Settlement Amounts. Schedule B (page 36) provides for cash settlements, and it is anticipated that in most instances cash payment will be made. However, at any point in time, if the cumulative sum of all earnings, E, for any issue year block, payable to the Reinsurer are negative, then the cash that the Reinsurer may pay the Company cannot exceed R x E, where R = the ratio of Account Values for the Separate Account plus loaned Values to total Account Values. R will be revised at each quarter end. The amount that Reinsurer does not pay the Company on account of this provision will be called the “Capital Account,” and will incur an interest rate of 12% per annum, until the Capital Account is paid off. For purposes of determining E, the interest on the Capital Account will be included.
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Sources: Reinsurance Agreement, Reinsurance Agreement (Pacific Select Exec Separate Acct Pacific Life Ins)