUM ADJUSTMENT. Reinsurance premiums for the interval during
which the policy was lapsed will be paid to ANNUITY & LIFE RE on a
YRT basis by ▇▇▇▇▇.
▇▇. ERRORS AND OMISSIONS
If either ANNUITY & LIFE RE or PRUCO fails to comply with any of the terms
of this Agreement and it is shown that the failure was unintentional or
the result of a misunderstanding or an administrative oversight on the
part of either party, this Agreement will remain in effect. If the failure
to comply changes the operation or effect of this Agreement, both parties
will be put back to the positions they would have occupied if the failure
to comply had not occurred. This section will not apply to any facultative
submission until PRUCO has mailed the Notification of Reinsurance form to
ANNUITY & LIFE RE.
11
23. INSOLVENCY
For the purpose of this Agreement, PRUCO or ANNUITY & LIFE RE shall be
deemed "insolvent" if it does one or more of the following:
a. A court-appointed receiver, trustee, custodian, conservator,
liquidator, government official or similar officer takes possession
of the property or assets of either PRUCO or ANNUITY & LIFE RE; or
b. Either PRUCO or ANNUITY & LIFE RE is placed in receivership,
rehabilitation, liquidation, conservation, bankruptcy or similar
status pursuant to the laws of any state or of the United States; or
c. Either PRUCO or ANNUITY & LIFE RE becomes subject to an order to
rehabilitate or an order to liquidate as defined by the insurance
code of the jurisdiction of the domicile of PRUCO or ANNUITY & LIFE
RE, as the case may be.
In the event that PRUCO is deemed insolvent, all reinsurance claims
payable hereunder shall be payable by ANNUITY & LIFE RE on the basis of
PRUCO's liability under the policies reinsured without diminution because
of the insolvency of PRUCO. Such claims shall be payable by ANNUITY & LIFE
RE directly to PRUCO, its liquidator or statutory successor. It is
understood, however, that in the event of such insolvency, the liquidator
or receiver or statutory successor of PRUCO shall give written notice to
ANNUITY & LIFE RE of the pendency of a claim against ANNUITY & LIFE RE on
a risk reinsured hereunder within a reasonable time after such claim is
filed in the insolvency proceeding. Such notice shall indicate the policy
reinsured and whether the claim could involve a possible liability on the
part of ANNUITY & LIFE RE. Failure to give such notice shall not excuse
the obligation of ANNUITY & LIFE RE unless it is substantially prejudiced
thereby. During the pendency of such claim, ANNUITY & LIFE RE may
investigate such claim and interpose, at its own expense, in the
proceeding where such claim is to be adjudicated, any defense or defenses
it may deem available to PRUCO, its liquidator, receiver or statutory
successor. It is further understood that the expense thus incurred by
ANNUITY & LIFE RE shall be chargeable, subject to court approval, against
PRUCO as part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to PRUCO solely as a
result of the defense undertaken by ANNUITY & LIFE RE.
In the event ANNUITY & LIFE RE is deemed insolvent, ANNUITY & LIFE RE will
be bound by any legal directions imposed by its liquidator, conservator,
or statutory successor. However, and if not in conflict with such legal
directions, PRUCO shall have the right to cancel this Agreement with
respect to occurrences taking place on or after the date ANNUITY & LIFE RE
first evidences insolvency. Such right to cancel shall be exercised by
providing ANNUITY & LIFE RE (or its liquidator, conservator, receiver or
statutory successor) with a written notice of PRUCO's intent to recapture
ceded business. If PRUCO exercises such right to cancel and recapture
ceded business, such election shall be in lieu of any premature recapture
fee. Upon such election, PRUCO shall be under no obligation to ANNUITY &
LIFE RE , its liquidator, receiver or statutory successor; however,
ANNUITY & LIFE RE , its liquidator, receiver or statutory successor shall
be liable for all claims incurred prior to the date of recapture.
24. ARBITRATION
a. GENERAL. All disputes and differences under this Agreement that
cannot be amicably agreed upon by the parties shall be decided by
arbitration. The arbitrators will have the authority to interpret
this Agreement and, in doing so, will consider the customs and
practices of the life insurance and life reinsurance industry. The
arbitrators will consider this Agreement as an honorable engagement
rather than merely a legal obligation, and they are relieved of all
judicial formalities and may abstain from following the strict rules
of law. The arbitration shall take place within the United States.
12
b. NOTICE. To initiate arbitration, one of the parties will notify the
other, in writing, of its desire to arbitrate. The notice will state
the nature of the dispute and the desired remedies. The party to
which the notice is sent will respond to the notification in writing
within 10 days of receipt of the notice. At that time, the
responding party will state any additional dispute it may have
regarding the subject of arbitration.
c. PROCEDURE. Arbitration will be heard before a panel of three
disinterested arbitrators. The arbitrators will be current or former
executive officers or employees of life insurance or reinsurance
companies; however, these companies will not be either party or any
of their reinsurers or affiliates. Each party will appoint one
arbitrator. Notice of the appointment of these arbitrators will be
given by each party to the other party within 30 days of the date of
mailing of the notification initiating the arbitration. These two
arbitrators will, as soon as possible, but no longer than 45 days
after the date of the mailing of the notification initiating the
arbitration, then select the third arbitrator.
Should either party fail to appoint an arbitrator or should the two
initial arbitrators be unable to agree on the choice of a third
arbitrator, each arbitrator will nominate three candidates, two of
whom the other will decline, and the decision will be made by
drawing lots on the final selection. Once chosen, the three
arbitrators will have the authority to decide all substantive and
procedural issues by a majority vote. The arbitration hearing will
be held on the date fixed by the arbitrators at a location agreed
upon by the parties. The arbitrators will issue a written decision
from which there will be no appeal. Either party may reduce this
decision to a judgment before any court that has jurisdiction of the
subject of the arbitration.
d. COSTS. Each party will pay the fees of its own attorneys, the
arbitrator appointed by that party, and all other expenses connected
with the presentation of its own case. The two parties will share
equal cost of the third arbitrator.
25. GOOD FAITH; FINANCIAL SOLVENCY
Each party agrees that all matters with respect to this Agreement require
its utmost good faith. Each party or its representatives has the right at
any reasonable time to inspect the other's records relating to this
Agreement.
Each party represents and warrants to the other party that it is solvent
on a statutory basis in all states in which it does business or is
licensed. Each party agrees to promptly notify the other if it is
subsequently financially impaired. ANNUITY & LIFE RE has entered into this
Agreement in reliance upon PRUCO's representations and warranties. Each
party affirms that it has and will continue to disclose all matters
material to this Agreement and each cession. Examples of such matters are
a material change in underwriting or issue practices or philosophy, or a
change in each party's ownership or control.
PRUCO acknowledges that ANNUITY & LIFE RE is neither a licensed nor an
accredited reinsurer under the applicable laws and regulations of Arizona.
However, to enable PRUCO to take the maximum credit for the risks ceded
under this Agreement on its statutory financial statements, ANNUITY & LIFE
RE has agreed to furnish and maintain during the life of this Agreement
one or more letters of credit in accordance with the applicable provisions
of Sections 29 and 30 below. ANNUITY & LIFE RE acknowledges that PRUCO is
entering into this Agreement in reliance upon ANNUITY & LIFE RE's
obligations with respect to furnishing and maintaining the letter(s) of
credit as described in Sections 29 and 30 below. ANNUITY & LIFE RE further
agrees that PRUCO's right of recapture under Section 20 of this Agreement
will be triggered if, at any point in the future, ANNUITY & LIFE RE fails
to satisfy any of its obligations with respect to furnishing and
maintaining, during the life of this Agreement, the letters of credit in
strict accordance with the applicable provisions of Sections 29 and 30
below.
13
26. MEDICAL INFORMATION BUREAU
ANNUITY & LIFE RE is required to strictly adhere to the Medical
Information Bureau Rules, and PRUCO agrees to abide by these Rules, as
amended from time to time. PRUCO will not submit a preliminary notice,
application for reinsurance, or reinsurance cession to ANNUITY & LIFE RE
unless PRUCO has a signed, currently required Medical Information Bureau
authorization.
27. GOVERNING LAW
This Agreement shall be governed by the laws of the State of Arizona
without giving effect to the principles of conflicts of laws thereof.
28. ASSIGNMENT
This Agreement is not assignable by either party except by the express
written consent of the other.
29. PROVISION FOR BERMUDA DOMICILED ANNUITY & LIFE RE
a. All applicable Federal Excise Taxes assessed to, and paid by, PRUCO
relative to ANNUITY & LIFE RE's portion of the reinsurance risks
under this Agreement will be reimbursed by ANNUITY & LIFE RE to
PRUCO.
b. The impact of the timing of the DAC Tax payments made by PRUCO as a
result of ANNUITY & LIFE RE being a BERMUDA domiciled reinsurer and
not a U.S. domiciled reinsurer will be paid by ANNUITY & LIFE RE.
c. ANNUITY & LIFE RE shall apply for, provide to PRUCO, and maintain
during the entire term of this Agreement, one or more letters of
credit with respect to all the amounts recoverable from ANNUITY &
LIFE RE under this Agreement (collectively, the "Letters of
Credit"). The Letters of Credit must satisfy each of the
requirements set forth in Section 30 below.
d. ANNUITY & LIFE RE agrees to the following:
i. Submit to the jurisdiction of an alternative dispute
resolution panel or court of competent jurisdiction within the
United States;
ii. Comply with all requirements necessary to give such court or
panel jurisdiction;
iii. Designate an agent upon whom service of process may be
effected; and
iv. Abide by the final decision of such court or panel.
30. LETTER OF CREDIT PROVISIONS
a. ANNUITY & LIFE RE is obtaining, providing to PRUCO, and maintaining
during the entire term of this Agreement, the Letters of Credit in
order to enable PRUCO to take the maximum credit for the risks ceded
under this Agreement on its statutory financial statements. As such,
each of the Letters of Credit must individually satisfy the
requirements of Subsections 30 b., 30 c. and 30 d. below and all of
the Letters of Credit collectively must satisfy the requirements of
Subsections 30 e. and 30 f. below. In addition, each Letter of
Credit
14
individually and all of the Letters of Credit collectively must
satisfy any other applicable legal or regulatory requirements of
Arizona that must be complied with in order to ensure that PRUCO is
entitled to take the maximum credit for the risks ceded under this
Agreement on its statutory financial statements, given that ANNUITY
& LIFE RE is neither a licensed nor an accredited reinsurer under
the applicable laws and regulations of Arizona.
b. Each of the Letters of Credit must: (I) be an original and signed by
an authorized official of the issuing bank or an authorized official
of the confirming bank (in the case of a confirmation meeting the
requirements of this Section); (II) contain an issuance date and
contain an expiry date that is no earlier than one calendar year
from the issuance date; (III) be issued or confirmed by a "Qualified
Bank" (as defined in subsection 30c. below); (IV) be issued on
behalf of ANNUITY & LIFE RE as the "Applicant" and include such
indication in a boxed area that states it is "For Internal
Identification Purposes Only" (or similar words to that effect) and
that does not affect the terms of the Letter of Credit or the bank's
obligations thereunder; (V) be issued to PRUCO as "Beneficiary" and
expressly indicate in the body of the Letter of Credit that the
definition of the "Beneficiary" under the Letter of Credit includes
any successor by operation of law of PRUCO, including, without
limitation, any liquidator, rehabilitator, receiver, or conservator
for PRUCO; (VI) be issued, presentable and payable at an office of
the issuing or confirming bank within the United States; (VII) be
"clean and unconditional" (meaning that the Letter of Credit makes
no reference to any other agreement, document or entity and provides
that the Beneficiary need only draw a sight draft under the Letter
of Credit or confirmation and present it to promptly obtain funds
and that no other document need be presented); (VIII) contain a
statement that it is not subject to any agreement, condition or
qualification outside the Letter of Credit itself; (IX) contain a
statement to the effect that the obligation of the issuing bank
under the Letter of Credit is an individual obligation of such bank
and is in no way contingent upon reimbursement with respect thereto;
(X) be irrevocable and contain an "evergreen clause" (meaning that
the letter of credit or confirmation cannot be revoked prior to its
expiry date and that it will automatically renew prior to the
occurrence of the expiry date unless written notice sent by U.S.
registered mail has been delivered to PRUCO as Beneficiary at the
notice address stipulated in subsection d. of this Section 30 not
less than 30 days prior to the expiry date); (XI) state that it is
subject to and governed by the laws of the State of Arizona and the
1993 Revision of the Uniform Customs and Practice for Documentary
Credits of the International Chamber of Commerce (Publication 500)
and that, in the event of any conflict, the laws of the State of
Arizona will control; and (XII) contain a provision for an extension
of time, of not less than 30 days after resumption of business, to
draw against the Letter of Credit in the event that one or more of
the occurrences described in article 17 of Publication 500 occurs.
c. As used in Subsection 30 b. above, the term "Qualified Bank" shall
mean a bank or trust company that: (I) is organized and existing, or
in the case of a branch or agency office of a foreign banking
organization is licensed, under the laws of the United States or any
state thereof; (II) is regulated, supervised and examined by United
States Federal or state authorities having regulatory authority over
banks and trust companies; (III) is determined by the Securities
Valuation Office of the National Association of Insurance
Commissioners to meet such standards of financial condition and
standing as are considered necessary and appropriate to regulate the
quality of banks and trust companies whose letters of credit will be
acceptable to insurance regulatory authorities; (IV) is not a
foreign branch office of a bank or trust company organized and
existing in the United States; and (V) is not a parent, subsidiary
or affiliate of PRUCO or ANNUITY & LIFE RE.
d. Each Letter of Credit must indicate that notices of non-renewal will
be sent to the following address, or such other address as may be
indicated in a notice sent by PRUCO to the issuing or confirming
bank:
Chief Actuary
PRUCO Life Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
15
e. All of the Letters of Credit must, in the aggregate, provide for a
maximum amount that can be drawn thereunder of a sum that is at
least as great as PRUCO has indicated will be required under this
Agreement and all other related reinsurance agreements between
ANNUITY & LIFE RE and PRUCO or any affiliate of PRUCO. Approximately
one month before the end of each calendar quarter, PRUCO will
indicate to ANNUITY & LIFE RE the aggregate coverage amount needed
under all of the Letters of Credit as well as any other information
necessary for ANNUITY & LIFE RE to provide PRUCO the required
Letters of Credit prior to end of each calendar quarter. The cost
for all Letters of Credit furnished and maintained under this
Agreement will be borne solely by ANNUITY & LIFE RE.
f. ANNUITY & LIFE RE and PRUCO agree that any or all of the Letters of
Credit provided by ANNUITY & LIFE RE pursuant to the provisions of
this Agreement may be drawn upon in full or in part at any time,
notwithstanding any other provisions in this Agreement, and may be
utilized by PRUCO or any successor by operation of law of PRUCO
including, without limitation, any liquidator, rehabilitator,
receiver or conservator of PRUCO for any of the following purposes:
i. to reimburse PRUCO for ANNUITY & LIFE RE's share of premiums
returned to the owners of policies reinsured under the
reinsurance agreement on account of cancellations of such
policies;
ii. to reimburse PRUCO for ANNUITY & LIFE RE's share of benefits
or losses paid by PRUCO under the terms and provisions of the
policies reinsured under this Agreement;
iii. to fund an account with PRUCO in an amount at least equal to
the deduction, for reinsurance ceded, from PRUCO's liabilities
for policies ceded under this Agreement. Such amount shall
include, but not be limited to, amounts for policy reserves,
reserves for claims and losses incurred (including losses
incurred but not reported), loss adjustment expenses, and
unearned premiums; and
iv. to pay any other amounts PRUCO claims are due under this
Agreement:
All of the foregoing will be applied without diminution
because of insolvency on the part of PRUCO or ANNUITY & LIFE
RE.
g. ANNUITY & LIFE RE further acknowledges and agrees that PRUCO or any
successor by operation of law of PRUCO including, without
limitation, any liquidator, rehabilitator, receiver or conservator
of PRUCO may draw upon any or all of the Letters of Credit in full
or in part in the event that: (I) a notice of cancellation or
non-renewal has been issued by the issuing or confirming bank under
any of the Letters of Credit and ANNUITY & LIFE RE has not obtained
one or more replacement letters of credit that satisfy all of the
applicable requirements of this Section 30 by that date which is ten
days prior to the earliest expiry date of the Letter of Credit or
Letters of Credit as to which notice of cancellation or non-renewal
has been sent; or (II) the maximum amount that may be drawn under
any of the Letters -- of Credit has been reduced other than in
accordance with PRUCO's direction or PRUCO has communicated to
ANNUITY & LIFE RE in accordance with the provisions of Subsection 30
e. above a need to increase the aggregate amount available under all
of the Letters of Credit and ANNUITY & LIFE RE has not obtained one
or more replacement Letters of Credit or one or more additional
Letters of Credit so that all issued and outstanding Letters of
Credit that will remain in effect provide for coverage in an amount
sufficient to meet the requirements of Subsection 30 e. above.
16
In witness of the above, PRUCO and ANNUITY & LIFE RE have by their respective
officers executed and delivered this Agreement in duplicate on the dates
indicated below, with an effective date of April 30, 2000.
PRUCO LIFE INSURANCE COMPANY ANNUITY & LIFE REASSURANCE, LTD
By: By:
------------------------------ ------------------------------
Title: Title:
------------------------------ ------------------------------
Date: Date:
------------------------------ ------------------------------
By: By:
------------------------------ ------------------------------
Title: Title:
------------------------------ ------------------------------
Date: Date:
------------------------------ ------------------------------
17
SCHEDULE A
REINSURANCE COVERAGE
--------------------------------------------------------------------------------
1. PLANS REINSURED:
This Agreement covers the following plans:
o PruLife Universal (UL) - Policies issued by PRUCO (Form Number
UL-2000 and all state variations)
o PruLife Custom Premier (VUL II) - Policies issued by PRUCO (Form
Number VUL-2000 and all state variations)
o Target Term Rider (TTR) issued by PRUCO (currently available on VUL
II policies)
Excluded from reinsurance under this Agreement are the Waiver of Premium
and Accidental Death Benefits included in the above reinsured policies.
Also excluded from reinsurance under this Agreement are riders that
provide additional life insurance on the lives of any dependent children
of the policyholder. Included under this Agreement is the Living Needs
Benefit rider.
2. AUTOMATIC PORTION REINSURED:
US/Canadian Residents
ANNUITY & LIFE RE will automatically reinsure an amount equal to 20% of
the net amount at risk related to the face amount of insurance.
The net amount of risk is determined as of the issue date and each
subsequent policy anniversary and is defined as the death benefit minus
the contract fund.
Non US/Canadian Residents
ANNUITY & LIFE RE will automatically reinsure an amount equal to 20% of
the net amount at risk related to the face amount of insurance.
3. AUTOMATIC RETENTION LIMIT:
PRUCO will retain at least 10% of each policy. PRUCO may cede up to 70% of
each policy on a first-dollar quota share basis to other reinsurers.
4. AUTOMATIC ACCEPTANCE LIMIT:
For any policy to be reinsured under automatic reinsurance, the face
amount will not exceed the amounts in the following tables:
US/Canadian Residents - No Foreign Travel
===============================================================
Issue Age of Insured Pref. Best - Class D Class E - H
---------------------------------------------------------------
Ages: 18 - 65 $ 50,000,000 $ 35,000,000
---------------------------------------------------------------
66 - 70 $ 40,000,000 $ 25,000,000
---------------------------------------------------------------
71 - 75 $ 35,000,000 $ 15,000,000
---------------------------------------------------------------
76 - 77 $ 15,000,000 $ 10,000,000
---------------------------------------------------------------
78 - 80 $ 10,000,000 $ 5,000,000
---------------------------------------------------------------
81 - 85 $ 5,000,000 None
---------------------------------------------------------------
86 - 90 $ 1,500,000 None
===============================================================
18
US/Canadian Residents - Foreign Travel
======================================================================
Pref. Best - Class C Class D - E Greater than
Class E
----------------------------------------------------------------------
Ages: 18 - 70 $ 10,000,000 $ 7,500,000 None
----------------------------------------------------------------------
71 - 75 $ 7,500,000 $ 5,000,000 None
----------------------------------------------------------------------
▇▇ - ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
======================================================================
Non US/Canadian Residents
======================================================================
Pref. Best - Class C Class D - E Greater than
Class E
----------------------------------------------------------------------
Ages: 18 - 70 $ 20,000,000 $ 15,000,000 None
----------------------------------------------------------------------
71 - 75 $ 15,000,000 $ 10,000,000 None
----------------------------------------------------------------------
▇▇ - ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
======================================================================
5. JUMBO LIMIT:
For any policy to be reinsured under automatic reinsurance, the total
amount of insurance in force and applied for in all companies will not
exceed the following amounts:
US/Canadian Residents- No Foreign Travel
$50,000,000 for all ages and rating classes.
US/Canadian Residents - Foreign Travel
$35,000,000 for issue ages through age 75 and rating classes through class
E. $0 for issue ages over 75 or rating classes higher than E.
Non US/Canadian Residents
$35,000,000 for issue ages through age 75 and rating classes through class
E. $0 for issue ages over 75 or rating classes higher than E.
6. OCCUPATION EXCLUSION LIST FOR AUTOMATIC REINSURANCE
o Entertainers
o High Profile Athletes
7. REPORTING PERIOD:
The reporting period will be monthly.
8. MINIMUM CESSION:
The minimum amount per cession that can be reinsured with ANNUITY & LIFE
RE is $10,000.
19
9. RESERVES FOR REINSURANCE:
The reinsurance reserve is the one-year term reserve on the portion of
each policy reinsured. This reserve will be calculated using 1980 CSO
ultimate mortality and 4 1/2 % interest.
10. RISK TRIGGER EVENT:
A "Risk Trigger Event" means that any of the following has occurred:
(1) ANNUITY & LIFE RE does not have statutory surplus of at least $300
million;
(2) ANNUITY & LIFE RE has failed to satisfy any of its obligations with
respect to furnishing and maintaining, during the life of this
Agreement, the Letters of Credit in strict accordance with the
applicable provisions of Sections 29 and 30 of this Agreement; or
(3) ANNUITY & LIFE RE no longer has in effect a Qualified Rating (as
defined below) from at least one of the Major Rating Agencies shown
in the chart below, which is at least as high as the minimum levels
shown:
=================================================================
Major Rating Agency Minimum Applicable Rating:
=================================================================
Fitch IBCA, Duff & ▇▇▇▇▇▇ A rating of "BBB+" or higher.
-----------------------------------------------------------------
▇▇▇▇▇ Investor Services, Inc. A rating of "Baa1" or higher.
-----------------------------------------------------------------
Standard & Poors Corporation A rating of "BBB+" or higher.
=================================================================
"Qualified Rating" shall mean the issuance of an insurance company
long-term, financial strength rating from one or more of the Major Rating
Agencies that remains in effect, that has not been suspended or withdrawn,
and that was issued as a result of the full interactive ratings review
process (including interviews with senior management) by the Major Rating
Agency in question. (Use of the modifiers "Q" or "Pi" by S&P or any
similar indication that a rating is a "qualified" or "limited" rating by
any other of the Major Rating Agencies means that the rating does not
constitute a "Qualified Rating" for purposes of this Agreement.)
11. RISK RETENTION LIMITS:
The total amount of insurance in force and applied for on an individual
life for PRUCO and its affiliates will not exceed the risk retention
limits in the following table.
==============================================================
Issue Age of Insured Pref. Best - Class D Class E - H
Ages: 18 - 65 $ 10,000,000 $ 10,000,000
66 - 70 $ 10,000,000 $ 10,000,000
71 - 75 $ 10,000,000 $ 10,000,000
76 - 77 $ 10,000,000 $ 5,000,000
78 - 80 $ 5,000,000 $ 2,500,000
81 - 85 $ 2,500,000 $ 1,000,000
86 - 90 $ 1,000,000 None
==============================================================
20
SCHEDULE B
AUTOMATIC AND FACULTATIVE REINSURANCE PREMIUMS
--------------------------------------------------------------------------------
1. STANDARD ANNUAL REINSURANCE PREMIUMS
The standard annual reinsurance premiums per $1,000 of net amount at risk
for (1) all cessions of automatic reinsurance and facultative obligatory
reinsurance and (2) all cessions of facultative reinsurance in the amount
of $2 million or less will be the product of the rates in the table
attached to this Schedule B and the following factors:
==============================================================
Face amounts $100,000 and greater AND issue age 18 and greater
--------------------------------------------------------------
Rating Class Factor
--------------------------------------------------------------
1 .315
--------------------------------------------------------------
2 .384
--------------------------------------------------------------
3 .493
--------------------------------------------------------------
4 .633
--------------------------------------------------------------
5 1.028
--------------------------------------------------------------
6 1.295
==============================================================
==============================================================
Face amount less than $100,000 OR issue age less than 18
--------------------------------------------------------------
Rating Class Factor
--------------------------------------------------------------
1 N/A
--------------------------------------------------------------
2 N/A
--------------------------------------------------------------
3 N/A
--------------------------------------------------------------
4 .705
--------------------------------------------------------------
5 N/A
--------------------------------------------------------------
6 1.473
==============================================================
The standard annual reinsurance premiums per $1,000 for cessions of
facultative obligatory reinsurance and facultative reinsurance in excess
of $2 million will be the product of the rates in the table attached to
this Schedule B and the following factors:
==============================================================
Rating Class Factor
--------------------------------------------------------------
1 .350
--------------------------------------------------------------
2 .420
--------------------------------------------------------------
3 .540
--------------------------------------------------------------
4 .700
--------------------------------------------------------------
5 1.130
--------------------------------------------------------------
6 1.420
==============================================================
21
2. SUBSTANDARD ANNUAL REINSURANCE PREMIUMS
Substandard extra premiums are available on classes 4 and 6 (Non-Smoker
and Smoker). For substandard issues, the substandard extra reinsurance
premium (plus any flat extra) is payable for 20 years. After this period,
the base reinsurance premium (plus any flat extra) is payable until the
end of the premium paying period.
The substandard extra annual reinsurance premiums per $1,000 for
substandard issues will be the product of the base reinsurance premiums
per $1,000 and the factor for the appropriate rating class.
Note that this is the total premium per $1,000, including both the base
and substandard premium.
The factors are as follows:
===========================================
Rating Class Factor
-------------------------------------------
A 1.40
-------------------------------------------
B 1.65
-------------------------------------------
C 1.90
-------------------------------------------
D 2.25
-------------------------------------------
E 2.75
-------------------------------------------
F 3.25
-------------------------------------------
G 3.75
-------------------------------------------
H 4.50
===========================================
3. FLAT EXTRA REINSURANCE PREMIUMS
The flat extra reinsurance premium per $1,000 will be the product of flat
extra premiums charged by PRUCO and the factors in the following table:
========================================================
Permanent Flat Extra Premiums (i.e., for more than 5
years duration)
--------------------------------------------------------
First year .25
--------------------------------------------------------
Renewal year .90
========================================================
========================================================
Temporary Flat Extra Premiums (i.e., for 5 years
duration or less)
--------------------------------------------------------
All years .90
========================================================
4. AGE BASIS
Age Last Birthday.
5. PREMIUM TAXES
Premium taxes are not reimbursed.
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