EXHIBIT 99.7(b)
VARIABLE ANNUITY GMDB REINSURANCE AGREEMENT
Between
COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY
(Hereinafter referred to as the "CEDING COMPANY")
Southborough, Massachusetts
And
THE CANADA LIFE ASSURANCE COMPANY
(Hereinafter referred to as the "REINSURER")
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
using its Michigan branch as its port of entry
TABLE OF CONTENTS
ARTICLE PAGE
--------------- ---------------
Access to Records IX 10
Arbitration XIII 13
Automatic Provisions IV 7
Currency XI 11
Definitions I 3
Effective Date, Term and Termination III 5
Insolvency XII 12
Litigation VIII 10
Miscellaneous XV 14
Notices XVI 15
Offset XIV 14
Parties to the Agreement II 5
Premium Accounting V 7
Reinsurance Claim Settlement VI 8
Reserves VII 9
Unintentional Errors, Misunderstandings or Omissions X 11
SCHEDULES
A Description of Guaranteed Minimum Death Benefits (GMDBs)
B Investment Funds Subject to this Reinsurance Agreement
C-1 Limits and Rules of CEDING COMPANY
C-2 Limits and Rules of the REINSURER
D REINSURANCE PREMIUM RATES by Treaty Year
E MORTALITY RATE by Attained Age and Sex of INSURED LIFE
F REINSURER Quota Share of Risk
G CEDING COMPANY Reporting Format and Data Requirements
Commonwealth and Canada Life Assurance GMDB
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ARTICLE I - DEFINITIONS
A. DURATION OF AGREEMENT:
EFFECTIVE DATE MEANS MARCH 31, 2012.
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.
TERMINATION DATE means November 30, 2022.
B. CONTRACT DEFINITIONS:
VARIABLE ANNUITY CONTRACT means a written annuity contract issued by the CEDING
COMPANY or its predecessors, or 100% reinsured by CEDING COMPANY for a written
annuity contract issued by First Allmerica Financial Life Insurance Company, to
a contract owner in accordance with which the CEDING COMPANY agrees to provide
specified benefits in accordance with specified terms and conditions.
INSURED LIFE means the owner or annuitant, as specified in the VARIABLE ANNUITY
CONTRACT, upon whose death a claim may be due under this Agreement.
GMDB TYPE means one of the Guaranteed Minimum Death Benefits specified in the
VARIABLE ANNUITY CONTRACT and described in Schedule A.
ACCOUNT VALUE means for each VARIABLE ANNUITY CONTRACT, the sum of the invested
assets in the investment funds described in Schedule B, as also further
described in Article IV, Section C.
GMDB AMOUNT means the CEDING COMPANY's minimum required payment, pursuant to a
VARIABLE ANNUITY CONTRACT, on the death of the INSURED LIFE.
EXCLUDED CONTRACT means any VARIABLE ANNUITY CONTRACT that has (a) a GMDB
provision that is suspended due to change in owner or annuitant, (b) a GMDB
AMOUNT that is contractually set to the ACCOUNT VALUE, or (c) a spousal
continuation. Any EXCLUDED CONTRACT shall be treated as such only on and after
the date as of which it satisfies any of the conditions identified as (a), (b),
or (c) above.
ACTIVE CONTRACT means a VARIABLE ANNUITY CONTRACT, other than an EXCLUDED
CONTRACT, that remains in effect and has not terminated due to death, lapse,
surrender or some other valid contingency, has not been annuitized, provided,
however, if the VARIABLE ANNUITY CONTRACT is reinstated or the annuitization has
been reversed pursuant to the VARIABLE ANNUITY CONTRACT or CEDING COMPANY
procedures, and the VARIABLE ANNUITY CONTRACT has not exceeded its maximum
annuity
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commencement date, then the VARIABLE ANNUITY CONTRACT shall be considered to be
an ACTIVE CONTRACT.
NET AMOUNT AT RISK means, for each ACTIVE CONTRACT, the excess, if any, of the
GMDB AMOUNT over the ACCOUNT VALUE.
C. REINSURED AMOUNT DEFINITION:
REINSURED NET AMOUNT AT RISK means the NET AMOUNT AT RISK multiplied by the
REINSURER's quota share of risk, with such REINSURED NET AMOUNT AT RISK not to
exceed $4,000,000 for each ACTIVE CONTRACT, in accordance with Schedule F.
D. REINSURANCE PREMIUM DEFINITIONS:
REINSURANCE PREMIUM RATE means the numerical percentage provided in Schedule D,
based on the attained age and sex of the INSURED LIFE, or of the oldest INSURED
LIFE if joint lives are insured.
MORTALITY RATE means a numerical value, provided in Schedule E, based on the
attained age and sex of the INSURED LIFE, or of the oldest INSURED LIFE if joint
lives are insured.
MONTHLY REINSURANCE PREMIUM means the sum of a) and b) where
a) is the sum, for each ACTIVE CONTRACT covered by this Agreement that
did not terminate due to death in the current month, of the product of
REINSURANCE PREMIUM RATE times the MORTALITY RATE times the REINSURED
NET AMOUNT AT RISK as of the preceding MONTHLY VALUATION DATE, and
b) is the sum, for each ACTIVE CONTRACT covered by this Agreement that
terminated due to death in the current month, of the product of
REINSURANCE PREMIUM RATE times the MORTALITY RATE times the REINSURED
NET AMOUNT AT RISK as of the date the GMDB CLAIM is in good order. To
the extent multiple beneficiaries are involved in a GMDB CLAIM and
fewer than all, but at least one, of the beneficiaries have received a
portion of the GMDB AMOUNT from the CEDING COMPANY, the REINSURED NET
AMOUNT AT RISK for the purpose of this item b) shall be based on each
beneficiary's portion of the GMDB AMOUNT.
REINSURANCE PREMIUM DUE DATE means the MONTHLY VALUATION DATE.
REMITTANCE DATE means the BUSINESS DAY on or immediately preceding the 25th day
of the calendar month following the REINSURANCE PREMIUM DUE DATE.
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E. REINSURANCE CLAIM DEFINITION:
GMDB CLAIM means the REINSURED NET AMOUNT AT RISK on the date that CEDING
COMPANY receives all claim paperwork in good order. To the extent multiple
beneficiaries are involved in a GMDB CLAIM and fewer than all, but at least one,
of the beneficiaries have received a portion of the GMDB AMOUNT from the CEDING
COMPANY, the REINSURER shall pay the GMDB CLAIM to the CEDING COMPANY in the
same proportion and at the same time as beneficiaries are paid the GMDB AMOUNTS.
For the avoidance of doubt, CEDING COMPANY and REINSURER agree that for each
respective beneficiary in a multiple beneficiary situation, GMDB CLAIM means
each beneficiary's portion of the REINSURED NET AMOUNT AT RISK on the date
CEDING COMPANY receives from each such beneficiary all claim paperwork in good
order.
Notwithstanding anything to the contrary in the Reinsurance Agreement, in cases
that require state imposed post-mortem interest to be added to the resulting
GMDB claim amount, as determined by the CEDING COMPANY, such interest shall be
added to the GMDB CLAIMS request for reimbursement submitted to the REINSURER
and shall be paid to the CEDING COMPANY in the same manner as the GMDB CLAIM.
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 or confer any rights and obligations
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. The Agreement covers VARIABLE ANNUITY CONTRACTS that:
(i) are among the GMDB TYPES identified in Schedule A;
(ii) have accounts invested in the investment funds described in Schedule
B;
(iii) were issued between September 11,1991 and November 29, 2002;
(iv) are ACTIVE CONTRACTS on the EFFECTIVE DATE;
(v) are in compliance with all of the other terms and provisions of
this Agreement
B. Subject to paragraphs C and D below, this Agreement will terminate on the
TERMINATION DATE.
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C. The CEDING COMPANY shall have the option of terminating this Agreement
immediately upon written notice to the REINSURER after the occurrence of
sub-provision 1 below, and with ninety (90) days written notice to the
REINSURER after the occurrence of sub-provision 2 below:
1. An order appointing a receiver, conservator or trustee for
management of REINSURER is entered or a proceeding is commenced
for rehabilitation, liquidation, supervision or conservation of
REINSURER.
2. REINSURER's Standard and Poor's Claim Paying Rating ("S&P
Rating") is reduced to "BBB-" or lower, but only if at the time
of such rating, the CEDING COMPANY is rated higher than BBB-.
REINSURER must report any adverse change in its S&P Rating to
CEDING COMPANY within fifteen (15) days of the change. Any notice
of termination given by the CEDING COMPANY enabled by such rating
reduction shall be deemed withdrawn if the REINSURER's S&P Rating
is restored to a level higher than "BBB-" or the CEDING COMPANY's
S&P Rating falls at or below the REINSURER's S&P Rating during
the 90-day notice period.
D. The REINSURER shall have the option of terminating this Agreement with
ninety (90) days written notice to the CEDING COMPANY after the occurrence
of any of the following:
1. The CEDING COMPANY fails to provide timely submissions of data in
accordance with Schedule G. The REINSURER must provide CEDING
COMPANY with Notice of Termination. If, during the ninety (90)
days following this notification, the REINSURER receives all data
submissions in arrears, this Agreement will remain in effect and
the notice of termination shall be deemed withdrawn. If the
CEDING COMPANY fails to provide the submission of data in
accordance with Schedule G as of the close of the last day of
this ninety (90) day notice period, the REINSURER's liability for
all risks reinsured associated with the withheld data under this
Agreement will terminate.
2. The CEDING COMPANY fails to pay premium on or before the
REMITTANCE DATE. In the event that the premiums are not paid by
the REMITTANCE DATE other than amounts that are the subject of a
good faith dispute, the REINSURER shall have the right to
terminate this agreement by giving ninety (90) days written
notice of termination to the CEDING COMPANY. If all premiums in
default and interest owed in accordance with Article III,
paragraph E are received by the REINSURER within the ninety (90)
day time period, this Agreement will remain in effect and the
notice of termination shall be deemed withdrawn. If premiums
remain in default as of the close of the last day of this ninety
(90) day notice period other than amounts that are the subject of
a good faith dispute, the REINSURER's liability for all risks
reinsured associated with the defaulted premiums under this
Agreement will terminate.
E. Except as otherwise provided herein, upon termination of this Agreement,
the REINSURER shall have no reinsurance liability with respect to any
VARIABLE ANNUITY CONTRACTS. Notwithstanding termination of reinsurance as
provided herein, the CEDING COMPANY shall continue to be liable to the
REINSURER for all undisputed
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unpaid reinsurance premiums earned by the REINSURER under this Agreement
and the REINSURER shall continue to be liable to the CEDING COMPANY for all
unpaid GMDB CLAIMS owed to the CEDING COMPANY under this Agreement for
deaths occurring prior to or on the TERMINATION DATE subject to the
limitation of Article VI, Section F. Such amounts owed by either party 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 as of the most recent MONTHLY VALUATION DATE, as
published in the Wall Street Journal, plus 1.00%.
ARTICLE IV - AUTOMATIC PROVISIONS
A. Subject to Article III, on the EFFECTIVE DATE of this Agreement, the CEDING
COMPANY shall automatically cede and the REINSURER shall automatically
accept the ACTIVE CONTRACTS that are covered under this Agreement.
B. This Agreement covers only the liability for GMDB CLAIMS paid under
VARIABLE ANNUITY CONTRACT forms or benefit rider forms that were inforce
prior to the EFFECTIVE DATE.
C. This Agreement covers only the liability for GMDB CLAIMS paid under
VARIABLE ANNUITY CONTRACTs invested in Variable and Fixed investment funds
listed on Schedule B. 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. The CEDING COMPANY may add new or revised investment funds without
REINSURER approval.
D. This Agreement covers only the liability for GMDB CLAIMS where the date of
death of the INSURED LIFE is on or after the EFFECTIVE DATE and before or
on the TERMINATION DATE.
E. The REINSURER'S liability for GMDB CLAIMS may be limited in accordance with
Schedule C-2.
ARTICLE V - PREMIUM ACCOUNTING
A. If reinsurance premiums are not paid by the REMITTANCE DATE, interest in
accordance with Article III, paragraph E 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 MONTHLY REINSURANCE PREMIUM
as shown therein as well as any premium adjustments from the prior period.
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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 E.
ARTICLE VI - REINSURANCE CLAIM SETTLEMENT
A. The REINSURER shall not be responsible for any obligation of the CEDING
COMPANY to any party under any VARIABLE ANNUITY CONTRACTS issued by the
CEDING COMPANY. The CEDING COMPANY is solely responsible for payment of
claims under the VARIABLE ANNUITY CONTRACTS.
B. The CEDING COMPANY shall calculate the GMDB CLAIM in compliance with
Schedule C-1, paragraph 1.
C. 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 GMDB CLAIMS as
shown therein, or at least sufficient data to show the GMDB claim was
properly paid. If requested by the REINSURER, the CEDING COMPANY shall
promptly 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. In cases that require escheatment to the state
due to published death records (e.g., via the Social Security Death Master
File or similar database), for deaths outside of the United States, or
certain other exception situations, death certificates may not be available
and alternative proofs of death shall be acceptable.
D. If the REINSURER does not reimburse GMDB CLAIMS by the REMITTANCE DATE of
the following valuation month, interest calculated in accordance with
Article III, paragraph E will be assessed from that REMITTANCE DATE and
will continue until the GMDB CLAIMS are paid in full.
E. A final statement of accounts prepared by the CEDING COMPANY is due sixty
(60) days after the TERMINATION DATE. On or before this date, the CEDING
COMPANY shall forward to the REINSURER its final statement of account as
set forth in Schedule G. Based on the statement of account, any amounts
owed by either party must be paid within thirty (30) days of receiving the
statement of accounts. If amounts owed are not paid within thirty (30) days
of receiving the statement of account, the amounts owed are subject to an
interest charge in accordance with Article III, paragraph E, assessed
beginning thirty (30) days after receiving the statement of account.
F. The CEDING COMPANY shall have six (6) months after the TERMINATION DATE to
submit to REINSURER an amended final statement of account. Any amounts owed
by either the CEDING COMPANY or the REINSURER based on the amended final
statement of account must be paid within thirty (30) days of receipt of the
amended 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 E.
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ARTICLE VII - RESERVES
A. The REINSURER will hold mortality risk reserves for its share of liability
on each policy calculated on a 1/24 Cx basis using the 1980 CSO Ultimate
only and the prevailing statutory interest rate.
B. It is the intention of both the REINSURER and the CEDING COMPANY that the
CEDING COMPANY qualifies for reinsurance credit in the Commonwealth of
Massachusetts for reinsurance ceded hereunder.
C. In the event that the REINSURER is not an authorized reinsurer for the
ability to provide the CEDING COMPANY reserve credit for the reinsurance
provided hereunder as required by applicable laws and regulations of the
Commonwealth of Massachusetts, provision for statutory reserves must be
satisfied by the REINSURER, and shall be so satisfied if at the end of each
calendar quarter and at all times interim until the next calendar quarter,
any of the following are provided by the REINSURER at its cost:
1. the funds (including any additional amounts legally required) are
in a trust that complies with the CEDING COMPANY's applicable
laws and regulations, subject to withdrawal solely by, and under
the exclusive control of the CEDING COMPANY, held in a qualified
United States financial institution, as defined below, are at
least as great as the statutory reserves as of the most recent
calendar quarter;
2. cash or marketable securities are transferred to the CEDING
COMPANY in an amount at least as great as the statutory reserves,
with the actual investment earnings on the proceeds owned by the
REINSURER;
3. clean, irrevocable, unconditional letters of credit, in an amount
at least as great as the statutory reserves, issued or confirmed
by a qualified United States financial institution, meeting
applicable standards of issuer acceptability as of the dates of
their issuance and complying with the CEDING COMPANY' applicable
laws and regulations; or
4. a combination of (1), (2) and (3), such that the sum is at least
as great as the statutory reserves.
D. If at the end of any calendar quarter the statutory reserve is a positive
value less than $500,001, the REINSURER is not required to comply with
Article VII, Section C.
E. A qualified United States financial institution means an institution that
meets either subdivision (1) or (2):
1. Is organized, or in the case of a United States office of a
foreign banking organization, is licensed, under the laws of the
United States or any state in the United States, is regulated,
supervised, and examined by federal or state authorities having
regulatory authority over banks and trust companies, and has been
determined by the commissioner of Massachusetts to meet such
standards of financial condition
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and standing as are considered necessary and appropriate to
regulate the quality of financial institutions whose letters of
credit will be acceptable to the commissioner of Massachusetts.
2. For those institutions that are eligible to act as a fiduciary of
a trust, is organized, or in the case of a United States branch
or agency office of a foreign banking organization, is licensed,
under the laws of the United States or any state in the United
States, has been granted authority to operate with fiduciary
powers, and is regulated, supervised, and examined by federal or
state authorities having regulatory authority over banks and
trust companies.
ARTICLE VIII - LITIGATION
In the event of any action brought against the CEDING COMPANY under any VARIABLE
ANNUITY CONTRACT that is subject to the terms and conditions of this Agreement,
the CEDING COMPANY shall provide a copy of such action and written notice of
such action within thirty (30) business days to the REINSURER.
ARTICLE IX - ACCESS TO RECORDS
A. The REINSURER, or its duly authorized representative, 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 such
documents, which reasonably pertain to this Agreement. 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. Upon request, within one hundred and thirty
(130) days following the end of each calendar year, the CEDING COMPANY and
the REINSURER will 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 such Confidential Information is not
disclosed in any form by any means by each of them or by any of its
employees to third parties of any kind, other than attorneys, accountants,
reinsurance intermediaries, consultants, retrocessionaires, hedge or other
risk mitigation counterparties in connection with its retrocession, CEDING
COMPANY's or its affiliates' officers, directors, and employees who have a
need for such information in the conduct of business, as might be necessary
during the course of external audits, to the extent it is required to
disclose any such information in its statutory filings, other than with
respect to non-public personal information to the extent it is required to
provide such information to any rating agency, or as required by applicable
law or any order, request, or subpoena by any governmental authority,
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 such party protects its own
proprietary or Confidential Information of like kind which shall be at
least a reasonable manner.
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"Confidential Information" means any information which (1) is not generally
available to or known by the public, or (2) has not been lawfully obtained
or developed by either party independently and not in violation of this
Agreement 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
which consists of:
1. Information or knowledge about each party's products, processes,
services, finances, customers, research, computer programs,
marketing and business plans, claims management practices; and
2. Any medical or other personal, individually identifiable
information about people or business entities with whom the
parties do business, including customers, prospective customers,
vendors, suppliers, individuals covered by insurance plan, and
each party's producers and employees.
3. Records provided pursuant to Paragraph A, above.
C. If either the CEDING COMPANY or the REINSURER discloses Confidential
Information to its affiliates, officers, directors, employees,
retrocessionaires or hedge counterparties, such 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.
D. This Article expires 3 years after the TERMINATION DATE.
ARTICLE X - UNINTENTIONAL ERRORS, MISUNDERSTANDINGS OR OMISSIONS
It is expressly understood and agreed that if failure to comply with any terms
of this Agreement is hereby shown to be the result of an unintentional error,
misunderstanding or omission, on the part of either the CEDING COMPANY or the
REINSURER, both the CEDING COMPANY and the REINSURER, will be restored to the
position they 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, and all monetary data elements as described
in Schedule G, are expressed in United States dollars and all premium and claim
payments shall be made in United States dollars.
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ARTICLE XII - INSOLVENCY
A. In the event of insolvency of the CEDING COMPANY, all reinsurance under
this Agreement will 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, within reasonable time after the claim is
filed in the insolvency proceeding, 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.
C. In the event of insolvency of the REINSURER, the CEDING COMPANY may
recapture immediately all ceded benefits upon written notice to the
REINSURER, its liquidator, receiver or statutory successor. The CEDING
COMPANY shall also have a claim on the REINSURER for any reinsurance credit
amounts including reserves, unearned premiums and other amounts due the
CEDING COMPANY on such reinsurance, at the date of recapture.
D. If the REINSURER is not licensed or accredited to transact insurance or
reinsurance in the Commonwealth of Massachusetts, then the following shall
apply: In the event of the failure of the REINSURER to perform its
obligations under the terms of this Agreement, the REINSURER, at the
request of the CEDING COMPANY, shall submit to the jurisdiction of an
alternative dispute resolution panel or any court of competent jurisdiction
in any state of the United States, will comply with all requirements
necessary to give such panel or court jurisdiction, and will abide by the
final decision of such panel or court; and the REINSURER will designate the
Commonwealth of Massachusetts Commissioner of Insurance or a designated
attorney as its true and lawful attorney upon whom may be served any lawful
process in any action, suit, or proceeding instituted by or on behalf of
the CEDING COMPANY.
E. In the even of insolvency of the CEDING COMPANY, the reinsurance shall be
payable under a contract(s) reinsured by the REINSURER on the basis of
claims filed and allowed in the liquidation proceeding, without diminution
because of the insolvency of the CEDING COMPANY. The payments shall be made
directly to the CEDING COMPANY or to its domiciliary liquidator, except:
(1) where the contract of insurance or reinsurance specifically
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provides another payee of such reinsurance in the event of insolvency of
the CEDING COMPANY, or (2) where the REINSURER, with the consent of the
direct insured, has assumed the policy obligations of the CEDING COMPANY as
direct obligations of the REINSURER to the payees under the policies and in
substitution for the obligations of the CEDING COMPANY to the payees.
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 Commonwealth of Massachusetts
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
Southborough, Massachusetts 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
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party the expense of the umpire and of the arbitration.
ARTICLE XIV - OFFSET
Either party shall have, and may exercise at any time the right to offset any
balance or amounts whether on account of premiums, or on account of claims or
otherwise, due from one party to the other under the terms of this Agreement.
ARTICLE XV - MISCELLANEOUS
A. This Agreement will be binding to the parties and their respective
successors and permitted assignees. This Agreement may not be assigned by
either party without the written consent of the other.
B. The Reinsurer represents that premiums received by it are effectively
connected with its conduct of a trade or business in the United States. If
the Policies include for U.S. Federal Income Tax purposes Specified
Insurance Contracts pursuant to Section 848 of the Internal Revenue Code or
the Final Income Tax Regulations thereunder, the Parties, with respect to
this Agreement, agree to make the election provided in Section
1.848-2(g)(8) of the Final Income Tax Regulations issued December 28, 1992
under Section 848 of the Internal Revenue Code of 1986.
1. The terms used in this Section are defined by reference to Regulation
1.848-2 in effect December 1992.
2. The Party with the net positive consideration for this Agreement for
each taxable year will capitalize specified policy acquisition
expenses with respect to this Agreement without regard to the general
deductions limitation of Section 848(c)(1).
3. Both Parties agree to exchange information pertaining to the amount of
net consideration under this Agreement each year to ensure consistency
or as otherwise required by the Internal Revenue Service.
4. The Ceding Company will submit a schedule to the Reinsurer by May 1 of
each year of its calculation of the net consideration for the
preceding calendar year. This schedule of calculations will be
accompanied by a statement stating that the Ceding Company will report
such net consideration in its tax return for the preceding calendar
year.
5. The Reinsurer may contest such calculation by providing an alternative
calculation to the Ceding Company by June 1. If the Reinsurer does not
so notify the Ceding Company, the Ceding Company will report the net
consideration as determined in its tax return for the previous
calendar year.
6. If the Reinsurer contests the Ceding Company's calculation of the net
consideration, the Parties will act in good faith to reach an
agreement as to the correct amount by July 1. If the Parties reach
agreement on an amount of the net consideration, each Party will
report such amount in their respective tax returns for the previous
calendar year.
14
C. 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.
D. 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 full performed and
discharged.
E. 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 facsimile with evidence
of successful transmission, sent via reputable overnight carrier, or
dispatched by certified or registered mail, return receipt requested,
postage prepaid, addressed to the parties as follows:
Chief Financial Officer (with a copy to the General Counsel)
Commonwealth Annuity and Life Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
Reinsurance Treaty Department
The Canada Life Assurance Company
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇ Fax:▇▇▇-▇▇▇-▇▇▇▇
B. Notice shall be deemed given on the date it is received in accordance with
the foregoing. Any party may change the address to which to send notices by
notifying the other party of such change of address in writing in
accordance with the foregoing.
15
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.
The Canada Life Assurance Company Commonwealth Annuity and Life Insurance
Company
By /s/ ▇▇▇▇-▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
----------------------------------- ------------------------------------
Name ▇▇▇▇-▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
--------------------------------- ----------------------------------
Date 5/9/2012 Date 5/7/2012
--------------------------------- ----------------------------------
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------- ------------------------------------
Name ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Name ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------- ----------------------------------
Date 5/9/2012 Date 5/7/2012
--------------------------------- ----------------------------------
16
SCHEDULE A
Description of Guaranteed Minimum Death Benefits (GMDBs)
The Guaranteed Minimum Death Benefits are described in the VARIABLE ANNUITY
CONTRACTS, riders, or prospectuses.
I. Dollar for Dollar Reduction for withdrawals:
Maximum of (AV, premium, 7yr ratchet)
Maximum of (AV, premium, 5yr ratchet)
II. Proportionate or Blended Reduction for Withdrawals:
Maximum of (AV, premium)
Maximum of (AV, premium, 5yr ratchet)
Maximum of (AV, 5% premium rollup, 1 yr ratchet)
Maximum of (AV, premium, 1 yr ratchet)
Maximum of (AV, 7% premium rollup)
Maximum of (AV, 7% premium rollup, 1 yr ratchet)
Maximum of (AV, premium, 15% Breakthrough ratchet)
Maximum of (AV, premium, 10% Breakthrough ratchet)
Maximum of (AV, 5% premium rollup, 15% Breakthrough ratchet)
Maximum of (AV, 5% premium rollup, 10% Breakthrough ratchet)
17
SCHEDULE B
Investment Funds Subject to this Reinsurance Agreement
All Investment Funds available to VARIABLE ANNUITY CONTRACT owners on the
EFFECTIVE DATE are subject to this Agreement. New Investment Funds, eligible for
reinsurance hereunder since the EFFECTIVE DATE, are listed below:
GS VIT Global Navigator Markets Fund
18
SCHEDULE C-1
Limits and Rules of the CEDING COMPANY
1) CEDING COMPANY will determine the Guaranteed Minimum Death Benefit for each
contract within fourteen (14) days of receipt of the date the CEDING COMPANY
determines the claim is in good order.
19
SCHEDULE C-2
Limits and Rules of the REINSURER
1) REINSURER's liability cannot be increased as a result of CEDING COMPANY's
actions with respect to contested claims.
2) REINSURER's liability cannot be increased as a result of extra-contractual
entitlements granted by the CEDING COMPANY, including extension of the maximum
annuity commencement date.
3) The REINSURER will not be liable for extra contractual damages (whether they
constitute Compensatory damages, Statutory penalties, Exemplary or Punitive
damages) which are awarded against the CEDING COMPANY unless such damages result
from any action of or recommendation by the REINSURER.
20
SCHEDULE D
REINSURANCE PREMIUM RATES
by OLDEST INSURED LIFE'S ATTAINED AGE LAST BIRTHDAY and SEX
ATTAINED
AGE
(ALB) MALE FEMALE
-----------------------------------
0 123.0% 115.5%
1 123.0% 115.5%
2 123.0% 115.5%
3 123.0% 115.5%
4 123.0% 115.5%
5 123.0% 115.5%
6 123.0% 115.5%
7 123.0% 115.5%
8 123.0% 115.5%
9 123.0% 115.5%
10 123.0% 115.5%
11 123.0% 115.5%
12 123.0% 115.5%
13 123.0% 115.5%
14 123.0% 115.5%
15 123.0% 115.5%
16 123.0% 115.5%
17 123.0% 115.5%
18 123.0% 115.5%
19 123.0% 115.5%
20 123.0% 115.5%
21 123.0% 115.5%
22 123.0% 115.5%
23 123.0% 115.5%
24 123.0% 115.5%
25 123.0% 115.5%
26 123.0% 115.5%
27 123.0% 115.5%
28 123.0% 115.5%
29 123.0% 115.5%
30 123.0% 115.5%
31 123.0% 115.5%
32 123.0% 115.5%
33 123.0% 115.5%
34 123.0% 115.5%
35 123.0% 115.5%
36 123.0% 115.5%
37 123.0% 115.5%
38 123.0% 115.5%
39 123.0% 115.5%
40 123.0% 115.5%
41 123.0% 115.5%
42 123.0% 115.5%
43 123.0% 115.5%
44 123.0% 115.5%
45 123.0% 115.5%
46 123.0% 115.5%
47 123.0% 115.5%
48 123.0% 115.5%
49 123.0% 115.5%
50 123.0% 115.5%
51 123.0% 115.5%
52 123.0% 115.5%
53 123.0% 115.5%
54 123.0% 115.5%
55 120.0% 113.0%
56 120.0% 113.0%
57 120.0% 113.0%
58 120.0% 113.0%
59 120.0% 113.0%
60 118.5% 111.5%
61 118.5% 111.5%
62 118.5% 111.5%
63 118.5% 111.5%
64 118.5% 111.5%
65 118.5% 110.5%
66 118.5% 110.5%
67 118.5% 110.5%
68 118.5% 110.5%
69 118.5% 110.5%
70 118.5% 110.5%
71 118.5% 110.5%
72 118.5% 110.5%
73 118.5% 110.5%
74 118.5% 110.5%
75 119.5% 111.0%
76 119.5% 111.0%
77 119.5% 111.0%
78 119.5% 111.0%
79 119.5% 111.0%
80 122.0% 114.0%
81 122.0% 114.0%
82 122.0% 114.0%
83 122.0% 114.0%
84 122.0% 114.0%
85 124.0% 114.0%
86 125.0% 114.0%
87 125.0% 114.0%
88 125.0% 114.0%
89 125.5% 114.0%
90 130.0% 116.5%
91 133.0% 118.5%
92 133.5% 119.5%
93 133.5% 120.0%
94 133.5% 121.0%
95 137.0% 125.5%
96 138.0% 125.5%
97 139.5% 127.0%
98 141.5% 129.0%
99 144.5% 131.5%
100 147.5% 132.0%
101 150.5% 132.0%
102 154.0% 132.0%
103 159.0% 132.0%
104 162.5% 132.0%
105 162.5% 132.0%
106 162.5% 132.0%
107 162.5% 132.0%
108 162.5% 132.0%
109 162.5% 132.0%
110 162.5% 132.0%
111 162.5% 132.0%
112 162.5% 132.0%
113 162.5% 132.0%
114 162.5% 132.0%
115+ 162.5% 132.0%
21
SCHEDULE E
MORTALITY RATES
by OLDEST INSURED LIFE's ATTAINED AGE LAST BIRTHDAY and SEX
▇▇▇▇▇ VA Monthly Mortality Rates (Rates per $1 of NAR)
ATTAINED
AGE
(ALB) MALE FEMALE
----------------------------------
0 0.00003 0.00003
1 0.00003 0.00003
2 0.00002 0.00002
3 0.00002 0.00002
4 0.00002 0.00001
5 0.00002 0.00001
6 0.00001 0.00001
7 0.00001 0.00001
8 0.00001 0.00001
9 0.00001 0.00001
10 0.00001 0.00001
11 0.00001 0.00001
12 0.00002 0.00001
13 0.00002 0.00001
14 0.00002 0.00001
15 0.00002 0.00002
16 0.00003 0.00002
17 0.00003 0.00002
18 0.00003 0.00002
19 0.00003 0.00002
20 0.00003 0.00002
21 0.00004 0.00002
22 0.00004 0.00002
23 0.00004 0.00002
24 0.00004 0.00002
25 0.00004 0.00002
26 0.00005 0.00002
27 0.00005 0.00002
28 0.00005 0.00002
29 0.00005 0.00002
30 0.00005 0.00003
31 0.00005 0.00003
32 0.00006 0.00003
33 0.00006 0.00003
34 0.00006 0.00003
35 0.00006 0.00003
36 0.00006 0.00003
37 0.00006 0.00004
38 0.00006 0.00004
39 0.00007 0.00004
40 0.00007 0.00005
41 0.00008 0.00005
42 0.00009 0.00005
43 0.00009 0.00005
44 0.00010 0.00006
45 0.00011 0.00006
46 0.00012 0.00007
47 0.00013 0.00008
48 0.00014 0.00009
49 0.00015 0.00010
50 0.00016 0.00012
51 0.00017 0.00013
52 0.00019 0.00014
53 0.00021 0.00016
54 0.00023 0.00017
55 0.00025 0.00019
56 0.00028 0.00021
57 0.00031 0.00023
58 0.00035 0.00025
59 0.00039 0.00027
60 0.00043 0.00030
61 0.00048 0.00033
62 0.00053 0.00037
63 0.00059 0.00041
64 0.00065 0.00045
65 0.00072 0.00050
66 0.00080 0.00056
67 0.00088 0.00062
68 0.00098 0.00069
69 0.00108 0.00076
70 0.00120 0.00085
71 0.00133 0.00094
72 0.00148 0.00105
73 0.00165 0.00116
74 0.00184 0.00130
75 0.00206 0.00145
76 0.00232 0.00163
77 0.00261 0.00183
78 0.00295 0.00207
79 0.00333 0.00233
80 0.00376 0.00264
81 0.00424 0.00299
82 0.00478 0.00339
83 0.00538 0.00384
84 0.00604 0.00436
85 0.00677 0.00495
86 0.00757 0.00561
87 0.00845 0.00635
88 0.00939 0.00718
89 0.01042 0.00810
90 0.01152 0.00912
91 0.01271 0.01025
92 0.01398 0.01148
93 0.01534 0.01283
94 0.01679 0.01431
95 0.01833 0.01591
96 0.01997 0.01765
97 0.02172 0.01952
98 0.02359 0.02154
99 0.02560 0.02371
100 0.02774 0.02603
101 0.03004 0.02852
102 0.03249 0.03117
103 0.03511 0.03400
104 0.03792 0.03700
105 0.04091 0.04018
106 0.04410 0.04356
107 0.04750 0.04712
108 0.05111 0.05089
109 0.05495 0.05487
110 0.05903 0.05905
111 0.06336 0.06345
112 0.06795 0.06808
113 0.07280 0.07293
114 0.07792 0.07801
115+ 0.08333 0.08333
22
SCHEDULE F
REINSURER Quota Share of Risk
For each VARIABLE ANNUITY CONTRACT, REINSURED NET AMOUNT AT RISK will be based
on a 42% share of risk.
23
SCHEDULE G
Reporting Format and Data Requirements
MONTHLY REPORTING DATA REQUIREMENTS (PREPARED BY CEDING COMPANY) ACTIVE
CONTRACTS ONLY
Contract Identifier
Insured Life Indicator (Owner or Annuitant)
Insured Life Issue Age
Insured Life Sex
Joint Insured Life Issue Age (if applicable)
Joint Insured Life Sex (if applicable)
Issue Date
Cumulative Premiums
Cumulative Withdrawals
Account value by subaccount and in total
GMDB Type
GMDB Amount
NET AMOUNT AT RISK
Qualified Status
Termination Indicator (reported in first monthly report following termination)
Maximum Annuity Commencement Date
QUARTERLY REPORTING REQUIREMENTS (PREPARED BY REINSURER)
GAAP Surplus position
Standard and Poor's Ratings
ADDITIONAL MONTHLY CLAIM REPORTING DATA REQUIREMENTS (PREPARED BY CEDING
COMPANY)
DEATHS ONLY:
This includes Monthly Reporting Data Requirements as of the Date of Notification
(the date that death related paperwork is submitted in full), plus the
following:
Date of Death
Date Claim Processed
Death Benefit Paid
Death Benefit Proceeds in Excess of Account Value
MONTHLY STATEMENT OF ACCOUNT (PREPARED BY CEDING COMPANY)
(prepared by Market and in aggregate)
1. Calculated value of GMDB CLAIMS to be reimbursed
2. Calculated value of REINSURED NET AMOUNT AT RISK and MONTHLY REINSURANCE
PREMIUM
24