Exhibit 6.g.i
[LOGO] Scottish RE
Automatic Yearly Renewable Term
Reinsurance Agreement
between
GE LIFE AND ANNUITY ASSURANCE COMPANY
Richmond, Virginia
(the "Company")
and
SCOTTISH RE (U.S.), Inc.
Charlotte, North Carolina
(the "Reinsurer")
This Agreement is effective February 4, 2002
Treaty Number 1062
TABLE OF CONTENTS
Article Page
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1. Preamble 1
2. Automatic Reinsurance 2
3. Facultative Reinsurance 3
4. Liability 4
5. Reinsurance Benefits 5
6. Premiums 6
7. Reserves 7
8. Reductions, Terminations and Changes 8
9. Conversions and Replacements 10
10. Claims 11
11. Recapture 13
12. General Provisions 15
13. Errors and Omissions 16
14. Confidentiality 17
15. Assignment 18
16. DAC Tax 19
17. Insolvency 20
18. Negotiation 21
19. Arbitration 22
20. Duration of Agreement 24
21. Execution 25
Schedules
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A Plans, Retention and Binding Limits
B Reinsurance Premiums
C Self Administered Reporting
D Underwriting Guidelines and Notification
Article 1
PREAMBLE
1.1. Parties to the Agreement. This is an agreement for Indemnity reinsurance
(the "Agreement") solely between GE Life and Annuity Assurance Company, of
Virginia (the "Company") and Scottish Re (U.S.), Inc., domiciled in
Delaware with offices in North Carolina (the "Reinsurer"), collectively
referred to as "the parties".
The acceptance of risks under this Agreement will create no right or legal
relationship between the Reinsurer and the insured, policy owner, or
beneficiary of any insurance policy or other contract of the Company. The
Company is solely liable to the insured, policy owner and beneficiary.
1.2. Construction. This Agreement will be construed in accordance with the laws
of the state of Delaware. Furthermore, this Agreement is a freely
negotiated contract between the Company and the Reinsurer and will not be
construed against either party due to the fact that it was the party that
drafted the Agreement.
1.3. Entire Agreement. This Agreement constitutes the entire agreement between
the Company and the Reinsurer with respect to the business reinsured
hereunder. There are no understandings between the parties other than as
expressed in this Agreement. Any change or modification to this Agreement
will be null and void unless made by amendment to this Agreement and signed
by both parties.
1.4. 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. Provided, however, that if by operation of this Section 1.4, the
rights and obligations of either the Company or the Reinsurer are
materially altered, the parties will negotiate a mutually acceptable
replacement provision to preserve the intent of the parties.
1
Article 2
AUTOMATIC REINSURANCE
2.1. General Conditions. On and after the effective date of this Agreement, the
Company will cede and the Reinsurer will accept reinsurance on the life
insurance policies, supplemental benefits, and riders listed in Schedule A,
provided that the issuance of the insurance by the Company constitutes the
transaction of business in a jurisdiction in which the Company is properly
licensed and the insurance is issued on the lives of residents of the
United States and Canada.
2.2. Coverage. When the Company retains its maximum limit of retention on a
life, as shown in Schedule A, the Reinsurer will automatically accept its
share of the policies up to the limits shown in Schedule A, provided that:
a. the policies are fully underwritten by employees of the Company
in accordance with the Company's normal underwriting guidelines
and practices, in accordance with Schedule D, and
b. the total amount of new reinsurance and the amount of reinsurance
in force with the Reinsurer on the life does not exceed the
Automatic Binding Limit shown in Schedule A, and
c. the amount of life insurance in force in all companies, including
any coverage to be replaced, plus the amount currently being
applied for on the life, does not exceed the Jumbo Limit shown in
Schedule A, and
d. the application is on a life that has not been submitted
facultatively to the Reinsurer or any other reinsurer within the
last five years, unless the reason for the original facultative
submission was capacity which may now be accommodated under the
terms of this Agreement.
2.3. Limits. If, due to previously issued policies, the Company has reached its
retention limit on a life, the Reinsurer will automatically accept
reinsurance on that life up to the limits shown in Schedule A, provided
that the Company has applied the same underwriting guidelines and practices
that it would have applied if the new policy had fallen within its
retention.
2
Article 3
FACULTATIVE REINSURANCE
Facultative reinsurance will not be covered under this Agreement.
3
Article 4
LIABILITY
4.1. Automatic Reinsurance. The liability of the Reinsurer on any automatic
reinsurance covered under this Agreement will commence simultaneously with
that of the Company, subject to the provisions of Article 2.
4.2. Conditional Receipt or Temporary Insurance Coverage. The Reinsurer will
accept liability on the Company's Conditional Receipt or Temporary
Insurance Coverage up to its share of the amount shown in Schedule A,
provided that the Company follows its normal cash-with-application
procedures for such coverages. All Conditional Receipt and Temporary
Insurance Coverage forms in use by the Company, as well as any subsequent
changes or modifications, must be approved in writing by the Reinsurer. The
Reinsurer's liability will commence and end simultaneously with the
Company's Conditional Receipt or Temporary Insurance Coverage liability.
4
Article 5
REINSURANCE BENEFITS
5.1. Life. Reinsurance under this Agreement is on a Yearly Renewable Term basis.
The reinsurance benefit will be the net amount at risk reinsured,
determined in the manner described below.
Variable Universal Life Plans. The net amount at risk of the policy is
defined to be the death benefit minus the account value. The reinsured
net amount at risk at each policy duration is the net amount at risk
of the policy at each duration minus the initial amount retained by
the Company, times the quota share percentage reinsured under this
Agreement.
5.2. Disability Waiver of Premium. The Disability Waiver of Premium benefit
amount reinsured will not be greater than the corresponding life insurance
benefit reinsured. For Variable Universal products, the Waiver of Premium
benefit will be defined as the cost of insurance premium waived by the
Company.
5.3. Accidental Death Benefit. The Accidental Death Benefit amount reinsured
will not be greater than the amount of the corresponding life insurance
benefit reinsured.
5
Article 6
PREMIUMS
6.1. Premiums. Reinsurance premiums for Life insurance and other benefits
reinsured under this Agreement are shown in Schedule B. The premiums will
be applied to the net amount at risk reinsured.
6.2. Payment of Premiums. Reinsurance premiums are payable in accordance with
the method outlined in Schedule C.
6.3. Delayed Payment. Undisputed premium balances that remain unpaid for more
than 60 days from the remit date will incur interest from the end of the
reporting period. The remit date is defined as 20 days after the end of the
reporting period. Interest will be calculated using the 13-week Treasury
Bill rate reported in the "Money Rates" section of the Wall Street Journal
for the last business day of the month of that reporting period.
6.4. Failure to Pay Premiums. The payment of reinsurance premiums is a condition
precedent to the liability of the Reinsurer for reinsurance covered under
this Agreement. In the event that reinsurance premiums are not paid within
90 days of the remit date, the Reinsurer will have the right to terminate
the reinsurance on all policies having reinsurance premiums in arrears. If
the Reinsurer elects to exercise its right of termination, it will give the
Company 30 days notice of its intention to terminate said reinsurance. Such
notice will be sent by certified mail, return receipt requested. If all
reinsurance premiums in arrears, including any which may become in arrears
during the 30 day period, are not paid before the expiration of said
period, the Reinsurer will be relieved of all liability under those
policies as of the last date to which premiums have been paid for each
policy. Reinsurance on policies on which reinsurance premiums subsequently
fall due will automatically terminate as of the last date for which
premiums have been paid for each policy, unless reinsurance premiums on
those policies are paid before their remit dates. Terminated reinsurance
may be reinstated, subject to approval by the Reinsurer, within 60 days of
the date of the termination, and upon payment of all reinsurance premiums
in arrears including any interest accrued thereon. The Reinsurer will have
no liability for any claims incurred between the date of termination and
the date of the reinstatement of the reinsurance. The right to terminate
reinsurance will not prejudice the Reinsurer's right to collect premiums
for the period during which reinsurance was in force prior to the
expiration of the 30 days notice.
6.5. Premium Rate Guarantee. The Reinsurer anticipates continuing to accept
premiums on the basis of the rates shown in Schedule B; however, the
Reinsurer can only guarantee that the life reinsurance premium rates
payable under this Agreement will not exceed the one-year term net premiums
computed on the 1980 CSO Mortality Table at the maximum valuation interest
rate allowable for the policies reinsured.
If the Reinsurer raises its reinsurance premium rates on any block of
inforce business reinsured under this Agreement, on which the Company has
not raised its retail premiums or cost-of-insurance charges, the Company
may recapture that block of business without penalty as of the effective
date of the increase in reinsurance premiums. The recapture will become
effective on individual policy anniversary dates beginning no sooner than
30 days after the Company has provided notice of its intent to recapture.
6
Article 7
RESERVES
7.1. Reserves. The parties intend that the Company will receive statutory
reserve credit in its state of domicile for the insurance risks ceded to
the Reinsurer. The parties agree to make all reasonable efforts to ensure
that this is accomplished.
7
Article 8
REDUCTIONS, TERMINATIONS AND CHANGES
Whenever a change is made in the status, plan, amount or other material feature
of a policy reinsured under this Agreement, the Reinsurer will, upon receipt of
notification of the change, provide adjusted reinsurance coverage in accordance
with the provisions of this Agreement. The Company will notify the Reinsurer of
any such change within 60 days of its effective date.
8.1. Reductions and Terminations. In the event of the reduction, lapse or
termination of a reinsured policy, the Company will, in order to maintain
its full retention, reduce or terminate reinsurance on that life, effective
on the same date.
If reinsurance is on an excess basis, the reinsured amount will be reduced
by the full amount of the reduction on the policy. If the amount of
reduction exceeds the risk amount reinsured, the reinsurance on the policy
will be terminated. If there is more than one reinsured policy on the life,
the reinsurance reduction will apply first to the policy being reduced and
then, on a chronological basis, to other reinsured policies on the life
commencing with the oldest policy. Termination or reduction of a fully
retained policy will cause a corresponding reduction in existing
reinsurance on that life, with the oldest policy being reduced first.
If reinsurance is on a Quota Share basis, the amount reinsured and the
amount retained by the Company will be reduced proportionately.
The Reinsurer will refund any unearned reinsurance premiums. However,
policy fees will be deemed earned for a policy year if the policy is
reinsured during any portion of that policy year.
8.2. Increases.
8.2.1. Noncontractual Increases. If the amount of insurance is increased as
a result of a noncontractual change, the increase will be considered new
reinsurance under this Agreement and will be underwritten by the Company in
accordance with its customary standards and procedures. If reinsurance is
on a Quota Share basis, the Company and the Reinsurer will share the
increased amount proportionately. Once the Company's maximum retention has
been reached, the remaining amount will be reinsured. The Reinsurer's
approval is required if the new amount will cause the reinsured amount on
the life to exceed either the Automatic Binding Limits or the Jumbo Limits
shown in Schedule A.
8.2.2. Contractual Increases. Reinsurance on net amount at risk increases
resulting from contractual policy provisions will be accepted only up to
the Automatic Binding Limits shown in Schedule A. Reinsurance premiums for
contractual increases will be on an attained-age/attained-duration basis.
8
Article 8 (continued)
REDUCTIONS, TERMINATIONS AND CHANGES
8.3. Risk Classification Changes. If the policyholder requests a Table Rating
reduction or removal of a Permanent Flat Extra, such change will be
underwritten according to the Company's normal underwriting practices.
8.4. Reinstatement. If a lapsed policy is reinstated in accordance with its
terms and in accordance with Company rules and procedures, the Reinsurer
will, upon receipt of notification of reinstatement, reinstate the
reinsurance coverage. Upon reinstatement of the reinsurance coverage, the
Company will pay the reinsurance premiums that would have accrued had the
policy not lapsed, together with interest at the same rate as the Company
receives under its policy.
8.5. Nonforfeiture Benefits.
8.5.1. Extended Term. If the original policy lapses and extended term
insurance is elected under the terms of the policy, reinsurance will
continue on the same basis as under the original policy until the expiry of
the extended term period.
8.5.2. Reduced Paid-up. If the original policy lapses and reduced paid-up
insurance is elected under the terms of the policy, the amount reinsured
will be reduced. If reinsurance is on an excess basis, reinsurance will be
reduced by the full amount of the reduction. If the amount of reduction
exceeds the risk amount reinsured, the reinsurance on the policy will be
terminated. If reinsurance is on a Quota Share basis, the amount reinsured
and the amount retained will be reduced proportionately. The reinsurance
premiums will be calculated in the same manner as reinsurance premiums were
calculated on the original policy.
9
Article 9
CONVERSIONS AND REPLACEMENTS
If a policy reinsured under this Agreement is converted, exchanged or replaced,
the Company will promptly notify the Reinsurer. Unless mutually agreed, policies
that had been reinsured with another reinsurer and that exchange or convert to a
plan covered under this Agreement will not be reinsured hereunder.
9.1. Conversions. The Reinsurer will continue to reinsure policies resulting
from the contractual conversion of any policy reinsured hereunder.
Reinsurance premium rates for conversions will be on an
attained-age/attained-duration basis at the same reinsurance premium rates
as those for the original policy.
If the conversion results in an increase in risk, the increase will be
underwritten by the Company in accordance with its customary standards and
procedures. The Reinsurer will accept such increases, subject to the new
business provisions of the Agreement. Reinsurance premiums for increases
will be first-year premiums at the agreed upon premium rate.
9.2. Exchanges and Replacements. A policy resulting from an exchange or
replacement will be underwritten by the Company in accordance with its
underwriting guidelines, standards and procedures for exchanges and
replacements. If the Company's guidelines treat the policy as new business,
then the reinsurance will also be considered new business. For purposes of
this Article, new business is defined as those policies on which:
a. The Company has obtained complete and current underwriting
evidence on the full amount; and
b. The full normal commissions are paid for the new plan; and
c. The Suicide and Contestable provisions apply as if the policy
were newly issued.
If new business provisions do not apply, the Company and the Reinsurer must
specifically agree on terms and procedures for the reinsurance coverage to
continue; otherwise, reinsurance coverage will terminate.
10
Article 10
CLAIMS
Claims covered under this Agreement include only death claims, payable as a
result of the death of an insured on a policy reinsured under this Agreement, as
well as additional benefits specified in Schedule A.
10.1. Notice. The Company will notify the Reinsurer, as soon as possible, after
it receives a claim on a policy reinsured under this Agreement.
10.2. Proofs of Loss. The Company will promptly provide the Reinsurer with
proper claim proofs, including a copy of the proof of payment by the
Company and a copy of the insured's death certificate. For contestable
claims, the Company will also send the Reinsurer a copy of all underwriting
papers and investigation reports.
10.3. Liability. Upon receipt of proper claim notice and proof of the claim, the
Reinsurer will promptly pay the reinsurance benefits due the Company. The
Company's contractual liability for claims on policies reinsured under this
Agreement is binding on the Reinsurer. However, for claims incurred during
the contestable period, if the total amount of reinsurance is greater than
the amount retained by the Company, or if the Company retained less than
its usual retention on the policy, the Company will consult with the
Reinsurer before conceding liability or making settlement to the claimant.
The total reinsurance recoverable from all companies will not exceed the
Company's total contractual liability on the policy minus the amount
retained. The maximum reinsurance death benefit payable to the Company
under this Agreement on each reinsured policy is the net amount at risk
specifically reinsured with the Reinsurer. The Reinsurer will also pay its
proportionate share of interest that the Company pays on the death
proceeds.
10.4. Settlement.
10.4.1. Life. For life insurance claims, the Reinsurer will pay its share
of death benefits in a single sum, regardless of the form of claim
settlement by the Company.
10.4.2. Waiver of Premium. For an approved Waiver of Premium claim, the
Reinsurer will pay its share of the gross premium waived by the Company,
and the Company will continue to pay the total reinsurance premium,
excluding the corresponding waiver reinsurance premium.
10.5. Contestable Claims. The Company will promptly notify the Reinsurer of its
intention to contest, compromise, or litigate a claim involving a reinsured
policy. The Company will also promptly and fully disclose all information
relative to the claim. The Reinsurer will notify the Company of its
decision to accept participation in the contest, compromise, or litigation.
If the Reinsurer has accepted participation, the Reinsurer will participate
in the same proportion that the amount at risk reinsured with the Reinsurer
bears to the total amount at risk to the Company on the claim and will
share in the reduction in liability in the same proportion. The Company
will promptly advise the Reinsurer of all significant developments in the
claim investigation, including notification of any legal proceedings
against it in response to denial of the claim.
If the Reinsurer does not accept participation, the Reinsurer will then
fulfill its obligation by paying the Company its full share of reinsurance
and will be relieved of all future liability on the claim, and will not
share in any subsequent reduction in liability.
11
Article 10 (continued)
10.6. Claim Expenses. The Reinsurer will pay its share of reasonable claim
investigation and legal expenses incurred as a result of the litigation or
settlement of contractual liability claims unless the Reinsurer has
discharged its liability in accordance with Section 10.5, above. If the
Reinsurer has so discharged its liability, the Reinsurer will not
participate in any expenses incurred thereafter.
The Reinsurer will not reimburse the Company for routine claim and
administration expenses, including the expenses or compensation of officers
and employees of the Company. The Reinsurer will not reimburse expenses
incurred by the Company as a result of a dispute arising out of conflicting
claims of entitlement to policy proceeds or benefits.
10.7. Misrepresentation or Suicide. If the Company returns premium to the
policyowner or beneficiary as a result of misrepresentation or suicide of
the insured, the Reinsurer will refund to the Company all reinsurance
premiums received on that policy in lieu of any other form of reinsurance
benefit payable under this Agreement.
10.8. Misstatement of Age or Sex. In the event of a change in the amount of the
Company's liability on a reinsured policy due to a misstatement of age or
sex, the Reinsurer's liability will change proportionately. Reinsurance
premiums will be adjusted from the inception of the policy, and any
difference will be settled without interest.
10.9. Extra-Contractual Damages. The Reinsurer will not participate in punitive
or compensatory damages that are awarded against the Company as a result of
an act, omission, or course of conduct committed solely by the Company in
connection with claims covered under this Agreement. The Reinsurer will,
however, pay its share of statutory penalties awarded against the Company
in connection with claims covered under this Agreement if the Reinsurer
elected to join the contest of the coverage in question.
For purposes of this Article the following definitions will apply:
"Punitive Damages" are those damages awarded as a penalty, the amount
of which is neither governed nor fixed 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;
"Statutory Penalties" are those amounts awarded as a penalty, but are
fixed in amount by statute.
However, in the case of a claim described under Section 10.5 and if the
Company follows the Reinsurer's recommendation, the Reinsurer recognizes
that circumstances may arise under which the Reinsurer, in equity, should
share in the payment of certain damages. Such circumstances are difficult
to define in advance, but involve those situations in which the Reinsurer
was an active party in the act, omission or course of conduct that
ultimately resulted in the assessment of such damages. The extent of such
sharing is dependent on a good faith assessment of culpability in each
case, but all factors being equal, the division of any such assessment
would be in proportion to the impact the Reinsurer's recommendations had on
such damages.
12
Article 11
RECAPTURE
11.1. Recapture. Whenever the Company changes its retention limits, it will
notify the Reinsurer, in writing, sixty days in advance of the effective
date of change. If the Company increases its retention limits, it may
exercise its right of recapture provided that all of the conditions shown
below are met.
If reinsurance is on an excess basis, the Company may recapture an amount
corresponding to the increase in its retention. If reinsurance is on a
quota share basis, the Company will maintain the existing quota share
percentage of retention on the policy, however, it may apply the percentage
up to the new increased retention limits.
11.2. Conditions. The conditions that must be met for recapture are:
a. The reduction of reinsurance on affected policies will become
effective on the policy anniversary date immediately following
the notice of election to recapture; provided, however, that no
reductions will be made until a policy has been in force for at
least 10 years;
b. The Company will give the Reinsurer sixty days advance written
notice of its intention to recapture existing business reinsured
under this Agreement;
c. The Company has maintained its maximum retention for the plan,
the insured's age and mortality classification;
d. In applying the Company's new retention limits, the new retention
will be based on (a) the insured's age at the time the
reinsurance was ceded to the Reinsurer and (b) the mortality
classification at the time of the recapture;
e. If any reinsured policy is recaptured, all reinsured policies
eligible for recapture must be recaptured up to the Company's new
maximum retention limits in a consistent manner and the Company
must increase its total amount of insurance on each reinsured
life. The Company may not revoke its election to recapture for
policies becoming eligible at future anniversaries;
f. If the reinsurance on the policy was ceded to more than one
reinsurer, the Reinsurer's reduction will be in proportion to its
share of the total reinsurance on the life;
g. No reduction may be made in any supplemental benefits reinsured
unless the life reinsurance is also being reduced;
h. If, at the time of recapture, the risk is an active claim for
Waiver of Premium Disability, the life risk will be considered
subject to recapture. However, the original disability
reinsurance will remain in effect until such time as the
disability ceases.
13
Article 11 (continued)
RECAPTURE
11.3. Recapture Liability. The Reinsurer will not be liable for any reinsured
policies or portions of such policies that were eligible for recapture and
were overlooked. The acceptance by the Reinsurer of reinsurance premiums
after the effective dates of recapture will not constitute or determine
liability on the part of the Reinsurer for such reinsurance and the
Reinsurer will be liable only for a refund of the premiums so received,
without interest.
14
Article 12
GENERAL PROVISIONS
12.1. Currency. All payments under this Agreement will be made in United States
currency. All amounts expressed in this Agreement and in any reports
produced by either the Company or the Reinsurer will be expressed in United
States currency.
12.2. Offset. Any debts or credits, in favor of or against either the Reinsurer
or the Company with respect to this Agreement are deemed mutual debts or
credits and may be, upon notice to the other party, offset and only the
balance will be allowed or paid.
12.3. Premium Tax. The Reinsurer will not reimburse the Company for premium
taxes.
12.4. Inspection of Records. The Reinsurer and the Company, or duly authorized
representatives, have the right at any reasonable time to inspect, at the
office of the other, all records and documents relating to the business
reinsured under this Agreement. This right of inspection will survive the
termination of this Agreement.
12.5. Company Data. The Company agrees to keep the Reinsurer informed of the
identity and terms of its policies, riders and contracts reinsured under
this Agreement, as well as special programs affecting reinsurance
hereunder. The Company will provide the Reinsurer with copies of its
application forms, policy forms, supplementary agreements, rate books, and
any other materials relevant to reinsured products.
The Company agrees to furnish the Reinsurer with all underwriting manuals
and retention schedules related to reinsurance ceded and to keep the
Reinsurer fully informed of all changes to such materials.
12.6. Interest Rate. If, under the terms of this Agreement, interest is accrued
on amounts due either the Company or the Reinsurer, such interest will be
calculated from the due date using the 13-week Treasury Bill rate reported
for the last working day of the calendar month in the "Money Rates" section
of the Wall Street Journal or comparable publication.
15
Article 13
ERRORS AND OMISSIONS
13.1. Remedy. If through unintentional error, oversight, or misunderstanding
(collectively "errors"), the Reinsurer or the Company fails to comply with
the terms of this Agreement and if, upon discovery of the error by either
party, the other is promptly notified, each will be restored to the
position that it would have occupied if the error had not occurred,
including interest.
If it is not possible to restore each party to the position that it would
have occupied, the parties will endeavor in good faith to resolve the
situation in a manner that is fair and reasonable and most closely
approximates the intent of this Agreement.
13.2. Responsibility. The Reinsurer will not, however, be responsible for
negligent or deliberate acts or for repetitive errors in administration by
the Company. If either party discovers that the Company has failed to cede
reinsurance as provided in this Agreement, or failed to comply with its
reporting requirements, the Reinsurer may require the Company to audit its
records for similar errors and to take the actions necessary to avoid
similar errors in the future.
16
Article 14
CONFIDENTIALITY
14.1. Confidentiality. The Company and the Reinsurer agree to treat Customer
Information and Proprietary Information with confidentiality in handling
and transmission of such information. Customer Information includes
medical, financial and other personal information about proposed, current,
and former policyowners, insureds, applicants, and beneficiaries of
policies issued by the Company. Proprietary Information includes
underwriting manuals and guidelines, applications and contract forms, and
premium rates and allowances of the Reinsurer and the Company, as well as
the terms of this Agreement.
The parties will not disclose such information to any other party unless
agreed to in writing, except as necessary for retrocession purposes, as
requested by external auditors, as required by court order, as required or
allowed by law or regulation, or to outside legal counsel as may be
necessary.
17
Article 15
ASSIGNMENT OF REINSURANCE
15.1. Assignment. If the Company proposes to sell, assumption reinsure, or
otherwise transfer the policies reinsured hereunder to another insurer, it
agrees to require that the other insurer assume all rights and obligations
of the Company under this Agreement. The Reinsurer may object to any such
transfer that would result in a material adverse economic impact to the
Reinsurer. If the Reinsurer so objects, the Company and the Reinsurer agree
to calculate a termination charge that will be paid by the Company to the
Reinsurer upon the transfer and this Agreement will be terminated with
respect to all policies transferred by the Company.
18
Article 16
DAC TAX
The parties to this Agreement agree to the following provisions pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulations effective December 29, 1992,
under Section 848 of the Internal Revenue Code of 1986, as amended.
a. The term "party" refers to either the Company or the Reinsurer, as
appropriate.
b. The terms used in this Article are defined by reference to Regulation
Section 1.848-2, effective December 29, 1992.
c. 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).
d. 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.
e. The Company will submit a schedule to the Reinsurer by April 1 of each
year of its calculation of the net consideration for the preceding
calendar year. This schedule of calculations will be accompanied by a
statement signed by an officer of the Company stating that the
Company will report such net consideration in its tax return for the
preceding calendar year.
f. The Reinsurer may contest such calculation by providing an alternative
calculation to the Company in writing within thirty days of the
Reinsurer's receipt of the Company's calculation. If the Reinsurer
does not so notify the Company within the required time, the Reinsurer
will report the net consideration as determined by the Company in the
Reinsurer's tax return for the previous calendar year.
g. If the Reinsurer contests the Company's calculation of the net
consideration, the parties will act in good faith to reach an
agreement as to the correct amount within thirty days of the date the
Reinsurer submits its alternative calculation. If the Company and the
Reinsurer reach an agreement on an amount of net consideration, each
party will report the agreed upon amount in its tax return for the
previous calendar year.
h. The Reinsurer represents and warrants that it is subject to United
States taxation under either Subchapter L or Subpart F of Part III of
Subchapter N of the Internal Revenue Code of 1986, as amended.
19
Article 17
INSOLVENCY
17.1. Insolvency of the Company. In the event of the insolvency of the Company,
all payments due the Company by the Reinsurer will be payable directly to
the liquidator, rehabilitator, receiver, or statutory successor of the
Company, without diminution because of the insolvency, for those claims
payments allowed against the Company by any court of competent jurisdiction
or by the liquidator, rehabilitator, receiver or statutory successor having
authority to allow such claims. The Reinsurer will be liable only for the
amounts reinsured and will not be or become liable for any amounts or
reserves to be held by the Company on policies reinsured under this
Agreement.
In the event of the insolvency of the Company, the liquidator,
rehabilitator, receiver, or statutory successor will give written notice to
the Reinsurer of a pending claim against the Company on any policy
reinsured hereunder within a reasonable time after such claim is filed in
the insolvency proceeding. During the pendency of a claim, the Reinsurer
may investigate the claim and, in a proceeding where the claim is to be
adjudicated, the Reinsurer may, at its own expense, interpose in the
proceedings any defense or defenses that it may deem available to the
Company or its liquidator, rehabilitator, receiver, or statutory successor.
Subject to court approval, the expense incurred by the Reinsurer will be
chargeable against the Company as part of the expense of liquidation to the
extent of the proportionate share of the benefit that may accrue to the
Company solely as a result of the defense undertaken by the Reinsurer.
Where two or more reinsurers are participating in the same claim and a
majority in interest elects to interpose a defense or defenses to such
claim, the expense will be apportioned in accordance with the terms of the
reinsurance agreements as though such expense had been incurred by the
Company.
17.2. Insolvency of the Reinsurer. In the event of the insolvency of the
Reinsurer, the Company may, upon giving 90 days written notice to the
Reinsurer, its liquidator, receiver or statutory successor, recapture all
of the business reinsured under this Agreement, subject to a mutually
agreed upon recapture fee.
17.3. Definition of Insolvency. A party to this Agreement will be deemed
insolvent if:
a. It applies for or consents to the appointment of a receiver,
rehabilitator, conservator, liquidator or statutory successor; or
b. A court order has been issued voluntarily or involuntarily placing it
into receivership, rehabilitation, conservatorship or liquidation, or
appointing a receiver, rehabilitator, conservator or liquidator; or
c. It files or consents to the filing of a petition in bankruptcy, seeks
reorganization or an arrangement with creditors or takes advantage of
any bankruptcy, dissolution, liquidation or similar law or statute.
20
Article 18
NEGOTIATION
18.1. Process. Within 15 days after the Reinsurer or the Company has given the
other party written notification of a specific dispute, each party will
appoint a designated officer of its company to attempt to resolve the
dispute. The officers will meet at a mutually agreeable location as soon as
possible and as often as necessary in order to gather and furnish the other
with all appropriate and relevant information concerning the dispute. The
officers will discuss the problem and will negotiate in good faith without
the necessity of formal arbitration proceedings. During the negotiation
process, all reasonable requests made by one officer to the other for
information will be honored. The specific format for such discussions will
be decided by the designated officers.
18.2. Decision. If the officers cannot resolve the dispute within 30 days of
their first meeting, the dispute will be submitted to formal arbitration,
unless the parties agree in writing to extend the negotiation period for an
additional 30 days.
21
Article 19
ARBITRATION
19.1. Intention. It is the intention of the Reinsurer and the Company 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 parties agree to act in all matters with the highest good faith.
However, if the Reinsurer and the Company cannot mutually resolve a dispute
that arises out of or relates to this Agreement, and the dispute cannot be
resolved through the Negotiation process, the dispute will be decided
through arbitration.
19.2. Process. To initiate arbitration, either the Company or the Reinsurer will
notify the other party by certified mail of its desire to arbitrate,
stating the nature of the dispute and the remedy sought. The party to which
the notice is sent will respond to the notification in writing within 10
days of its receipt.
There will be three arbitrators who will be current or former officers of
life insurance or life reinsurance companies other than the parties to this
Agreement, their affiliates or subsidiaries. Each of the three arbitrators
will be impartial regarding the dispute. Each of the parties to this
Agreement will appoint one of the arbitrators and these two will select the
third. If either party refuses or neglects to appoint an arbitrator within
60 days after the other party has given written notice to the other of its
arbitrator appointment, the party that has given notice may appoint the
second arbitrator. If the two arbitrators do not agree on a third
arbitrator within 30 days of the appointment of the second arbitrator, then
the Company and the Reinsurer will each name three candidates to serve as
the third arbitrator. Beginning with the party that did not initiate
arbitration, each party will eliminate one candidate from the six until one
remains. If this candidate declines to serve as the arbitrator, then 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.
19.3. Arbitration Hearing. The arbitration hearing will be held on the date set
by the arbitrators at a mutually agreed upon location. In no event will
this date be later than 6 months after the appointment of the third
arbitrator. As soon as possible, the arbitrators will establish arbitration
procedures as warranted by the facts and issues of the particular case. At
least 15 days prior to the arbitration hearing, each party will 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 will
have the power to decide all substantive and procedural rules of the
arbitration including but not limited to inspection of documents,
examination of witnesses and any other matter relating to the conduct of
the arbitration.
19.4. Decision. The arbitrators will base their decision on the terms and
conditions of this Agreement and the customs and practices of the insurance
and reinsurance industries rather than on strict interpretation of the law.
The decision of the arbitrators will be
22
Article 19, (continued)
ARBITRATION
made by majority rule, submitted in writing, and will be final and binding
on both parties. There will be no appeal from the decision. Either party to
the arbitration may petition any court having jurisdiction over the parties
to reduce the decision to judgment.
19.5. Costs of Arbitration. Unless the arbitrators decide otherwise, each party
will bear the expense of its own arbitration activities, including its
appointed arbitrator and any outside attorney and witness fees. The parties
will jointly bear the expense of the third arbitrator.
23
Article 20
DURATION OF AGREEMENT
This Agreement is unlimited in duration. However, the Company or the Reinsurer
may terminate this Agreement with respect to the reinsurance of new business by
either party giving 90 days written notice of termination to the other, such
notice to be sent by certified mail.
The Company will continue to cede and the Reinsurer will continue to accept new
business during the 90-day period. Reinsurance on all reinsured policies in
force at the end of the 90-day period will remain in force until the termination
or expiry of such policies or until the contractual termination of reinsurance
under the provisions of this Agreement.
24
Article 21
EXECUTION
The Company and the Reinsurer declare that this Agreement and all its terms will
be effective as of February 4, 2002, and will apply to all eligible policies
with issue dates on or after such date.
In witness whereof, the parties to this Agreement have executed this Agreement
in duplicate.
Treaty #1062
Scottish Re (U.S.), Inc.
By: /s/ Illegible Attest: /s/ Illegible
------------------------------ --------------------------
Title: President & Coo Title: Vice President
Date: 2-14-02 Date: 2/14/02
GE Life and Annuity Assurance Company
By: /s/ Illegible Attest: /s/ Illegible
------------------------------ --------------------------
Title: Illegible Title: Illegible
Date: 3-21-02 Date: 3-22-2002
25
SCHEDULE A
PLANS, RETENTION AND BINDING LIMITS
1. PLANS REINSURED
Accumulator Variable Universal Life - Single and Joint Life
2. RETENTION
A. LIFE
Issue Std - Table 6 - Table 10 -
Age Table 4 Table 8 Table 16
------- ---------- ---------- ----------
0 - 75 $1,000,000 $1,000,000 $1,000,000
76 - 80 100,000 100,000 0
81 - 85 100,000 0 0
B. WAIVER OF PREMIUM
Same as Life
C. ACCIDENTAL DEATH BENEFIT
Not Reinsured
2. AUTOMATIC BINDING LIMITS
100% of the excess over the Company's retention is ceded to the Reinsurance
Pool up to the following maximum Pool binding limits.
A. LIFE
Issue Std - Table 6 - Table 10 -
Age Table 4 Table 8 Table 16
------- ----------- ----------- -----------
0 - 75 $20,000,000 $20,000,000 $20,000,000
76 - 80 2,000,000 2,000,000 0
81 - 85 2,000,000 0 0
The Reinsurer's share of the Reinsurance Pool is 20%.
B. WAIVER OF PREMIUM - Automatic Binding Limits apply only to risks with
issue ages of 18 through 65.
Same as Life
26
SCHEDULE A, pg 2
PLANS, RETENTION AND BINDING LIMITS
C. ACCIDENTAL DEATH BENEFIT
Not Applicable
4. JUMBO LIMITS
Automatic coverage of any risk will be granted only if the total amount in
force and applied for on the life in all insurance companies, including any
amount to be replaced, does not exceed the applicable amounts shown below.
a. Life: $30,000,000
b. Waiver of Premium: Premium waived on $3,000,000 of insurance.
5. TEMPORARY INSURANCE AGREEMENT
The amount of coverage provided by the Reinsurer will be limited to its
proportionate share of the excess, if any, over the Company's maximum
Temporary Insurance Agreement of $1,000,000. The maximum issue age for TIA
is age 70.
27
SCHEDULE B
REINSURANCE PREMIUMS
Life. For single-life policies, reinsurance premium rates per thousand for the
life risk will be the single-life rates shown in this Schedule B, multiplied by
the following percentages.
Class All Years
----- ---------
Super Preferred Non Tobacco 50%
Preferred Non Tobacco 73%
Standard Non Tobacco 95%
Preferred Tobacco 140%
Standard Tobacco 210%
For joint-life policies, reinsurance premium rates will be calculated by taking
the joint-life rate per dollar, shown in this Schedule B, for the appropriate
age and rating for each insured, then adding any Flat Extras as a per dollar
amount, then applying the ▇▇▇▇▇▇▇ methodology to determine the reinsurance rate
per dollar. The reinsurance premium rate will be 88% of the result. The minimum
reinsurance premium is $.12 per thousand.
Substandard Ratings. Premiums will be increased by 25% per table. Allowances
will be the same as those for the standard life coverage.
Policy Fees. To be retained by the Company.
Waiver of Premium. Reinsurance premiums will be the premiums charged by the
Company minus the following allowances.
First Year Renewals
---------- --------
85% 15%
Flat Extras. The total reinsurance premium will include the flat extra premium
minus the allowances shown below.
Type First Year Renewal
---- ---------- -------
Temporary Flat (1-5 years) 15% 15%
Permanent Flat (6 years & greater) 85% 15%
28
SCHEDULE C
SELF-ADMINISTERED REPORTING
I. PREMIUM ACCOUNTING. Reinsurance premiums are payable monthly in arrears. The
Company will calculate the amount of reinsurance premium due. If an amount is
due the Reinsurer, the Company will remit that amount with the required reports.
If an amount is due the Company, the Reinsurer will remit such amount within 30
days of receipt of the Billing Statement.
Within 15 days after the end of the month, the Company will send the Reinsurer
the following reports.
(1) Billing Statement - policy level detail in a form mutually acceptable
to the Company and Reinsurer. At a minimum, it will contain the data
elements specified in the Policy Detail section, below, and will be
segmented as follows:
New Business and Other First-Year Premiums
Renewal Premiums
Changes and Terminations - The type of change (reissue,
reinstatement, increase or decrease in Net Amount at Risk, change
in retention, change in mortality rating, continuation) or
termination will be clearly identified for each policy, as well
as effective date of change and policy duration at time of
change. Conversions/Replacements - showing the original policy
number and original policy date along with the current policy
data.
(2) Summary Accounting Report - summary of financial transactions for the
reporting period. Premiums and allowances will be summarized by the
following categories: Life, ADB, Waiver and Other;
Automatic/Facultative; First Year/Renewal/Single. Any other adjustment
will be specifically identified.
(3) Policy Exhibit Report - summary of policy movement during the
reporting period, showing policy count and reinsurance amount in force
at the beginning of the period, increases (new business,
reinstatements, other increases) during the period, decreases
(terminations, reductions, surrenders, death claims or other
decreases) by change category and the resulting in force reinsurance
at the end of the reporting period.
II. OTHER REPORTS: The following reports will be submitted on a quarterly basis
and are due 30 days after the end of the quarter:
Inforce Report - Policy level detail for each inforce policy in a form mutually
acceptable to the Company and Reinsurer. At a minimum, it should contain the
data elements specified in the Policy Detail section, below.
Reserve Report - Include number of policies, net amount at risk, statutory basic
and deficiency reserves, substandard, WP and ADB reserve and tax reserve amount
(annual) summarized by company plan code (risk classification), and by reserving
basis (Mortality Table, Interest, and Reserving Method).
29
SCHEDULE C, pg 2
SELF ADMINISTERED REPORTING
III. POLICY DETAIL
Treaty Identifier
Name of Insured (Last Name, First Name, Middle Initial)
Gender
Date of Birth
Issue Age
Tobacco Class
Underwriting Risk Classification
Substandard table rating
Flat extra premium amount
Duration of flat extra premium
Policy Number
Policy Issue Date (month, day, century, year)
Policy Status
Plan Code
Auto/facultative indicator
Reinsurance type (Coinsurance, Mod-co, YRT)
Policy fee
Shown separately for each coverage (Life, ADB, Waiver, Flat Extra, etc.)
Face amount
Retained amount
Ceded amount
Reinsurance net amount at risk
Reinsurance premium amount
Reinsurance allowance/discount amount
.. For increasing plans, Ultimate Ceded Amount
.. For participating policies, reinsured dividend amount when applicable
.. For joint policies, second insured name, DOB, gender, smoker rating, risk
class, issue age
.. For conversions/replacements, include original policy number and original
issue date
.. For billing statement detail, include transaction type (new business,
lapse, death, etc.), effective date of change and policy duration at time
of change.
.. For billing statement and inforce reporting, include effective date of tape
or statement
Reinsurer may request a change in the reporting requirements in order to obtain
data it reasonably needs to properly administer this Agreement or to prepare its
financial statements.
30
SCHEDULE D
UNDERWRITING GUIDELINES AND NOTIFICATION
The Company affirms that its retention schedule, underwriting guidelines,
issuance rules, premium rates and policy forms applicable to the reinsured
policies and in effect as of the effective date of this Agreement have been
supplied to the Reinsurer. This includes:
a. Policy Application Forms
b. Underwriting Manual and Agent's Guide
c. Policy Delivery and Reinstatement Rules
d. Medical and Non-Medical Requirements
e. Financial Questionnaires
f. Tobacco Use Guidelines
g. Preferred Underwriting Guidelines
h. Procedures for Allocation of Facultative Cases Among Reinsurers
i. Practices and applicable forms in compliance with current Medical
Information Bureau (MIB) guidelines
The Company will promptly notify the Reinsurer of any proposed material changes
in its underwriting guidelines. This Agreement will not extend to policies
issued after such changes unless the Reinsurer has consented in writing to
accept polices subject to such changes.
31
GELAAC/SCOTTISH RE ACCUMULATOR VUL PRODUCT PROPOSED REINSURANCE AGREEMENT
SECTION COMMENT/CONCERN
-----------------------------------------------------------------------------------------------------------------------------
5.1 & 5.2 Reinsurance Benefits Replace Universal Life with Variable Universal Life
-----------------------------------------------------------------------------------------------------------------------------
6.3 Delayed Premiums Number of days to remit should be changed from 15 to 20
-----------------------------------------------------------------------------------------------------------------------------
6.4 Failure to Pay Premiums Change the 60 day period to 90 days for failure to remit
-----------------------------------------------------------------------------------------------------------------------------
10.9 Extra-Contractual Damages Include our paragraph on participation in contested claims (below)
-----------------------------------------------------------------------------------------------------------------------------
Schedule A, 1. Change plan name to Accumulator
-----------------------------------------------------------------------------------------------------------------------------
Schedule C, 1. Billing mode is annually in advance. Remittance period should be 20 days. Remove duplicate
of Schedule C at the end of the treaty
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
10.9 addition:
However, in the case of a claim described under section 5 of this Article and if
the Company follows the Reinsurer's recommendation, the Reinsurer recognizes
that circumstances may arise under which the Reinsurer, 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 the Reinsurer Life was 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 a 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 the Reinsurer recommendations had on such
damages.
[LOGO] GE Financial Assurance
Financial Services Group
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Memorandum
================================================================================
DATE: March 1, 2002
TO: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
FROM: ▇▇▇ ▇▇▇▇▇
RE: GELAAC/Scottish Re Agreement
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇:
I agree with all of your comments and suggested additions. I also have the
following comment on this agreement:
SECTION COMMENT
--------------------------------------------------------------------------------
6.3 Delayed Add "Undisputed" at the beginning of the first
Premiums sentence of this section.
--------------------------------------------------------------------------------
GELAAC/SCOTTISH RE ACCUMULATOR VUL PRODUCT PROPOSED REINSURANCE AGREEMENT
SECTION COMMENT/CONCERN
-----------------------------------------------------------------------------------------------------------------------------
5.1 & 5.2 Reinsurance Benefits Replace Universal Life with Variable Universal Life
-----------------------------------------------------------------------------------------------------------------------------
6.3 Delayed Premiums Number of days to remit should be changed from 15 to 20
-----------------------------------------------------------------------------------------------------------------------------
6.4 Failure to Pay Premiums Change the 60 day period to 90 days for failure to remit
-----------------------------------------------------------------------------------------------------------------------------
10.9 Extra-Contractual Damages Include our paragraph on participation in contested claims (below)
-----------------------------------------------------------------------------------------------------------------------------
Schedule A, 1. Change plan name to Accumulator
-----------------------------------------------------------------------------------------------------------------------------
Schedule C, 1. Billing mode is annually in advance. Remittance period should be 20 days. Remove duplicate
of Schedule C at the end of the treaty
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
10.9 addition:
However, in the case of a claim described under section 5 of this Article and if
the Company follows the Reinsurer's recommendation, the Reinsurer recognizes
that circumstances may arise under which the Reinsurer, 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 the Reinsurer Life was 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 a 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 the Reinsurer recommendations had on such
damages.
CONTRACT REVIEW
Parties to the contract: GELAAC
Scottish Re
------------------------------------------
Purpose of the contract: Reinsure Accumulator VUL
------------------------------------------
------------------------------------------
Issues of concern: See attached
------------------------------------------
------------------------------------------
Person to sign for [X] LOV [ ] FFSC
(indicate appropriate corporation)
[ ] FFRL [ ] FRL Re [ ] Other:
---------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: SVP, risk
Person requesting ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Approval Level Needed: Department Head [X]
Executive Committee Member [ ]
President [ ]
Chairman [ ]
Law Department Review: Date:
------------------------------------- -------------
