Terminal Settlement Clause Samples
The Terminal Settlement clause defines the process and terms for finalizing all outstanding financial obligations between parties at the end of a contract or upon its termination. Typically, this clause outlines how remaining payments, fees, or liabilities are calculated and settled, specifying deadlines and acceptable methods of payment. Its core function is to ensure that both parties have a clear, agreed-upon procedure for closing out their financial relationship, thereby preventing disputes and ensuring a clean break at the contract's conclusion.
Terminal Settlement. (a) In connection with a termination of this Agreement or recapture of the Covered Insurance Policies pursuant to Section 8.4, a Terminal Settlement will take place. In connection therewith, the Ceding Company shall deliver to the Reinsurer, within forty-five (45) calendar days following the Recapture Effective Date, a statement (the “Terminal Settlement Statement”) setting forth the Ceding Company’s computation of the Terminal Settlement, including a good faith calculation of the Embedded Value Payment. The “Terminal Settlement” shall consist of (i) the Quarterly Net Settlement Amount for the Terminal Accounting Period, and (ii) the Embedded Value Payment with respect to the then in-force Covered Insurance Policies as of the Recapture Effective Date. “Embedded Value Payment” means an amount equal to (x)(A) the present value, based on the best estimate assumptions and market conditions at the Recapture Effective Date, of statutory after-tax future profits and losses from this Agreement, minus (B) the present value of the cost of capital, based on the standalone target capital for a capital ratio of 350% of company action level risk-based capital calculated under SAP where the cost of capital is the change in the amount of target capital over the projected duration of the business reinsured hereunder, net of after-tax investment income on the target capital, where (A) – (B) is adjusted for taxes, including federal income tax and DAC tax impact based on relevant tax rules applicable to the Ceding Company as of the Recapture Effective Date, all discounted at 10.0%, minus (y) the aggregate expense to the Ceding Company, not to exceed $1,000,000, associated with replacing the reinsurance provided hereunder or entering into a reasonably equivalent alternative arrangement, minus (z) the Recapture Penalty. If the Embedded Value Payment is positive, such amount will be paid by the Ceding Company to the Reinsurer as part of the Terminal Settlement. If the Embedded Value Payment is negative, the absolute value of such negative amount shall be paid by the Reinsurer to the Ceding Company as part of the Terminal Settlement. “Recapture Penalty” means $2,700,00.
Terminal Settlement. Termination of this Agreement for Reinsurance Coverage in force is subject to a Terminal Settlement. If the amount of the Terminal Settlement is positive, the Ceding Company shall pay such amount to the Reinsurer in cash. If the amount of the Terminal Settlement is negative, the Reinsurer shall pay the absolute value of such amount to the Ceding Company in cash. In either case, the payment is due as of the Termination Effective Date of this Agreement and payable within 5 business days after the Termination Effective Date. The Terminal Settlement is equal to a) plus b) where:
a) is equal to the Net Settlement as of the beginning of the current accounting period through Termination Effective Date;
b) is equal to the early termination recapture fee as defined below: The fee will reflect all the present and future obligations and will approximate the economic results of the Agreement and place the parties in the position in which they would have been in, adjusted for the time value of money, had the business continued to be reinsured until the end of the each Cover Policy’s 20th anniversary. Specifically, the recapture fee will be equal to the Reinsurer’s unamortized acquisition costs (“DAC”) net of any GAAP benefit reserves (“Reserves”) plus an estimate of the Reinsurer’s lost future GAAP profits (“FP”). DAC and Reserves will be equal to the amounts reported in the Reinsurer’s most recent audited financial statements for this business. FP will be determined by an independent actuarial firm, agreed upon by both parties, and will consider the following elements: Historical experience of the underlying business. Discount rates consistent with the current market conditions. Reinsurer GAAP methods and assumptions. Current market perceptions of mortality improvements and later duration lapse rates related to the business reinsured.
Terminal Settlement. (a) Termination of this Agreement under Section 8.02 for reinsurance coverage is subject to a settlement (the “Terminal Settlement”) equal to:
(i) the Net Settlement as of the applicable termination effective date, which for purposes of this Section 8.03 shall be a positive number if the Net Settlement is payable to the Reinsurer and a negative number if the Net Settlement is payable to the Ceding Company; plus
(ii) an amount equal to the Required Amount; plus
(iii) an additional amount as may be mutually agreed by the parties.
(b) If the amount of the Terminal Settlement is positive, the Reinsurer shall pay such amount to the Ceding Company by wire transfer or by transferring Permitted Assets with a Statutory Value equal to the Required Amount to the Ceding Company. If the amount of the Terminal Settlement is negative, the Ceding Company shall pay the absolute value of such amount to the Reinsurer by wire transfer. The party with the payment obligation shall pay the other party the Terminal Settlement within thirty (30) calendar days after the applicable termination effective date. In the event that, subsequent to the Terminal Settlement, the Ceding Company receives a valid claim for a Reinsured Liability that was incurred prior to the applicable termination effective date, the Reinsurer will reimburse the Ceding Company for such Reinsured Liability upon receipt of documentation with respect to such claim that is reasonably satisfactory to the Reinsurer.
(c) Upon termination of this Agreement, the Ceding Company shall cooperate with the Reinsurer to cancel any letter of credit or trust account created to provide credit for reinsurance hereunder.