AUTOMATIC BULK YRT NON-REFUND AGREEMENT
CEDING COMPANY: MONY Life Insurance Company
New York, New York
And
MONY Life Insurance Company of America
Phoenix, Arizona
Referred to as the "Ceding Company" in this Agreement.
REINSURER: Allianz Life Insurance Company of North America
Minneapolis, Minnesota
Referred to as "Allianz Life" in this Agreement.
ACCEPTED COVERAGES: Life Insurance (Single & Joint Life)
Waiver of Premium Rider
Waiver of Monthly Deductions Rider
Accidental Death and Dismemberment Benefit
EFFECTIVE DATE: November 16, 1998
1
IN WITNESS WHEREOF, Allianz Life and the Ceding Company have executed this
Agreement on the dates set forth below:
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
By: [ILLEGIBLE] Witness: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
----------------------------------- -------------------------------
Title: [ILLEGIBLE] Title: Vice President Corporate Legal
-------------------------------- ---------------------------------
Officer & Secretary
---------------------------------
Place: _______________________________ Date: 2/3/00
----------------------------------
MONY LIFE INSURANCE COMPANY
By: ▇▇▇▇▇▇ Peos Witness: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------- -------------------------------
Title: Vice President Title: Assistant Secretary
-------------------------------- ---------------------------------
Place: _______________________________ Date: 1/25/00
----------------------------------
MONY LIFE INSURANCE COMPANY OF AMERICA
By: ▇▇▇▇▇▇ Peos Witness: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------- -------------------------------
Title: Vice President Title: Secretary
-------------------------------- ---------------------------------
Place: _______________________________ Date: 1/25/00
----------------------------------
Table of Contents
-----------------
ARTICLE I - BASIS OF REINSURANCE ......................................... 3
ARTICLE II - TYPE OF REINSURANCE ......................................... 3
ARTICLE III - AUTOMATIC AND FACULTATIVE SUBMISSIONS ...................... 3
ARTICLE IV - COMMENCEMENT AND TERMINATION OF LIABILITY ................... 4
ARTICLE V - REINSURANCE PREMIUM RATES .................................... 5
ARTICLE VI - AMOUNT AT RISK .............................................. 6
ARTICLE VII - PAYMENT OF REINSURANCE PREMIUMS ............................ 7
ARTICLE VIII - PREMIUM TAXES ............................................. 7
ARTICLE IX - CLAIMS ...................................................... 8
ARTICLE X - EXTRA-CONTRACTUAL DAMAGES .................................... 10
ARTICLE XI - POLICY CHANGES .............................................. 10
ARTICLE XII - RECAPTURE AND RETENTION CHANGES ............................ 11
ARTICLE XIII - INSPECTION OF RECORDS ..................................... 12
ARTICLE XIV - ERRORS ..................................................... 12
ARTICLE XV - ARBITRATION ................................................. 12
ARTICLE XVI - INSOLVENCY ................................................. 14
ARTICLE XVII - ENTIRE CONTRACT PROVISION ................................. 14
ARTICLE XVIII - SEVERABILITY ............................................. 15
ARTICLE XIX - NON-PARTICIPATING AND NON-REFUND ........................... 15
ARTICLE XX - HEADINGS .................................................... 15
ARTICLE XXI - PARTIES TO AGREEMENTS ...................................... 15
ARTICLE XXII - DURATION OF AGREEMENT ..................................... 15
ARTICLE XXIII - DAC TAX .................................................. 15
SCHEDULE A - RETENTION LIMITS ............................................ 17
SCHEDULE B - SAMPLE REINSURANCE APPLICATION .............................. 20
SCHEDULE C - ACCEPTED PLANS OF INSURANCE AND RATES ....................... 21
SCHEDULE D - POLICY LIMITS ............................................... 24
SCHEDULE E - SAMPLE BULK REPORTS ......................................... 27
2
ARTICLE I - BASIS OF REINSURANCE
Commencing on the Effective Date, the Ceding Company may submit any of its
individual life insurance risks, underwritten with the Ceding Company's then
existing individual risk underwriting rules and written procedures, under the
Accepted Plans of Insurance as listed in Schedule C, on an automatic basis,
subject to the provisions of this Agreement. These provisions may be changed or
modified by written agreement between the parties named in Article XX.
The Ceding Company may at any time submit insurance risks under the Accepted
Plans of Insurance as listed in Schedule C on a facultative basis subject to the
provisions of this Agreement.
ARTICLE II - TYPE OF REINSURANCE
The individual life reinsurance covered by this Agreement shall be upon the
yearly renewable term plan for the net amount at risk, or on another basis, as
set forth in Article VI.
ARTICLE III - AUTOMATIC AND FACULTATIVE SUBMISSIONS
Automatic Submissions: Allianz Life will automatically accept individual life
reinsurance on a risk subject to the following conditions:
1. The Ceding Company has kept amounts equal to the Retention Limits as shown in
Schedule A and has classified the risk in a mortality class according to its
normal underwriting rules.
2. The amounts to be reinsured do not exceed the Automatic Acceptance Limits
shown in Schedule D of this Agreement.
3. The face amount of individual life insurance applied for on the life in all
companies, including the Ceding Company, when added to the face amount of
life insurance in force on the life in all companies, including the Ceding
Company, shall not exceed the Jumbo Limit as set forth in Schedule D of this
Agreement.
4 The insured must be a permanent resident of the United States or Canada.
5. The insured's issue age must be between those found in Schedule D of this
Agreement.
6. The Ceding Company shall not have submitted an application for facultative
reinsurance on the life to any company within three (3) years of the
automatic risk offered under this Agreement.
7. The mortality rating for each risk shall not be in excess of that found in
Schedule D of this Agreement.
Facultative Submissions: In applying to Allianz Life for facultative individual
life reinsurance, the Ceding Company shall use a form in substantial accord with
Schedule B of this Agreement. The Ceding Company shall submit copies of the
original application, medical examiners' reports, inspection reports, attending
physicians' statements plus any other papers or information that may have a
bearing on the insurability of the risk. Upon receipt of such application,
Allianz Life shall examine the papers and promptly notify the Ceding Company of
its decision. Allianz Life shall have the option of accepting, rating or
rejecting each risk.
Automatic and Facultative Submissions: The Ceding Company shall furnish Allianz
Life with any specimen copies of its individual life insurance applications,
policy forms, rider forms,
3
Conditional Receipt, Temporary Insurance Receipt, reinstatement rules, placement
requirements, and any tables of rates and values which may be required for the
proper administration of the business reinsured under this Agreement. The Ceding
Company shall keep Allianz Life informed with respect to any modifications of
such rules, requirements or forms under which reinsurance may be desired. The
Ceding Company must follow its written procedures for the delivery of its
policies including evidence of good health and collection of premiums and be in
compliance with relevant laws of all applicable jurisdictions. Exceptions to
following the Ceding Company's written procedures can be granted only by written
approval from Allianz Life.
Allianz Life shall be notified of any changes in underwriting procedures or
practices of the Ceding Company.
ARTICLE IV - COMMENCEMENT AND TERMINATION OF LIABILITY
Automatic Business: The liability of Allianz Life on automatic individual life
reinsurance offers shall commence and terminate simultaneously with that of the
Ceding Company notwithstanding the other provisions of this agreement. The
reinsurance shall be subject to the same terms and conditions as the policy
issued by the Ceding Company on the life of the insured, excluding the
provisions governing dividends, cash values, policy loans, and settlement
options.
Whenever the Ceding Company becomes liable for a loss under the terms of a
Conditional Receipt or Temporary Insurance Receipt, Allianz Life shall be liable
to the Ceding Company for the amount over the Ceding Company's standard
retention as specified in Schedule A of this Agreement, but not in excess of the
automatic reinsurance limits listed in Schedule D, and only if the risk would
have qualified for automatic reinsurance hereunder.
In order for Allianz Life to be liable on any Conditional Receipt or Temporary
Insurance Receipt, in accordance with the preceding qualifications, the Ceding
Company must have submitted to Allianz Life a copy of the application and
receipt it intends to use with regard to the risks reinsured hereunder and must
adhere in practice to the terms of said receipt. The Ceding Company shall give
Allianz Life timely notice of proposed changes to its Conditional Receipt,
Temporary Insurance Receipt or in its practices in issuing Conditional Receipts
or Temporary Insurance Receipts.
Facultative Business: Except as hereinafter provided regarding Conditional
Receipt and Temporary Insurance Receipt coverage, the liability of Allianz Life
on facultative individual life reinsurance offers that are accepted and
acknowledged by the Ceding Company shall commence and terminate simultaneously
with that of the Ceding Company, notwithstanding the other provisions of this
Agreement.
Acceptance of Allianz Life's offer of reinsurance by the Ceding Company shall be
in accordance with the terms contained in that offer and the provisions of this
Agreement. If Allianz Life's offer is not accepted, such offer shall terminate
on the earlier of (1) the date the Ceding Company withdraws its application; or
(2) the termination date in Allianz Life's offer. The date of termination may be
extended by written request from the Ceding Company, unless Allianz Life has
denied in writing such request.
4
Allianz Life will not be liable for a claim incurred under the terms of a
Conditional Receipt or Temporary Insurance Receipt for a risk, which has been
submitted to Allianz Life on a facultative basis.
Bulk Reports: When the Ceding Company receives payment for a policy reinsured
with Allianz Life, the Ceding Company shall, within sixty (60) days of such
payment, include the cession on the bulk reporting form. Cessions shall only be
accepted up to twenty-four months following the effective date of the Ceding
Company's policy.
Conversions and Internal Replacements: For conversions and internal replacements
originally ceded under this Agreement and issued as new policies, the liability
of Allianz Life under the new policy shall begin immediately subsequent to the
termination of Allianz Life's liability under the original policy.
Amount: The amount of reinsurance under this Agreement, with respect to any
policy reinsured, shall be maintained in force without reduction, unless
reinsurance is terminated or reduced as otherwise provided in this Agreement.
ARTICLE V - REINSURANCE PREMIUM RATES
Standard and Substandard Premiums: Allianz Life anticipates that the yearly
renewable term rates attached to Schedule C of this Agreement will be continued
indefinitely for all individual life reinsurance cessions to which such rates
shall apply. However, if any one or more of such premium rates for any policy
year or years after the first shall be less than the net premium rate or rates
based on the 1980 CSO Table at 4 1/2% interest for the applicable mortality
rating, only the latter rate or rates shall be guaranteed by Allianz Life.
Flat Extra Premiums: Refer to Schedule C of this Agreement.
Waiver of Premium and Waiver of Monthly Deductions Riders: Refer to Schedule C
of this Agreement.
Accidental Death and Dismemberment Benefit: Refer to Schedule C of this
Agreement.
Term Renewals and Term Conversion Premiums: Refer to Schedule C of this
Agreement.
Interim Billing of Premiums for Additional Periods: If the original policy is
issued with insurance for an additional period, the reinsurance premium for such
an additional period shall be computed at the second policy year premium rate
and the premium for the first full policy year shall be computed at the first
year rate. A policy fee shall not be payable for additional term periods unless
the policy terminates in the first policy year.
5
ARTICLE VI - AMOUNT AT RISK
The individual life reinsurance of Allianz Life shall be upon the yearly
renewable term plan for the net amount at risk for which the Ceding Company has
paid premiums. If the Ceding Company retains a portion of the risk, such
retention shall be maintained unchanged except as allowed in Article XII of this
Agreement.
Reducing Term Plans: If the individual life insurance reinsured is issued as a
reducing term plan, Allianz Life's net amount at risk for the first policy year
shall equal the face amount of the life insurance reinsured as of the beginning
of the first policy year. After the first policy year, Allianz Life's net amount
at risk for each of the policy years two through ten, inclusive, shall be
reduced by one-ninth of the difference between (a) the face amount of the life
insurance reinsured as of the beginning of the first policy year, and (b) the
face amount of the life insurance reinsured as of the beginning of the tenth
policy year Allianz Life's net amount at risk for each of the ten policy years,
during any ten policy year period after the first ten policy years, shall be the
prior policy year's net amount at risk, less an amount equal to one-tenth of the
difference between (a) the face amount of the life insurance reinsured as of the
beginning of the policy year immediately preceding the period involved, and (b)
the face amount of the life insurance reinsured as of the beginning of the last
policy year of the period involved.
Universal/Variable Life Plans: Allianz Life's net amount at risk for
Universal/Variable Life plans shall be proportionate to the Ceding Company's
actual net amount at risk or a mutually acceptable approximation agreed to in
writing by all parties.
A Plan Other Than a Level Term Plan, Reducing Term Plan, or Universal/Variable
Life Plan: Allianz Life's net amount at risk for the first policy year shall
equal the face amount of the individual life insurance reinsured. After the
first policy year, Allianz Life's net amount at risk for each of the policy
years two through ten, inclusive, shall be reduced by an amount equal to
one-ninth of the cash value of the life insurance reinsured as of the end of the
tenth policy year.
Allianz Life's net amount at risk for each of the ten policy years, during any
ten policy year period after the first ten policy years, shall be the prior
year's net amount at risk less an amount equal to one-tenth of the difference
between (a) the cash value of the life insurance reinsured as of the end of the
policy year immediately preceding the period involved, and (b) the cash value of
the life insurance reinsured as of the end of the last policy year of the period
involved.
5
ARTICLE VII - PAYMENT OF REINSURANCE PREMIUMS
Reinsurance premiums are to be paid annually at Allianz Life's home office
without regard to the frequency of payment stipulated in the policy issued by
the Ceding Company.
At the end of each month, the Ceding Company shall send Allianz Life a statement
of all reinsurance premiums falling due during the month and premiums for any
new reinsurance. The statement shall include data substantially in accord with
that which is set forth in Schedule E of this Agreement.
If a statement shows that a net reinsurance premium balance is payable to
Allianz Life, the Ceding Company shall include with the statement its payment
for the amount of the net balance.
If a statement shows that a net balance is payable to the Ceding Company,
Allianz Life shall pay to the Ceding Company the amount of the net balance
within thirty (30) days after the day on which the Ceding Company submitted the
monthly statement to Allianz Life.
Payments: The payment of reinsurance premiums in accordance with the provisions
of this section shall be a condition precedent to the liability of Allianz Life
under reinsurance covered by this Agreement. The initial premiums shall be due
as of the date when such reinsurance becomes effective and shall be paid to
Allianz Life not later than sixty (60) days after such due date. Renewal
premiums are due on the respective annual anniversary dates of the policies
reinsured and shall be paid to Allianz Life not later than thirty (30) days
after the first day of the month following that in which such premiums fall due.
Allianz Life shall have the right to terminate the reinsurance for risks for
which reinsurance premiums are in default by giving the Ceding Company thirty
(30) days written notice. The Ceding Company will be liable for the payment of
reinsurance premiums to the effective date of termination. After the effective
date of termination, an interest charge of 1% per month will be made on the then
accumulated unpaid reinsurance premium.
Terminations: The Ceding Company will give Allianz Life timely notice of all
policy terminations and changes that affect the reinsurance covered under this
Agreement. Unearned reinsurance premiums will be refunded, except that policy
fees are not refundable on any mid-policy year termination.
ARTICLE VIII - PREMIUM TAXES
Allianz Life shall not reimburse the Ceding Company for any state premium taxes
the latter may be required to pay.
7
ARTICLE IX - CLAIMS
Notice of Claims: The Ceding Company will notify Allianz Life as soon as
reasonably possible after it receives notice of a claim on a policy reinsured
hereunder.
Proofs: Copies of proofs or other written documentation relating to any claim
reimbursable under this Agreement shall be furnished to Allianz Life. With
respect to the claim administration, negotiation, payment, denial, or settlement
of any claim or legal proceeding, the Ceding Company shall act with good faith
and in accordance with its standard practices applicable to all claims, whether
reinsured or not.
Receipt of Premium: Receipt by Allianz Life of the initial reinsurance premium
and of each subsequent reinsurance premium, in accordance with the provisions of
Article VII of this Agreement, shall be a condition precedent to Allianz Life's
indemnification of the reinsurance to the Ceding Company.
Incontestable Policies: If a claim is made to the Ceding Company on a policy
which is incontestable, Allianz Life shall accept the decision of the Ceding
Company in payment or settlement of that claim. Allianz Life shall indemnify the
Ceding Company for Allianz Life's percentage of reinsurance liability upon
receiving proof of loss and notice the Ceding Company has paid the claim.
Contestable Policies: If a claim is contestable and the Ceding Company has
retained more of the net amount at risk than it has ceded to Allianz Life,
Allianz Life shall abide the issue as it shall be settled by the Ceding Company
for Allianz Life's percentage of reinsurance liability upon receipt of proof of
loss and of payment by the Ceding Company to the claimant.
If a claim is contestable and Allianz Life has more of the net amount at risk
than the Ceding Company, all documentation in connection with such claim shall
be submitted to Allianz Life for its advice and counsel on the claim before
conceding any liability, making any settlement, or denying benefits. However,
such consultation shall not impair the Ceding Company's freedom to determine its
action on the claim.
Contest: The Ceding Company will notify Allianz Life of its intention to
contest, compromise, or litigate a claim or to appeal a judgment under the
insurance involving this reinsurance. Allianz Life shall be afforded the
opportunity to be associated, either together with the other reinsurers on
automatic reinsurance or independently on facultative reinsurance, with the
Ceding Company in defense or control of any claim or suit or proceeding under
the insurance involving this reinsurance. The Ceding Company and Allianz Life
shall cooperate in every respect in the defense of such claim, suit, or
proceeding. Allianz Life will pay its share of the payment and specific
expenses, including attorney's fees, arbitration or court costs, penalties,
interest and any judgments, special investigations or similar expenses, but
excluding salaries of employees, therein involved, unless it declines to be a
party to the contest, compromise or litigation, in which case Allianz Life will
pay the Ceding Company its share of the full amount of the reinsurance and
thereby be fully discharged of any further liability and subsequent expenses.
Reinsurance Liability: Reinsurance liability shall include indemnification of
the Ceding Company by Allianz Life for amounts attributable to the Ceding
Company's percentage share of (a) the contractual benefit on a policy reinsured
under this Agreement; and (b) any unusual
8
expenses incurred by or reimbursed by the Ceding Company arising from the
defense or investigation of a claim for liability on a policy reinsured under
this Agreement or from the taking up or rescinding of such a policy.
In no event shall the following be items of reinsurance liability:
1. routine investigative or administrative expenses, excluding fees and expenses
of commercial inspection agencies;
2. salaries of employees or other internal expenses of the Ceding Company, other
than travel expenses in connection with an investigation;
3. expenses incurred in connection with a dispute or contest arising out of
conflicting claims of entitlement to policy proceeds or benefits which the
Ceding Company admits are payable;
4. expenses, fees, settlement, or judgments arising out of or in connection with
claims made against the Ceding Company for extra-contractual damages as more
fully described within the Extra-Contractual Damages Article.
Payment of Claims: Indemnification of Allianz Life's percentage of reinsurance
liability on account of death shall be made in one lump sum, regardless of the
Ceding Company's mode of settlement. Unless otherwise agreed between Allianz
Life and the Ceding Company, there shall be no netting against payments due
under this Agreement.
Interpleader: Payment of a claim will include amounts paid by the Ceding Company
into a court of appropriate jurisdiction in connection with a dispute or contest
arising out of conflicting claims of entitlement to policy proceeds. Allianz
Life is not liable for double or additional payment of policy proceeds.
Waiver of Premium: If a claim is approved for waiver of premium benefits on a
policy reinsured hereunder, the Ceding Company shall continue to pay reinsurance
premiums less any applicable allowances to Allianz Life, excluding the premium
for waiver of premium reinsurance. Allianz Life shall pay to the Ceding Company
its proportionate share of the premiums at the rate applicable to the original
policy for the covered life and supplementary benefits reinsured under this
Agreement.
Misstatement of Age or Sex: In the event that the amount of insurance provided
by a policy or policies reinsured under this Agreement is increased or reduced
because of a misstatement of age or sex established after the death of the
insured, the reinsurance liability of Allianz Life shall increase or reduce in
an amount equal to the amount of the increase or reduction of the original
insurance multiplied by the proportion represented by Allianz Life's percentage
immediately prior to the discovery of such misstatement of age or sex.
Reinsurance in force with Allianz Life shall be reformed on the basis of the
adjusted amounts using values applicable to the correct age and sex. Any
adjustment in reinsurance premiums required by such reformation shall be made
without interest.
Interest: If the Ceding Company pays or reimburses interest on the contractual
benefit of a policy reinsured under this Agreement, Allianz Life shall indemnify
the Ceding Company for Allianz Life's percentage of such interest.
9
ARTICLE X - EXTRA-CONTRACTUAL DAMAGES
Extra-contractual damages include punitive damages, consequential damages, and
compensatory damages. In no event shall Allianz Life participate in such
damages, which are awarded against the Ceding Company as a result of an act,
omission, or course of conduct committed by the Ceding Company or its Agent in
connection with the insurance reinsured under this Agreement. Allianz Life
shall, however, pay its share of statutory penalties awarded against the Ceding
Company in connection with insurance reinsured under this Agreement if Allianz
Life elected to join in the contest of the coverage in question.
The parties recognize that circumstances may arise, in equity, which would
require Allianz Life, to the extent permitted by law, to share proportionately
in certain assessed damages. Such circumstances are difficult to define in
advance, but generally would be those situations in which Allianz Life was an
active party and directed, consented to, or ratified in writing the act,
omission, or course of conduct which ultimately results in the assessment of
punitive, statutory, and/or, compensatory damages. In such situations, the
Ceding Company and Allianz Life would share such damages so assessed in
proportions to the risk insured.
For the purposes of this provision, the following definitions shall apply:
"Punitive Damages" are those damages awarded as a penalty, the amount of which
is not governed, nor fixed by statute:
"Statutory Penalties" are those amounts, which are awarded as a penalty, but
fixed in amount by statute;
"Compensatory Damages" are those amounts awarded to compensate for the actual
damages sustained, and are not awarded as a penalty, nor fixed in amount by
statute.
ARTICLE XI - POLICY CHANGES
Changes: If any change is made in the plan of the original policy reinsured
automatically with Allianz Life, including any change in status caused by the
application of a non-forfeiture provision, a corresponding change shall be made
in the reinsurance. If a change is made in the underwriting classification of
the original policy reinsured with Allianz Life, a corresponding change shall be
made in the reinsurance subject to the prior approval of Allianz Life if the
original policy was facultatively submitted to Allianz Life.
The parties hereto may from time to time agree, in writing, that other methods
of changing or reducing the reinsurance with Allianz Life shall apply in a given
case without otherwise affecting the terms of this Agreement. If, for any
reason, the net amount at risk increases due to a policy change, the increased
amount of insurance must meet all conditions and requirements of new business
issued under this Agreement.
Reductions and Terminations: If a policy of life insurance issued by the Ceding
Company is terminated or reduced, the reinsurance with respect to that policy
shall be reduced in like manner as of the same date and time. If any portion of
insurance retained by the Ceding Company is reduced or terminated, the
reinsurance with respect to other policies issued on the same life shall be
simultaneously reduced or terminated so that the Ceding Company maintains their
original
10
retention. In such cases, the reinsurance to be reduced or terminated shall be
determined by the chronological order in which it was effected; the first
effected being the first reduced or terminated, and so on. Two or more policies
issued on the same date shall be considered one policy.
If the reinsurance on any particular policy has been ceded to more than one
reinsurer, the reduction shall be applied to all reinsurers on such policy in
proportion to the amounts originally ceded to each reinsurer. In no case shall
the Ceding Company be required to assume a risk in excess of its regular
retention limit at the time of issue of the original policy under which
reinsurance is being terminated.
Reinstatements: If an automatic policy reinsured hereunder lapses for nonpayment
of premium and is reinstated in accordance with the written terms and rules of
the Ceding Company, Allianz Life shall automatically reinstate its reinsurance
under such policy. The Ceding Company shall pay Allianz Life all reinsurance
premiums in arrears in connection with the reinstatement, with interest, at the
same rate and in the same manner as the Ceding Company received under its
policy. Reinstatement rules of the Ceding Company must be submitted to Allianz
Life as required in Article III of this Agreement.
If a facultative policy reinsured hereunder lapses for nonpayment of premium and
reinstatement is applied for, all papers in connection with said reinstatement
shall be forwarded to Allianz Life for its review and approval. Upon such
approval, the Ceding Company shall pay Allianz Life all reinsurance premiums in
arrears in connection with the reinstatement, with interest, at the same rate
and in the same manner as the Ceding Company received under its policy.
ARTICLE XII - RECAPTURE AND RETENTION CHANGES
If the Ceding Company increases its retention limits, the Ceding Company may
reduce the reinsurance on all risks except those on which it kept amounts that
were less than the maximum retention limits in effect when the original
insurance was issued. The retention limits of the Ceding Company as of the
effective date of this Agreement are shown in Schedule A. Special reduced or
zero limits for specific underwriting hazards or impairments not described in
Schedule A shall not be considered to be maximum limits of retention. The
amounts recaptured will be sufficient to increase the Ceding Company's retention
to the new limits. If there are other reinsurers, the reduction on each risk
will be divided according to each reinsurer's portion of the total reinsurance
on the risk. If the reinsurance is reduced on any risk, similar reductions shall
be made on all risks eligible for recapture. The Ceding Company shall give
written notice to Allianz Life ninety (90) days prior to the effective date of
its increase in retention for new issues. Recapture available hereunder shall be
effected not less than ninety (90) days after Allianz Life receives written
notice. The reinsurance in force shall then be reduced as provided herein upon
the later of the anniversary date next following, or the tenth
(l0/th/)anniversary date.
The above recapture provisions do not apply to risks that are accruing benefits
under the waiver of premium provisions of the policy; these risks must be
recaptured as soon as they are no longer collecting waiver of premium benefits.
The reduction in reinsurance due to recapture of accidental death benefits will
be effective on the first policy anniversary following the written notice to
recapture.
11
ARTICLE XIII - INSPECTION OF RECORDS
Allianz Life may, at any time with reasonable notice, inspect all books,
documents and procedures that relate to reinsurance under this Agreement.
Such inspection shall take place in the offices of the Ceding Company or
that of its agent or broker during normal business hours.
ARTICLE XIV - ERRORS
If either the Ceding Company or Allianz Life shall fail to perform an
obligation under this Agreement and such failure shall be the result of
an error on the part of the Ceding Company or Allianz Life, such error
shall be corrected by restoring both the Ceding Company and Allianz Life
to the positions they would have occupied had no such error occurred.
An "error" is a clerical mistake made inadvertently and excludes errors
of judgment and all other forms of error.
This provision shall apply only to clerical errors relating to the
administration of reinsurance covered by this Agreement and not to the
administration of the insurance provided by the Ceding Company to its
insured. Any negligent or deliberate acts or omissions by the Ceding
Company regarding the insurance provided are the responsibility of the
Ceding Company and its liability insurer, if any, but not that of Allianz
Life.
There is a mutual obligation on both the Ceding Company and Allianz Life
to ensure that all errors are identified and corrected in an equitable
manner at the earliest possible date.
ARTICLE XV - ARBITRATION
It is the intention of the Ceding Company and Allianz Life that the
customs and practices of the insurance and reinsurance industry shall be
given full effect in the operation and interpretation of this Agreement.
The parties agree to act in all things with good faith. If Allianz Life
or the Ceding Company cannot mutually resolve a dispute, which arises out
of or relates to this Agreement, the dispute shall be decided through
arbitration as set forth in this provision. The arbitrators shall base
their decision on the terms and conditions of this Agreement and, if
necessary, on the customs and practices of the insurance and reinsurance
industry rather then solely on a strict interpretation of the applicable
law. There shall be no appeal from the arbitrators' decision and the
parties may reduce that decision to judgment. This article shall survive
the termination of this Agreement.
To initiate arbitration, either the Ceding Company or Allianz Life shall
notify the other party, in writing, of its desire to arbitrate, stating
the nature of its dispute and the remedy sought. The party to which the
notice is sent shall respond to the notification, in writing, within ten
(10) working days of its receipt.
Arbitrators: The arbitration hearing shall be before a panel of three
arbitrators, each of whom must be a present or former officer of a life
insurance company. An arbitrator may not be a present or former officer,
attorney or consultant of the Ceding Company, Allianz Life or either
party's affiliates.
12
Selection of Arbitrators: The Ceding Company and Allianz Life shall each name
three (3) candidates to serve as an arbitrator. The Ceding Company and Allianz
Life shall each choose one candidate from the other party's list and these two
candidates shall serve as the first two arbitrators. If one or more candidates
so chosen shall decline to serve as an arbitrator, the party that named such
candidate shall add an additional candidate to its list and the other party
shall again choose one candidate from the list. This process shall continue
until two arbitrators have been chosen and have accepted. The Ceding Company and
Allianz Life shall each present their initial lists of three (3) candidates by
written notification to the other party within twenty-five (25) working days of
the date of the mailing of the notification initiating the arbitration. Any
subsequent additions to the list which are required shall be presented within
ten (10) working days of the date the naming party receives notice that a chosen
candidate has declined to serve.
The two arbitrators shall then select the third arbitrator from the four
(4) candidates remaining on the lists of the Ceding Company and Allianz Life
within fourteen (14) days of the acceptance of their positions as arbitrators.
If the two arbitrators cannot agree on the choice of the third, then this choice
shall be referred back to the Ceding Company and Allianz Life. The Ceding
Company and Allianz Life shall take turns striking the name of one of the
candidates from the remaining four (4) candidates until only one candidate
remains. If the candidate so chosen shall decline to serve as the third
arbitrator, the candidate whose name was stricken last shall be nominated as the
third arbitrator. This process shall continue until a candidate has been chosen
and has accepted. This candidate shall serve as the third arbitrator. The first
turn at striking the name of a candidate shall belong to the party that is
initiating the arbitration. Once chosen, the arbitrators are empowered to decide
all substantive and procedural issues by a majority of votes.
Communications: It is agreed that each of the three arbitrators should be
impartial regarding the dispute and should resolve the dispute on the basis
described in this provision. Therefore, at no time will either the Ceding
Company or Allianz Life contact or otherwise communicate with any person who has
been designated as a candidate to serve as an arbitrator concerning the dispute,
except upon the basis of jointly-drafted communications provided by both the
Ceding Company and Allianz Life to inform those candidates actually chosen as
arbitrators of the nature and facts of the dispute. Likewise, any written or
oral arguments provided to the arbitrators concerning the dispute shall be
coordinated with the other party and shall be provided simultaneously to the
other party or shall take place in the presence of the other party.
Hearing: The arbitration hearing shall be held on the date fixed by the
arbitrators. In no event shall this date be later than six (6) months after the
appointment of the third arbitrator. As soon as possible, the arbitrators shall
establish pre-arbitration procedures as warranted by the facts and issues of the
particular case. At least ten (10) working days prior to the arbitration
hearing each party shall provide the other party and the arbitrators with a
detailed statement of the facts and arguments it will present at the arbitration
hearing. The arbitrators may consider any relevant evidence; they shall give the
evidence such weight as they deem it entitled to after consideration of any
objections raised concerning it. The party initiating the arbitration shall have
the burden of proving its case by a preponderance of the evidence. Each party
may examine any witnesses who testify at the arbitration hearing. Within twenty
(20) working days after the end of the arbitration hearing, the arbitrators
shall issue a written decision. In their decision the arbitrators shall
apportion the costs of arbitration, which shall include, but not be limited to,
their own fees and expenses, as they deem appropriate.
13
ARTICLE XVI - INSOLVENCY
In the event of insolvency of the Ceding Company, all reinsurance claims payable
shall be paid directly to its liquidator, receiver, or statutory successor,
without diminution because of the insolvency of the Ceding Company or because
such liquidator, receiver, or statutory successor has failed to pay all or a
portion of any claim.
Notice: In the event of insolvency of the Ceding Company, the liquidator,
receiver, or statutory successor shall give Allianz Life written notice of the
pendency of a claim on a policy reinsured, within a reasonable time (in no event
to exceed one year) after such claim is filed in the insolvency proceeding.
Investigation: During the pendency of a claim, Allianz Life may investigate such
claim and interpose, at its own expense in the name of the Ceding Company, its
liquidator, receiver or statutory successor in the proceeding where such claim
is to be adjudicated, any defense or defenses which Allianz Life may deem
available to the Ceding Company or its liquidator, receiver, or statutory
successor.
The expense thus incurred by Allianz Life shall be chargeable, subject to court
approval, against the Ceding Company as part of the expense of liquidation to
the extent of a proportionate share of the benefit which may accrue to the
Ceding Company solely as a result of the defense undertaken by Allianz Life.
Where two or more reinsurers are involved in the same claim and a majority in
interest elects to interpose a defense or defenses to such claim, the expense
shall be apportioned as though such expense had been incurred by the Ceding
Company.
Cancellation Option: In the event of insolvency of Allianz Life, the Ceding
Company, upon written notice within ninety (90) days, may at its option cancel
this Agreement effective retroactively to the date of such insolvency as it
relates to the renewal of existing reinsurance. Allianz Life shall then make
proper financial adjustment from the effective cancellation date and remain
liable for the payment of any claim which had occurred prior to the date of
cancellation whether or not due proof of such claim had actually been received
by such date.
Right to Offset: In the event of the insolvency of either the Ceding Company or
Allianz Life, any amounts owed by Allianz Life to the Ceding Company and by the
Ceding Company to Allianz Life with respect to this Agreement, shall be offset,
as permitted by law, against each other with the balance to be paid by the
appropriate party.
ARTICLE XVII - ENTIRE CONTRACT PROVISION
This Agreement represents the entire agreement between Allianz Life and the
Ceding Company and supersedes, with respect to its subject matter, any prior
oral or written agreements between the parties. No modification of any provision
of this Agreement shall be effective unless set forth in a written amendment to
this Agreement which is executed by both parties. A waiver shall constitute a
waiver only with respect to the particular circumstances for which it is given
and not a waiver of any future circumstance.
14
ARTICLE XVIII - SEVERABILITY
If any provision of this Agreement is found by a court of competent jurisdiction
to violate any applicable federal or state statute or regulation, such provision
shall be deemed void and unenforceable, the parties to abide, however, by the
remainder of this Agreement in accordance with its terms.
ARTICLE XIX - NON-PARTICIPATING AND NON-REFUND
Allianz Life does not participate in dividends, if any, that are payable nor
does it pay any refunds resulting from the experience of policies reinsured
under this Agreement.
ARTICLE XX - HEADINGS
Paragraph headings and Article headings are not controlling or binding
provisions of this Agreement.
ARTICLE XXI - PARTIES TO AGREEMENTS
This is an agreement solely between the Ceding Company and Allianz Life. The
acceptance of reinsurance hereunder shall not create any right or legal
relationship whatsoever between Allianz Life and the insured or the beneficiary.
ARTICLE XXII - DURATION OF AGREEMENT
This Agreement shall be unlimited as to its duration but may be amended at any
time in writing by mutual consent of the two parties as signed by their
respective officers. Either party may terminate this Agreement as to further new
reinsurance with ninety (90) days written notice to the other. Such terminations
as to new reinsurance shall not affect existing reinsurance which shall remain
in force as long as such policies shall remain in force and reinsurance premiums
are paid when due, regardless of any change in ownership, merger or acquisition
of either company.
ARTICLE XXIII - DAC TAX
The Ceding Company and Allianz Life hereby agree to the following pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulation issued December 1992, under
Section 848 of the Internal Revenue Code of 1986.
1. The term "party" will refer to either the Ceding Company or Allianz Life as
appropriate.
2. The terms used in this Article are defined by reference to Regulation
1.848-2 in effect December 1992.
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 Section 848(c)(1).
4. Both parties agree to exchange information pertaining to the amount of net
consideration under this Agreement each year to ensure consistency or as
otherwise required by the internal Revenue Service.
15
5. Allianz Life will submit a schedule to the Ceding Company by April 1, of
each year of its calculation of the net consideration for the preceding
calendar year. A statement stating that Allianz Life will report such net
consideration in its tax return for the preceding calendar year will
accompany this schedule of calculations.
6. The Ceding Company may contest such calculation by providing an alternative
calculation to Allianz Life by May 1 of the year following the end of the
taxable year. If the Ceding Company does not notify Allianz Life by May 1,
the new considerations reported in the respective tax returns will be the
value as defined in Item 5 above.
7. If the Ceding Company contests Allianz Life's calculation of the net
consideration, the parties will act in good faith to reach an agreement on
the correct amount within thirty (30) days of the date the Ceding Company
submits its alternative calculation. If the Ceding Company and Allianz Life
reach agreement on an amount of the net consideration, each party shall
report such amount in their respective tax returns for the previous
calendar year.
16