AUTOMATIC REINSURANCE AGREEMENT
EFFECTIVE NOVEMBER 15, 2000
between
THE TRAVELERS INSURANCE COMPANY
AND
THE TRAVELERS LIFE AND ANNUITY COMPANY
of
Hartford, Connecticut
as Ceding Company: referred to as You and Your
and
[ ] LIFE INSURANCE COMPANY
of
[ ]
as Reinsurer: referred to as We, Us and Our
TABLE OF CONTENTS
ARTICLES
Article I Scope of the Agreement Page 1
Parties to the Agreement
Effective Date of the Agreement
Scope of the Agreement
Duration of the Agreement
Article II Reinsurance Coverage Page 2
Automatic Reinsurance
Facultative Reinsurance
Basis of Reinsurance
Article III Procedures Page 3
Automatic Reinsurance
Facultative Reinsurance
Policy Expenses
Reference Materials
Article IV Liability Page 4
Automatic Reinsurance
Facultative Reinsurance
Policy Expenses
Conditional Receipt Liability
Continuation of Liability
Article V Reinsurance Rates and Payments Page 5
Reinsurance Rates
Payments
Tax Reimbursement
Experience Refund
Article VI Changes to the Reinsurance Page 7
Errors and Oversights
Misstatement of Age or Sex
Changes to the Underlying Policy
Reductions, Terminations and Reinstatements
Continued...
TABLE OF CONTENTS - (CONTINUED)
Article VII Recapture Page 10
Basis of Recapture
Method of Recapture
Article VIII Claims Page 12
Notice of Claim
Settlement of Claims
Contestable Claims
Claim Expenses
Extra Contractual Damages
Article IX Arbitration Page 14
Basis for Arbitration
Negotiation
Arbitration Proceedings
Article X Insolvency Page 16
Your (Ceding Company) Insolvency
Our (Reinsurer) Insolvency
Article XI Inspection of Records Page 18
Article XII Execution of the Agreement Page 19
EXHIBITS
[ ]
ARTICLE I - SCOPE OF THE AGREEMENT
1. PARTIES TO THE AGREEMENT
We mutually agree to transact reinsurance according to the terms of this
Agreement. This Agreement is for indemnity reinsurance and we are the only
two parties to the Agreement. There will be no right or legal relationship
whatsoever between us as reinsurer and any other person having an interest
of any kind in policies reinsured under this Agreement.
2. EFFECTIVE DATE OF THE AGREEMENT
This Agreement will go into effect at 12:01 A.M., November 15, 2000 and
will cover policies issued on plans of insurance specified in Exhibit A on
and after the effective dates specified in Exhibit A. The provisions of
this Agreement will also extend to policies where issues have been
backdated to a maximum six months prior to the Agreement effective date.
3. SCOPE OF THE AGREEMENT
The text of this Agreement and all Exhibits, Schedules and Amendments are
considered to be the entire agreement between us. There are no other
understandings or agreements between us regarding the policies reinsured
other than as expressed in this Agreement. We may make changes or
additions to this Agreement, but they will not be considered to be in
effect unless they are made by means of a written amendment which has been
signed by both of us.
4. DURATION OF THE AGREEMENT
The duration of this Agreement will be unlimited. However, either one of
us may terminate the Agreement at any time by giving the other ninety days
prior written notice. We will continue to accept new reinsurance during
the ninety-day period.
Existing reinsurance will not be affected by the termination of this
Agreement for new reinsurance. Existing reinsurance will remain in force
until the termination or expiry of the underlying policy on which
reinsurance is based, as long as you continue to pay reinsurance premiums
as shown in Article V (Reinsurance Rates and Payments). However, we will
not be liable for any claims or premium refunds which are not reported to
us within one hundred eighty days following the termination or expiry of
the last cession reinsured under this Agreement.
ARTICLE II - REINSURANCE COVERAGE
1. AUTOMATIC REINSURANCE
We will accept automatically reinsurance of life benefits for your
individually underwritten ordinary life policies on any permanent resident
of the United States and its territories, the Bahamas or Canada, in
agreement with the provisions and limitations shown in Exhibit A
(Reinsurance Coverage).
We will also accept automatically reinsurance of riders and supplementary
benefits written with the covered life benefits, but only to the extent
that the riders and supplementary benefits are specifically shown in
Exhibit A (Reinsurance Coverage), Part I.
You have the right to modify your retention limits shown in Exhibit A
(Reinsurance Coverage), Part II at any time. If your retention limits are
reduced as a result of the modification, you will need to notify us in
writing before you can cede reinsurance on the basis of the reduced
retention limits. We will prepare a treaty amendment which will serve as
our written approval of the reduction.
We reserve the right to amend the Automatic Acceptance Limits shown in
Exhibit A (Reinsurance Coverage), Part III if you modify your retention
limits. We also reserve the right to modify the Automatic Acceptance
Limits if you elect to participate in another arrangement or arrangements
to secure additional automatic binding capacity.
Changes in your issue limits or underwriting guidelines will be subject to
our review. Significant changes to your underwriting guidelines which will
affect future reinsurance will be subject to our written approval.
2. FACULTATIVE REINSURANCE
If you wish to submit a risk not covered automatically under this
Agreement, or if you wish our advice on any application, you may submit
and we will consider the risk on a facultative basis.
3. BASIS OF REINSURANCE
Life reinsurance under this Agreement will be on the Yearly Renewable Term
plan for the net amount at risk on the portion of the original policy that
is reinsured
Continued...
ARTICLE II - REINSURANCE COVERAGE
3. BASIS OF REINSURANCE - (CONTINUED)
with us. The net amount at risk for any policy period will be calculated
according to Exhibit C (Reinsurance Rates and Allowances), Part I.
Riders or supplementary benefits ceded with life benefits will be
reinsured as shown in Exhibit C. Any differences in the net amount at risk
calculation for these benefits will be shown in Exhibit C.
ARTICLE III - PROCEDURES
1. AUTOMATIC REINSURANCE
No individual notification will be necessary for placing automatic
reinsurance. Subject to Article V (Reinsurance Rates and Payments) and
Exhibit B (Reinsurance Reporting Forms and Reinsurance Administration),
new business or changes to existing reinsurance will be shown on your
periodic billing report.
2. FACULTATIVE REINSURANCE
When you wish to submit a risk for facultative consideration, you will
send us a reinsurance application form together with copies of all the
information you have regarding the insurability of the risk. You may use
either the Application for Reinsurance shown in Exhibit B-1 (Reinsurance
Reporting Forms and Reinsurance Administration) or you may use your own
form, as long as it is in general compliance with the Application for
Reinsurance. We will review the information and promptly notify you of our
decision.
After we have made an unconditional offer to reinsure a risk, no
individual notification of your acceptance will be necessary. You will
confirm your acceptance of our offer and the placement of the reinsurance
on your periodic billing report. Your confirmation must be made no later
than the termination date we specify in our acceptance of the risk.
Our offer may remain open beyond the termination date shown in our
acceptance if you give us a written request for an extension and we give
you our written approval of the request. If an extension is granted, the
offer will terminate automatically on the expiry date shown in our written
approval of the extension.
Continued...
ARTICLE III - PROCEDURES - (CONTINUED)
3. POLICY EXPENSES
You will bear the expenses of all medical examinations, inspection fees
and other charges incurred in connection with policy issues,
reinstatements or reentries.
4. REFERENCE MATERIALS
Upon request you will provide us with any reference materials which we may
require for proper administration of reinsurance ceded under this
Agreement.
ARTICLE IV - LIABILITY
1. AUTOMATIC REINSURANCE
Our liability for reinsurance placed automatically under this Agreement
will begin simultaneously with your liability for the underlying policy on
which reinsurance is based, however, our liability could terminate earlier
than yours due to the reductions and recapture provisions of this
Agreement.
2. FACULTATIVE REINSURANCE
Our liability for facultative reinsurance will begin simultaneously with
your liability for the underlying policy on which reinsurance is based
when we have given you an unconditional offer to reinsure the risk and you
have indicated your acceptance of our offer on the periodic billing
report, provided that the acceptance date is before the expiry date shown
on our offer, and the acceptance must occur during the lifetime of the
insured. Our liability could terminate earlier than yours due to the
reductions and recapture provisions of this Agreement.
If our offer depends on your approval of further information about the
insurability of the risk, we will have no liability unless you have
requested and approved the information and documented your policy file
accordingly.
3. CONDITIONAL RECEIPT LIABILITY
Our liability for losses under the terms of a Conditional Receipt or
Temporary Insurance Receipt is shown in Exhibit E (Conditional Receipt
Liability).
Continued...
ARTICLE IV - LIABILITY - (CONTINUED)
4. CONTINUATION OF LIABILITY
Continuation of our liability is conditioned on your payment of
reinsurance premiums as shown in Article V (Reinsurance Rates and
Payments) and is subject to Article VI (Changes to the Reinsurance) and
Article VII (Recapture).
ARTICLE V - REINSURANCE RATES AND PAYMENTS
1. REINSURANCE RATES
Reinsurance rates that you will pay us for business covered under this
Agreement are shown in Exhibit C. The reinsurance rate payable for any
cession for any accounting period will be calculated on the basis of the
net amount at risk reinsured as of that period.
For technical reasons relating to the uncertain status of deficiency
reserve requirements by the various state insurance departments, the Life
reinsurance rates cannot be guaranteed for more than one year. On all
reinsurance ceded at these rates, however, we anticipate continuing to
accept premiums on the basis of the rates shown in the premium schedule.
We can only increase rates to you if we decided to do so on an entire
class of business. At that point, you would have the right to recapture
any business affected by such change.
If the original policy is issued with interim insurance, you will pay us a
reinsurance rate for the interim period that is the same percentage of the
first year premium that the interim period bears to twelve months. The
rate that you pay us for the first policy year after the interim period
will be calculated on the basis of the full annual reinsurance rate.
Procedures and details of reinsurance rate calculation for any benefits or
riders ceded under this Agreement are shown in Exhibit C.
All financial transactions under this Agreement will be in United States
dollars, unless we mutually agree to use other currencies. Specifications
of the currencies and details of currency conversion procedures will be
shown in Exhibit C if necessary.
Continued...
ARTICLE V - REINSURANCE RATES AND PAYMENTS - (CONTINUED)
2. PAYMENTS
You will self-administer the periodic reporting of your statements of
account and payment of balances due to us as shown in Exhibit B.
Within thirty days after the close of each reporting period, you will send
us a statement of account for that period along with payment of the full
balance due. If the statement of account shows a balance due you, we will
remit that amount to you within thirty days of our receipt of the
statement of account.
Your timely payment of reinsurance premiums is a condition precedent to
our continued liability. If you have not paid the balance due us by the
thirty-first day following the close of the reporting period, we have the
right to give you thirty days' written notice of our intention to
terminate the reinsurance on which the balance is due and unpaid. At the
end of this thirty-day period, our liability will automatically terminate
for all reinsurance on which balances remain due and unpaid, including
reinsurance on which balances became due and unpaid during and after the
thirty-day notice period. Even though we have terminated the reinsurance,
you will continue to be liable for the payment of unpaid balances along
with interest charges calculated from the due date shown above to the date
of payment. The interest rate payable will be the same that you charge for
delinquent premiums on your individual life insurance policies.
Any amounts due, by either of the parties to this Agreement, whether they
arise out of this Agreement, or out of any other reinsurance relationship
between the parties, may be offset against the claims of the other party.
This right will continue to exist after the termination of this Agreement,
or of any business relationship between the parties.
You may reinstate reinsurance terminated for non-payment of balances due
at any time within sixty days of the date of termination, by paying us all
balances due and interest charged in full. However, we will have no
liability for claims incurred between the termination date and the
reinstatement date.
Continued...
ARTICLE V - REINSURANCE RATES AND PAYMENTS - (CONTINUED)
3. TAX REIMBURSEMENTS
Details of any reimbursement of premium taxes that you pay on behalf of
reinsurance payments to us are shown in Exhibit C, Section VIII. (Premium
Taxes).
We mutually agree to the following pursuant to Section 1.848-2 (g) (8) of
the Income Tax Regulation issued December 29, 1992 under Section 848 of
the Internal Revenue Code of 1986, as amended. This election will be
effective for all taxable years for which this Agreement remains in
effect.
The terms used in this Section are defined in Regulation Section 1.848-2
in effect as of December 29, 1992. The term "net consideration" will refer
to either net consideration as defined in Section 1.848-2 (f) or "gross
premium and other consideration" as defined in Section 1.848-3 (b), as
appropriate.
a) 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 IRC Section 848 (c) (1).
b) We mutually agree to exchange information pertaining to the amount
of net consideration under this Agreement each year to ensure
consistency. We also mutually agree to exchange information
otherwise required by the Internal Revenue Service.
4. EXPERIENCE REFUND
Details of any Experience Refund payable to you will be shown in Exhibit
C. Section XI. (Experience Refund).
ARTICLE VI - CHANGES TO THE REINSURANCE
1. ERRORS AND OVERSIGHTS
If either of us fail to comply with any of the provisions of this
Agreement because of an unintentional oversight or misunderstanding, the
underlying status of this Agreement will not be changed. Both of us will
be restored to the position we would have occupied had no such oversight
nor misunderstanding occurred.
Continued...
ARTICLE VI - CHANGES TO THE REINSURANCE - (CONTINUED)
Any monetary adjustments made between you and us to correct an Error shall
be without interest.
You will perform an audit of your records in any situation where it is
discovered that a policy(ies) was eligible for automatic reinsurance and
was not reported to us.
2. MISSTATEMENT OF AGE OR SEX
If the misstatement of the age or sex of a reinsured life causes an
increase or reduction in the amount of insurance in your underlying
policy, we will both share in the change in proportion to our original
liabilities at the time the policy was issued. In the event that
correction of age or sex causes retention to be changed, per schedule at
time of issue, amounts retained and reinsured will be corrected.
3. CHANGES TO THE UNDERLYING POLICY
a) All changes. If any change is made to the underlying policy, the
reinsurance will change accordingly. You will notify us of the
change and the appropriate premium adjustment on your periodic
statement of account.
b) Increases. If the amount at risk increases because of a change in
the underlying policy, you will promptly send us copies of all
papers relating to the change in plan. Our approval will be
necessary if the increase causes the amount reinsured to exceed the
Automatic Acceptance Limits shown in Exhibit A, Part III., if the
policy was reinsured on a facultative basis, or if the underwriting
classification of a substandard risk reinsurance on a facultative
basis was changed.
c) Extended Term and Reduced Paid-Up Insurance. If any policy reinsured
under this Agreement converts to Extended Term Insurance or Reduced
Paid-Up Insurance, the net amount at risk reinsured will be adjusted
as appropriate and reinsurance will be continued in accordance with
the provisions of the underlying policy. Reinsurance payments for
the adjusted policy will be calculated on the basis of the original
issue age of the insured and the duration of the original policy at
the time the adjustment became effective, i.e. point-in-scale basis.
Continued...
ARTICLE VI - CHANGES TO THE REINSURANCE - (CONTINUED)
4. REDUCTIONS, TERMINATIONS AND REINSTATEMENTS
If any part of the underlying coverage on a life reinsured under this
Agreement is reduced or terminated, the amount of reinsurance will also be
reduced or terminated to the extent that you will continue to maintain
your appropriate retention limit as shown in Exhibit A for the issue age
and table rating of the insured. You will not be required to assume
amounts in excess of the retention limit that was in force when the
affected policy or policies were issued.
The total amount of the reduction of a reinsured policy will be applied
directly to our net amount at risk. If reinsurance on the policy was
placed with more than one reinsurer, our net amount at risk will be
reduced in the same proportion that our initial amount of reinsurance bore
to the total initial amount reinsured in all companies.
If a policy reinsured under this Agreement is lapsed or terminated, the
reinsurance will also terminate. If additional policies on the same life
are reinsured with us, and if the termination causes you to maintain less
than the retention limit shown in Exhibit A, the policy(ies) issued next
in sequence to the terminated policy will be decreased until you maintain
your full retention on the risk. This procedure will not apply to any
policies reinsured on a facultative basis where you have not kept your
full retention.
You will also follow the procedures shown in the above paragraphs when the
reduction or termination applies to a policy or policies that you have
fully retained, and where the reduction or termination will cause you to
maintain less than your current retention for any policy or policies
reinsured.
If a policy reinsured automatically lapses and is reinstated in accordance
with your standard rules and procedures, reinsurance for the amount at
risk effective at the time of the lapse will be reinstated automatically
at the date of reinstatement of the policy. You will notify us of the
reinstatement on your periodic statement of account. You will send us
copies of your reinstatement papers only upon request.
We will not need to approve reinstatement of a policy reinsured under this
Agreement on a facultative basis when:
a) you have kept your full retention on the policy; and
b) the reinsured amount falls within the Automatic Acceptance Limits
shown in Exhibit A.
Continued...
ARTICLE VI - CHANGES TO THE REINSURANCE
4. REDUCTIONS, TERMINATIONS AND REINSTATEMENTS - (CONTINUED)
Otherwise, you will need our prior review and approval for reinstatement
of any facultative reinsurance. You will send us prompt written notice of
your intention to reinstate the policy along with copies of the
reinstatement papers required by your standard rules and procedures. The
reinsurance will be reinstated at the same time as the policy, subject to
our written approval of the reinstatement.
You will notify us of all reinstatements on your periodic statement of
account, and you will pay all reinsurance payments due from the date of
reinstatement to the date of the current statement of account, including a
proportionate share of interest collected. Thereafter, reinsurance
payments will be in accordance with Article V. (Reinsurance Rates and
Payments).
ARTICLE VII - RECAPTURE
1. BASIS OF RECAPTURE
If you increase the retention limits or the percentage of the risk that
you retain, shown in Exhibit A, you may make a corresponding reduction in
eligible reinsurance cessions. Policies are eligible for recapture if:
a) you have maintained your retention limit as described in Exhibit A.
Policies on which you retained a reduced retention or no retention
will not be eligible for recapture.
b) the policy has been in force under this Agreement for the Recapture
Period shown in Exhibit C, Section IX. The recapture period will
always be measured from the original policy issue date. For
converted policies the recapture period will be the greater of the
recapture period in the original reinsurance agreement, or the
recapture period in the agreement to which the policy has converted.
c) life risks under an active Waiver of Premium claim are eligible for
recapture.
Continued...
ARTICLE VII - RECAPTURE - (CONTINUED)
2. METHOD OF RECAPTURE
You will give us written notice of your intention to recapture within
ninety days of the effective date of your retention increase. If you elect
to recapture at a later date, you will give us additional written notice
before you begin the recapture.
When you have given us written notice of your intent to recapture, and the
date that the recapture will begin:
a) All eligible policies as described in Exhibit A will be recaptured;
b) Reinsurance will be reduced on the next anniversary date of each
eligible policy;
c) Reinsurance on each eligible policy will be reduced by an amount
that will increase your retention to the current limit set forth in
Exhibit A.
d) If there is reinsurance in force in other companies on any one
insured life, the reduction of the reinsurance in force under this
Agreement will be in the same proportion that the amount reinsured
with us bears to the total reinsurance on the life.
If you omit or overlook the recapture of any eligible policy or policies,
our acceptance of reinsurance payments after the date the recapture would
have taken place will not cause us to be liable for the amount of the risk
that would have been recaptured. We will be liable only for a refund of
reinsurance payments received, without interest.
If your retention increase is due to your purchase by or purchase of
another company, or your merger, assumption or any other affiliation with
another company, no immediate recapture will be allowed. However, you may
recapture eligible policies once the Recapture Period set out in Exhibit
C, Section IX. has expired.
ARTICLE VIII - CLAIMS
1. NOTICE OF CLAIM
When you receive notice that a claim has been incurred on a policy
reinsured under this Agreement, you will immediately complete and send us
a form in compliance with the "Request for Reinsurance Benefits" Form
shown in Exhibit D. In every case of loss, any proofs acceptable to you
will be sufficient for us. You will forward copies of these proofs and the
claimant's statement as each document becomes available. Copies of the
application and underwriting papers will be sent only for a claim incurred
during the contestable period of the policy; otherwise you will send us
only the claim documents we specifically request.
2. SETTLEMENT OF CLAIMS
We will accept your good faith decision in settling any claim except as
specified in this Article. Once we have received the proofs cited in
Section 1 and upon evidence of your settlement with the claimant, we will
discharge our net reinsurance liability by paying you one lump sum,
regardless of the method of settlement you use.
Your claim settlements will be administered in good faith, according to
the standard procedures you apply to all claims, whether reinsured or not.
3. CONTESTABLE CLAIMS
You will immediately notify us if you intend to contest, compromise or
litigate a claim involving reinsurance. If we prefer not to participate in
the contest, we will notify you of our decision within fifteen days of our
receipt of all documents requested, and we will immediately pay you the
full amount of reinsurance due. Once we have paid our reinsurance
liability, we will not be liable for legal and/or investigative expenses
and we will have no further liability for expenses associated with the
contest, compromise or litigation.
When we agree to participate in a contest, compromise or litigation
involving reinsurance, you will give us prompt notice of the beginning of
any legal proceedings involving the contested policy. You will promptly
furnish us with copies of all documents pertaining to a lawsuit or notice
of intent to file a lawsuit by any of the claimants or parties to the
policy.
We will share in the payment of legal or investigative expenses relating
to a contested claim in the same proportion as our liability bears to your
liability. We will not reimburse expenses associated with non-reinsured
policies.
Continued...
ARTICLE VIII - CLAIMS
3. CONTESTABLE CLAIMS - (CONTINUED)
If your contest, compromise or litigation results in a reduction in the
liability of the contested policy, we will share in the reduction in the
same proportion that the amount of reinsurance bore to the amount payable
under the terms of the policy on the date of death of the insured.
4. CLAIM EXPENSES
We will pay our proportionate share of the following expenses arising out
of the settlement or litigation of a claim, providing that the expenses
are reasonable:
a) investigative expenses;
b) attorneys' fees;
c) penalties and interest imposed automatically against you by statute
and rising solely out of a judgment rendered against you in a suit
for policy benefits;
d) interest paid to the claimant on death benefit proceeds according to
your practices. Reimbursement of interest in excess of 9%, unless
otherwise dictated by local legislation, will require our approval.
4. CLAIM EXPENSES - (CONTINUED)
Our share of claim expenses will be in the same proportion that our
liability bears to your liability. You will be responsible for payment of
the following claim expenses, which are not considered items of "net
reinsurance liability" as referenced in Section 2. of this Article:
a) routine administrative expenses for the home office or elsewhere,
including your employees' salaries;
b) expenses incurred in connection with any dispute or contest arising
out of a conflict in claims of entitlement to policy proceeds or
benefits which you admit are payable.
Continued...
ARTICLE VIII - CLAIMS - (CONTINUED)
5. EXTRA CONTRACTUAL DAMAGES
We will not be liable for nor will we pay any extra contractual damages,
including but not limited to consequential, compensatory, exemplary or
punitive damages which are awarded against you, or which you pay
voluntarily, in settlement of a dispute or claim where damages were
awarded as the result of any direct or indirect act, omission or course of
conduct undertaken by you, your agents or representatives, in connection
with any aspect of the policies reinsured under this Agreement.
We recognize that special circumstances may arise in which we should
participate to the extent permitted by law in certain assessed damages.
These circumstances are difficult to describe or define in advance but
would include only those situations in which we were an active party in
the act, omission or course of conduct which ultimately resulted in the
assessment of the damages. The extent of our participation is dependent
upon a good-faith assessment of the relative culpability in each case; but
all factors being equal, the division of any such assessment would
generally be in the same proportion of the net liability accepted by each
party.
ARTICLE IX - ARBITRATION
1. BASIS FOR ARBITRATION
We mutually understand and agree that the wording and interpretation of
this Agreement is based on the usual customs and practices of the
insurance and reinsurance industry. While we agree to act in good faith in
our dealings with each other, it is understood and recognized that
situations arise in which we cannot reach an agreement. In the event that
any dispute cannot be resolved to our mutual satisfaction, the dispute
will first be subject to good-faith negotiation as described below in an
attempt to resolve the dispute without the need to institute formal
arbitration proceedings.
Continued...
ARTICLE IX - ARBITRATION - (CONTINUED)
2. NEGOTIATION
Within ten days after one of us has given the other the first written
notification of the specific dispute, each of us will appoint a designated
officer to attempt to resolve the dispute. The officers will meet at a
mutually agreeable location as early as possible and as often as
necessary, in order to gather and furnish the other with all appropriate
and relevant information concerning the dispute. The officers will discuss
the problem and will negotiate in good faith without the necessity of any
formal arbitration proceedings. During the negotiation process, all
reasonable requests made by one officer to the other for information will
be honored. The specific format for such discussions will be decided by
the designated officers.
If the officers cannot resolve the dispute within thirty days of their
first meeting, we agree that we will submit the dispute to formal
arbitration. However, we may agree in writing to extend the negotiation
period for an additional thirty days.
3. ARBITRATION PROCEEDINGS
No later than fifteen days after the final negotiation meeting, the
officers taking part in the negotiation will give both of us written
confirmation that they are unable to resolve the dispute and that they
recommend establishment of formal arbitration.
An arbitration panel consisting of three past or present officers of life
reinsurance companies that have never been affiliated with either of the
Parties in any way will settle the dispute. Each of us will appoint one
arbitrator and the two will select a third. If the two arbitrators cannot
agree on the choice of a third, the choice will be made by the Chairman of
the American Arbitration Association.
The arbitration proceedings will be conducted according to the Commercial
Arbitration Rules of the American Arbitration Association which are in
effect at the time the arbitration begins.
The arbitration will take place in Hartford, Connecticut unless we
mutually agree otherwise.
Continued...
ARTICLE IX - ARBITRATION
3. ARBITRATION PROCEEDINGS - (CONTINUED)
Within sixty days after the beginning of the arbitration proceedings the
arbitrators will issue a written decision on the dispute and a statement
of any award to be paid as a result. The decision will be based on the
terms and conditions of this Agreement as well as the usual customs and
practices of the insurance and reinsurance industry, insofar as they are
not in conflict with the specific terms of this Agreement, rather than on
strict interpretation of the law. The decision will be final and binding
on both of us and there will be no further appeal, except that either of
us may petition any court having jurisdiction regarding the award rendered
by the arbitrators.
We may agree to extend any of the negotiation or arbitration periods shown
in this Article.
Unless otherwise decided by the arbitrators, we will share equally in all
expenses resulting from the arbitration, including the fees and expenses
of the arbitrators, except that each of us will be responsible for our own
attorneys' fees. Further, the Parties agree that the arbitrators shall not
be allowed to award punitive damages.
ARTICLE X - INSOLVENCY
1. YOUR (CEDING COMPANY) INSOLVENCY
If you are judged insolvent by a court or by the Insurance Commissioner
for your state of domicile, we will pay all reinsurance under this
Agreement directly to you, your liquidator, rehabilitator, receiver or
statutory successor on the basis of your liability under the policy or
policies reinsured without decrease because of your insolvency. It is
understood, however, that in the event of your insolvency the liquidator,
receiver or statutory successor will give us written notice of a pending
claim on a policy reinsured within a reasonable time after the claim is
filed in the insolvency proceedings. While the claim is pending, we may
investigate and interpose at our own expense in the proceedings where the
claim is to be adjudicated, any defense that we may deem available to you,
your liquidator, receiver or statutory successor. It is further understood
that the expense we incur will be chargeable, subject to court approval,
against you as part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to you solely as a
result of the defense we have undertaken. Where two or more reinsurers are
involved in the same claim and a majority in interest elects to interpose
defense to the claim, the expenses will be apportioned in accordance with
the terms of the reinsurance agreement as though you had incurred the
expense.
Continued...
ARTICLE X - INSOLVENCY - (CONTINUED)
2. OUR (REINSURER) INSOLVENCY
We will immediately notify you in the event that we are adjudged insolvent
by a court of law, including, but not limited to the appointment of a
receiver, and we will be considered in default under this Agreement. Our
liability for business in force and ceded under this Agreement prior to
the date that we were adjudged insolvent will neither decrease nor
terminate but will continue, subject to your payments of premiums on such
business as shown in Article V. Amounts due us by you will be paid
directly to our liquidator, rehabilitator, receiver or statutory successor
without diminution because of our insolvency.
You may terminate this Agreement for both new and in-force business upon
written notice to us via Certified Mail (hereinafter referred to as the
"written notice of termination") in the event that we are adjudged
insolvent or financially impaired; or upon the occurrence of any of the
following:
a) we are placed in receivership, rehabilitation, liquidation,
conservation, bankruptcy, or similar status pursuant to the laws of
any state or the United States; or
b) a court-appointed receiver, custodian, trustee, liquidator,
conservator, governmental official or similar officer takes
possession over our assets, or
c) the publicized claims paying ability ratings assigned to the
Reinsurer by two or more of the specified Industry Rating Agencies
fall below the Minimum Acceptable Ratings defined in the following
table:
INDUSTRY RATING AGENCY MINIMUM ACCEPTABLE RATINGS
---------------------- --------------------------
Standard & Poor's BBB-
Moody's A3
A.M. Best A-
Duff & ▇▇▇▇▇▇ BBB-
For purposes of this subparagraph, the Specified Industry Rating
Agencies shall be the four Industry Rating Agencies listed in the
above table. However, any Industry Rating Agency that has either
discontinued its ratings services for any period of time, or has not
published a current claims paying ability rating for the Reinsurer
for any period of time shall not be a Specified Industry Rating
Agency for that period.
Continued...
ARTICLE X - INSOLVENCY
2. OUR (REINSURER) INSOLVENCY - (CONTINUED)
Such termination shall be effective upon receipt by Reinsurer of the
written notice of termination (the "Termination Date"). Notice from the
Ceding Company shall be received by the Reinsurer within 45 days of
Reinsurer's rating falling below the Minimum Acceptable Ratings. Within 30
days of the Termination Date, the Reinsurer will pay Ceding Company, as of
the Termination Date, any claims known to Reinsurer and incurred under
this Agreement prior to the Termination Date plus the amount of any
unearned premiums net of allowances. With respect to any claims not known
or reported to Reinsurer as of the Termination Date, Reinsurer shall pay
within 30 days of the report to Reinsurer these claims plus any unearned
premiums net of allowances. The Ceding Company will pay the Reinsurer any
unpaid premiums for policies covered by the Agreement earned prior to the
Termination Date. Such payments are in full and complete discharge of all
obligations of the Ceding Company and the Reinsurer under this Agreement,
except the Reinsurer shall remain liable for any claim that occurred prior
to the Termination Date that the Reinsurer has not previously paid.
ARTICLE XI - INSPECTION OF RECORDS
1. INSPECTION OF RECORDS
Either one of us will have the right at any reasonable time to inspect the
original papers, records, books, files or other documents relating
directly or indirectly to the reinsurance coverage under this Agreement.
ARTICLE XII - EXECUTION OF THE AGREEMENT
In witness whereof, we have caused this Agreement to be executed in duplicate at
the dates and places shown below, by our respective officers duly authorized to
do so.
THE TRAVELERS INSURANCE COMPANY
HARTFORD, CONNECTICUT
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Signature Signature:
----------------------------- ------------------------------
Name Name
----------------------------- ------------------------------
Title Title
----------------------------- ------------------------------
Date of Signature Date of Signature
THE TRAVELERS LIFE AND ANNUITY COMPANY
HARTFORD, CONNECTICUT
----------------------------- ------------------------------
Signature Signature:
----------------------------- ------------------------------
Name Name
----------------------------- ------------------------------
Title Title
----------------------------- ------------------------------
Date of Signature Date of Signature
[ ] LIFE INSURANCE COMPANY
DALLAS, TEXAS
----------------------------- ------------------------------
Signature Signature:
----------------------------- ------------------------------
Name Name
----------------------------- ------------------------------
Title Title
----------------------------- ------------------------------
Date of Signature Date of Signature
