AUTOMATIC AND FACULTATIVE
YEARLY RENEWABLE TERM REINSURANCE AGREEMENT
Effective October 1, 1999
Between
LIBERTY LIFE ASSURANCE COMPANY
OF BOSTON
("Ceding Company")
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And
SECURITY LIFE OF DENVER INSURANCE COMPANY
("Reinsurer")
Security Life Center
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Reinsurer Agreement No. 0316-2246
AUTOMATIC AND FACULTATIVE
YEARLY RENEWABLE TERM REINSURANCE AGREEMENT
This Agreement is between
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON (Ceding Company)
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And
SECURITY LIFE OF DENVER INSURANCE COMPANY (Reinsurer),
Security Life Center, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
The Reinsurer agrees to reinsure certain portions of the Ceding Company's
contract risks as described in the terms and conditions of this Agreement.
This reinsurance Agreement constitutes the entire Agreement between the parties
with respect to the business being reinsured hereunder and there are no
understandings between the parties other than as expressed in this Agreement.
Any change or modification to this Agreement is null and void unless made by
mendment to this Agreement and signed by both parties.
In witness of the above, the Ceding Company and the Reinsurer have by their
respective officers executed and delivered this Agreement in duplicate on the
dates indicated below, with an effective date of October 1, 1999.
LIBERTY LIFE ASSURANCE COMPANY SECURITY LIFE OF DENVER
OF BOSTON INSURANCE COMPANY
By: By:
Title: Title:
Date: Date:
By: By:
Title: Title:
Date: Date:
AUTOMATIC AND FACULTATIVE
YEARLY RENEWABLE TERM REINSURANCE AGREEMENT
Table of Contents
1. PARTIES TO AGREEMENT 1
2. REINSURANCE BASIS 1
3. AUTOMATIC REINSUARNCE TERMS 1
a. CONVENTIONAL UNDERWRITING 1
b. RETENTION 1
c. AUTOMATIC ACCEPTANCE LIMITS 2
d. AUTOMATIC IN FORCE AND APPLIED FOR LIMIT 2
e. RESIDENCE 2
f. MINIMUM CESSION 2
g. FACULTATIVE QUOTES 2
4. AUTOMATIC REINSURANCE NOTICE PROCEDURE 2
5. FACULTATIVE REINSURANCE 2
6. COMMENCEMENT OF REINSURANCE COVERAGE 3
a. AUTOMATIC REINSURANCE 3
b. FACULTATIVE REINSURANCE 3
c. PRE-ISSUE COVERAGE 3
7. BASIS OF REINSURANCE AMOUNT AND REINSURANCE PREMIUM RATES 4
a. LIFE REINSURANCE 4
b. SUPPLEMENTAL BENEFITS 4
c. TABLE RATED SUBSTANDARD PREMIUMS 4
d. FLAT EXTRA PREMIUMS 4
e. RATES NOT GUARNATEED 4
8. CASH VALUES OR LOANS 4
9. PAYMENT OF REINSURANCE PREMIUMS 4
a. PREMIUM DUE 4
b. FAILURE TO PAY PREMIUMS 5
c. OVERPAYMENT OF REINSURANCE PREMIUM 5
d. UNDERPAYMENT OF REINSURANCE PREMIUM 5
e. RETURN OF REINSURANCE PREMIUM 5
f. UNEARNED PREMIUMS 5
10. PREMIUM TAX REIMBURSEMENT 6
11. DAC TAX AGREEMENT 6
12. REPORTS 6
13. RESERVES FOR REINSURANCE 7
14. CLAIMS 7
a. NOTICE 7
b. PROOFS 7
c. AMOUNT AND PAYMENT OF BENEFITS 7
d. CONTESTED CLAIMS 7
e. CLAIMS EXPENSES 8
f. EXTRACONTRACTUAL DAMAGES 8
15. POLICY CHANGES 8
a. NOTICE 8
b. INCREASES 8
c. REDUCTION OR TERMINATION 9
d. OTHER POLICY CHANGES, CONVERSIONS, EXCHANGES, ETC 9
e. EXTENDED TERMS AND REDUCED PAID-UP INSURANCE 9
16. REINSTATEMENTS
a. AUTOMATICE REINSTATEMENT 9
b. FACULTATIVE REINSTATEMENT 9
c. PREMIUM ADJUSTEMENT 9
d. NONFORFEITURE REINSURANCE TERMINATION 10
17. INCREASE IN RETENTION 10
a. NEW BUSINESS 10
b. RECAPTURE 10
18. ERRORS AND OMISSIONS 11
19. INSOLVENCY 11
20. ARBITRATION 11
a. GENERAL 11
b. NOTICE 12
c. PROCEDURE 12
d. COSTS 12
e. OFFSET 12
21. GOOD FAITH; FINANCIAL SOLVENCY 12
22. TERM OF THIS AGREEMENT 13
23. MEDICAL INFORMATION BUREAU 13
24. SEVERABILITY 13
Listing of Schedules:
SCHEDULE A
1. Plans Reinsured
2. Automatic Portion Reinsured
3. Automatic Retention Limits
4. Automatic Acceptance Limits
5. Automatic In Force and Applied for Limits
6. Premium Due
7. Recapture Period
8. Net Amount at Risk
SCHEDULE B - AUTOMATIC REINSURANCE PREMIUMS
1. Life Insurance
2. Supplemental Benefits
3. Age Basis
4. Other Policy Changes, Conversions, Exchanges, Etc.
SCHEDULE C - REPORTING INFORMATION
Information on Risks Reinsured
Policy Exhibit Summary
Reserve Credit Summary
Accounting Summary
SCHEDULE D - FACULTATIVE FORMS
Application for Reinsurance
Notification of Reinsurance
AUTOMATIC AND FACULTATIVE
YEARLY RENEWABLE TERM
REINSURANCE AGREEMENT
1. PARTIES TO AGREEMENT.
This Agreement is solely between the Reinsurer and the Ceding Company.
There is no third party beneficiary to this Agreement. Reinsurance under
this Agreement will not create any right nor legal relationship between the
Reinsurer and any other person, for example, any insured, policy owner,
agent, beneficiary, assignee, or reinsurer. The Ceding Company agrees that
it will not make the Reinsurer a party to any litigation between any such
third party and the Ceding Company. The Ceding Company will not use the
Reinsurer's name with regard to the Ceding Company's agreements or
transactions with these third parties unless the Reinsurer gives prior
approval for the use of its name.
2. REINSURANCE BASIS.
This Agreement, including the attached Schedules, states the terms and
conditions of automatic and facultative reinsurance that is on a Yearly
Renewable Term basis. This Agreement is applicable only to reinsurance of
policies directly written by the Ceding Company. Any policies acquired
through merger of another company, reinsurance, or purchase of another
company's policies are not included under the terms of this Agreement.
3. AUTOMATIC REINSURANCE TERMS.
The Reinsurer agrees to automatically accept contractual risks on the life
insurance plans and supplemental benefits shown in Schedule A, subject to
the following requirements:
a. CONVENTIONAL UNDERWRITING.
Automatic reinsurance applies only to insurance applications
underwritten by the Ceding Company with conventional underwriting and
issue practices that are consistently applied. Conventional
underwriting and issue practices are those customarily used and
generally accepted by life insurance companies. Some examples of
non-customary underwriting practices that are not accepted for
automatic reinsurance under this Agreement are guaranteed issue, any
form of simplified underwriting, short-form applications, any form of
non-customary non-medical underwriting limits, or internal or external
policy exchanges that do not require conventional underwriting. An
example of an unacceptable issue practice is the issuance of a policy
that has contestability or suicide clauses with time limitations that
are shorter than the maximum allowed by state law.
b. RETENTION.
The Ceding Company will retain, and not otherwise reinsure, an amount
of insurance on each life equal to its retention shown in Schedule A.
If the Ceding Company's scheduled retention is zero, automatic
reinsurance is not available.
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c. AUTOMATIC ACCEPTANCE LIMITS.
On any one life, the amount automatically reinsured under all
agreements with all reinsurers must not exceed the Automatic
Acceptance Limits shown in Schedule A.
d. AUTOMATIC IN FORCE AND APPLIED FOR LIMIT.
On any one life, the total amount of life insurance in force and
applied for with all companies, of which the Ceding Company is aware,
must not exceed the In Force and Applied For Limit shown in Schedule
A.
e. RESIDENCE.
Each insured must be a resident of the United States or Canada, at the
time of issue.
f. MINIMUM CESSION.
There is no minimum cession amount for this Agreement.
g. FACULTATIVE QUOTES.
The risk must not have been submitted on a facultative basis to the
Reinsurer or any other reinsurer.
4. AUTOMATIC REINSURANCE NOTICE PROCEDURE.
After the policy has been paid for and delivered, the Ceding Company will
submit all relevant individual policy information, as defined in Schedule
C, in its next statement to the Reinsurer.
5. FACULTATIVE REINSURANCE.
The Ceding Company may apply for facultative reinsurance with the Reinsurer
on a risk if the automatic reinsurance terms are not met, or if the terms
are met and it prefers to apply for facultative reinsurance. If the Ceding
Company wishes to obtain a facultative quote from other reinsurers on a
case eligible for automatic reinsurance, the case must also be submitted to
the Reinsurer for a facultative offer. The following items must be
submitted to obtain a facultative quote:
a. A form substantially similar to the Reinsurer's "Application for
Reinsurance" form shown in Schedule D.
b. Copies of the original insurance application, medical examiner's
reports, financial information, and all other papers and information
obtained by the Ceding Company regarding the insurability of the risk.
After receipt of the Ceding Company's application, the Reinsurer will
promptly examine the materials and notify the Ceding Company either of the
terms and conditions of the Reinsurer's offer for facultative reinsurance
or that no offer will be made. The Reinsurer's offer expires 120 days after
the offer is made, unless the written offer specifically states otherwise.
If the Ceding Company accepts the Reinsurer's offer, then the Ceding
Company
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will note its acceptance in its underwriting file and mail, as soon as
possible, a formal reinsurance cession to the Reinsurer using a form
substantially similar to the "Notification of Reinsurance" form shown in
Schedule D. If the Ceding Company does not accept the Reinsurer's offer,
then the Ceding Company will notify the Reinsurer in writing, as soon as
possible. Automatic reinsurance rates can be used for facultative business
up to the limits shown in Schedule B.
6. COMMENCEMENT OF REINSURANCE COVERAGE.
Commencement of the Reinsurer's reinsurance coverage on any policy or
pre-issue risk under this Agreement is described below:
a. AUTOMATIC REINSURANCE.
The Reinsurer's reinsurance coverage for any policy that is ceded
automatically under this Agreement will begin and end simultaneously
with the Ceding Company's contractual liability for the policy
reinsured.
b. FACULTATIVE REINSURANCE.
The Reinsurer's reinsurance coverage for any policy that is ceded
facultatively under this Agreement shall begin when;
i. The Ceding Company accepts the Reinsurer's offer; and
ii. The policy has been issued.
c. PRE-ISSUE COVERAGE.
The Reinsurer will not be liable for benefits paid under the Ceding
Company's conditional receipt or temporary insurance agreement unless
all the conditions for automatic reinsurance coverage under Section 3
of this Agreement are met. The Reinsurer's liability under the Ceding
Company's conditional receipt or temporary insurance agreement is
limited to the lesser of i. or ii. below:
i. The Automatic Acceptance Limits with the Reinsurer shown in
Schedule A.
ii. The amount for which the Ceding Company is liable, less its
retention shown in Schedule A, less any amount of reinsurance
with other reinsurers.
The pre-issue liability applies only once on any given life regardless
of how many receipts were issued or initial premiums were accepted by
the Ceding Company. After a policy has been issued, no reinsurance
benefits are payable under this preissue coverage provision.
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7. BASIS OF REINSURANCE AMOUNT AND REINSURANCE PREMIUM RATES.
a. LIFE REINSURANCE.
The amount reinsured on a policy is the policy's net amount at risk
less the Ceding Company's retention available on the policy less any
amount of reinsurance with other reinsurers. The retention on each
life is shown in Schedule A. The net amount at risk is shown in
Schedule A. The reinsurance premiums per $1000 are shown in
Schedule B.
b. SUPPLEMENTAL BENEFITS.
Supplemental benefits are not reinsured under this Agreement.
c. TABLE RATED SUBSTANDARD PREMIUMS.
If the Ceding Company's policy is issued with a table rated
substandard premium, the reinsurance premiums shown in Schedule B will
apply.
d. FLAT EXTRA PREMIUMS.
If the Ceding Company's policy is issued with a flat extra premium,
the reinsurance premiums shown in Schedule B will apply.
e. RATES NOT GUARANTEED.
The reinsurance premium rates are not guaranteed. The Reinsurer
reserves the right to change the rates at any time. If the Reinsurer
changes the rates, it will give the Ceding Company 90 days' prior
written notice of the change. Any change applies only to reinsurance
premiums due after the expiration of the notice period. The maximum
reinsurance premiums are equal to the statutory valuation premiums for
yearly renewable term insurance at the maximum interest rates and
minimum mortality rates for each year of issue.
8. CASH VALUES OR LOANS.
This Agreement does not provide reinsurance for cash surrender values. In
addition, the Reinsurer will not participate in policy loans or other forms of
indebtedness on reinsured business.
9. PAYMENT OF REINSURANCE PREMIUMS
a. PREMIUM DUE.
The reinsurance premiums for each reinsurance cession are due, as
shown in Schedule A. All amounts due or otherwise accrued to any of
the parties hereto or any of their parents, affiliates, or
subsidiaries, whether by reason of premiums, losses, expenses, or
otherwise, under this agreement or any other contract heretofore or
hereafter entered into, will at all times be fully subject to the
right of offset and only the net balance will be due and payable.
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b. FAILURE TO PAY PREMIUMS.
If the reinsurance premiums are 60 days past due, for reasons other
than those due to error or omission as defined below in Section 19,
the premiums will be considered in default and the Reinsurer may
terminate the reinsurance upon 30 days' prior written notice. The
Reinsurer will have no further liability as of the termination date.
The Ceding Company will be liable for the prorated reinsurance
premiums to the termination date. The Ceding Company agrees that it
will not force termination under the provisions of this paragraph
solely to avoid the recapture requirements or to transfer the block of
business reinsured to another reinsurer.
c. OVERPAYMENT OF REINSURANCE PREMIUM
If the Ceding Company overpays a reinsurance premium and the Reinsurer
accepts the overpayment, the Reinsurer's acceptance will not
constitute nor create a reinsurance liability nor result in any
additional reinsurance. Instead, the Reinsurer will be liable to the
Ceding Company for a credit in the amount of the overpayment, without
interest.
d. UNDERPAYMENT OF REINSURANCE PREMIUM.
If the Ceding Company fails to make a full premium payment for a
policy or policies reinsured hereunder, due to an error or omission as
defined below in Section 18, the amount of reinsurance coverage
provided by the Reinsurer shall not be reduced. However, once the
underpayment is discovered, the Ceding Company will be required to pay
to the Reinsurer the difference between the full premium amount and
the amount actually paid, without interest. If payment or the full
premium is not made within 60 days after the discovery of the
underpayment, the underpayment shall be treated as a failure to pay
premiums and subject to the conditions of Paragraph 9.b., above.
e. RETURN OF REINSURANCE PREMIUM.
If a misrepresentation on an application or a death of an insured by
suicide results in the Ceding Company returning the policy premiums to
the policy owner rather than pay the policy benefits, the Reinsurer
will refund all of the reinsurance premiums it received on that policy
to the Ceding Company, without interest.
This refund given by the Reinsurer will be in lieu of all other
reinsurance benefits payable on that policy under this Agreement. If
there is an adjustment to the policy benefits due to a
misrepresentation or misstatement of age or sex, a corresponding
adjustment will be made to the reinsurance benefits.
f. UNEARNED PREMIUMS.
Unearned premiums will be returned on deaths, surrenders and other
terminations. This refund will be on a prorated basis without interest
from the date of termination of the policy to the date to which a
reinsurance premium has been paid.
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10. PREMIUM TAX REIMBURSEMENT.
Premium taxes will not be reimbursed.
11. DAC TAX AGREEMENT.
The Ceding Company and the Reinsurer herein collectively called the
"Parties", or singularly the "Party", hereby enter into an election under
Treasury Regulations Section 1.848-2(g) (8) whereby:
a. For each taxable year under this Agreement, the party with the net
positive consideration, as defined in the regulations promulgated
under Treasury Code Section 848, will capitalize specified policy
acquisition expenses with respect to this Agreement without regard to
general deductions limitation of Section 848 (c) (1);
b. The Ceding Company and the Reinsurer agree to exchange information
pertaining to the net consideration under this Agreement each year to
insure consistency or as otherwise required by the Internal Revenue
Service;
c. The Ceding Company will submit to the Reinsurer by May 1 of each year
its calculation of the net consideration for the preceding calendar
year. This schedule of calculations will be accompanied by a statement
signed by an officer of the Ceding Company stating that the Ceding
Company will report such net consideration in its tax return for the
preceding calendar year;
d. The Reinsurer may contest such calculation by providing an alternative
calculation to the Ceding Company in writing within 30 days of the
Reinsurer's receipt of the Ceding Company's calculation. If the
Reinsurer does not so notify the Ceding Company, the Reinsurer will
report the net consideration as determined by the Ceding Company in
the Reinsurer's tax return for the previous calendar year;
e. If the Reinsurer contests the Ceding Company's calculation of the net
consideration, the parties will act in good faith to reach an
agreement as to the correct amount within 30 days of the date the
Reinsurer submits its alternative calculation. If the Ceding Company
and the Reinsurer reach agreement on the net amount of consideration,
each party will report such amount in their respective tax returns for
the previous calendar year.
Both Parties represent and warrant that they are subject to U.S. taxation
under either Subchapter L of Chapter 1, or Subpart F of Subchapter N of
Chapter 1 of the Internal Revenue Code of 1986, as amended.
12. REPORTS.
The reporting period is monthly. The administrating party is the Ceding
Company. For each reporting period, the Ceding Company will submit a
statement to the Reinsurer with
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information that is substantially similar to the information displayed in
Schedule C. The statement will include information on the risks reinsured
with the Reinsurer, premiums owed, policy exhibit activity, and an
accounting summary. Within fifteen days after the end of each calendar
quarter, the Ceding Company will submit a reserve credit summary similar to
that shown in Schedule C.
13. RESERVES FOR REINSURANCE.
Reserves for this YRT Agreement shall be based [REDACTED]. The statutory
reserve basis for the reinsurance will be shown on the reserve credit
summary provided each quarter.
14. CLAIMS.
a. NOTICE.
The Ceding Company will notify the Reinsurer, as soon as reasonably
possible, after it receives a claim request.
b. PROOFS.
The Ceding Company will promptly provide the Reinsurer with proper
claim proofs, all relevant information respecting the claim, and an
itemized statement of the benefits paid by the Ceding Company.
c. AMOUNT AND PAYMENT OF BENEFITS.
As soon as the Reinsurer receives proper claim notice and proof of the
claim, the Reinsurer will promptly pay the reinsurance benefits due
the Ceding Company. The Ceding Company's contractual liability for
claims is binding on the Reinsurer. The maximum benefit payable to the
Ceding Company under each reinsured policy is the amount specifically
reinsured with the Reinsurer. The total reinsurance in all companies
on a policy must not exceed the Ceding Company's total contractual
liability on the policy, less its retention used on the policy. The
excess, if any, of the total reinsurance in all companies plus the
Ceding Company's retention used on the policy over its contractual
liability under the reinsured policy will first be applied to reduce
all reinsurance on the policy. This reduction in reinsurance will be
shared among all the reinsurers in proportion to their respective
amounts of reinsurance prior to the reduction.
d. CONTESTED CLAIMS.
The Ceding Company will notify the Reinsurer of its intention to
contest, compromise, or litigate a claim involving a reinsured policy.
If the Ceding Company's contest, compromise, or litigation results in
a reduction in its liability, the Reinsurer will share in the
reduction in the proportion that the Reinsurer's net liability bears
to the sum of the net liability of all reinsurers on the insured's
date of death. If the Reinsurer should decline to participate in the
contest, compromise or litigation,
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the Reinsurer will then release all of its liability by paying the
Ceding Company its full share of reinsurance and not sharing in any
subsequent reduction in liability.
e. CLAIM EXPENSES.
The Reinsurer will pay its share of reasonable investigation and legal
expenses connected with the litigation or settlement of contractual
liability claims unless the Reinsurer has released its liability, in
which case the Reinsurer will not participate in any expenses after
the date of release. However, claim expenses do not include routine
claim and administration expenses, including the Ceding Company's home
office expenses. Also, expenses incurred in connection with a dispute
or contest arising out of conflicting claims of entitlement to policy
proceeds or benefits that the Ceding Company admits are payable are
not a claim expense under this Agreement.
f. EXTRACONTRACTUAL DAMAGES.
The Reinsurer will not participate in and shall not be liable to pay
the Ceding Company or others for any amounts in excess of the
Reinsurer's share of the net amount at risk on the mortality risk
reinsured hereunder, including extracontractual damages or liabilities
and related expenses and fees. Extracontractual damages are any
damages awarded against the Ceding Company, including, for example,
those resulting from negligence, reckless or intentional conduct,
fraud, oppression, or bad faith committed by the Ceding Company in
connection with the mortality risk insurance reinsured under this
Agreement.
The excluded extracontractual damages shall include, by way of example
and not limitation:
i. Actual and consequential damages;
ii. Damages for emotional distress or oppression;
iii. Punitive exemplary or compensatory damages;
iv. Statutory damages, fines, or penalties;
v. Amounts in excess of the risk reinsured hereunder that the
Ceding Company pays to settle a dispute or claim;
vi. Third-party attorney fees, costs and expenses.
IS. POLICY CHANGES.
a. NOTICE.
If a reinsured policy is changed, a corresponding change will be made
in the reinsurance for that policy. The Ceding Company will notify the
Reinsurer of the change in the Ceding Company's next accounting
statement.
b. INCREASES.
If life insurance on a reinsured policy is increased and the increase
is subject to new underwriting evidence, then the increase of life
insurance on the reinsured policy will be handled the same as the
issuance of a new policy. If the increase is not subject to
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new underwriting evidence, then the increase will be automatically
accepted by the Reinsurer, but it is not to exceed the Automatic
Acceptance Limits shown in Schedule A. The reinsurance rates will be
based on the original issue age, duration since issuance of the
original policy and the original underwriting classification.
c. REDUCTION OR TERMINATION.
If life insurance on a reinsured policy is reduced, then the
reinsurance will be reduced by the amount of the reduction on the date
of such change. If more than one reinsurer participates in the
reinsurance, the reinsurance with each reinsurer will be reduced
proportionately. If life insurance on a reinsured policy is
terminated, then the reinsurance will cease on the date of such
termination.
d. OTHER POLICY CHANGES CONVERSIONS EXCHANGES, ETC.
Exchanges, replacements or other changes in the insurance reinsured
with the Reinsurer, where not fully underwritten as a new issue, will
continue to be ceded to the Reinsurer. The rates will be based on the
original issue age and duration since issuance of the original policy.
When these changes are fully underwritten, the policy will be handled
the same as the issuance of a new policy.
e. EXTENDED TERM AND REDUCED PAID-UP INSURANCE.
When a reinsured policy changes to extended term or reduced paid-up
insurance, the Ceding Company will notify the Reinsurer of the new
amount of reinsurance. The reinsurance rates will remain the same as
the rates used for the original policy and will be based on the
original issue age, duration since issuance of the original policy and
the original underwriting classification.
16. REINSTATEMENTS.
a. AUTOMATIC REINSTATEMENT.
If the Ceding Company reinstates a policy that was originally ceded to
the Reinsurer as automatic reinsurance using conventional underwriting
practices, the Reinsurer's reinsurance for that policy will be
reinstated.
b. FACULTATIVE REINSTATEMENT.
If the Ceding Company has been requested to reinstate a policy that
was originally ceded to the Reinsurer as facultative reinsurance, then
the Ceding Company will again submit the case to the Reinsurer for
underwriting approval before the reinsurance can be reinstated.
c. PREMIUM ADJUSTMENT.
The reinsurance premiums for the interval during which the policy was
lapsed will be paid to the Reinsurer on the same basis as the Ceding
Company charged its policy owner for the reinstatement.
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d. NONFORFEITURE REINSURANCE TERMINATION.
If the Ceding Company has been requested to reinstate a policy that
was reinsured while on extended term or reduced paid-up then such
reinsurance will terminate and either automatic or facultative
reinstatement procedures will be followed.
17. INCREASE IN RETENTION.
a. NEW BUSINESS.
If the Ceding Company increases its retention limits, then it may, at
its option and with written notice to the Reinsurer, increase its
retention limits shown in Schedule A for policies issued after the
effective date of the retention increase.
b. RECAPTURE.
If the Ceding Company increases its retention limits, then it may,
with 90 days' written notice to the Reinsurer, reduce or recapture the
reinsurance in force subject to the following requirements:
i. A cession is not eligible for recapture until it has been
reinsured for the minimum number of years shown in Schedule A.
The effective date of the reduction in reinsurance will be the
later of the first policy anniversary following the expiration
of the 90-day notice period to recapture and the policy
anniversary date when the required minimum of years is
attained.
ii. The Ceding Company may recapture reinsurance amounts equal to
the original quota share percentage retained times the amount
of retention increase.
iii. If more than one policy per life is eligible for recapture,
then the eligible policies may be recaptured beginning with
the policy with the earliest issue date and continuing in
chronological order according to the remaining policies' issue
dates.
iv. Recapture of reinsurance will not be allowed on any policy for
which the Ceding Company did not keep its maximum retention at
issue. The Ceding Company's retention limits are stated in
Section 3 of Schedule A.
v. If any policy eligible for recapture is also eligible for
recapture from other reinsurers, the reduction in the
Reinsurer's reinsurance on that policy will be in proportion
to the total amount of reinsurance on the life with all
reinsurers.
vi. Recapture will not be made on a basis that may result in any
anti-selection against the Reinsurer. The Reinsurer maintains
the discretion to determine when anti-selection has occurred.
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18. ERRORS AND OMISSIONS.
Any unintentional or accidental failure of the Ceding Company or the
Reinsurer to comply with the terms of this Agreement which can be shown to
be the result of an oversight, misunderstanding or clerical error, will not
be deemed 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 Ceding Company and the Reinsurer shall negotiate in good
faith to equitably apportion any resulting liabilities and expenses.
This provision applies only to oversights, misunderstandings or clerical
errors relating to the administration of reinsurance covered by this
Agreement. This provision does not apply to the administration of the
insurance provided by the Ceding Company to its insured or any other errors
or omissions committed by the Ceding Company with regard to the policy
reinsured hereunder.
19. INSOLVENCY.
In the event that the Ceding Company is deemed insolvent, all reinsurance
claims payable hereunder will be payable by the Reinsurer directly to the
Ceding Company, its liquidator, receiver or statutory successor, without
diminution because of the insolvency of the Ceding Company. It is
understood, however, that in the event of such insolvency, the liquidator,
receiver or statutory successor of the Ceding Company will give written
notice to the Reinsurer of the pendency of a claim against the Reinsurer on
a risk reinsured hereunder within a reasonable time after such claim is
filed in the insolvency proceeding. Such notice will indicate the policy
reinsured and whether the claim could involve a possible liability on the
part of the Reinsurer. During the pendency of such claim, the reinsurer may
investigate such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses it may deem
available to the Ceding Company, its liquidator, receiver or statutory
successor. It is further understood that the expense thus incurred by the
Reinsurer will be chargeable, subject to court approval, against the Ceding
Company as part of the expense of liquidation to the extent of a
proportionate share of the benefit that may accrue to the Ceding Company
solely as a result of the defense undertaken by the Reinsurer.
20. ARBITRATION.
a. GENERAL.
All disputes and differences under this Agreement that cannot be
amicably agreed upon by the parties will be decided by arbitration.
The arbitrators will have the authority to interpret this Agreement
and, in doing so, will consider the customs and practices of the life
insurance and reinsurance industries. The arbitrators will consider
this Agreement an honorable engagement rather than merely a legal
obligation, and they are relieved of all judicial formalities and may
abstain from following the strict rules of the law.
11
b. NOTICE.
To initiate arbitration, one of the parties will notify the other, in
writing, of its desire to arbitrate. The notice will state the nature
of the dispute and the desired remedies. The party to which the notice
is sent will respond to the notification in writing within 10 days of
receipt of the notice. At that time, the responding party will state
any additional dispute it may have regarding the subject of
arbitration.
c. PROCEDURE.
Arbitration will be heard before a panel of three arbitrators. The
arbitrators will be executive officers of life insurance or
reinsurance companies; however, these companies will not be either
party nor their affiliates. Each party will appoint one arbitrator.
Notice of the appointment of these arbitrators will be given by each
party to the other party within 30 days of the date of mailing of the
notification initiating the arbitration. These two arbitrators will,
as soon as possible, but no longer than 45 days after the day of the
mailing of the notification initiating the arbitration, then select
the third arbitrator. Should either party fail to appoint an
arbitrator or should the two initial arbitrators be unable to agree on
the choice of a third arbitrator, each arbitrator will nominate three
candidates, two of whom the other will decline, and the decision will
be made by drawing lots on the final selection. Once chosen, the three
arbitrators will have the authority to decide all substantive and
procedural issues by a majority vote. The arbitration hearing will be
held on the date fixed by the arbitrators at a location agreed upon by
the parties. The arbitrators will issue a written decision from which
there will be no appeal. Either party may reduce this decision to a
judgment before any court that has jurisdiction of the subject of the
arbitration.
d. COSTS.
Each party will pay the fees of its own attorneys, the arbitrator
appointed by that party, and all other expenses connected with the
presentation of its own case. The two parties will share equally in
the cost of the third arbitrator.
The arbitrators shall operate in a fair but cost efficient manner. For
example, the arbitrators are not bound by technical rules of evidence
and may limit the use of depositions and discovery.
e. OFFSET
All amounts due or otherwise accrued to any of the parties hereto or
any of their parents, affiliates, or subsidiaries, whether by reason
of premiums, losses, expenses, or otherwise, under this agreement or
any other contract heretofore or hereafter entered into, will at all
times be fully subject to the right of offset and only the net balance
will be due and payable.
21. GOOD FAITH; FINANCIAL SOLVENCY.
The Ceding Company agrees that all matters with respect to this Agreement
require its utmost good faith. The Reinsurer or its representatives have
the right at any reasonable time
12
to inspect the Ceding Company's records relating to this Agreement. 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 agrees to promptly notify the other if it is subsequently
financially impaired. The Reinsurer has entered into this Agreement in
reliance upon the Ceding Company's representations and warranties. The
Ceding Company affirms that it has disclosed and will continue to disclose
to the Reinsurer all matters material to this Agreement and each
reinsurance cession. Examples of such matters are a change in underwriting
or issue practices or philosophy, a change in underwriting management
personnel, or a change in the Ceding Company's ownership or control.
22. TERM OF THIS AGREEMENT.
The Ceding Company will maintain and continue the reinsurance provided in
this Agreement as long as the policy to which it relates is in force or has
not been fully recaptured. This Agreement may be terminated, without cause,
for the acceptance of new reinsurance after 90 days' written notice of
termination by either party to the other. The Reinsurer will continue to
accept reinsurance during this 90-day period. The Reinsurer's acceptance
will be subject to both the terms of this Agreement and the Ceding
Company's payment of applicable reinsurance premiums. In addition, this
Agreement may be terminated immediately for the acceptance of new
reinsurance by either party if one of the parties materially breaches this
Agreement, or becomes insolvent or financially impaired.
23. MEDICAL INFORMATION BUREAU.
The Reinsurer is required to strictly adhere to the Medical Information
Bureau Rules, and the Ceding Company agrees to abide by these Rules, as
amended from time to time. The Ceding Company will not submit a preliminary
notice, application for reinsurance, or reinsurance cession to the
Reinsurer unless the Ceding Company has an authentic, signed preliminary or
regular application for insurance in its home office and the current
required Medical Information Bureau authorization.
24. SEVERABILITY
In the event that any provision or term of this Agreement shall be held by
any court, arbitrator, or administrative agency to be invalid, illegal or
unenforceable, all of the other terms and provisions shall remain in full
force and effect to the extent that their continuance is practicable and
consistent with the original intent of the parties. In addition, if any
provision or term is held invalid, illegal or unenforceable, the parties
will attempt in good faith to renegotiate the Agreement to carry out the
original intent of the parties.
13
SCHEDULE A
i. PLANS REINSURED:
The policy plans and supplemental benefits automatically and facultatively
reinsured are:
[REDACTED]
2. AUTOMATIC PORTION REINSURED:
[REDACTED]
3. AUTOMATIC RETENTION LIMITS:
[REDACTED]
4. AUTOMATIC ACCEPTANCE LIMITS:
On each life, the amount automatically reinsured under all agreements with
all reinsurers must not exceed the following:
[REDACTED]
5. AUTOMATIC IN FORCE AND APPLIED FOR LIMIT:
[REDACTED]
1
6. PREMIUM DUE:
Reinsurance premiums are due annually in advance. These premiums are due on
the issue date and each subsequent policy anniversary.
7. RECAPTURE PERIOD:
[REDACTED]
8. NET AMOUNT AT RISK:
[REDACTED]
SCHEDULE B
AUTOMATIC REINSURANCE PREMIUMS - YEARLY RENEWABLE TERM BASIS
[REDACTED]
75-80 Basic Select and Ultimate Mortality Table
Male
Age Last Birthday
[RATES REDACTED]
75-80 Basic Select and Ultimate Mortality Table
Female
Age Las Birthday
[RATES REDACTED]
SCHEDULE C
REPORTING INFORMATION
INFORMATION ON RISKS REINSURED
1. Type of Transaction
2. Effective Date of Transaction
3. Automatic/Facultative Indicator
4. Policy Number
5. Full Name of Insured
6. Date of Birth
7. Sex
8. Smoker/Nonsmoker
9. Policy Plan Code
10. Insured's State of Residence
11. Issue Age
12. Issue Date
13. Duration from Original Policy Date
14. Face Amount Issued
15. Reinsured Amount (Initial Amount)
16. Reinsured Amount (Current Amount at Risk)
17. Change in Amount at Risk Since Last Report
18. Death Benefit Option (For Universal Life Type Plans)
19. ADB Amount (If Applicable)
20. Substandard Rating
21. Flat Extra Amount Per Thousand
22. Duration of Flat Extra
23. ▇▇ ▇▇▇▇▇ (Yes or No)
24. Previous Policies (Yes or No)
25. Premiums
SCHEDULE C, CONTINUED
SAMPLE
POLICY EXHIBIT SUMMARY
(LIFE REINSURANCE ONLY)
[REDACTED]
SCHEDULE C, CONTINUED
SAMPLE
RESERVE CREDIT SUMMARY
[REDACTED]
SCHEDULE C, CONTINUED
SAMPLE
ACCOUNTING SUMMARY
[REDACTED]
SCHEDULE D
FACULTATIVE FORMS
Application for Reinsurance--
[REDACTED]
Notification of Reinsurance--
[REDACTED]
Amendment No. 1
Effective March 1, 2001
To
The Automatic and Facultative Yearly Renewable Term
Reinsurance Agreement
Effective October 1, 1999
(the "Agreement")
Between
LIBERTY LIFE ASSURANCE COMPANY
OF BOSTON
("Ceding Company")
And
SECURITY LIFE OF DENVER INSURANCE COMPANY
("Reinsurer")
RECITALS
WHEREAS, the REINSIIRER currently reinsures CEDING COMPANY's plans under the
Agreement; and
WHEREAS, CEDING COMPANY wishes to cede policies issued under the Universal Life
plans to the REINSURER under the Agreement;
AGREEMENT
The parties agree to the following:
1) Schedule A of the Agreement shall be amended as of March 1, 2001 to include a
new Universal Life product and term rider. Schedule A, Paragraph 1 is hereby
removed in its entirety and replaced with the following:
1. PLANS REINSURED:
The policy plans and supplemental benefits automatically and facultatively
reinsured are:
[REDACTED]
1
2) Except as herein amended, all other terms and conditions of this Agreement
shall remain unchanged.
In witness of the above, CEDING COMPANY and the REINSURER have by their
respective officers executed and delivered this Amendment in duplicate on the
dates indicated below, with an effective date of March 1, 2001.
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON SECURITY LIFE OF DENVER INSURANCE COMPANY
By: By:
Title: Title:
Date: Date:
By: By:
Title: Title:
Date: Date:
AMENDMENT 3
Effective September 16, 2002
To
AUTOMATIC AND FACULTATIVE
YEARLY RENEWABLE
REINSURANCE AGREEMENT
EFFECTIVE October 1, 1999
(the "Agreement")
between
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
("Ceding Company")
and
SECURITY LIFE OF DENVER INSURANCE COMPANY
("Reinsurer")
RECITALS
WHEREAS, the Reinsurer currently reinsures Ceding Company's plans under the
Agreement; and
WHEREAS, the Ceding Company and the Reinsurer wish to amend or modify the
Agreement to provide reinsurance coverage for policies issued under the Ceding
Company's [REDACTED] program;
AGREEMENT
The parties agree to the following:
1. Article 3.a., is amended to add the following:
Policies issued under the [REDACTED] program as specified in Amendment 3,
will be eligible for automatic reinsurance under this Agreement.
2. Effective September 16, 2002 to November 15, 2002, policies issued under
the [REDACTED] program must be issued in accordance with the program
specification in Exhibit B-I, as well as complying with the following limits:
[REDACTED]
1
Except as herein amended, all other terms and conditions of this Agreement shall
remain unchanged.
In witness of the above, Ceding Company and the Reinsurer have, by their
respective officers, executed and delivered this Amendment in duplicate on the
dates indicated below, with an effective date of September 16, 2002.
LIBERTY LIFE ASSURANCE COMPANY SECURITY LIFE OF DENVER
OF BOSTON INSURANCE COMPANY
By: By:
Title: Title:
Date: Date:
By: By:
Title: Title:
Date: Date:
EXHIBIT B-I
[REDACTED]