AUTOMATIC AND FACULTATIVE
YEARLY RENEWABLE TERM REINSURANCE AGREEMENT
Effective March 1, 2002
This Agreement is Between
MONY LIFE INSURANCE COMPANY OF AMERICA
And
MONY LIFE INSURANCE COMPANY
("Ceding Company")
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And
SECURITY LIFE OF DENVER INSURANCE COMPANY
("Reinsurer")
Security Life Center
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▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Reinsurer Agreement No. 0281-2936
AUTOMATIC AND FACULTATIVE
YEARLY RENEWABLE TERM REINSURANCE AGREEMENT
This Agreement is between
MONY LIFE INSURANCE COMPANY OF AMERICA and MONY LIFE INSURANCE COMPANY
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
And
SECURITY LIFE OF DENVER INSURANCE COMPANY,
Security Life Center, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
The Reinsurer agrees to reinsure certain portions of the Ceding Company's
contract risks as described in the terms and conditions of this Agreement.
This reinsurance Agreement constitutes the entire Agreement between the parties
with respect to the business being reinsured hereunder and there are no
understandings between the parties other than as expressed in this Agreement.
Any change or modification to this Agreement is null and void unless made by
amendment to this Agreement and signed by both parties.
In witness of the above, the Ceding Company and the Reinsurer have by their
respective officers executed and delivered this Agreement in duplicate on the
dates indicated below, with an effective date of March 1, 2002.
MONY LIFE INSURANCE COMPANY OF SECURITY LIFE OF DENVER INSURANCE
AMERICA COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ [ILLEGIBLE]
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Title: asst VP Title: EXECUTIVE DIRECTOR
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Date: 11/12/02 Date: Nov 4, 2002
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By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ [to come in]
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Title: Secretary Title: [to come in]
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Date: 11/12/02 Date: [to come in]
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MONY LIFE INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: VP
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Date: 11/12/02
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By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Assistant Secretary
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Date: 11/12/02
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AUTOMATIC AND FACULTATIVE REINSURANCE AGREEMENT
Table of Contents
1. PARTIES TO AGREEMENT.............................................. 5
2. REINSURANCE BASIS................................................. 5
3. AUTOMATIC REINSURANCE TERMS....................................... 5
a. UNDERWRITING................................................ 5
b. RETENTION................................................... 6
c. REINSURERS' AUTOMATIC ACCEPTANCE LIMITS..................... 6
d. AUTOMATIC IN FORCE AND APPLIED FOR LIMIT.................... 6
e. RESIDENCE................................................... 6
f. MINIMUM CESSION............................................. 6
g. FACULTATIVE QUOTES.......................................... 6
h. LOCATION LIMIT.............................................. 6
4. AUTOMATIC REINSURANCE NOTICE PROCEDURE............................ 6
5. FACULTATIVE REINSURANCE........................................... 6
6. COMMENCEMENT OF REINSURANCE COVERAGE.............................. 7
a. AUTOMATIC REINSURANCE....................................... 7
b. FACULTATIVE REINSURANCE..................................... 7
c. PRE-ISSUE COVERAGE.......................................... 8
7. BASIS OF REINSURANCE AMOUNT AND REINSURANCE PREMIUM RATES......... 8
a. LIFE REINSURANCE............................................ 8
b. SUPPLEMENTAL BENEFITS....................................... 8
c. TABLE RATED SUBSTANDARD PREMIUMS............................ 9
d. FLAT EXTRA PREMIUMS......................................... 9
e. PREMIUM ADJUSTMENTS......................................... 9
8. CASH VALUES OR LOANS.............................................. 9
9. PAYMENT OF REINSURANCE PREMIUMS................................... 9
a. PREMIUM DUE................................................. 9
b. FAILURE TO PAY PREMIUMS..................................... 9
c. OVERPAYMENT OF REINSURANCE PREMIUM..........................10
d. UNDERPAYMENT OF REINSURANCE PREMIUM.........................10
e. RETURN OF REINSURANCE PREMIUM...............................10
f. PREMIUM CORRECTION AT TERMINATION...........................10
10. PREMIUM TAX REIMBURSEMENT.........................................11
11. DAC TAX AGREEMENT.................................................11
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12. REPORTS...........................................................11
13. RESERVES FOR REINSURANCE..........................................12
14. DEATH CLAIMS......................................................12
a. NOTICE OF DEATH.............................................12
b. PROOFS......................................................12
c. DEATH CLAIMS PAYABLE........................................12
d. AMOUNT AND PAYMENT OF DEATH CLAIMS..........................12
e. CONTESTED CLAIMS............................................13
f. CLAIM EXPENSES..............................................13
g. EXTRACONTRACTUAL DAMAGES....................................13
15. POLICY CHANGES....................................................14
a. NOTICE......................................................14
b. INCREASES...................................................14
c. REDUCTION OR TERMINATION....................................14
d. EXCHANGES AND REPLACEMENTS..................................14
e. NON-FORFEITURE BENEFITS.....................................15
16. POLICYHOLDER REINSTATEMENTS.......................................15
a. AUTOMATIC REINSTATEMENT.....................................15
b. FACULTATIVE REINSTATEMENT...................................15
c. PREMIUM ADJUSTMENT..........................................16
d. REINSTATEMENT FOLLOWING REINSURANCE OF NON-FORFEITURE
BENEFITS....................................................16
17. INCREASE IN RETENTION AND RECAPTURE...............................16
a. NEW BUSINESS................................................16
b. RECAPTURE...................................................16
18. ERRORS AND OMISSIONS..............................................17
19. INSOLVENCY........................................................17
20. ARBITRATION.......................................................18
a. GENERAL.....................................................18
b. NOTICE......................................................19
c. PROCEDURE...................................................19
d. COSTS.......................................................19
e. OFFSET......................................................20
21. GOOD FAITH; FINANCIAL SOLVENCY....................................20
22. TREATMENT OF CONFIDENTIAL INFORMATION.............................20
23. TERM OF THIS AGREEMENT............................................21
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24. MEDICAL INFORMATION BUREAU........................................21
25. SEVERABILITY......................................................21
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SCHEDULE A - COVERAGE AND LIMITS
1. Plans Reinsured
2. Automatic Portion Reinsured
3. Maximum Dollar Retention Limits
4. Reinsurers' Automatic Acceptance Limits
5. Automatic In Force and Applied for Limits
6. Stacking Limit
7. Premium Due
8. Recapture Period
9. Net Amount at Risk
10. Special COLI Reporting Information
11. Location Limit
SCHEDULE B - AUTOMATIC REINSURANCE PREMIUMS
1. Life Insurance
2. Age Basis
SCHEDULE C - REPORTING INFORMATION
Information on Risks Reinsured
Policy Exhibit Summary
Reserve Credit Summary
Accounting Summary
SCHEDULE D - FACULTATIVE FORMS
APPLICATION FOR REINSURANCE
EXHIBIT 1 Underwriting Guidelines
EXHIBIT 2 Rates
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AUTOMATIC AND FACULTATIVE AGREEMENT
1. PARTIES TO AGREEMENT.
This Agreement is solely between Reinsurer and Ceding Company. There is
no third party beneficiary to this Agreement. Reinsurance under this
Agreement will not create any right nor legal relationship between the
Reinsurer and any other person, for example, any insured, policy owner,
agent, beneficiary, assignee, or other reinsurer. The Ceding Company
agrees that it will not make the Reinsurer a party to any litigation
between any such third party and the Ceding Company. The Ceding Company
and the Reinsurer will not disclose the other's name to these third
parties with regard to the agreements or transactions that are between
the Ceding Company and the Reinsurer, unless the Ceding Company or the
Reinsurer gives prior approval for the use of its name.
Except for the purposes of carrying out this Agreement and as required
by law, the Reinsurer shall not disclose or use any non-public
personally identifiable customer or claimant information
("Customer/Claimant Information") provided by the Ceding Company to the
Reinsurer, as such Customer/Claimant Information is defined by the
▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and related regulations. Such Customer/Claimant
Information shall be shared only with those entities with which the
Reinsurer may, from time to time, contract in accordance with the
fulfillment of the terms of this Agreement, including but not limited to
the Reinsurer's retrocessionaires and the Reinsurer's affiliates.
2. REINSURANCE BASIS.
This Agreement, including the attached Schedules and Exhibits, states
the terms and conditions of automatic and facultative reinsurance that
is on a Yearly Renewable Term basis. This Agreement is applicable only
to reinsurance of policies directly written by the Ceding Company. Any
policies acquired through merger of another company, reinsurance, or
purchase of another company's policies are not included under the terms
of this Agreement.
3. AUTOMATIC REINSURANCE TERMS.
The Ceding Company shall cede and the Reinsurer agrees to automatically
accept contractual risks on the life insurance plans and supplemental
benefits shown in Schedule A, subject to the following requirements:
a. UNDERWRITING.
For fully underwritten policies, guaranteed issue plans and
simplified issue plans automatic reinsurance applies only to
insurance applications underwritten by the Ceding Company
according to its underwriting guidelines shown in Exhibit 1 of
the Agreement.
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b. RETENTION.
The Ceding Company will retain, and not otherwise reinsure, an
amount of insurance on each life equal to its quota share
percentage or Maximum Dollar Retention Limits, whichever is
less, as shown in Schedule A. If the Ceding Company's Maximum
Dollar Retention Limit is zero, automatic reinsurance is not
available.
c. REINSURERS' AUTOMATIC ACCEPTANCE LIMITS.
On any one life, the amount automatically reinsured, including
any increases, under all agreements with all reinsurers must not
exceed the Reinsurers' Automatic Acceptance Limits shown in of
Schedule A.
d. AUTOMATIC IN FORCE AND APPLIED FOR LIMIT.
For fully underwritten policies, the total amount of life
insurance in force and applied for with all companies, of which
the Ceding Company is aware, must not exceed the In Force and
Applied For Limit shown in Schedule A.
e. RESIDENCE.
Each insured must be a resident of the United States or Canada
at the time of issue.
f. MINIMUM CESSION.
The minimum amount of reinsurance per cession that the Reinsurer
will accept is $10,000 and reinsurance will be terminated when
the amount reinsured is less than $10,000.
g. FACULTATIVE QUOTES.
The risk must not have been previously submitted on a
facultative basis to the Reinsurer or any other reinsurer.
h. LOCATION LIMIT.
On any one case reinsured with the Reinsurer, the amount
automatically reinsured must not exceed the Location Limit shown
in Section 7 of Schedule A.
4. AUTOMATIC REINSURANCE NOTICE PROCEDURE.
After the policy has been paid for and delivered, the Ceding Company
will submit all relevant individual policy information, as defined in
Schedule C, in its next statement to the Reinsurer.
5. FACULTATIVE REINSURANCE.
The Ceding Company may apply for facultative reinsurance with the
Reinsurer on a case or a policy risk if the automatic reinsurance terms
are not met or if the terms for automatic reinsurance are met and it
prefers to apply for facultative reinsurance.
For fully underwritten polcies, if the Ceding Company submits a risk to
the Reinsurer on a facultative basis, copies of the complete
underwriting file and all other information the Ceding Company may have
pertaining to the insurability of the risk shall be sent to the
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Reinsurer along with the a form substantially similar to the Reinsurer's
"Application for Reinsurance" form, as shown in Schedule D.
For guaranteed issue and simplified issue cases, the Ceding Company
shall submit all cases to the Reinsurer that do not meet the automatic
reinsurance parameters. After receipt of the Ceding Company's
application, the Reinsurer will promptly examine the materials and
notify the Ceding Company of:
a. the terms and conditions of the facultative offer made by
the Reinsurer; or
b. that an offer will not be made.
The Reinsurer will promptly examine the materials and notify the Ceding
Company of:
a. the terms and conditions of the facultative offer made by
the Reinsurer; or
b. that an offer will not be made.
For all facultative offers, the Reinsurer's offer expires 120 days after
the offer is made, unless the written offer specifically states
otherwise. If the Ceding Company accepts the Reinsurer's offer, then the
Ceding Company will note its acceptance in its underwriting file and
notify the Reinsurer on the next monthly premium report as described in
Article 12. If the Ceding Company does not accept the Reinsurer's offer
or the business is not placed, then the Ceding Company will notify the
Reinsurer in writing, as soon as possible. Automatic reinsurance rates
can be used for facultative business, unless Reinsurer's offer specifies
otherwise.
6. COMMENCEMENT OF REINSURANCE COVERAGE.
Commencement of the Reinsurer's reinsurance coverage on any policy or
pre-issue risk under this Agreement is described below:
a. AUTOMATIC REINSURANCE.
The Reinsurer's reinsurance coverage for any policy that is
ceded automatically under this Agreement will begin and end
simultaneously with the Ceding Company's contractual liability
for the policy reinsured.
b. FACULTATIVE REINSURANCE.
The Reinsurer's reinsurance coverage for any policy that is
ceded facultatively under this Agreement shall begin when:
i. The Ceding Company accepts the Reinsurer's offer; and
ii. The policy has been issued.
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c. PRE-ISSUE COVERAGE.
Automatic
The Reinsurer will not be liable for benefits paid under the
Ceding Company's insurance binder agreement unless all the
conditions for automatic reinsurance coverage under Section 3 of
this Agreement are met. Reduced binding authority shall be
granted to the Ceding Company on insurable lives during the
Enrollment and Underwriting period of a plan (90 days from the
binder start date), with said authority limited to the lesser of
the actual face amount on each life or $1,000,000, split between
the Ceding Company and the Reinsurer on a 50/50 first dollar
quota share basis. Those lives so covered must satisfy the
Ceding Company's actively-at-work criteria for a period of 90
days preceding the binder start date.
Facultative
For facultative reinsurance, the Reinsurer shall not be liable
for benefits paid by the Ceding Company under the insurance
binder agreement unless the Ceding Company submits the case to
the Reinsurer, the Reinsurer provides a facultative offer and
the Ceding Company accepts the facultative offer.
For fully underwritten policies submitted to the Reinsurer on a
facultative basis, the Reinsurer shall not be liable for
benefits paid by the Ceding Company under an insurance binder
agreement.
The pre-issue liability applies only once on any given life
regardless of how many receipts were issued or initial premiums
were accepted by the Ceding Company. After a policy is in force,
no reinsurance benefits are payable under this pre-issue
coverage provision.
In the event that the Ceding Company's rules with respect to
cash handling and the issuance of binder insurance are not
followed, the Reinsurer will participate in the liability if the
conditions for automatic reinsurance are met and the Ceding
Company does not knowingly allow such rules to be violated or
condone such a practice. Such liability shall be limited to the
lesser of i or ii above. As in all cases, the provisions of
Section 14 apply to such a claim.
7. BASIS OF REINSURANCE AMOUNT AND REINSURANCE PREMIUM RATES.
a. LIFE REINSURANCE.
The amount reinsured on a policy is the policy's net amount at
risk less the Ceding Company's retention available on the
policy. The quota share retention on each life is shown in
Schedule A. The net amount at risk calculation is shown in
Schedule A. The reinsurance premiums per $1000 are shown in
Schedule B.
b. SUPPLEMENTAL BENEFITS.
Supplemental benefits are not reinsured under this Agreement.
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c. TABLE RATED SUBSTANDARD PREMIUMS
If the Ceding Company's policy is issued with a table rated
substandard premium, the reinsurance premiums shown in Schedule
B will apply.
d. FLAT EXTRA PREMIUMS.
If the Ceding Company's policy is issued with a flat extra
premium, the reinsurance premiums shown in Schedule B will
apply.
e. PREMIUM ADJUSTMENTS.
The reinsurance premium rates are not guaranteed. The Reinsurer
reserves the right to change the rates at any time, subject to a
maximum premium. The maximum reinsurance premiums are equal to
the statutory valuation premiums for yearly renewable term
insurance at the maximum interest rates and minimum mortality
rates for each year of issue. If the Reinsurer changes the
rates, it will give the Ceding Company 90 days' prior written
notice of the change. Any change applies only to reinsurance
premiums due after the expiration of the notice period.
8. CASH VALUES OR LOANS.
This Agreement does not provide reinsurance for cash surrender values.
In addition, the Reinsurer will not participate in policy loans or other
forms of indebtedness on reinsured business.
9. PAYMENT OF REINSURANCE PREMIUMS
a. PREMIUM DUE.
The reinsurance premiums for each reinsurance cession are due,
as shown in Schedule A. All amounts due or otherwise accrued to
any of the parties hereto or any of their parents, affiliates,
or subsidiaries, whether by reason of premiums, losses,
expenses, or otherwise, under this agreement or any other
contract heretofore or hereafter entered into, will at all times
be fully subject to the right of offset and only the net balance
will be due and payable.
b. FAILURE TO PAY PREMIUMS.
If the reinsurance premiums are 90 days past due, for reasons
other than those due to error or omission as defined below in
Section 18, the premiums will be considered in default and the
Reinsurer may terminate the reinsurance upon 30 days' prior
written notice. The Reinsurer will have no further liability as
of the termination date. The Ceding Company will be liable for
the prorated reinsurance premiums to the termination date. The
Ceding Company agrees that it will not force termination under
the provisions of this paragraph to avoid the recapture
requirements or to transfer the block of business reinsured to
another reinsurer.
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The reinsurance coverage may be reinstated at the option of the
Reinsurer upon receipt of all the overdue premiums. However, the
Reinsurer shall not have liability for claims that occur during
the termination period. The Reinsurer reserves the right to
review all terminated reinsurance cessions prior to offering
reinstatement.
c. OVERPAYMENT OF REINSURANCE PREMIUM.
If the Ceding Company overpays a reinsurance premium and the
Reinsurer accepts the overpayment, the Reinsurer's acceptance
will not constitute nor create a reinsurance liability nor
result in any additional reinsurance. Instead, the Reinsurer
will be liable to the Ceding Company for a credit in the amount
of the overpayment, without interest.
d. UNDERPAYMENT OF REINSURANCE PREMIUM.
If the Ceding Company fails to make a full premium payment for a
policy or policies reinsured hereunder, due to an error or
omission as defined below in Section 18, the amount of
reinsurance coverage provided by the Reinsurer shall not be
reduced. However, once the underpayment is discovered, the
Ceding Company will be required to pay to the Reinsurer the
difference between the full premium amount and the amount
actually paid, without interest. If payment of the full premium
is not made within 60 days after the discovery of the
underpayment, the underpayment shall be treated as a failure to
pay premiums and subject to the conditions of Section 9.b.,
above.
e. RETURN OF REINSURANCE PREMIUM.
If a misrepresentation or misstatement on an application or a
death of an insured by suicide results in the Ceding Company
returning the policy premiums to the policy owner rather than
pay the policy benefits, the Reinsurer will refund all of the
reinsurance premiums it received on that policy to the Ceding
Company, without interest. This refund given by the Reinsurer
will be in lieu of all other reinsurance benefits payable on
that policy under this Agreement.
If there is an adjustment to the policy benefits due to a
misrepresentation or misstatement of age or sex, a corresponding
adjustment will be made to the reinsurance benefits.
f. PREMIUM CORRECTION AT TERMINATION.
Upon death, surrenders and other terminations, reinsurance
premiums will be corrected if the Net Amount at Risk has changed
from the prior anniversary. The premium correction will equal
the Reinsurer's proportionate share of the Net Amount at Risk at
death, surrender, or other termination less the Reinsurer's
proportionate share of the Net Amount at Risk as of the last
anniversary date multiplied by the reinsurance premium rate,
prorated for the year.
Unearned premiums will be returned on deaths, surrenders and
other terminations. 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.
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10. PREMIUM TAX REIMBURSEMENT.
The Reinsurer will not reimburse premium taxes.
11. DAC TAX AGREEMENT.
The Ceding Company and the Reinsurer 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 Treasury Code Section 848, will capitalize
specified policy acquisition expenses with respect to this
Agreement without regard to general deductions limitation of
Section 848 (c) (1);
b. The Ceding Company and the Reinsurer 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. The Ceding Company will submit to the Reinsurer by May 1 of each
year its calculation of the net consideration for the preceding
calendar year. This schedule of calculations will be accompanied
by a statement signed by an officer of the Ceding Company
stating that the Ceding Company will report such net
consideration in its tax return for the preceding calendar year;
d. The Reinsurer may contest such calculation by providing an
alternative calculation to the Ceding Company in writing within
30 days of the Reinsurer's receipt of the Ceding Company's
calculation. If the Reinsurer does not so notify the Ceding
Company, the Reinsurer will report the net consideration as
determined by the Ceding Company in the Reinsurer's tax return
for the previous calendar year;
e. 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 within 30 days of
the date the Reinsurer submits its alternative calculation. If
the Ceding Company and the Reinsurer reach agreement on the net
amount of consideration, each party will report such amount in
their respective tax returns for the previous calendar year.
Both Parties 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.
12. REPORTS.
The administering party is the Ceding Company. The reporting period is
monthly. For each reporting period, the Ceding Company will submit a
statement to the Reinsurer with
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information that is substantially similar to the information displayed
in Schedule C. The statement will include information on the risks
reinsured with the Reinsurer, premiums owed, policy exhibit activity,
and an accounting summary. The Ceding Company agrees to identify COLI
and BOLI policies from any other policies reported and provide the
Reinsurer with separate reports or identifiers for the COLI and BOLI
policies. Within fifteen days after the end of each calendar quarter,
the Ceding Company will submit a reserve credit summary similar to that
shown in Schedule C.
The Ceding Company also agrees to provide the Reinsurer with Special
COLI and BOLI Reporting Information as contained in Section 9 of
Schedule A.
13. RESERVES FOR REINSURANCE.
Reserves for this YRT Agreement shall be based on 1/2c[BASE OF x],
using the minimum valuation mortality table and maximum valuation
interest rate. The statutory reserve basis for the reinsurance will be
shown on the reserve credit summary provided each quarter.
14. DEATH CLAIMS.
a. NOTICE OF DEATH.
The Ceding Company will notify the Reinsurer, as soon as
reasonably possible, after it receives notice of a death claim
(or premium waiver disability claim) arising from a death of an
insured under a policy reinsured.
b. PROOFS.
The Ceding Company will promptly provide the Reinsurer with
proper death (or disability) claim proofs (including, for
example, proofs required under the policy), all relevant
information respecting the existence and validity of the death
claim, and an itemized statement of the death claim benefits
paid by the Ceding Company under the policy.
c. DEATH CLAIMS PAYABLE.
Death claims are payable only as a result of the actual death
(or for waiver of premium due to disability) of an insured, to
the extent reinsured under this Agreement and for which there is
contractual liability for the death claim under the issuing
company's in force policy. No acceleration or estimation of
death claims on living individuals is permitted, due, owing or
payable, nor will they form the basis of any claim against the
Reinsurer whatsoever.
d. AMOUNT AND PAYMENT OF DEATH CLAIMS.
After the Reinsurer receives proper death claim notice, proofs
of the death (or disability) claim, and proof of payment of the
death claim by the Ceding Company, the Reinsurer will promptly
pay the reinsurance benefits due and owing to the Ceding
Company. The Ceding Company's contractual liability for death
(and disability) claims is binding on the Reinsurer. The maximum
death benefit payable to the
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Ceding Company under each reinsured policy is the Reinsurer's
quota share percentage of the Net Amount at Risk on the date of
death. The total reinsurance in all companies on a policy shall
not exceed the Ceding Company's total contractual liability on
the policy, less its retention used on the policy. The excess,
if any, of the total reinsurance in all companies plus the
Ceding Company's retention used on the policy over its
contractual liability under the reinsured policy will first be
applied to reduce all reinsurance on the policy. This reduction
in reinsurance will be shared among all the reinsurers in
proportion to their respective amounts of reinsurance prior to
the reduction.
e. CONTESTED CLAIMS.
The Ceding Company will notify the Reinsurer of its intention to
contest, compromise, or litigate a claim involving a reinsured
policy. If the Ceding Company's contest, compromise, or
litigation results in a reduction in its liability, the
Reinsurer will share in the reduction in the proportion that the
Reinsurer's net liability bears to the sum of the net liability
of all reinsurers on the insured's date of death. If the
Reinsurer should decline to participate in the contest,
compromise or litigation, the Reinsurer will then release all of
its liability by paying the Ceding Company its full share of
reinsurance and not sharing in any subsequent reduction in
liability.
f. CLAIM EXPENSES.
The Reinsurer will pay its share of reasonable investigation and
legal expenses connected with the litigation or settlement of
contractual liability claims unless the Reinsurer has released
its liability, in which case the Reinsurer will not participate
in any expenses after the date of release. However, claim
expenses do not include routine claim and administration
expenses, including the Ceding Company'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 the Ceding Company admits are payable
are not a claim expense under this Agreement.
g. EXTRACONTRACTUAL DAMAGES.
The Reinsurer shall not be liable for any extracontractual
damages, including, but not limited to, punitive, exemplary,
compensatory and consequential damages, assessed against the
Ceding Company.
However, for claim denials and rescissions, the Reinsurer will
reimburse the Ceding Company for the Ceding Company's
extracontractual damages that result from the Reinsurer's
actions that directly and proximately cause such
extracontractual damages. Any such reimbursement will be in
proportion to the Reinsurer's direct and proximate participation
in the actions that lead to the extracontractual damages.
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15. POLICY CHANGES.
a. NOTICE.
If a reinsured policy is changed, a corresponding change will be
made in the reinsurance for that policy. The Ceding Company will
notify the Reinsurer of the change in the Ceding Company's next
accounting statement.
b. INCREASES.
If life insurance on a reinsured policy is increased and the
increase is subject to new underwriting evidence, then the
increase of life insurance on the reinsured policy will be
administered the same as the issuance of a new policy. If the
increase is not subject to new underwriting evidence, and
increases are scheduled and known at issue, or due to the
product's financial performance, then the increase will be
automatically accepted by the Reinsurer, but the total amount of
reinsurance is not to exceed either the Reinsurers' Automatic
Acceptance Limits shown in Section 4 of Schedule A for automatic
policies, or the ultimate amount shown in the Reinsurer's
facultative offer for policies ceded on a facultative basis.
Reinsurance rates will be based on the original issue age,
duration since issuance of the original policy and the original
underwriting classification. Other increases not subject to new
underwriting evidence are not allowed under this Agreement.
c. REDUCTION OR TERMINATION.
If life insurance on a reinsured policy is reduced, then
reinsurance will be reduced proportionately so that the portion
reinsured, as outlined in Schedule A, remains the same. If life
insurance on a reinsured policy is terminated, then reinsurance
will cease on the date of such termination.
Reductions and terminations are permitted only when the
underlying policyholder directs such a reduction or termination
of the issuing company policy that is in force at the time that
the reductions and terminations take place.
d. EXCHANGES AND REPLACEMENTS.
For purposes of this Agreement, an exchange or replacement is a
new policy replacing an existing policy of the same type, where
the new policy lacks at least one of the following
characteristics: new business underwriting, full first year
commissions, new suicide period, or new contestable period. New
policies resulting from exchanges or replacements in the
insurance reinsured hereunder will continue to be ceded to the
Reinsurer under this Agreement, in an amount not to exceed the
original amount reinsured hereunder.
Reinsurance rates for exchanges or replacements will be those in
effect at issuance of the original policy and will be point in
scale (based on the original issue age, duration, and original
underwriting class since issuance of the original policy). The
recapture period applicable to the original policy shall govern
the new policy and duration shall be measured from the effective
date of the original policy.
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If an exchange or replacement results in an increase in risk
amount, the increase will be underwritten by the Ceding Company
as new business and will be eligible for reinsurance coverage
under this Agreement as new business.
When an exchange or replacement is fully underwritten with new
suicide and contestable periods and full first year commissions,
the resulting policy will be administered the same as the
issuance of a new policy.
e. NON-FORFEITURE BENEFITS.
1) EXTENDED TERM.
If the original policy lapses and extended term insurance is
elected under the terms of the policy, the Ceding Company will
notify the Reinsurer of the new amount of reinsurance. The
reinsurance rates will remain the same as the rates used for the
original policy and will be based on the original issue age,
duration since issuance of the original policy and the original
underwriting classification.
2) REDUCED PAID UP.
If the original policy lapses and reduced paid up insurance is
elected under the terms of the policy, the amount reinsured will
be reduced and the Ceding Company will notify the Reinsurer of
the new amount of reinsurance. If reinsurance is on an excess
basis, reinsurance will be reduced by the full amount of the
reduction. If the amount of the reduction exceeds the risk
amount reinsured, the reinsurance on the policy will be
terminated. If reinsurance is on a first dollar quota share
basis, the amount reinsured and the amount retained by the
Ceding Company will be reduced based upon their respective quota
share percentages. The reinsurance rates will remain the same as
the rates used for the original policy and will be based on the
original issue age, duration since issuance of the original
policy and the original underwriting classification.
16. POLICYHOLDER REINSTATEMENTS.
a. AUTOMATIC REINSTATEMENT.
If the Ceding Company reinstates a policy that was originally
ceded to the Reinsurer as automatic reinsurance, the Reinsurer's
reinsurance for that policy will be reinstated.
b. FACULTATIVE REINSTATEMENT.
If the Ceding Company has been requested to reinstate a policy
that was originally ceded to the Reinsurer as facultative
reinsurance, and the Ceding Company requires underwriting
approval prior to reinstatement, then the Ceding Company will
resubmit the case to the Reinsurer for underwriting approval
before the reinsurance can be reinstated.
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c. PREMIUM ADJUSTMENT.
The reinsurance premiums for the interval during which the
policy was lapsed will be paid to the Reinsurer on the same
basis as the Ceding Company charged its policy owner for the
reinstatement.
d. REINSTATEMENT FOLLOWING REINSURANCE OF NON-FORFEITURE BENEFITS.
If the Ceding Company has been requested to reinstate a policy
that was reinsured while on extended term or reduced paid-up
then the reinsurance for the extended term or reduced paid up
option will terminate and the original policy will be reinstated
using either the automatic or facultative reinstatement
procedures set forth above, in accordance with the reinsurance
method used for the original policy. If the reinstatement
results in an increase in the Reinsured Net Amount at Risk
greater than that attained at the time of the non-forfeiture
activity, the terms of Article 15.b will govern the increase.
17. INCREASE IN RETENTION AND RECAPTURE
a. NEW BUSINESS.
If the Ceding Company increases its Maximum Dollar Retention
Limits, then it may, at its option and with 90 days written
notice to the Reinsurer, increase its Maximum Dollar Retention
Limits shown in Schedule A for policies issued after the
effective date of the Maximum Dollar Retention Limit increase.
The Ceding Company may change its quota share percentage for new
issues with 90 days written notice. Such change will apply for
all new business after the 90 day notice period has expired. For
in force policies, the Ceding Company shall not change its quota
share percentage.
b. RECAPTURE.
If the Ceding Company increases its Maximum Dollar Retention
Limits, then it may also increase its Quota Share Percentage,
set forth in Schedule A. Subsequent to both increases, Ceding
Company may then, with 90 days' written notice to the Reinsurer,
reduce or recapture the reinsurance in force subject to the
following requirements:
i. An in-force cession is not eligible for recapture until
it has been reinsured for the minimum number of years
shown in Schedule A. The effective date of the reduction
in reinsurance shall be the later of the first policy
anniversary following the expiration of the 90-day
notice period to recapture and the policy anniversary
date when the required minimum of years is attained, or
as otherwise agreed between the parties.
ii. On all policies eligible for recapture, reinsurance will
be reduced by the amount necessary to increase the total
insurance retained up to the new Quota Share Percentage.
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iii. If more than one policy per life is eligible for
recapture, then the eligible policies may be recaptured
beginning with the policy with the earliest issue date
and continuing in chronological order according to the
remaining policies' issue dates.
iv. Recapture will not be allowed on any policy for which
the Ceding Company did not keep its Maximum Dollar
Retention Limit or the full Quota Share Percentage as
stated in Schedule A, whichever is less.
v. If any policy eligible for recapture is also eligible
for recapture from other reinsurers, the reduction in
the Reinsurer's reinsurance on that policy will be in
proportion to the total amount of reinsurance on the
life with all reinsurers.
vi. Recapture will not be made on a basis that may result in
any anti-selection against the Reinsurer. The Reinsurer
maintains the discretion to determine when
anti-selection has occurred.
18. ERRORS AND OMISSIONS.
Any unintentional or accidental failure of the Ceding Company or the
Reinsurer to comply with the terms of this Agreement which can be shown
to be the result of an oversight, misunderstanding or clerical error,
will not be deemed a breach of this Agreement. Upon discovery, the error
will be corrected so that both parties are restored to the position they
would have occupied had the oversight, misunderstanding or clerical
error not occurred. Should it not be possible to restore both parties to
such a position, the Ceding Company and the Reinsurer shall negotiate in
good faith to equitably apportion any resulting liabilities and
expenses.
This provision applies only to oversights, misunderstandings or clerical
errors relating to the administration of reinsurance covered by this
Agreement. This provision does not apply to the administration of the
insurance provided by the Ceding Company to its insured or any other
errors or omissions committed by the Ceding Company with regard to the
policy reinsured hereunder.
19. INSOLVENCY.
a. For the purpose of this Agreement, the Ceding Company or
Reinsurer shall be considered insolvent when it:
i. As the result of a liquidation or similar proceeding,
applies for or consents to the appointment of a
receiver, trustee, or liquidator of its properties or
assets; or
ii. Is adjudicated as bankrupt or insolvent; or
iii. Files or consents to the filing of a petition in
bankruptcy, seeks reorganization or an arrangement with
creditors, or applies any bankruptcy, dissolution,
liquidation, or similar law or statute; or
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iv. Becomes the subject of an order to rehabilitate or to
liquidate as defined by the insurance code of the
jurisdiction of domicile of the Ceding Company or
Reinsurer, as appropriate.
b. REINSURER INSOLVENCY
Upon the event of insolvency of Reinsurer, Reinsurer will be
bound by any legal directions imposed by its liquidator,
receiver or statutory successor. However, if not in conflict
with such legal directions, Ceding Company shall have the right
to cancel this Agreement as respects occurrences taking place on
or after the date Reinsurer first evidences insolvency, by
giving to Reinsurer (or its liquidator, receiver or statutory
successor) written notice stating that such recapture is thereby
effected. If Ceding Company chooses this recapture option, upon
the effective date of recapture and again six months following
the recapture, the Reinsurer will calculate a terminal
accounting that will include a refund of unearned premiums and
unpaid claims. The Reinsurer will not pay to the Ceding Company
any amount representing the reserve on the business. Payment of
amounts specified in the terminal accounting will be the
Reinsurer's full and final payment to the Ceding Company.
c. CEDING COMPANY INSOLVENCY
In the event that the Ceding Company is deemed insolvent, all
reinsurance claims payable hereunder will be payable by the
Reinsurer directly to the Ceding Company, its liquidator,
receiver or statutory successor, without diminution because of
the insolvency of the Ceding Company. It is understood, however,
that in the event of such insolvency, the liquidator, receiver
or statutory successor of the Ceding Company will give written
notice to the Reinsurer of the pendency of a claim against the
Ceding Company on a risk reinsured hereunder within a reasonable
time after such claim is filed in the insolvency proceeding.
Such notice will indicate the policy reinsured and whether the
claim could involve a possible liability on the part of the
Reinsurer. During the pendency of such claim, the Reinsurer 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 the Ceding Company, its
liquidator, receiver or statutory successor. It is further
understood that the expense thus 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.
20. ARBITRATION.
a. GENERAL.
Notwithstanding any other provision, all disputes and other
matters in question between the parties, arising out of, or
relating to this Agreement, shall be submitted exclusively to
arbitration upon the written request of either party; except a
party shall not be prevented from filing and prosecuting a suit
in a court of competent jurisdiction solely for the purpose of
obtaining equitable relief, including for example,
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but not limited to, injunction or enforcement of subpoenas. The
disputes and matters subject to arbitration include, but are not
limited to disputes upon or after termination of this Agreement,
and issues respecting the existence, scope, and validity of this
Agreement. The arbitrators are to seek efficiencies in time and
expense. The arbitrators are not bound to comply strictly with
the rules of evidence. The arbitration panel also has, for
example, the authority to issue subpoenas to third parties
compelling prehearing depositions, and for document production.
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 arbitrators.
The arbitrators will be current and former executive officers of
life insurance or reinsurance companies; however, these
companies will not be either party nor their 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 thirty (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
day of the mailing of the notification initiating the
arbitration, then select the third arbitrator. In the event that
either party should fail to choose an arbitrator within thirty
(30) days after the other party has given notice of its
arbitrator appointment, the party which has already appointed an
arbitrator may choose an additional arbitrator, and the two
shall, in turn, choose a third arbitrator before entering
arbitration. If the two arbitrators are unable to agree upon the
selection of a third arbitrator within thirty (30) days
following their appointment, each arbitrator shall nominate
three candidates within ten (10) days thereafter, two of whom
the other shall decline and the decision shall be made by
drawing lots.
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 equally in the cost of the third arbitrator.
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The arbitrators shall operate in a fair but cost efficient
manner. For example, the arbitrators are not bound by technical
rules of evidence and may limit the use of depositions and
discovery.
The arbitration panel may, in its discretion, award attorneys'
fees, costs, expert witness fees, expenses and interest, all as
it deems appropriate to the prevailing party.
e. OFFSET.
All amounts due or otherwise accrued to any of the parties
hereto or any of their parents, affiliates, or subsidiaries,
whether by reason of premiums, losses, expenses, or otherwise,
under this agreement or any other contract heretofore or
hereafter entered into, will at all times be fully subject to
the right of offset and only the net balance will be due and
payable.
21. GOOD FAITH; FINANCIAL SOLVENCY.
This Agreement is entered into in reliance on the utmost good faith of
the parties including, for example, their representations and
disclosures. It requires the continuing utmost good faith of the
parties; their representatives, successors, and assigns. This includes a
duty of full and fair disclosure of all information respecting the
formation and continuation of this contract, the business reinsured, the
underwriting and policy issues (rules, practices, and staff), the
financial condition of the parties, studies and reports on the business
reinsured, and the solvency of the parties.
The Reinsurer or its representatives have the right at any reasonable
time to inspect the Ceding Company'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. The Reinsurer has entered into this
Agreement in reliance upon the Ceding Company's representations and
warranties. The Ceding Company affirms that it has disclosed and will
continue to disclose to the Reinsurer all matters material to this
Agreement and each reinsurance cession. Examples of such matters are a
change in underwriting or issue practices or philosophy, a change in
underwriting management personnel, or a change in the Ceding Company's
ownership or control.
22. TREATMENT OF CONFIDENTIAL INFORMATION.
Except for the purposes of carrying out this Agreement and as required
by law, the Reinsurer shall not disclose or use any non-public
personally identifiable customer or claimant information
("Customer/Claimant Information") provided by the Ceding Company to the
Reinsurer, as such Customer/Claimant Information is defined by the
▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and related regulations. Such Customer/Claimant
Information shall be shared only with those entities with which the
Reinsurer may, from time to time, contract in accordance with the
fulfillment of the terms of this Agreement, including but not limited to
the Reinsurer's retrocessionaires and the Reinsurer's affiliates.
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23. TERM OF THIS AGREEMENT.
The Ceding Company will maintain and continue the reinsurance provided
in this Agreement as long as the policy to which it relates is in force.
This Agreement may be terminated, without cause, for the acceptance of
new reinsurance after 90 days' written notice of termination by either
party to the other. The Reinsurer will continue to accept reinsurance
during this 90-day period. The Reinsurer's acceptance will be subject to
both the terms of this Agreement and the Ceding Company's payment of
applicable reinsurance premiums. 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 or financially impaired.
24. MEDICAL INFORMATION BUREAU.
The Reinsurer is required to strictly adhere to the Medical Information
Bureau Rules, and the Ceding Company agrees to abide by these Rules, as
amended from time to time.
25. SEVERABILITY.
In the event that any provision or term of this Agreement shall be held
by any court, arbitrator, or administrative agency to be invalid,
illegal or unenforceable, all of the other terms and provisions shall
remain in full force and effect to the extent that their continuance is
practicable and consistent with the original intent of the parties. In
addition, if any provision or term is held invalid, illegal or
unenforceable, the parties will attempt in good faith to renegotiate the
Agreement to carry out the original intent of the parties.
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