EX-g.1
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AUTOMATIC AND FACULTATIVE YRT REINSURANCE AGREEMENT
(HEREINAFTER REFERRED TO AS THE "AGREEMENT")
BETWEEN
▇▇▇▇▇▇▇ NATIONAL LIFE INSURANCE COMPANY
LANSING, MICHIGAN, USA
(HEREINAFTER REFERRED TO AS THE "CEDING COMPANY")
and
RGA REINSURANCE COMPANY
ST. LOUIS, MISSOURI, USA
(HEREINAFTER REFERRED TO AS THE "REINSURER")
THIS AGREEMENT IS EFFECTIVE JANUARY 10, 2005
(HEREINAFTER REFERRED TO AS THE "EFFECTIVE DATE")
TABLE OF CONTENTS
ARTICLE TITLE PAGE
I PARTIES TO THE AGREEMENT 3
II COMMENCEMENT, TERMINATION AND CONTINUANCE OF REINSURANCE 3
III SCOPE 4
IV COVERAGE 5
V LIABILITY 6
VI RETENTION AND RECAPTURE 6
VII REINSURANCE PREMIUMS AND ALLOWANCES 6
VIII RESERVES 7
IX TERMINATIONS AND REDUCTIONS 7
X POLICY ALTERATIONS 7
XI POLICY ADMINISTRATION AND PREMIUM ACCOUNTING 8
XII CLAIMS 9
XIII ARBITRATION 10
XIV INSOLVENCY 11
XV OFFSET 12
XVI RIGHT TO INSPECT 12
XVII UNINTENTIONAL ERRORS, MISUNDERSTANDINGS OR OMISSIONS 12
XVIII CHOICE OF LAW AND FORUM 12
XIX CONFIDENTIALITY AND SECURITY OF INFORMATION 13
XX SEVERABILITY 13
XXI REINSURANCE CREDIT 13
XXII ALTERATIONS TO THE AGREEMENT 14
XXIII EXECUTION OF THE AGREEMENT 15
SCHEDULES
I REINSURANCE SPECIFICATIONS 16
II RETENTION 19
III BUSINESS COVERED 20
IV REINSURANCE PREMIUMS 21
V LIMITS 26
VI SAMPLE STATEMENT SPECIFICATIONS 27
VII SAMPLE POLICY EXHIBIT 28
VIII DEFINITIONS 29
IX TERMINAL ILLNESS BENEFIT RIDER 31
ARTICLE I - PARTIES TO THE AGREEMENT
Reinsurance required by the Ceding Company will be assumed by the Reinsurer as
described in the terms of this Agreement.
This is an Agreement solely between the Reinsurer and the Ceding Company. In no
instance will anyone other than the Reinsurer or the Ceding Company have any
rights under this Agreement, and the Ceding Company is and will remain solely
liable to any insured, policyowner, or beneficiary under the Original Policies
reinsured hereunder.
The current general and special policy conditions, the premium schedules, and
underwriting guidelines of the Ceding Company, applying to the business covered
by this Agreement as set out in the Schedules, will form an integral part of
this Agreement. Additions or alterations to any of these conditions or schedules
will be reported to the Reinsurer without delay. In the case of significant
changes, both parties to the Agreement must agree to the new reinsurance
conditions.
ARTICLE II - COMMENCEMENT, TERMINATION AND CONTINUANCE OF REINSURANCE
1. AGREEMENT COMMENCEMENT
Notwithstanding the date on which this Agreement is signed, this Agreement
will take effect as from the date shown in the attached Schedule I, and
applies to new business taking effect on and after this date.
2. AGREEMENT TERMINATION
This Agreement will be in effect for an indefinite period and may be
terminated as to new reinsurance at any time by either party giving ninety
(90) days written notice of termination. The day the notice is mailed to
the other party's home office, or, if the mail is not used, the day it is
delivered to the other party's home office or to an officer of the other
party will be the first day of the ninety (90) day period.
During the ninety (90) day period, this Agreement will continue to operate
in accordance with its terms.
3. POLICY TERMINATION
If the policy is terminated by death, lapse, surrender or otherwise, the
reinsurance will terminate on the same date. If premiums have been paid on
the reinsurance for a period beyond the termination date, refunds will
follow the terms as shown in Schedule I.
If the policy continues in force without payment of premium during any days
of grace pending its surrender, whether such continuance be as a result of
a policy provision or a practice of the Ceding Company, the reinsurance
will also continue without payment of premium and will terminate on the
same date as the Ceding Company's risk terminates.
If the policy continues in force because of the operation of an automatic
premium loan provision, or other such provision by which the Ceding Company
receives compensation for its risk, then the reinsurance will also continue
and the Ceding Company will pay the Reinsurer the reinsurance premium for
the period to the date of termination.
4. CONTINUATION OF REINSURANCE
On termination of this Agreement in accordance with the provisions in
paragraph two of this Article, the reinsurance ceded will remain in force
subject to the terms and conditions of this Agreement until their natural
expiry.
ARTICLE III - SCOPE
1. RETENTION OF THE CEDING COMPANY
The type and amount of the Ceding Company's retention on any one life is as
shown in Schedule II. In determining the amounts at risk in each case, any
additional death benefits on the same life (e.g. additional term insurance
or family income benefits) will be taken into account, as will the amounts
at risk under any other existing policies, at the time of commencement, of
the policy ceded under this Agreement.
The Ceding Company may alter its retention in respect of future new
business at any time. The Ceding Company will promptly notify the Reinsurer
of such alteration and its effective date.
2. CURRENCY
All reinsurance to which the provisions of this Agreement apply will be
effected in the same currencies as that expressed in the Original Policies
and as shown in Schedule I.
3. THE REINSURER'S SHARE
The Reinsurer's share is as shown in Schedule V.
4. BASIS OF REINSURANCE
Plans of insurance listed in Schedule III will be reinsured on the basis
described in Schedule I, using the rates given in the Rate Schedule as
shown in Schedule IV.
5. REINSURANCE ALLOWANCES
The Reinsurer will pay to the Ceding Company the reinsurance allowance, if
any, as shown in Schedule IV. If any reinsurance premiums or installments
of reinsurance premiums are returned to the Ceding Company, any
corresponding reinsurance allowance previously credited to the Ceding
Company, will be reimbursed to the Reinsurer.
6. PREMIUM RATE GUARANTEE
Premium rate guarantees, if any, are as shown in Schedule IV.
7. POLICY FEES
Policy fees, if any, are as shown in Schedule IV.
8. TAXES
Taxes, if any, are as shown in Schedule I.
9. EXPERIENCE REFUND OR PROFIT COMMISSION
If an Experience Refund or Profit Commission is payable under this
Agreement, the conditions and formula are as shown in Schedule IV.
10. EXPENSE OF THE ORIGINAL POLICY
The Ceding Company will bear the expense of all medical examinations,
inspection fees and other charges incurred in connection with the Original
Policy.
ARTICLE IV - COVERAGE
AUTOMATIC PROVISIONS
For each risk on which reinsurance is ceded, the Ceding Company's retention
at the time of issue will take into account both currently issued and
previously issued policies.
The Ceding Company must cede and the Reinsurer must automatically accept
reinsurance, if all of the following conditions are met for each life:
1. RETENTION
The Ceding Company has retained its limit of retention as shown in
Schedule II; and
2. PLANS AND RIDERS
The basic plan or supplementary benefit, if any, is shown in Schedule
III; and
3. AUTOMATIC ACCEPTANCE LIMITS
The underwriting class, age, minimum reinsurance amount, binding
amounts and jumbo limits fall within the automatic limits as shown in
Schedule V; and
4. UNDERWRITING
The risk is underwritten according to the Ceding Company's Standard
Guidelines; and
The Ceding Company has never made facultative application for
reinsurance on the same life to the Reinsurer or any other Reinsurer;
and
5. RESIDENCE
The risk is a resident of the countries, as shown in Schedule I.
If, for a given application, the Ceding Company cannot comply with the
automatic reinsurance conditions described above, or if the Ceding
Company submits the application to other Reinsurers for their
facultative assessment, the Ceding Company can submit this application
to the Reinsurer on a facultative basis.
FACULTATIVE PROVISIONS
The Ceding Company will send copies of the original applications, all
medical reports, inspection reports, attending physician's statement,
and any additional information pertinent to the insurability of the
risk to the Reinsurer.
The Ceding Company will also notify the Reinsurer of any underwriting
information requested or received after the initial request for
reinsurance is made. For policies which contain automatic increase
provisions, the Ceding Company will inform the Reinsurer of the
initial and ultimate risk amounts for which reinsurance is being
requested, or in the case of indexed amounts, the basis of the
indexing.
On a timely basis, the Reinsurer will submit a written decision to the
Ceding Company. In no case will the Reinsurer's offer on facultative
submissions be open after one hundred twenty (120) days have elapsed
from the date of the Reinsurer's offer to participate in the risk.
Acceptance of the offer and delivery of the policy according to the
rules of the Ceding Company must occur within one hundred twenty (120)
days of the final reinsurance offer. Unless the Reinsurer explicitly
states in writing that the final offer is extended, the offer will be
automatically withdrawn at the end of day one hundred twenty (120).
The Reinsurer will not be liable for proceeds paid under the Ceding
Company's Conditional Receipt or temporary insurance agreement for
risks submitted on a facultative basis. ARTICLE V - LIABILITY
The liability of the Reinsurer for all claims within automatic cover
and all claims arising after facultative acceptance as described in
Article IV, will commence simultaneously with that of the Ceding
Company and will cease at the same time as the liability of the Ceding
Company ceases.
ARTICLE VI - RETENTION AND RECAPTURE
If the Ceding Company changes its limit of retention as shown in Schedule II,
written notice of the change will promptly be given to the Reinsurer. At the
option of the Ceding Company, a corresponding reduction may be made in the
reinsurance in force under this Agreement, on all lives, on which the Ceding
Company has maintained its maximum limit of retention, provided that all
eligible business is reduced on the same basis. The Ceding Company may apply the
new limits of retention to existing reinsurance and reduce and recapture
reinsurance inforce in accordance with the following rules:
1. No recapture will be made unless reinsurance has been in force for the
minimum period shown in Schedule I.
2. Recapture will become effective on the policy anniversary date following
written notification of the Ceding Company's intent to recapture.
3. No recapture will be made unless the Ceding Company retained its maximum
limit of retention for the plan, age and mortality rating at the time the
policy was issued. No recapture will be allowed in any class of fully
reinsured business or in any classes of risks for which the Ceding Company
established special retention limits less than the Ceding Company's maximum
retention limits for the plan, age, and mortality rating at the time the
policy was issued.
4. If any reinsurance is recaptured, all reinsurance eligible for recapture,
under the provisions of this Article, must be recaptured.
5. If there is reinsurance with other reinsurers on risks eligible for
recapture, the necessary reduction is to be applied to each company in
proportion to the total outstanding reinsurance.
ARTICLE VII - REINSURANCE PREMIUMS AND ALLOWANCES
1. LIFE REINSURANCE
Premiums for life and supplemental benefit reinsurance will be as shown in
Schedule IV.
2. SUBSTANDARD PREMIUMS
Premiums will be increased by any Flat Extra Premium as shown in Schedule
IV, charged the insured on the face amount initially reinsured. Premiums
will be increased by any substandard premium as shown in Schedule IV,
charged the insured on the net amount at risk reinsured.
3. JOINT POLICY PREMIUMS
In the case of joint policy premiums, if any, the premium rate payable to
the Reinsurer will be as shown in Schedule IV.
4. SUPPLEMENTAL BENEFITS
The Reinsurer will receive a proportionate share of any premiums for
additional benefits as shown in Schedule IV. This share will be based on
the ratio between the amount at risk and the total initial benefits insured
and will remain constant throughout the entire period of premium payment.
ARTICLE VIII - RESERVES
Reserve requirements of the Ceding Company, if any, are as shown in Schedule I.
ARTICLE IX - TERMINATIONS AND REDUCTIONS
Terminations or reductions will take place in accordance with the following
rules in order of priority:
1. The Ceding Company must keep its initial or recaptured retention on the
policy.
2. Termination or reduction of a wholly reinsured policy will not affect other
reinsurance inforce.
3. A termination or reduction on a wholly retained case will cause an equal
reduction in existing automatic reinsurance with the oldest policy being
reduced first.
4. A termination or reduction will be made first to reinsurance of partially
reinsured policies with the oldest policy being reduced first.
5. If the policies are reinsured with multiple reinsurers, the reinsurance
will be reduced by the ratio of the amount of reinsurance in each company
to the total outstanding reinsurance on the risk involved.
6. When a policy is reinstated, reinsurance will be reinstated as if the lapse
or reduction had not occurred.
ARTICLE X - POLICY ALTERATIONS
1. REINSTATEMENT
Any policy originally reinsured in accordance with the terms and conditions of
this Agreement by the Ceding Company may be automatically reinstated with the
Reinsurer as long as the policy is reinstated in accordance with the procedures
and rules of the Ceding Company. Any policy originally reinsured with the
Reinsurer on a facultative basis which has been in a lapsed status for more than
ninety (90) days must be submitted with underwriting requirements and approved
by the Reinsurer before it is reinstated. The Ceding Company will pay the
Reinsurer its share of amounts collected or charged for the reinstatement of
such policies.
2. EXCHANGES OR CONVERSIONS
An exchange or conversion is a new policy replacing a policy issued earlier
by the Ceding Company or a change in an existing policy that is issued or
made either:
1. Under the terms of the Original Policy, or
2. Without the same new underwriting information the Ceding Company
would obtain in the absence of the Original Policy, or
3. Without a suicide exclusion period, or contestable period of
equal duration, to those contained in new issues by the Ceding
Company, or
4. Without the payment of the same commissions in the first year,
that the Ceding Company would have paid in the absence of the
Original Policy.
Exchanges or conversions will be reinsured under this Agreement only if the
Original Policy was reinsured with the Reinsurer; the amount of reinsurance
under this Agreement will not exceed the amount of the reinsurance on the
Original Policy with the Reinsurer immediately prior to the exchange or
conversion. Premiums will be as shown in Schedule IV.
ARTICLE X - POLICY ALTERATIONS (CONTINUED)
Note: An original date policy reissue will not be treated as an exchange or
conversion of the Original Policy. It will be treated as a new policy and
the Original Policy will be treated as not taken. All premiums previously
paid to the Reinsurer for the Original Policy will be refunded to the
Ceding Company. All premiums will be due on the new policy from the
original issue date.
Note: Re-entry, e.g. wholesale replacement and similar programs are not covered
under this Article. If Re-entry is applicable to this Agreement, then it
will be covered in Schedule IV.
ARTICLE XI - POLICY ADMINISTRATION AND PREMIUM ACCOUNTING
1. ACCOUNTING PERIOD AND PREMIUM DUE
The Ceding Company will submit accounts to the Reinsurer, for reporting new
business, alterations, terminations, renewals, claims, and premium due, as
shown in Schedule I.
2. ACCOUNTING ITEMS
The accounts will contain a list of premiums due for the current accounting
period, explain the reason for each premium payment, show premium subtotals
adequate to use for premium accounting, including first year and renewal
year premiums and allowances. The account information should provide the
ability to evaluate retention limits, premium calculations and to establish
reserves.
3. REINSURANCE ADMINISTRATION REQUIREMENTS
Reinsurance administration requirements are as shown in Schedule VI and
Schedule VII.
4. PAYMENT OF BALANCES
The Ceding Company will pay any balance due the Reinsurer, at the same time
as the account is rendered, but in all cases, by the accounting and premium
due frequency as shown in Schedule I. The Reinsurer will pay any balance
due the Ceding Company, at the same time as the account is confirmed,
however, at the latest, within thirty (30) days after receipt of the
statement of account. Should the Reinsurer be unable to confirm the account
in its entirety, the confirmed portion of the balance will be paid
immediately. As soon as the account has been fully confirmed, the
difference will be paid immediately by the debtor. All balances not paid
within thirty (30) days of the due date shown on the statement will be in
default.
5. BALANCES IN DEFAULT
The Reinsurer will have the right to terminate the reinsurance for new
business and all policies having reinsurance premiums in arrears, by giving
ninety (90) days written notice of its intention to the Ceding Company. If
all reinsurance premiums in arrears, including any that become in arrears
during the ninety (90) day notice period, are not paid before the
expiration of the notice period, the Reinsurer will be relieved of all
liability under those policies as of the last date to which premiums have
been paid for each policy. Reinsurance on policies on which reinsurance
premiums subsequently fall due will automatically terminate as of the last
date to which premiums have been paid for each policy, unless reinsurance
premiums on those policies are paid on or before their due date pursuant to
section 4 above.
The first day of this ninety (90) day notice of termination, resulting from
default as described in section 4 of this Article, will be the day the
notice is received in the mail by the Ceding Company, or if the mail is not
used, the day it is delivered to the Ceding Company. If all balances in
default are received within the ninety (90) day time period, the Agreement
will remain in effect. The interest payable on balances in default is
stipulated as shown in Schedule I.
ARTICLE XI - POLICY ADMINISTRATION AND PREMIUM ACCOUNTING (CONTINUED)
6. FLUCTUATIONS IN EXCHANGE RATES
If the premium due periods allowed for the payment of balances are exceeded
by either party, the debtor will bear the currency risk, in the event of
any subsequent alteration in the exchange rate, by more than [REDACTED]%,
unless the debtor is not responsible for the delay in payment.
ARTICLE XII - CLAIMS
Claims covered under this Agreement include only death claims, which are those
due to the death of the insured on a policy reinsured and any additional
benefits which are defined in accordance with the underlying policy and are
reinsured under this Agreement.
1. NOTICE
The Ceding Company will promptly notify the Reinsurer of all claims.
2. PROOFS
In every case of loss, copies of the proofs obtained by the Ceding Company
will be taken by the Reinsurer as sufficient. Copies thereof, together with
proof of the amount paid on such claim by the Ceding Company will be
furnished to the Reinsurer when requesting its share of the claim.
3. PAYMENT OF BENEFITS
The Reinsurer will pay its share of all payable claims, however, if the
amount reinsured with the Reinsurer is more than the amount retained by the
Ceding Company and the claim is a contestable claim with a face amount of
[REDACTED] or more under this Agreement, the Ceding Company must submit all
papers in connection with such claim, including all underwriting and
investigation papers, to the Reinsurer for its recommendation before
admission of any liability on the part of the Ceding Company. The Reinsurer
reserves the right to request any additional documentation it deems
necessary, regardless of the dollar amount.
If the amount of insurance changes because of a misstatement of rate
classification, the Reinsurer's share of reinsurance liability will change
proportionately.
For claims under the Terminal Illness Benefit Rider, the reinsurance
benefit is the Reinsurer's proportionate share of the terminal illness
benefit payable (the death benefit less the Ceding Company's discount
percentage and subject to the Ceding Company's cap on dollar amount or
percentage of the total death benefit payable to the insured). Immediately
following payment of any terminal illness benefit claim, the net amount at
risk reinsured hereunder for the policy will be reduced proportionately
with the reduction in the face amount of the policy.
4. CONTESTED CLAIMS
The Ceding Company will notify the Reinsurer of its intention to contest,
compromise, or litigate a claim. Unless it declines to be a party to such
action, the Reinsurer will pay its share of any settlement up to the
maximum that would have been payable under the specific policy had there
been no controversy plus its share of claim investigation fees paid to a
third party, except as specified below.
If the Reinsurer declines to be a party to the contest, compromise, or
litigation of a claim, it will pay its full share of the amount reinsured,
as if there had been no contest, compromise, or litigation, and its
proportionate share of covered expenses incurred to the date, from the date
it notifies the Ceding Company it declines to be a party.
ARTICLE XII - CLAIMS (CONTINUED)
5. CLAIMS EXPENSES
In no event will the following categories of expenses or liabilities be
reimbursed:
a. Salaries of employees or other internal expenses of the Ceding Company
or the original issuing companies;
b. Expenses incurred in connection with a dispute or contest arising out
of conflicting or any other claims of entitlement to policy proceeds
or benefits.
6. EXTRA CONTRACTUAL OBLIGATIONS
In no event shall the Reinsurer be liable for any proportion of the Ceding
Company's liability consisting in any part of damages, including those
exemplary or punitive in nature, nor for fines or statutory penalties
awarded against the Ceding Company, policyholder, and/or any agents thereof
as a result of any act, omission, or course of conduct committed by or for
the Ceding Company, the policyholder and/or any agents thereof or for which
the Ceding Company, the policyholder and/or any agents thereof shall
otherwise be responsible, in connection with the handling of or pertaining
to the policies.
The Reinsurer shall likewise not be liable for any legal fees or expenses
attendant to the defense of claims of the kind referred to in the paragraph
above.
As an exception to this exclusion, the Reinsurer shall indemnify the Ceding
Company for its proportionate share of any such Extra Contractual
Obligations and/or associated legal fees or expenses attendant to the
defense thereof to the extent that the Reinsurer concurred, both in advance
and in writing, with the Ceding Company's act, omission, or course of
conduct in connection with the handling of or pertaining to the policies
that resulted in the incurral of such Extra Contractual Obligations.
Notwithstanding the limited exception set forth in the paragraph above,
this Agreement shall not provide any indemnity with respect to any Extra
Contractual Obligation incurred by the Ceding Company as a result of any
fraudulent and/or criminal act or omission by any officer, director or
employee of the Ceding Company who is acting individually, or collectively,
or in collusion with any individual or corporation, or any other
organization, or party which is involved in the presentation, or defense,
or settlement of any claim covered hereunder.
ARTICLE XIII - ARBITRATION
1. GENERAL
The parties agree to act in all things with the highest good faith.
However, if the parties cannot mutually resolve a dispute or claim, which
arises out of, or in connection with this Agreement, including formation
and validity, and whether arising during, or after the period of this
Agreement, the dispute or claim will be referred to an arbitration tribunal
(a group of three arbitrators), and settled through arbitration.
The arbitrators will be individuals, other than from the contracting
companies, including those who have retired, with more than ten (10) years
insurance or reinsurance experience within the industry.
The arbitrators will base their decision on the terms and conditions of
this Agreement plus, as necessary, on the customs and practices of the
insurance and reinsurance industry rather than solely on a strict
interpretation of the applicable law; there will be no appeal from their
decision, and any court having jurisdiction of the subject matter, and the
parties, may reduce that decision to judgment.
2. NOTICE
To initiate arbitration, either party will notify the other party by
certified mail of its desire to arbitrate, stating the nature of the
dispute and the remedy sought. The party to which the notice is sent, will
respond to the notification in writing, within ten (10) days of its
receipt.
ARTICLE XIII - ARBITRATION (CONTINUED)
3. PROCEDURE
Each of the two parties will appoint one arbitrator, and these two
arbitrators will select the third arbitrator. Upon the selection of the
third arbitrator, the arbitration tribunal will be constituted, and the
third arbitrator will act as chairman of the tribunal.
If either party fails to appoint an arbitrator within sixty (60) days after
the other party has given notice of appointing an arbitrator, then the
arbitration association, as shown in Schedule I, will appoint an arbitrator
for the party that has failed to do so.
The party that has failed to appoint an arbitrator will be responsible for
all expenses levied by the arbitration association, for such appointment.
Should the two arbitrators be unable to agree on the choice of the third
arbitrator, then the appointment of this arbitrator is left to the
arbitration association. Such expense shall be borne equally by each party
to this Agreement.
The tribunal, may in its sole discretion make orders and directions as it
considers to be necessary for the final determination of the matters in
dispute. Such orders and directions may be necessary with regard to
pleadings, discovery, inspection of documents, examination of witnesses and
any other matters relating to the conduct of the arbitration. The tribunal,
will have the widest discretion permissible under the law, and practice of
the place of arbitration, when making such orders or directions.
4. ARBITRATION COSTS
All costs of the arbitration will be determined by the tribunal, which may
take into account the law and practice of the place of arbitration, and in
what manner arbitration costs will be paid, and by whom.
5. PLACE OF ARBITRATION
The place of arbitration is as shown in Schedule I.
6. ARBITRATION SETTLEMENT
The award of the tribunal, will be in writing, and binding upon the
consenting parties.
ARTICLE XIV - INSOLVENCY
In the event of the insolvency of the Ceding Company, this reinsurance shall be
payable directly to the Ceding Company, or to its liquidator, receiver,
conservator or statutory successor on the basis of the liability of 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. It is agreed,
however, that the liquidator, receiver, conservator or statutory successor of
the Ceding Company shall give written notice to the reinsurers of the pendency
of a claim against the Ceding Company indicating the policy or bond reinsurance
which claim would involve a possible liability on the part of the reinsurers
within a reasonable time after that claim is filed in the conservation or
liquidation proceeding or in the receivership, and that during the pendency of
that claim the reinsurers may investigate that claim and interpose, at their own
expense, in the proceeding where that claim is to be adjudicated any defense(s)
they may deem available to the Ceding Company or its liquidator, receiver,
conservator or statutory successor. This expense incurred by the reinsurers
shall be chargeable, subject to approval of the court, against the Ceding
Company as part of the expense of conservation or liquidation to the extent of a
pro rata share of the benefit which may accrue to the Ceding Company solely as a
result of the defense undertaken by the reinsurers.
1. Where two or more reinsurers are involved in the same claim and a majority
in interest elect to interpose defense to that claim, the expense will be
apportioned in accordance with the terms of the Agreement as though that
expense had been incurred by the Ceding Company.
ARTICLE XIV - INSOLVENCY (CONTINUED)
2. This insolvency clause shall not preclude the Reinsurer from asserting any
excuse or defense to payment of this reinsurance other than the excuses or
defenses of the insolvency of the Ceding Company and the failure of the
Ceding Company's liquidator, receiver, conservator or statutory successor
to pay all or a portion of any claim.
ARTICLE XV - OFFSET
All amounts due or otherwise accrued to any of the parties hereto whether by
reason of premiums, losses, expenses, or otherwise, under this Agreement will at
all times be fully subject to the right of offset and only the net balance will
be due and payable. To the extent permitted by applicable law, the right of
offset will not be affected or diminished because of the insolvency of either
party.
ARTICLE XVI - RIGHT TO INSPECT
Upon request the Ceding Company will furnish the Reinsurer with detailed
information concerning the risks reinsured under this Agreement. In particular
the Reinsurer will be entitled to request that:
1. Copies of the whole or part of any documents relating to the risks and
their reinsurance be made available to the Reinsurer at its own expense;
2. During the Ceding Company's normal office hours these documents will be
made available to a representative of the Reinsurer who will be named in
advance; notification of such visits will normally be given two (2) weeks
in advance and even in urgent cases at least forty-eight (48) hours in
advance; and
3. The Reinsurer will have this right of inspection as long as one of the two
parties to this Agreement is claiming from the other.
ARTICLE XVII- 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 XVIII - CHOICE OF LAW AND FORUM
This Agreement, will in all respects be governed by, and construed in accordance
with the law and exclusive jurisdiction of the courts, as shown in Schedule I.
ARTICLE XIX - CONFIDENTIALITY AND SECURITY OF INFORMATION
The Reinsurer and the Ceding Company recognize that the business of reinsurance
requires the transmission, use, and storage of "non-public personal information"
(as the term is defined in the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and applicable regulations
promulgated thereunder) (herein the "Information") about proposed, current, and
former owners, insureds, applicants, and beneficiaries (collectively,
"Customers"), and both parties are committed to conduct business in a manner
that provides the required security for the Information.
In consideration of the promises contained in this Agreement and the business
between the Reinsurer and the Ceding Company, the parties agree as follows:
1. The Reinsurer acknowledges that it has and/or will receive Information
about Customers from the Ceding Company. The Reinsurer agrees that it may
use the Information only for the purposes set forth in the reinsurance
agreements by and between the parties. The Reinsurer and the Ceding Company
agree to transmit Information only through reasonably secure transmission
devices including, when appropriate, encrypted electronic transmission.
2. The Reinsurer agrees to treat Information as confidential and to maintain
its confidentiality by, among other things, maintaining a reasonably secure
system for handling the Information and exercising no less than that degree
of care the Reinsurer exercises with respect to its own information of a
similar nature that it does not wish to be disclosed to a third party. In
that regard, and without limitation, the Reinsurer agrees to employ the
following practices:
a) The Reinsurer will advise employees who receive Information of the
obligation of confidentiality under this Agreement (the Ceding Company
agrees that communication by the Reinsurer to its employees of a
general policy regarding confidentiality of customer information,
including information about customers of ceding companies, is
sufficient to satisfy this clause.); and
b) Except as required by law, the Reinsurer will not disclose Information
to third parties without the consent of the Ceding Company; however,
the Ceding Company agrees that the Reinsurer may, in the normal course
of its business, share Information with other insurance and
reinsurance companies ("Retrocessionaires") to the extent necessary to
retrocede risk to the Retrocessionaires, so long as the
Retrocessionaires have agreed to maintain the confidentiality of the
Information on terms substantially similar to this Agreement.
3. In the event the Reinsurer is required by court order or other legislative,
judicial, or administrative process to disclose Information, the Reinsurer
agrees to provide the Ceding Company with prompt notice of the order or
process so the Ceding Company has an opportunity to obtain a protective
order or other relief.
4. The terms of this article shall survive in the event that the Ceding
Company or its successors, and the Reinsurer, or its successors, cease
their business relationship.
ARTICLE XX - SEVERABILITY
If any provision of this Agreement shall be rendered illegal or unenforceable by
the laws, regulations or public policy of any state, such provision shall be
considered void in such state, but this shall not affect the validity or
enforceability of any other provision of this Agreement or the enforceability of
such provision in any other jurisdiction.
ARTICLE XXI - REINSURANCE CREDIT
It is the intention of both the Reinsurer and the Ceding Company that the Ceding
Company qualifies for reinsurance credit in the state of Michigan for
reinsurance ceded hereunder. Without limiting the generality of the immediately
preceding sentence, the Reinsurer shall, in conformity with all applicable laws
and regulations governing the Reinsurer, take any and all commercially
reasonable steps within its control so that the Ceding Company may take full
credit in its Standard Accounting Practices financial statements for the
business ceded under this Agreement.
ARTICLE XXII - ALTERATIONS TO THE AGREEMENT
This 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 alterations to the provisions of this Agreement will be made by amendment,
addenda or by correspondence attached to the Agreement embodying such
alterations as may be agreed upon and signed by both parties. These documents
will be regarded as part of this Agreement and will be equally binding.
ARTICLE XXIII - EXECUTION OF THE AGREEMENT
IN WITNESS OF THE ABOVE,
▇▇▇▇▇▇▇ NATIONAL LIFE INSURANCE COMPANY
OF
LANSING, MICHIGAN, USA
AND
RGA REINSURANCE COMPANY
OF
ST. LOUIS, MISSOURI, USA
HAVE BY THEIR RESPECTIVE OFFICERS EXECUTED AND DELIVERED THIS AGREEMENT IN
DUPLICATE ON THE DATES INDICATED BELOW:
▇▇▇▇▇▇▇ NATIONAL LIFE INSURANCE COMPANY
BY: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇ BY: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------- -----------------
TITLE: SVP & Chief Actuary TITLE: AVP & Associate Gen Counsel
------------------- ---------------------------
DATE: 3/18/05 DATE: 3/18/05
------- -------
RGA REINSURANCE COMPANY
BY: /s/ ▇▇▇▇▇▇ ▇▇▇▇
----------------
TITLE: VICE PRESIDENT
DATE: 3-14-05
-------
SCHEDULE I - REINSURANCE SPECIFICATIONS
--------------------------------------------------------------------------------
COMMENCEMENT, TERMINATION AND CONTINUANCE OF REINSURANCE, ARTICLE II:
--------------------------------------------------------------------------------
1. EFFECTIVE DATE: This Agreement applies to policies with applications
received by the Ceding Company on and after January 10, 2005.
2. POLICY TERMINATION: REFUNDS: The Reinsurer will refund any unearned
reinsurance premiums. However, policy fees, if any, will be deemed earned
for a policy year if the policy is reinsured during any portion of that
policy year.
--------------------------------------------------------------------------------
SCOPE, ARTICLE III:
--------------------------------------------------------------------------------
1. CURRENCY: United States Dollars ("US$")
2. BASIS OF REINSURANCE: Yearly Renewable Term
3. TAXES:
DAC TAX REGULATIONS
The Ceding Company and the Reinsurer hereby agree to the following pursuant
to Section 1.848-2(g)(8) of the Income Tax Regulations issued December 29,
1992, under Section 848 of the Internal Revenue Code of 1986, as amended.
1. The term "party" will refer to either the Ceding Company or the
Reinsurer as appropriate.
2. The terms used in this Article are defined by reference to Treasury
Regulation Section 1.848-2 in effect as of December 29, 1992. The term
"net consideration" will refer to net consideration as defined in
Treasury Regulation Section 1.848-2(f).
3. 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 IRS Section 848(c)(1).
4. The Ceding Company and the Reinsurer agree to exchange information
pertaining to the amount of net consideration under this Agreement
each year to ensure consistency. The Ceding Company and the Reinsurer
also agree to exchange information which may be otherwise required by
the IRS.
5. The Ceding Company will submit a schedule to the Reinsurer by June 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 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.
6. The Reinsurer may contest such calculation by providing an alternative
calculation to the Ceding Company. 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.
7. 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. If the Ceding Company and the
Reinsurer reach agreement on an amount of net consideration, each
party will report such amount in their respective tax returns for the
previous calendar year.
SCHEDULE I - REINSURANCE SPECIFICATIONS (CONTINUED)
--------------------------------------------------------------------------------
SCOPE, ARTICLE III (CONTINUED):
--------------------------------------------------------------------------------
3. TAXES (CONTINUED):
PREMIUM TAX: Premium tax will not be reimbursed.
--------------------------------------------------------------------------------
COVERAGE, ARTICLE IV:
--------------------------------------------------------------------------------
RESIDENCE: United States, Canada, Puerto Rico, or Guam
--------------------------------------------------------------------------------
RETENTION AND RECAPTURE, ARTICLE VI:
--------------------------------------------------------------------------------
MINIMUM RECAPTURE PERIOD: Available after twenty (20) years provided
the corporate maximum dollar amount retention was held at issue.
Recapture is not available due to any change in the financial
condition of the Reinsurer.
--------------------------------------------------------------------------------
RESERVES, ARTICLE VIII:
--------------------------------------------------------------------------------
The Ceding Company agrees to post on its books any deficiency reserves
on the coverage reinsured under this Agreement.
--------------------------------------------------------------------------------
POLICY ADMINISTRATION AND PREMIUM ACCOUNTING, ARTICLE XI:
--------------------------------------------------------------------------------
1. ACCOUNTING PERIOD: Monthly
PREMIUM DUE: Annually in advance
2. REINSURANCE ADMINISTRATION: Self administration (Client
administers)
3. BALANCES IN DEFAULT:
The Reinsurer reserves the right to charge interest at the prime
rate plus [REDACTED]% as stated in the Wall Street Journal on the
1st business day in January prior to the due date of the premium
when:
a. Renewal premiums are not paid within sixty (60) days of the
due date.
b. Premiums for new business are not paid within one hundred
twenty (120) days of the date the policy is issued.
SCHEDULE I - REINSURANCE SPECIFICATIONS (CONTINUED)
--------------------------------------------------------------------------------
ARBITRATION, ARTICLE XIII:
--------------------------------------------------------------------------------
1. ARBITRATION ASSOCIATION: American Arbitration Association
2. PLACE OF ARBITRATION: St. Louis, Missouri, USA
--------------------------------------------------------------------------------
CHOICE OF LAW AND FORUM, ARTICLE XVIII:
--------------------------------------------------------------------------------
1. CHOICE OF LAW AND FORUM: Missouri, USA
SCHEDULE II - RETENTION
Domestic and Canadian Business
The Ceding Company will retain up to the maximum limits stated below:
Issue Ages Standard - Table 2 Table 3 - 8 Table 9 - Up
0 - 65 [REDACTED] [REDACTED] [REDACTED]
66 - 75 [REDACTED] [REDACTED] [REDACTED]
76 - 85 [REDACTED] [REDACTED] [REDACTED]
SCHEDULE III - BUSINESS COVERED
EFFECTIVE JANUARY 10, 2005
--------------------------------------------------------------------------------
PLAN(S)
--------------------------------------------------------------------------------
Ultimate Investor
Advisor Variable Universal Life
--------------------------------------------------------------------------------
RIDER(S)
--------------------------------------------------------------------------------
Extended Maturity Option
Other Insured Rider
Terminal Illness Rider
SCHEDULE IV - REINSURANCE PREMIUMS
EFFECTIVE JANUARY 10, 2005
--------------------------------------------------------------------------------
LIFE:
--------------------------------------------------------------------------------
Business covered, as shown in Schedule III will be reinsured on the
Yearly Renewable Term basis with the Reinsurer participating only in
mortality risks (not cash values, loans, dividends or other features
specific to permanent policies). The mortality risk shall be the net
amount at risk on that portion of the policy which is reinsured with
the Reinsurer.
The life reinsurance premium rates contained in this Agreement are
guaranteed for one (1) year, and the Reinsurer anticipates continuing
to accept premiums on the basis of these rates indefinitely. If the
Reinsurer deems it necessary to increase rates, such increased rates
cannot be higher than the valuation net premiums for annually
renewable term insurance calculated using the minimum statutory
mortality rates and maximum statutory interest rate for each year of
issue.
Reinsurance premiums will be determined according to the amount
reinsured with the Reinsurer per insured life as follows. The life
reinsurance premium will be calculated in the case of life risks, by
multiplying the appropriate monthly life premium rate, from the
attached Rate Schedule labeled below, for the age of the insured, at
the beginning of the policy year, by the amount at risk reinsured for
that policy year multiplied by twelve (12) and then, multiplied by the
applicable pay percentage as shown below. The same procedure will
apply for single premium policies and for paid up policies.
RATE SCHEDULE
PLAN(S) UNDERWRITING CLASS YEAR 1 YEARS 2+
Ultimate Investor and S-1 Preferred Plus Non-Tobacco [REDACTED] [REDACTED]
Advisor Variable Universal Life Preferred Non-Tobacco [REDACTED] [REDACTED]
(Issue Ages 0 - 70) Standard Non-Tobacco [REDACTED] [REDACTED]
Preferred Tobacco [REDACTED] [REDACTED]
Standard Tobacco [REDACTED] [REDACTED]
(Issue Ages 71-90) S-1 Non-Tobacco [REDACTED] [REDACTED]
Tobacco [REDACTED] [REDACTED]
Reinsurance premiums will be on an age nearest birthday basis.
All policy fees will be retained by the Ceding Company.
--------------------------------------------------------------------------------
SUBSTANDARD PREMIUMS:
--------------------------------------------------------------------------------
SUBSTANDARD TABLE EXTRA
Premiums will be increased by any substandard premium charged the
insured on the net amount at risk reinsured. For substandard table
ratings, premiums will be increased by the following percent per
table:
[REDACTED]%
SCHEDULE IV - REINSURANCE PREMIUMS (CONTINUED)
--------------------------------------------------------------------------------
SUBSTANDARD PREMIUMS (CONTINUED):
--------------------------------------------------------------------------------
FLAT EXTRA PREMIUMS
The premium will be increased by any Flat Extra Premium charged the
insured on the face amount initially reinsured. The Reinsurer shall
pay expense allowances to the Ceding Company equal to a percentage, as
shown below, of the reinsurance premium for Flat Extra Premiums.
ALLOWANCE
PERCENTAGE
FIRST YEAR PERMANENT PAYABLE 6 FIRST YEAR TEMPORARY PAYABLE
YEARS OR MORE: 1 - 5 YEARS: RENEWAL:
[REDACTED]% [REDACTED]% [REDACTED]%
--------------------------------------------------------------------------------
SUPPLEMENTAL BENEFITS:
--------------------------------------------------------------------------------
RIDER(S)
The reinsurance premium to be paid to the Reinsurer for reinsurance of
the following rider(s) will be based on the appropriate monthly rate
as shown below, multiplied by twelve (12), and then multiplied by the
following pay percentages.
PAY PERCENTAGE
RATE SCHEDULE
RIDER UNDERWRITING CLASS YEAR 1 YEARS 2+
Other Insured Rider S-2 Preferred Plus Non-Tobacco [REDACTED] [REDACTED]
(Issue Ages 0 - 70) Preferred Non-Tobacco [REDACTED] [REDACTED]
Standard Non-Tobacco [REDACTED] [REDACTED]
Preferred Tobacco [REDACTED] [REDACTED]
Standard Tobacco [REDACTED] [REDACTED]
(Issue Ages 71-90) S-2 Non-Tobacco [REDACTED] [REDACTED]
Tobacco [REDACTED] [REDACTED]
EXTENDED MATURITY OPTION:
The Reinsurer will participate in the Extended Maturity Option and
there will be no separate charge for this benefit.
TERMINAL ILLNESS BENEFIT RIDER:
There are no premiums for this benefit. Please see Schedule IX for
further details on this benefit.
SCHEDULE IV - REINSURANCE PREMIUMS (CONTINUED)
--------------------------------------------------------------------------------
RE-ENTRY'S:
--------------------------------------------------------------------------------
Re-entry's are not covered under this Agreement.
--------------------------------------------------------------------------------
CONVERSIONS OR EXCHANGES:
--------------------------------------------------------------------------------
Conversions or exchanges are not covered under this Agreement.
--------------------------------------------------------------------------------
EXPERIENCE REFUND OR PROFIT COMMISSION:
--------------------------------------------------------------------------------
Experience Refund or Profit Commissions are not covered under this
Agreement.
SCHEDULE IV - REINSURANCE PREMIUMS (CONTINUED)
--------------------------------------------------------------------------------
RATE SCHEDULE S-1
--------------------------------------------------------------------------------
SCHEDULE IV - REINSURANCE PREMIUMS (CONTINUED)
--------------------------------------------------------------------------------
RATE SCHEDULE S-2
--------------------------------------------------------------------------------
SCHEDULE V - LIMITS
--------------------------------------------------------------------------------
REINSURER'S SHARE:
--------------------------------------------------------------------------------
The Reinsurer's share will be [REDACTED]% of the excess over the Ceding
Company's retention specified in Schedule II.
--------------------------------------------------------------------------------
ISSUE AGE LIMITS:
--------------------------------------------------------------------------------
0 - 85*
*Issue ages over 85 must be submitted on a facultative basis.
--------------------------------------------------------------------------------
MINIMUM REINSURANCE AMOUNT:
--------------------------------------------------------------------------------
[REDACTED]
--------------------------------------------------------------------------------
POOL BINDING LIMITS (excluding the Ceding Company's retention):
--------------------------------------------------------------------------------
DOMESTIC AND CANADIAN BUSINESS
MAXIMUM AUTOMATIC POOL BINDING LIMIT:
Issue Ages Standard - Table 2 Table 3 - 8 Table 9 - Up
0 - 65 [REDACTED] [REDACTED] [REDACTED]
66 - 75 [REDACTED] [REDACTED] [REDACTED]
76 - 85 [REDACTED] [REDACTED] [REDACTED]
--------------------------------------------------------------------------------
JUMBO LIMIT:
--------------------------------------------------------------------------------
[REDACTED]
SCHEDULE VI - SAMPLE STATEMENT SPECIFICATIONS
The following information should appear on each statement and inforce listing:
o Name of the insured(s)
o Date of birth of the insured(s)
o The issue age of each insured(s)
o The sex of the insured(s)
o The insured(s) country of residence
o Underwriting classification (i.e. preferred, standard, etc.)
o Smoking class (i.e. smoker, nonsmoker, etc.)
o Indication if business is Facultative or Automatic
o Indication if business is Risk Premium or Coinsurance
o Policy number(s)
o Plan code(s) / kind code(s): cession series
o Original face amount of the policy(s)
o Amount(s) ceded to the Reinsurer
o Amount of premium being paid; separated for supplementary benefits.
o The amount of any reinsurance premium allowances
o Any extra premiums concerned. Example: $5 / 1000 / 5 YRS
o Effective date and duration of any policy(s) change, reissue, or
termination
SCHEDULE VII - SAMPLE POLICY EXHIBIT
POLICY SUMMARY NUMBER OF POLICIES REINSURANCE
CLASSIFICATION AMOUNT
Inforce as of last report [REDACTED] [REDACTED]
New issues [REDACTED] [REDACTED]
Reinstatements [REDACTED] [REDACTED]
Increases [REDACTED]
Decreases - still inforce [REDACTED]
Rollover - in [REDACTED] [REDACTED]
Deduct By:
Death [REDACTED] [REDACTED]
Surrender [REDACTED] [REDACTED]
Lapse [REDACTED] [REDACTED]
Conversion - out [REDACTED] [REDACTED]
Decreases - termination [REDACTED] [REDACTED]
Inactive - pending [REDACTED] [REDACTED]
Not taken [REDACTED] [REDACTED]
Inforce as of current report [REDACTED] [REDACTED]
SCHEDULE VIII - DEFINITIONS
ASSUME - To accept or take over a risk, the converse of cede.
AUTOMATIC REINSURANCE - A reinsurance agreement under which the Reinsurer is
obligated to accept or assume risks that meet certain specific criteria based on
the Ceding Company's underwriting.
BINDING LIMIT - The amount of risk over the Ceding Company's retention, which
can be ceded automatically if all automatic conditions are met.
CASH VALUE - The amount of money that the policy owner will receive as a refund
if the policy owner cancels the coverage and returns the policy to the company.
CEDE - To transfer an insurance risk from the company originally issuing the
policy to another insurance company known as the Reinsurer.
CEDING COMPANY - A ceding insurer is an insurer that underwrites and issues an
original, principal policy to an insured and contractually transfers (cedes) a
portion of the risk to the Reinsurer. A ceding Reinsurer is a Reinsurer which
transfers (cedes) a portion of the underlying reinsurance to a retrocessionaire.
CONDITIONAL RECEIPT - A provision included in some life insurance policies
providing coverage from the date of the application to the date at which the
policy is either issued or declined.
EXCESS REINSURANCE - A form of reinsurance under which recoveries are available
when a given loss exceeds the Ceding Company's retention (excess of loss
reinsurance) defined in this Agreement.
EXPERIENCE REFUND OR PROFIT COMMISSION - A provision found in some reinsurance
agreements which provides for profit sharing. Parties agree to a formula for
calculating profit, an allowance for the Reinsurer's expenses, and the Ceding
Company's share of such profit after expenses.
EXTRA CONTRACTUAL OBLIGATIONS (ECO) - A generic term that, when used in a
reinsurance agreement, refers to damages awarded by a court against an insurer
which are outside the provisions of the insurance policy, due to the insurer's
bad faith, fraud or gross negligence in the handling of a claim.
FACULTATIVE - Reinsurance under which the Ceding Company has the option
(faculty) of submitting and the Reinsurer has the option of accepting or
declining individual risks. This Agreement merely reflects how individual
facultative reinsurance will be handled.
FLAT EXTRA PREMIUM - A method for rating substandard risks used when the extra
risk is considered to be constant. The underwriter assesses a specific extra
premium for each [REDACTED] of insurance. Flat extra ratings usually apply to
applicants in hazardous occupations or avocations, aviation, or with certain
physical impairments of a temporary nature.
INDEXING - The adjustment of the Ceding Company's retention and the reinsurance
limit by a measure of inflation such as the consumer price index.
JUMBO LIMIT - The limit placed on an amount of coverage that may be inforce, or
applied for in all companies, on an individual life for automatic reinsurance
purposes. If such insurance exceeds the limit, the Ceding Company must submit
the risk to the Reinsurer for facultative review.
MINIMUM REINSURANCE AMOUNT - The smallest cession that the Reinsurer will accept
automatically. The minimum size is set to avoid the expenses associated with
small cessions.
ORIGINAL POLICY(S) - Insurance contracts between the original company and the
insured(s).
SCHEDULE VIII - DEFINITIONS (CONTINUED)
POLICY RESERVE - A liability account that identifies the amount of assets that,
together with the future premiums to be received from inforce policies, is
expected to be sufficient to pay future claims on those inforce policies. Also
called a legal reserve or a statutory reserve.
POOL - A method of allocating reinsurance among several reinsurers. Using this
method, each reinsurer receives a specified percentage of each risk ceded into
the pool. A reinsurance pool is a multi-reinsurer agreement under which each
reinsurer in the group or pool assumes a specified portion of each risk ceded to
the pool.
PREMIUM - (Written/Unearned/Earned) - Written premium is premium registered on
the books of an insurer or Reinsurer at the time a policy is issued and paid.
Premium for a future exposure period is said to be unearned premium. For an
individual policy, written premium minus unearned premium equals earned premium.
Earned premium is income for the accounting period while unearned premium will
be income in a future accounting period.
PUNITIVE DAMAGES - A term that, when used in reinsurance agreements, refers to
damages awarded by a court against an insured or against an insurer in addition
to compensatory damages. Punitive damages are intended to punish the insured or
the insurer for willful and careless misconduct and to serve as a deterrent.
When the award is against an insurer, it is usually related to the conduct of
the insurer in the handling of a claim.
RATE - The premium rate is the amount of premium charged per exposure unit, e.g.
per [REDACTED].
RECAPTURE - The process by which the Ceding Company recovers the liabilities
transferred to the Reinsurer.
REINSURER - A company which contractually assumes all or part of the Ceding
Company's risk.
RETENTION - The dollar amount or percentage of each loss retained by the Ceding
Company under this reinsurance agreement. The Ceding Company's retention is not
reinsured in any way.
RISK - Insurance on an individual life.
RISK PREMIUM REINSURANCE - Another name for Yearly Renewable Term (YRT)
reinsurance. A form of reinsurance under which the risks, but not the permanent
plan reserves, are transferred to the Reinsurer for a premium that varies each
year with the amount at risk and the ages of the insureds. Under the YRT method,
the Ceding Company will transfer to the Reinsurer the mortality risk on either a
net amount at risk basis or on an approximation of the net amount at risk basis.
SELF-ADMINISTRATION - A reinsurance arrangement where the Ceding Company
provides the Reinsurer with periodic reports for reinsurance ceded giving
premium, inforce, reserve, and any other information required by the Reinsurer
for its financial reports. Self-administration is also known as bulk or
bordereaux.
STANDARD GUIDELINES - The underwriting guidelines intended to be applied to all
applications for insurances of the type(s) reinsured under this Agreement.
SUBSTANDARD RISKS - Those insureds that, under the terms of the Ceding Company's
Standard Guidelines, do not meet the criteria for issuance at standard premium
rates.
SUBSTANDARD TABLE EXTRA - Substandard table extra ratings usually apply to
physically impaired lives. The rates will be increased by a factor as shown in
Schedule IV for each table of additional mortality.
SUM AT RISK OR NET AMOUNT AT RISK - The excess of the death benefit of a policy
over the Statutory Reserve of a policy.
TERMINATION - The formal ending of a reinsurance agreement by its natural
expiry, cancellation or commutation by both parties. Terminations can be either
on a cutoff or runoff basis. Under cutoff provisions, the parties' obligations
are fixed as of the agreed cutoff date. Otherwise, obligations incurred while
the agreement was inforce are run off to their natural extinction.
YEARLY RENEWABLE TERM - Another name for Risk Premium Reinsurance.
SCHEDULE IX - TERMINAL ILLNESS BENEFIT RIDER
The Reinsurer will participate in the terminal illness benefit rider and there
will be no charge for this benefit.
If a policy owner diagnosed to be terminal within twelve (12) months requests a
benefit that is less than one hundred percent (100%) of the policy face amount,
the policy will continue to be reinsured for the full ceded face amount until
the insured's death, at which time a claim for the full ceded face amount will
be submitted to the reinsurers. If the benefit requested is one hundred percent
(100%) of the policy face amount, a claim will be made to the reinsurers for the
benefit paid and the amount recovered from the reinsurers will include a
discount similar to the discount under the rider.