Swiss Re Life & Health
Reinsurer Copy
This Automatic Self Administered YRT Reinsurance Agreement
Effective March 1, 2000
is made between
The Union Central Life Insurance Company
of Cincinnati, Ohio
(hereinafter referred to as "the Company")
and
Swiss Re Life & Health America Inc.
of New York, New York
(hereinafter referred to as "the Reinsurer" )
The following Articles, qualified by the Exhibits of the
Agreement, will form the basis of the Agreement.
This Agreement will be referred to as Agreement No. 6806-1
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Table of Contents
Article 1
1.1 Scope of Coverage
1.2 Forms, Manuals, Issue Rules
Article 2
2.1 Automatic Coverage
2.2 Facultative Coverage
Article 3
3.1 Automatic Submissions
3.2 Facultative Submissions
Article 4
4.1 Premium Accounting
4.2 Non-Payment of Premiums
Article 5.
5.1 Right of Offset
Article 6
6.1 Conversions
6.2 Policy Changes
6.3 Reductions
6.4 Lapses
6.5 Reinstatements
6.6 Minimum Reinsurance Limit
Article 7
7.1 Retention Limit Changes
7.2 Recapture
Article 8
8.1 Liability
8.2 Commencement of Automatic Reinsurance Liability
8.3 Commencement of Facultative Reinsurance Liability
8.4 Conditional or Interim Receipt Liability
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Article 9
9.1 Claims Notice
9.2 Claims Payment
9.3 Contested Claims
9.4 Claims Expenses
9.5 Extra Contractual Obligations
9.6 Misstatement of Age or Sex
Article 10
10.1 Oversights
10.2 Arbitration
Article 11
11.1 Insolvency
Article 12
12.1 DAC Tax
12.2 Taxes and Expenses
Article 13
13.1 Entire Agreement
13.2 Parties to Agreement
13.3 Inspection of Records
13.4 Good Faith
13.5 Confidentiality
Article 14
14.1 Duration of Agreement
14.2 Severability
14.3 Construction
Exhibits
A-1 Business Covered
A-2 Required Forms, Manuals & Issue Rules -
Conditional Receipt Amount
B Application for Reinsurance
C General Terms - Reinsurance Rates and Allowances
D The Company's Retention Limits
E The Automatic Acceptance Limits
F Reinsurance Reports
G DAC Tax Election
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Article 1
1.1 Scope of Coverage
This Agreement applies to all insurance policies and
supplementary benefits and riders attached thereto
(hereinafter referred to as "policies"), as listed in
Exhibit A-1, which have been issued directly by the
Company in accordance with its underwriting rules,
premium rates and policy forms as provided to the
Reinsurer.
The Company will cede, and the Reinsurer will accept risk
on the above referenced policies in accordance with the
terms and conditions of this Agreement. The policies
accepted by the Reinsurer will be hereinafter referred to
as "Reinsured Policies".
The Company may not reinsure the amount it has retained on
the business covered hereunder on any basis whatsoever
without the Reinsurer's written consent.
This Agreement does not cover the following on an automatic
basis unless specified elsewhere in this Agreement:
1.1.1 Noncontractual conversions, rollovers, or exchanges;
or
1.1.2 Any business issued under a program where full
current evidence of insurability consistent with the
amount of insurance is not obtained, or where
conventional selection criteria are not applied in
underwriting the risk; or
1.1.3 Any conversion of a previously issued policy that
had been reinsured with another reinsurer.
Each policy covered under this Agreement must provide for
the maximum normal periods of suicide and contestability
protection permitted in the state in which the policy is
executed.
1.2 Forms, Manuals, Issue Rules
The Company affirms that its retention schedule,
underwriting rules, issue rules, premium rates and policy
forms applicable to the Reinsured Policies and in use as
of the effective date of this Agreement have been supplied
to the Reinsurer as listed in Exhibit A-2; that it has
fully disclosed all material facts regarding the business
reinsured hereunder.
The Company will notify the Reinsurer of any proposed
material changes in its retention schedule and/or
underwriting and issue rules and/or premium rates and/or
policy forms. This Agreement will not extend to policies
issued pursuant to such changes unless the Reinsurer has
consented in writing to accept policies subject to such
changes.
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It is the Company's responsibility to ensure that the
applicable forms are in compliance with current Medical
Information Bureau (M.I.B.) regulations.
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Article 2
2.1 Automatic Coverage
For automatic reinsurance coverage of any policy covered
under this Agreement, the Company will retain the amount
stipulated in Exhibit D according to the age and mortality
rating at the time of underwriting. The Company will
automatically cede the amount of reinsurance to the
Reinsurer according to the Automatic Acceptance Limits
specified in Exhibit E.
2.2 Facultative Coverage
The reinsurance will be on a facultative basis if the
Company receives an application for a policy covered under
this Agreement for which:
2.2.1 The total of the new reinsurance required and the
amount already reinsured on that life under this
Agreement and all other life agreements between the
Reinsurer and the Company, exceeds the Automatic
Acceptance Limits set out in Exhibit E; or
2.2.2 The Company intends to retain less than the
Retention Limit set out in Exhibit D taking into
account the applicant's age and mortality rating; or
2.2.3 The amount of insurance in force, including any
coverage to be replaced, plus the amount currently
applied for on that life in all companies exceeds
the Jumbo Limit stated in Exhibit E; or
2.2.4 The application is on a life for which an
application had been submitted by the Company on
a facultative basis to the Reinsurer or any other
reinsurer within the last 3 years, unless the
reason for submitting facultatively no longer
applies.
The reinsurance will also be on a facultative basis if
the Company submits an application to the Reinsurer for
its consideration on a plan or rider which qualifies for
automatic reinsurance under this Agreement.
The relevant terms and conditions of this Agreement will
apply to those facultative offers made by the Reinsurer
which are accepted by the Company.
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Article 3
3.1 Automatic Submissions
The Company will submit automatic policies to the
Reinsurer according to the reporting terms set out in
Exhibit F.
Upon the request of the Reinsurer, the Company will send
to the Reinsurer copies of the application, underwriting
papers and other papers on a life reinsured automatically
under this Agreement.
3.2 Facultative Submissions
The Company will apply for reinsurance on a facultative
basis by sending to the Reinsurer an Application for
Reinsurance, a sample of which is included as Exhibit B.
Accompanying this Application for Reinsurance will be
copies of all underwriting evidence that is available
for risk assessment. Any subsequent information received
by the Company that is pertinent to the risk assessment
will be transmitted to the Reinsurer immediately.
After consideration of the Application for Reinsurance
and related papers, the Reinsurer will promptly inform
the Company of its underwriting decision.
If the underwriting decision is acceptable to the
Company and the Company's policy is subsequently placed
in force in accordance with the issue rules provided to
the Reinsurer, the Company will duly notify the Reinsurer
according to the terms outlined in Exhibit F.
The Company will advise the Reinsurer in writing if the
Application for Reinsurance is not to be placed with the
Reinsurer.
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Article 4
4.1 Premium Accounting
The Company will pay the Reinsurer premiums in accordance
with the terms specified in Exhibit C.
The method and requirements for reporting and remitting
premiums are outlined in Exhibit F.
The Reinsurer reserves the right to charge interest on
overdue premiums. The interest will be calculated
according to the terms and conditions specified in
Exhibit C.
4.2 Non-Payment of Premiums
The Reinsurer may terminate its liability for any
Reinsured Policy for which the premiums have not been paid
within 60 days after the Due Date stated in Exhibit F, by
giving the Company 15 days written notice of such
termination.
Notwithstanding such termination, the Company is still
obligated to pay the overdue premiums, plus interest to
the date of payment.
The Company will not force termination under the
provisions of this Article solely to avoid the recapture
requirements or to transfer the Reinsured Policies to
another reinsurer.
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Article 5
5.1 Right of Offset
The Company and the Reinsurer will have the right to offset
any balance or balances whether on account of premiums,
allowances or claims due from one party to the other, under
this Agreement or under any other reinsurance agreement
between the Company and the Reinsurer.
The right of offset will not be affected or diminished
because of the insolvency of either party.
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Article 6
6.1 Conversions
In the event of the conversion of a Reinsured Policy the
policy arising from the conversion will be reinsured with
the Reinsurer. The amount to be reinsured will be
determined on the same basis as used for the original
policy (e.g. excess of retention, quota share) but will not
exceed the amount reinsured as of the date of conversion
unless mutually agreed otherwise.
If the policy arising from a conversion is on a plan that
is:
6.1.1 Reinsured on a coinsurance basis with the Reinsurer,
the appropriate premium at the attained age will be
used and the policy year for the purpose of
commission rates will be based on the duration of
the original policy; or
6.1.2 Reinsured on a YRT basis with the Reinsurer, the
appropriate YRT rate at the attained age and duration
of the original policy will be used and any allowance
will be based on the duration of the original policy;
or
6.1.3 Not covered by any reinsurance agreement with the
Reinsurer, reinsurance will be on a YRT basis using
the YRT rates specified in Exhibit C, at the
attained age and duration of the original policy.
The above terms will apply unless specified otherwise in
Exhibit C.
Unless mutually agreed otherwise, policies that had been
reinsured with another reinsurer and which convert to a
plan covered under this Agreement will not be reinsured
with the Reinsurer.
6.2 Policy Changes
If the plan, the amount of reinsurance or the premiums of a
Reinsured Policy are changed, the Company will promptly
inform the Reinsurer.
Whenever a Reinsured Policy is changed and the Company's
underwriting rules do not require that full evidence be
obtained, the reinsurance will remain in effect with the
Reinsurer. The suicide, contestability and recapture
periods applicable to the original Reinsured Policy will
apply to the reissued Reinsured Policy and the duration
will be measured from the effective date of the original
Reinsured Policy.
Whenever any Reinsured Policy is changed and the Company's
underwriting rules require that full evidence be obtained,
the change will be subject to the Reinsurer's approval, if:
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6.2.1 The new amount of the Reinsured Policy would be in
excess of the Automatic Acceptance Limit, in effect
at the time of the change, as set out in Exhibit E;
or
6.2.2 The new amount of the policy and the amount already
in force on the same life exceeds the Jumbo Limit
stated in Exhibit E; or
6.2.3 The Reinsured Policy is on a facultative basis.
The amount of any non-contractual increase will be subject
to the terms stated in Exhibit C.
The Company will report the details of all changes
according to the terms outlined in Exhibit F, Reinsurance
Reports.
For changes not covered under this Agreement, which affect
the terms of any Reinsured Policy, the Company must obtain
the Reinsurer's approval before such changes become
effective.
6.3 Reductions
Unless specified otherwise in this Agreement, if the
amount of insurance of a policy issued by the Company is
reduced, then the amount of reinsurance on that life will
be reduced effective the same date by the full amount of
the reduction under the original policy. If the amount of
insurance terminated equals or exceeds the amount of
reinsurance, the full amount of reinsurance is terminated.
If the reinsurance is a quota share of the policy issued
by the Company, the reduction would be proportional.
The reduction will first apply to any reinsurance on the
policy being reduced and then in a chronological order
according to policy date ("first in, first out") to any
reinsurance on the other policies in force on the life.
However, the Company will not be required to assume a risk
for an amount in excess of its regular retention for the
age at issue and the mortality rating of the policy under
which reinsurance is being terminated.
If the reinsurance for a policy has been placed with more
than one reinsurer, the reduction will be applied to all
reinsurers pro rata to the amounts originally reinsured
with each reinsurer.
6.4 Lapses
When a policy lapses, the corresponding Reinsured Policy
will be terminated effective the same date. The
Reinsurer's liability with respect to unearned premiums
on the terminated Reinsured Policy is set out in Exhibit F.
Unless specified otherwise in this Agreement, if a policy
fully retained by the Company
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lapses, the Reinsured Policy or Policies on that same life
will be reduced or terminated effective the same date in
order for the Company to maintain its full retention. The
terms under the preceding Reductions clause would apply.
If the Company allows extended or reduced paid-up
insurance following a lapse, the reinsurance will be
appropriately amended. If the Company allows the policy
to remain in force under its automatic premium loan
regulations, the reinsurance will continue unchanged and
in force as long as such regulations remain in effect,
except as provided for otherwise in this Agreement.
6.5 Reinstatements
If a policy reinsured on an automatic basis is reinstated
in accordance with its terms or the rules of the Company,
as provided to the Reinsurer, the Reinsured Policy will
be reinstated automatically by the Reinsurer. The
Reinsurer's approval is required only for the reinstate-
ment of a facultative policy when the Company's regular
reinstatement rules indicate that more evidence than a
Statement of Good Health is required.
The Company's liability with respect to the premiums in
arrears is set out in Exhibit F.
6.6 Minimum Reinsurance Limit
The Company may not submit a policy to the Reinsurer
unless the amount of the policy to be reinsured exceeds
the Minimum Initial Reinsurance Limit specified in Exhibit
C. The Reinsured Policy will be canceled whenever its net
amount at risk becomes less than the Minimum Final
Reinsurance Limit set out in Exhibit C.
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Article 7
7.1 Retention Limit Changes
If the Company changes its retention limits, it will
provide the Reinsurer with written notice of the new
retention limits and the effective date.
A change to the Company's Retention Limits in Exhibit D
will not affect the Reinsured Policies in force at the
time of such a change except as specifically provided
for elsewhere in this Agreement.
7.2 Recapture
The Company may apply its increased retention limits to
reduce the benefit amount of in force Reinsured Policies
provided:
7.2.1 The Company gives the Reinsurer written notice of
its intention to recapture within 90 days of the
effective date of the retention increase; and
7.2.2 Such recaptures are made on the next anniversary of
each Reinsured Policy affected and with no recapture
being made until the Reinsured Policy has been in
force for the period stated in Exhibit C. For a
conversion policy or re-entry, the recapture terms
of the original policy will apply and the duration
for the recapture period will be measured from the
effective date of the original policy; and
7.2.3 The Company has maintained from the time the policy
was issued, its full retention as set out in Exhibit
D for the plan and the insured's classification.
Reinsured policies on a first dollar quota share
basis will not be eligible for recapture; and
7.2.4 The Company has applied its increased Retention
Limits in a consistent manner to all categories
of its Retention Limits set out in Exhibit D
unless otherwise agreed to by the Reinsurer.
In applying its increased Retention Limits to Reinsured
Policies, the age and mortality rating at the time of
issue will be used to determine the amount of the
Company's increased retention.
Recapture as provided herein is optional with the
Company, but if any Reinsured Policy is recaptured,
all Reinsured Policies eligible for recapture under
the provisions of this Article must be recaptured. If
there is reinsurance in other companies on risks
eligible for recapture, the necessary reduction is
to be applied pro rata to the total outstanding
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reinsurance.
The amount of reinsurance eligible for recapture is based
on the reinsurance net amount at risk as of the date of
recapture.
The Company may not recapture reinsurance if the Company
has either obtained or increased stop loss reinsurance
coverage as justification for the increase in retention.
If there is a Waiver of Premium (W.P.) claim in effect
when recapture takes place, the W.P. claim will stay in
effect until the W.P. claim terminates. The Reinsurer
will not be liable for any other benefits, including the
basic life risk, that are eligible for recapture. All
such eligible benefits will be recaptured as if there
was no W.P. claim.
The Reinsurer will not be liable, after the effective
date of recapture, for any Reinsured Policies or portions
of such Reinsured Policies eligible for recapture, that
the Company has overlooked. The Reinsurer will be liable
only for a credit of the premiums, received after the
recapture date, less any allowance.
The terms and conditions for the Company to recapture in
force Reinsured Policies due to the insolvency of the
Reinsurer are set out in the Insolvency clause in
Article 11 .
If the Company transfers business which is reinsured
under this Agreement to a successor company, then the
successor company has the option to recapture the
reinsurance, in accordance with the recapture criteria
outlined in this Article, only if the successor company
has a higher retention limit than the Company.
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Article 8
8.1 Liability
Unless specified elsewhere in the Agreement, the
Reinsurer's liability for the Reinsured Policies is
restricted to its share of the Company's liability as
limited by the terms and conditions of the particular
policy under which the Company is liable.
The Reinsurer may terminate its liability for any
policies for which reinsurance premium payments are in
arrears, according to the terms set out in Article 4 of
this Agreement.
8.2 Commencement of Automatic Reinsurance Liability
The Reinsurer's liability for any Reinsured Policy
accepted automatically will begin simultaneously with
the Company's contractual liability for that policy.
8.3 Commencement of Facultative Reinsurance Liability
If a facultative application is submitted by the Company
to the Reinsurer only, then the Reinsurer's liability
will begin simultaneously with the Company's contractual
liability for this facultative policy. The amount of the
Reinsurer's liability will be the lesser of the
Reinsurer's offer, the Conditional Receipt Amount set
out in Exhibit A-2 or the Automatic Acceptance Limits
set out in Exhibit E. The Reinsurer's liability ceases
if the Reinsurer declines the risk and duly notifies
the Company. The Reinsurer's liability would also cease
if the Company declines the Reinsurer's offer.
If, however, a facultative application is submitted by
the Company to any other reinsurer, in addition to the
Reinsurer, the liability of the Reinsurer will commence
when the Reinsurer has received written notice from the
Company, during the lifetime of the insured, that the
Reinsurer's offer has been accepted. The Company will
have 120 days from the date of the Reinsurer's final
offer in which to place the policy with the insured/
owner, after which time the Reinsurer's offer will
expire unless the Reinsurer explicitly states in writing
that the offer is extended for some further period.
8.4 Conditional or Interim Receipt Liability
The extent of the Reinsurer's liability on a per life
basis, for claims accepted by the Reinsurer that have
arisen under the conditional receipt or interim receipt
coverage, is set out in Exhibit A-2.
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Article 9
9.1 Claims Notice
The Company will notify the Reinsurer as soon as
reasonably possible after the Company receives the claim.
Copies of all claims papers will be sent promptly by the
Company to the Reinsurer. The settlement made by the
Company will be binding on the Reinsurer. However, for
claims made during the contestable period or in any case
where the total amount of reinsurance ceded to the
Reinsurer is greater than the amount retained by the
Company, or if the Company retained less than, or none
of, its usual retention on the policy, then all papers
in connection with the claim will be submitted to the
Reinsurer and the Company will wait for up to ten days
from the date of submission for the Reinsurer's
recommendation before conceding liability or making
settlement to the claimant.
The Company will provide the Reinsurer with all further
reports and papers required by the Reinsurer for its
consideration of the claim.
For Joint Life Last Survivor business, the Company will
notify the Reinsurer of the first death.
9.2 Claims Payment
Provided there is no existing breach of this Agreement
by the Company, the Reinsurer will be liable to the
Company for the benefits reinsured and the reinsurance
will not exceed the Company's contractual liability under
the terms of its policies. The payment of death claims by
the Reinsurer will be in one lump sum regardless of the
mode of settlement under the original policy. The
Reinsurer's share of interest, which is based on the
death proceeds paid by the Company, will be payable in
addition to the death claim settlement. The Reinsurer
will pay to the Company premiums at the rate applicable
to the original policy on any policy approved for a
waiver of premium claim, provided always that the waiver
of premium benefit applicable to such benefits has been
reinsured under this Agreement.
9.3 Contested Claims
The Company will notify the Reinsurer of its intention to
contest, compromise or litigate a claim involving a
Reinsured Policy. The Company will also provide the
Reinsurer prompt notice of any legal proceedings initiated
against the Company in response to its denial of a claim
on a reinsured policy. Should any claim be settled on a
reduced compromise basis, or should a contested claim be
settled for a reduced sum, the Company and the Reinsurer
will participate in such reductions in proportion to their
respective liabilities under the policy or policies
reinsured.
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The Reinsurer may pay its share of the death benefit if
it does not deem it advisable to contest the claim.
9.4 Claims Expenses
The Reinsurer will pay its share of reasonable
investigation and legal expenses incurred in adjudicating
or litigating the claim. The Reinsurer will not be liable
for any portion of any routine investigative or
administrative expenses incidental to the settlement of
claims (such as compensation of salaried employees) which
are incurred by the Company; nor for any expenses incurred
in connection with a dispute or contest arising out of
conflicting claims of entitlement to policy proceeds or
benefits that the Company admits are payable. In the event
that the Reinsurer pays its share of the death benefit of
a policy for which the Company is contesting the claim,
the Reinsurer will not be liable for any subsequent
expenses incurred by the Company.
9.5 Extra Contractual Obligations
Extra Contractual Obligations are obligations outside of
the contractual obligations and include but are not
limited to punitive damages, bad faith damages,
compensatory damages, and other damages or statutory
penalties which may arise from the willful and/or
negligent acts or omissions by the Company.
The Reinsurer is not liable for Extra Contractual
Obligations unless it concurred in writing and in advance
with the actions of the Company which ultimately led to
the imposition of the Extra Contractual Obligations.
In such situations, the Company and the Reinsurer will
share in Extra Contractual Obligations, in equitable
proportions, but all factors being equal, the division
of any such assessments would be in proportion to the
total risk accepted by each party for the plan of
insurance involved.
Notwithstanding anything stated herein, this Agreement
will not apply to any Extra Contractual Obligations
incurred by the Company as a result of any fraudulent
and/or criminal act by any employee or officer of the
Company or an agent representing the Company, acting
individually, collectively or in collusion in the
presentation, defense, or settlement of any claim.
9.6 Misstatement of Age or Sex
In the event of an increase or reduction in the amount
payable under a policy due to a misstatement in age or
sex, the proportionate liabilities under this Agreement
will be the basis for determining each party's share of
any increase or reduction. The Reinsured Policy will be
rewritten from commencement on the basis of the adjusted
amounts using premiums and amounts at risk for the
correct ages and sex, and the proper adjustment for the
difference in reinsurance premiums, without interest,
will be made.
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Article 10
10.1 Oversights
Any unintentional or accidental failure to comply with the
terms of this Agreement which can be shown to be the result
of an oversight, misunderstanding or clerical error, by
either the Company or the Reinsurer, will not be deemed to
be a breach of this Agreement. Upon discovery, the error
will be corrected so that both parties are restored to the
position they would have occupied had the oversight,
misunderstanding or clerical error not occurred. Should
it not be possible to restore both parties to such a
position, the party responsible for the oversight,
misunderstanding or clerical error will be responsible
for any resulting liabilities and expenses.
This provision will apply only to oversights,
misunderstandings or clerical errors relating to the
administration of reinsurance covered by this Agreement
and not to the administration of the insurance provided
by the Company to its insured.
If the Company or the Reinsurer discovers that the Company
did not cede reinsurance on a policy it should have
reinsured under this Agreement, the Company may be
required to audit its records, at the request of the
Reinsurer, to determine if reinsurance was unreported
on any other policies. The Company is expected to take
the necessary actions to ensure that similar oversights
do not recur. If the Reinsurer receives no evidence that
the Company has taken action to remedy such a situation,
the Reinsurer reserves the right to limit its liability
to correctly reported policies only.
Any negligent or deliberate acts or omissions by the
Company regarding the insurance or reinsurance provided
are the responsibility of the Company and its liability
insurer, if any, but not that of the Reinsurer.
10.2 Arbitration
Any controversy arising hereafter between the Company and
the Reinsurer relating to policies covered under this
Agreement or the breach thereof will be referred to three
arbitrators. These arbitrators must be officers of Life
Insurance Companies or Life Reinsurance Companies
excluding officers of the parties to this Agreement,
their affiliates or subsidiaries or past employees of
any of these entities. The arbitrators who will regard
this Agreement from the standpoint of practical business
as well as the law, are empowered to determine the
interpretation of the treaty obligation.
Each party will appoint one arbitrator and these two
arbitrators will select a third arbitrator within two
weeks of the appointment of the second. If either party
refuses or neglects to appoint an arbitrator within 60
days after receipt of the written request for arbitration,
the other party may appoint a second arbitrator. Should
the two arbitrators not agree on the choice of the third,
then each party will name four candidates to serve as the
arbitrator. Beginning with the party who did not initiate
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arbitration, each party will eliminate one candidate from
the eight listed until one candidate remains. If this
candidate declines to serve as the arbitrator, the
candidate last eliminated will be approached to serve.
This process will be repeated until a candidate has agreed
to serve as the third arbitrator.
The place of meeting of the arbitrators will be decided
by a majority vote of the arbitrators. The written
decision of a majority of the arbitrators will be final
and binding on both parties and their respective
successors and assigns.
The arbitrators will render a decision within four
months of the appointment of the third arbitrator,
unless both parties agree otherwise. In the event no
decision is rendered within four months, new arbitrators
will be selected as above.
Alternatively, if both parties consent, any controversy
may be settled by arbitration in accordance with the
rules of the American Arbitration Association.
Unless the Arbitrators decide otherwise, each party will
bear the expense of its own arbitration, including its
arbitrator and outside attorney fees and will jointly
and equally bear with the other party the expense of the
third arbitrator.
Judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.
It is specifically the intent of both parties that
these arbitration provisions will replace and be in
lieu of any statutory arbitration provision, if the
law so permits.
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Article 11
11.1 Insolvency
A party to this Agreement will be deemed "insolvent"
when it:
11.1.1 Applies for or consents to the appointment of a
receiver, rehabilitator, conservator, liquidator or
statutory successor (hereinafter referred to as the Authorized
Representative) of its properties or assets; or
11.1.2 Is adjudicated as bankrupt or insolvent; or
11.1.3 Files or consents to the filing of a petition in
bankruptcy, seeks reorganization or an arrangement
with creditors or takes advantage of any bank-
ruptcy, dissolution, liquidation, or similar law
or statute; or
11.1.4 Becomes the subject of an order to rehabilitate or
an order to liquidate as defined by the insurance
code of the jurisdiction of the party's domicile.
In the event of the insolvency of the Company, all
reinsurance made, ceded, renewed or otherwise becoming
effective under this Agreement will be payable by the
Reinsurer directly to the Company or to its Authorized
Representative, on the basis of the liability of the
Company under the Reinsured Policies without diminution
because of the insolvency of the Company.
The Authorized Representative will give written notice
to the Reinsurer of all pending claims against the
Company on any policies reinsured within a reasonable
time after such claims are filed in the insolvency
proceedings. While a claim is pending, the Reinsurer
may investigate such claim and interpose, at its own
expense, in the proceedings where the claim is to be
adjudicated, any defense or defenses which it may deem
available to the Company or the Authorized Representative.
The expense thus incurred by the Reinsurer will be
chargeable, subject to court approval, against the
Company as part of the expense of conservation or
liquidation to the extent of a proportionate share of
the benefit which may accrue to the Company solely as
a result of the defense undertaken by the Reinsurer.
Where two or more reinsurers are involved in the same
claim and a majority in interest elect to interpose a
defense to such claim, the expense will be apportioned
in accordance with the terms of the Agreement as though
such expense had been incurred by the Company.
In the event of insolvency of the Company, the Right
of Offset afforded under Article 5 will remain in full
force and effect to the extent permitted by applicable law.
In the event of the insolvency of the Reinsurer, the
Company may cancel this Agreement for new business by
promptly providing the Reinsurer, its receiver,
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rehabilitator, conservator, liquidator or statutory
successor with written notice of the cancellation effective
the date on which the Reinsurer's insolvency is
established by the authority responsible for such
determination. Any requirement for a notification period
prior to the cancellation of the Agreement would not apply
under such circumstances.
In addition, the Company may provide the Reinsurer, its
receiver, rehabilitator, conservator, liquidator or
statutory successor with written notice of its intent to
recapture all reinsurance in force under this Agreement
regardless of the duration the reinsurance has been in
force or the amount retained by the Company on the policies
reinsured hereunder. The effective date of a recapture due
to insolvency would be at the election of the Company and
would not be earlier than the date on which the Reinsurer's
insolvency is established by the authority responsible for
such determination. Any Recapture Fee applicable will be
mutually agreed upon by the Company and the Reinsurer, its
rehabilitator, conservator, liquidator or statutory
successor.
22
Article 12
12.1 DAC Tax
The Company and the Reinsurer agree to the DAC Tax
Election pursuant to Section 1 .848-2(g)(8) of the
Income Tax Regulation under Section 848 of the Internal
Revenue code of 1986, as amended, whereby:
12.1.1 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); and
12.1.2 Both parties agree to exchange information
pertaining to the amount of net consideration
under this Agreement each year to ensure
consistency.
The term "net consideration" will refer to the net
consideration as defined in Regulation Section 1.848-2(f).
The method and timing of the exchange of this information
is set out in Exhibit G.
This DAC Tax Election will be effective for all years for
which this Agreement remains in effect.
The Company and the Reinsurer represent and warrant that
they are subject to U.S. taxation under either the
provisions ,of subchapter L of Chapter 1 or the provisions
of subpart F of subchapter N of Chapter 1 of the Internal
Revenue Code of 1986, as amended.
12.2 Taxes and Expenses
Apart from any taxes, allowances, refunds, and expenses
specifically referred to elsewhere in this Agreement, no
taxes, allowances, or proportion of any expense will be
paid by the Reinsurer to the Company in respect of any
Reinsured Policy.
23
Article 13
13.1 Entire Agreement
This Agreement will constitute the entire agreement
between the parties with respect to the business being
reinsured hereunder. There are no understandings between
the Company and the Reinsurer other than as expressed in
this Agreement.
Any alteration to this Agreement will be null and void
unless made by written amendment, attached to the
Agreement and signed by both parties.
13.2 Parties to Agreement
This is an Agreement solely between the Company and the
Reinsurer. The acceptance of reinsurance hereunder will
not create any right or legal relation between the
Reinsurer and the insured, beneficiary, or any other party
to any policy of the Company which may be reinsured
hereunder.
This Agreement will be binding upon the parties hereto and
their respective successors and assigns.
13.3 Inspection of Records
The Reinsurer, or its duly appointed representatives,
will have access to the records of the Company concerning
the business reinsured hereunder for the purpose of
inspecting, auditing and photocopying those records. Such
access will be provided at the office of the Company and
will be during reasonable business hours.
Provided there is business in force under this Agreement,
the Reinsurer's right of access as specified above will
survive the term of the Agreement.
13.4 Good Faith
All matters with respect to this Agreement require the
utmost good faith of both parties.
Each party represents and warrants to the other party that
it is solvent on a statutory basis in all states in which
it does business or is licensed. Each party will promptly
notify the other if it is subsequently financially
impaired.
The Reinsurer has entered into this Agreement in reliance
upon the Company's representations and warranties. The
Company affirms that it has and will continue to
24
disclose all matters material to this Agreement. Examples
of such matters are a change in underwriting or issue
practices or philosophy, a change in underwriting or
claims management personnel, or a change in the Company's
ownership or control.
The Company affirms that the underwriting, administration
and claims practices it employs are consistent with the
customary and usual practices of the insurance industry
as a whole. Should the Company engage in exceptional or
uncustomary practices, it will inform the Reinsurer of
such action and obtain its written consent before
assigning any liability to the Reinsurer with respect
to any policies covered under this Agreement.
13.5 Confidentiality
Both the Company and the Reinsurer will hold confidential
and not disclose or make competitive use of any shared
proprietary information unless otherwise agreed to in
writing, or unless the information otherwise becomes
publicly available or the disclosure of which is required
for retrocession purposes or has been mandated by law or
is duly required by external auditors.
25
Article 14
14.1 Duration of Agreement
This Agreement is unlimited as to its duration. The
Reinsurer or the Company may terminate this Agreement by
14.1.1 Giving at least 90 days written notice to that
effect to the other party; or
14.1.2 As provided elsewhere in this Agreement.
During the 90 day notification period, the Reinsurer will
continue to accept policies covered under the terms of
this Agreement.
Further, the Reinsurer remains liable for all Reinsured
Policies in force at the date of the termination, set
forth in the notice, until their natural expiration,
unless the parties mutually decide otherwise or as
specified otherwise in this Agreement.
14.2 Severability
If any provision of this Agreement is determined to be
invalid or unenforceable, such determination will not
affect or impair the validity or the enforceability of
the remaining provisions of this Agreement.
14.3 Construction
The rights and obligations under this Agreement will be
construed and administered in accordance with the laws
of the Company's state of domicile stated in Exhibit A-1 .
26
Made in duplicate and executed by both parties.
Signed for and on behalf of The Union Central Life Insurance
Company
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President & Actuary Title: 2nd Vice President
Date: June 1, 2001 Place: Cincinnati, Ohio
Signed for and on behalf of Swiss Re Life & Health America Inc.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: VP Life Marketing Title: 2nd VP
Date: June 30, 2000 Place: Stamford, CT