EXHIBIT 99.(b)(7)(b)
Variable Payment Contract
Reinsurance Agreement
(No. 112-0104-SC)
Between
COUNTRY INVESTORS LIFE
ASSURANCE COMPANY
Of
Bloomington, Illinois
(referred to as you, your or Reinsured)
and
EQUITRUST LIFE
INSURANCE COMPANY
Of
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▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
(referred to as we, us, our or Reinsurer)
(REFERRED TO JOINTLY AS THE CONTRACTING COMPANIES AND SEPARATELY AS EACH
COMPANY OR EITHER COMPANY)
CONTENTS
ARTICLES
I Automatic Reinsurance 3
II Liability 3
III Plan and Amount of Insurance 3
IV Payments to Reinsurer 4
V Payments by Reinsurer 4
VI Reporting 5
VII Deposits of the Reserve 5
VIII Interest Credit on Modified Coinsurance Reserve
and Modified Coinsurance Reserve Adjustment 5
IX General Provisions 6
X Recapture 9
XI Arbitration 10
XII Duration of Agreement 11
XIII Modification of Allowances and Product Design 12
XIV Execution 13
SCHEDULES
Schedule A Business Reinsured 14
Schedule B Basis of Reinsurance 15
Schedule C Settlement Report 16
Schedule D Commission and Expense Allowances 17
Schedule E Financial Reporting 18
Schedule F Interest Credit on Modified Coinsurance Reserve 19
Schedule G Modified Coinsurance Reserve Adjustment 20
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ARTICLE I
AUTOMATIC REINSURANCE
1. Insurance. You will cede and we will accept as reinsurance the variable
payment contracts ("contracts") written by you as shown in Schedule A.
2. Coverages. The contracts reinsured in Schedule A are the Variable Payment
Contracts that arose from Individual Flexible Premium Deferred Variable
Annuity certificates and Flexible Premium Variable Universal Life
certificates issued on or after January 1, 2004. Reinsurance will be
limited in percentage as provided in Schedule B.
ARTICLE II
LIABILITY
1. Liability. Our liability for any reinsurance under this Agreement begins
upon the effective date of this Agreement as set forth in Article XIV,
Execution, and ends after all contracts reinsured have been terminated or
recaptured. Our liability to you under this Agreement will be coexisting
with your liability under the contracts reinsured.
2. Our liability will be settled and paid to you for each reporting period on
the basis of the quarterly reports you prepare in the form of Schedule C.
Payment of any amount due to be paid by either company will be determined
on a net basis and shall be paid within ten (10) business days after
receipt of the report.
3. This is a contract solely between the contracting parties. Our obligations
under this contract are solely to you and your obligations are solely to
us.
ARTICLE III
PLAN AND AMOUNT OF INSURANCE
1. Plan. Reinsurance under this Agreement will be on the basis specified in
Schedule B, in accordance with the contract forms you issue as listed in
Schedule A.
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2. Reduction and Terminations. If any of the contracts reinsured under this
Agreement are reduced or terminated by payment of a death benefit or
surrender, the reinsurance will be reduced proportionately.
ARTICLE IV
PAYMENTS TO REINSURER
1. The premium to be paid to us by you with respect to each contract
reinsured, as specified in Schedule A, will be our quota share percentage,
as specified in Schedule B, of the consideration corresponding to the
portion of the contract included under this
reinsurance agreement.
2. You will pay to us our quota share percentage of the Administrative
Services Fees which are paid to you through the Administrative Services
Agreements with the underlying fund companies.
3. You will pay to us our quota share percentage of any gain due to
as-of-processing.
ARTICLE V
PAYMENTS BY REINSURER
1. Benefits
We will pay you our quota share of:
(a) the Death Benefits you pay,
(b) the Benefit Payments you pay, and
(c) the Surrender Values you pay.
2. Commission and Expense Allowances. We will pay you our quota share of the
commission and expense allowances as outlined in Schedule D.
3. As-of-Processing. We will pay to you our quota share percentage of any loss
due to as-of-processing.
4. Compliance and Accounting Fees. We will pay to you our quota share
percentage of the compliance and accounting fees as billed.
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5. Other Expenses. We will pay to you our quota share percentage of the Other
Expenses as billed.
ARTICLE VI
REPORTING
1. You will provide us with information necessary to properly account for the
business reinsured. The reporting period shall be as specified in Schedule
E.
2. Not later than ten (10) days after the end of each reporting period, you
will submit a report substantially in accordance with Schedule C. You agree
to provide or make available to us such documentation as may be necessary
to support the items reported.
3. Not later than ten (10) days after the end of each reporting period, you
will submit reports substantially in accordance with Schedules F and G.
4. Not later than ten (10) days after the end of each reporting period, you
will submit a report substantially in accordance with Schedule E.
ARTICLE VII
DEPOSITS OF THE RESERVE
1. We will deposit with you our quota share percentage of the reserves for the
business reinsured under this Agreement.
2. For the purpose of this Article, reserves are defined to be the total
Statutory Reserve of the contracts reinsured.
ARTICLE VIII
INTEREST CREDIT ON MODIFIED COINSURANCE RESERVE
AND MODIFIED COINSURANCE RESERVE ADJUSTMENT
1. We will receive an interest credit on the modified coinsurance reserve. The
amount of the credit will be determined as set forth in Schedule F.
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2. You will receive a modified coinsurance reserve adjustment. The amount of
the adjustment will be determined as set forth in Schedule G.
3. Both the interest credit and the reserve adjustment will be made at the end
of each reporting period.
ARTICLE IX
GENERAL PROVISIONS
1. Reinsurance Conditions. The reinsurance is subject to the same terms,
limitations and conditions as the insurance under the contracts written by
you on which the reinsurance is based.
2. Obligations Created by Underlying Contracts. All claims made on the
underlying contracts, when settled by you in good faith, will be binding on
us. We will be bound to pay our proportion of such settlements and our
proportion of expenses incurred in the investigation and settlement of
claims or suits. You will advise us promptly of such obligations as they
become known to you.
If you are required by applicable state law to pay interest from a
specified date, such as the date of death of an insured, on the contractual
benefit of an underlying contract, we will be bound to pay our proportion
of such interest.
You will give us prompt notice of any claim submitted on any underlying
contract and prompt notice of any legal proceedings as they become known to
you. You will furnish to us copies of documents bearing on such claims or
legal proceedings upon request.
You must promptly notify us of your intent to contest insurance reinsured
under this Agreement or to assert defenses to a claim for such insurance.
If we agree to participate in and share the expenses of the contest or
assertion of defenses, and if your contest of such insurance results in the
reduction of liability, we will share in this reduction. Our percentage of
the reduction will be proportionate. If we should decline to participate in
the contest or assertion of defenses, we will then be released of all our
liability by paying you the full amount of reinsurance and not sharing in
any subsequent reduction in liability.
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3. Extra-Contractual Damages. In no event will we have any liability for any
Extra-Contractual Damages which are rendered against you as a result of
acts, omissions or course of conduct committed by you, unless we or one of
our affiliated companies were an active party in the act, omission or
course of conduct which ultimately resulted in the assessment of such
damage in connection with the insurance reinsured under this Agreement.
We recognize that circumstances may arise under which we, in equity, should
share, to the extent permitted by law, in paying certain assessed damages.
Such circumstances are difficult to define in advance, but involve those
situations in which we were an active party in the act, omission or course
of conduct which ultimately resulted in the assessment of such damages. The
extent of such sharing is dependent on good faith assessment of culpability
in each case, but all factors being equal, the division of any such
assessment would be in proportion to what impact our action, omission, or
course of conduct had on such damages.
4. Errors and Omissions. Any inadvertent delay, omission or error will not
relieve either contracting company from any obligation which would attach
to it hereunder if such delay, omission or error is rectified immediately
upon discovery. Such rectification will include, but not be limited to, any
cost necessary to restore the non-erring company to the position it would
have occupied had the error not occurred.
5. Misstatement of Age or Sex. In the event that any obligation arising from
an underlying contract is increased or reduced because of a misstatement of
age or sex of an insured, our liability with regard to that underlying
contract will be increased or reduced accordingly. Any adjustment in
reinsurance premium will be made on the same basis as the underlying
contract.
6. Inspection. At any reasonable time and with reasonable notice, the
contracting companies or their duly authorized representatives may inspect
the original papers and any other books or documents at the Home Office of
the other relating to or affecting reinsurance under this Agreement.
7. Confidentiality. It is mutually agreed by the contracting companies that
any information, documentation and reports that are made available for
inspection under this section of the Agreement will be kept confidential
and under no circumstances may the information, documentation and reports
be disclosed to, or made available for inspection by any third party unless
required by law, regulation, a self-regulatory organization or mandated by
court order, without the prior consent of the other contracting company,
which should not be
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unreasonably withheld. In the event that confidential information is
required to be disclosed under one of the above circumstances, the
disclosing company will promptly give written notice of the disclosure to
the other company.
8. Choice of Law. If any provision of this Agreement is held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this
Agreement will not be affected thereby. This Agreement will be construed
and enforced in accordance with the applicable federal law and the laws of
the state of
Iowa.
9. Insolvency. In the event of the your declared insolvency, and the
appointment of a domiciliary liquidator, receiver, conservator or statutory
successor for you, this reinsurance shall be payable immediately upon
demand, with reasonable provision for verification, directly to you or your
domiciliary liquidator, receiver, conservator or statutory successor, on
the basis of your liability without diminution because of your insolvency
or because your liquidator, receiver, conservator or statutory successor
has failed to pay all or a portion of any claim.
Every liquidator, receiver, conservator or statutory successor of yours
shall give us written notice of the pendency of a claim involving you
indicating which of the contracts would involve possible liability on the
part of us or to you or your domiciliary liquidator, receiver, conservator
or statutory successor, within a reasonable amount of time after the claim
is filed in the conservation, liquidation or other proceeding.
During the pendency of any claim, we may investigate the same and
interpose, at our own expense, in the proceeding where that claim is to be
adjudicated, any defense or defenses that we may deem available to you, to
your contract holder, or to any liquidator, receiver or statutory successor
of yours. The expenses thus incurred by us will be chargeable, subject to
approval of the applicable court, against you as part of the expense of
conservation or liquidation to the extent of a pro rata share of the
benefit which may accrue to you as a result of the defense undertaken by
us.
This reinsurance shall be payable directly by us to you or to your
domiciliary liquidator, receiver, conservator or statutory successor,
except as expressly required otherwise by applicable insurance law.
10. Insolvency of the Reinsurer. In the event of the insolvency, bankruptcy,
receivership, rehabilitation or dissolution of the Reinsurer, you may
retain all or any portion of any amount then due or which may become due to
the Reinsurer under this Agreement and use such
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amounts for the purposes of paying any and all liabilities of the Reinsurer
incurred under this Agreement. When all such liability hereunder has been
discharged, you shall pay the Reinsurer, its successor or statutory
receiver, the balance of such amounts withheld as may remain.
11. Offset. We and you shall consider any balance due and unpaid, whether on
account of premiums, allowances, losses or claims expenses, to be mutual
debts or credits under this Agreement and will offset, if permitted under
the applicable law. Only the balance will be considered in determining your
or our liability under this Agreement.
12. Entire Agreement; Modification. This Agreement constitutes the entire
agreement between the contracting companies regarding the subject matter of
this Agreement. This Agreement cannot be modified or amended except by
written instrument executed by both contracting companies.
ARTICLE X
RECAPTURE
1. With the exception of the provision in Article XII, business reinsured
under this Agreement will not be eligible for recapture before 20 years.
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ARTICLE XI
ARBITRATION
1. It is the intention of the contracting companies that the customs and
practices of the insurance and reinsurance industry will be given full
effect in the operation and interpretation of this Agreement. The
contracting companies agree to act in all things with the utmost good
faith. If the contracting companies cannot mutually resolve a dispute
arising out of or relating to this Agreement, however, the dispute will be
decided through arbitration, as set forth below. 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 applicable law.
2. Any controversy or claim arising out of or relating to this Agreement will
be settled by arbitration.
3. There must be three arbitrators who will be active, former or retired
officers of life insurance companies other than the contracting companies
or their subsidiaries or affiliates. Each of the contracting companies will
appoint one of the arbitrators and these two arbitrators will select the
third.
In the event either company fails to choose an arbitrator within thirty
(30) days after the other company has given written notice of its
arbitrator appointment, the company which has given written notice may
choose two arbitrators who will, in turn, choose a third arbitrator before
entering arbitration. If the two arbitrators are unable to agree upon the
selection of a third arbitrator within thirty (30) days following
appointment, each arbitrator will nominate three candidates within ten days
thereafter. The final selection will be made by a court of competent
jurisdiction from among the six names submitted by the arbitrators.
4. With regard to (3) above, arbitration must be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association
that will be in effect on the date of delivery of demand for arbitration.
5. The contracting companies will pay their respective arbitrator and
arbitration expenses. The contracting companies will share the third
arbitrator's expenses equally.
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6. The award agreed upon by the arbitrators will be final and binding upon the
contracting companies, with judgment entered in any court having
jurisdiction.
ARTICLE XII
DURATION OF AGREEMENT
1. This Agreement shall be for an Initial Term of five years. Prior to the
completion of the Initial Term, this Agreement may be terminated with
respect to the submission or acceptance of new contracts if there has been
a breach or default in the performance of any material covenant or
obligation of this Agreement and failure to cure or remedy such breach or
default within one hundred and eighty (180) days of the date on which
notice of such breach or default and intent to terminate is received, or
such longer period as may be specified in such notice. Notice under this
provision will be made by certified mail, overnight delivery or hand
delivery with proof of receipt.
2. After the Initial Term, submission or acceptance of new business under this
Agreement may be terminated at any time by either company giving one
hundred and eighty (180) days written notice of termination. Notice under
this provision will be made by certified mail, overnight delivery or hand
delivery with proof of receipt.
3. During the one hundred and eighty (180) day period after notice of
termination pursuant to paragraphs 1 and 2 of this Article XII, this
Agreement will continue to be in force.
4. After termination, the contracting parties to this agreement are liable
under the terms of this Agreement for all underlying contracts that became
effective prior to termination of this Agreement. After termination, the
contracting parties to this agreement are liable for reinsuring any
variable payment contracts that arise from any underlying variable annuity
or variable universal life certificate that has an application date on or
before the effective date of termination.
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ARTICLE XIII
MODIFICATION OF ALLOWANCES AND PRODUCT DESIGN
1. All reinsurance commissions and expense allowances specified in this
Agreement will be guaranteed until April 1, 2005.
2. After April 1, 2005, the contracting parties shall annually review the
actual acquisition and maintenance expense experience to determine if any
modifications to the reinsurance expense allowances as shown on Schedule D
are required. Any such changes to the allowances would reflect the change
in actual expense experience as consistently allocated. Also, any changes
would reflect the intention of the contracting parties to share the
expenses consistent with the quota share percentage shown in Schedule B.
The revised expense allowances would apply to all business.
3. Product Modifications. Requested product modifications will be implemented
only upon mutual agreement. During the Initial Term of this Agreement, if
new terms are not mutually agreed to within one hundred and eighty (180)
days after the date the proposal of the new product design changes for new
business is made, the contracting parties agree to resolve any dispute
about proposed or requested modifications of product design by arbitration
pursuant to Article XI of this Agreement. After the Initial Term, if new
terms are not mutually agreed to within one hundred and eighty (180) days
after the date any product design changes are proposed, this Agreement will
terminate.
4. Nothing in this Agreement will be construed as limiting the right of either
company to request the redesign of the products reinsured under this
treaty. Examples of reasons that might cause you to request such a redesign
include, but would not be limited to: adjusting pricing to take into
account emerging experience that is more favorable than that assumed in the
pricing; adjusting pricing to compensate for any adverse deviations from
pricing assumptions; or accommodating new financial objectives.
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ARTICLE XIV
EXECUTION
In witness of the above, this Agreement is signed in duplicate at the dates and
places indicated and shall be effective as of January 1, 2004.
EquiTrust Life County Life
Insurance Company Insurance Company
at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
on ___________________, 20__ on ___________________, 20__
By: By:
----------------------------- -----------------------------
Title: Title:
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By: By:
----------------------------- -----------------------------
Title: Title:
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SCHEDULE A
BUSINESS REINSURED
1. The contract holders must be residents of the United States and issue age
90 or under.
2. FORM NAME AND TYPE FORM NUMBER
Variable Payment Contract
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