EXHIBIT 7
AUTOMATIC ANNUITY RElNSURANCE AGREEMENT
EXHIBIT 7
RAS Treaty No. 1193
AUTOMATIC
ANNUITY RElNSURANCE AGREEMENT
Between
IL ANNUITY AND INSURANCE COMPANY
of
Indianapolis, Indiana
a Massachusetts Corporation
(referred to as the Reinsured)
and
RIUNIONE ADRIATICA Dl SICURTA
of
Trieste, Italy
(referred to as the Reinsurer)
Effective December 31, 1996
TABLE OF CONTENTS
ARTICLE.
--------
I AUTOMATIC REINSURANCE
II LIABILITY
III PLAN AND AMOUNT OF INSURANCE
IV REINSURANCE PREMIUMS
V CLAIMS
VI REPORTING
VII ANNUITIZATION
VIII GENERAL PROVISIONS
IX RECAPTURE
X ARBITRATION
XI LETTER OF CREDIT
XII IMPROPER SOLICITATION OF POLICY OWNERS
XIII DURATION OF AGREEMENT
XIV INTERMEDIARY CLAUSE
XV EXECUTION
SCHEDULE A BUSINESS REINSURED
SCHEDULE B MONTHLY REPORTING
SCHEDULE C QUARTERLY REPORTING
SCHEDULE D ANNUAL REPORTING
SCHEDULE E PROSPECTUSES
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THE REINSURED AND THE REINSURER MUTUALLY AGREE TO REINSURE ON THE TERMS AND
CONDITIONS SET OUT BELOW.
ARTICLE I
AUTOMATIC REINSURANCE
---------------------
1. Insurance. The Reinsured will cede and the Reinsurer will accept as
reinsurance the guaranteed minimum death benefit (GMDB) and the guaranteed
minimum maturity benefit (GMMB) provided according to the terms of the
policies written by the Reinsured as shown in Schedule A.
2. Policies. The policies reinsured in Schedule A are Deferred Variable
Annuity policies. Only those policies approved in the state in which they
are issued will be covered.
3. Residency. The annuitant must be a resident of the United States.
ARTICLE II
LIABILITY
---------
1. The Reinsurer's liability for reinsurance under this Agreement will begin
simultaneously with the Reinsured's liability. The Reinsurer's liability
for reinsurance will terminate when the Reinsured's liability terminates.
2. The liability of the Reinsurer shall be settled and paid to the Reinsured
monthly on the basis of the monthly reports prepared by the Reinsured in
the form shown in Schedule B. Payments of amounts due to the Reinsurer and
to the Reinsured shall be made, subject to the right of offset as set forth
in Article VIII, within thirty days after receipt of the monthly report.
3. This Agreement is between the Reinsurer and the Reinsured. No third party
has any contractual rights or relationship under the terms of this
Agreement.
ARTICLE III
PLAN AND AMOUNT OF INSURANCE
----------------------------
l. Plan. Reinsurance under this Agreement will be on the yearly renewable term
basis in accordance with the policy forms issued by the Reinsured and
listed on Schedule A.
2. Reductions. If there is a partial withdrawal the net amount at risk under
the guaranteed minimum death benefit will be reduced proportionately.
3. Terminations. Payment of a death benefit or full surrender will result in
termination of the policy and the reinsurance
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ARTICLE IV
REINSURANCE PREMIUMS
--------------------
The monthly risk premium rate is 1.5 basis points. The monthly risk premium to
be paid by the Reinsured to the Reinsurer shall be calculated by multiplying the
risk premium rate by one-half the sum of the account values at the beginning and
at the end of the month. Account values, as used in this Agreement, shall mean
the aggregate value of all reinsured policies before deducting any surrender
charges.
ARTICLE V
CLAIMS
------
1. All reinsurance claim settlements are subject to the terms and conditions
of the policy under which the Reinsured is liable.
2. At the time of death, if it is within the surrender charge period, the
Reinsurer will pay any excess of the GMDB over the cash surrender value.
Otherwise, the Reinsurer will pay the excess of the GMDB over the account
value.
3. On the maturity date, as provided by the reinsured policy, the Reinsurer
will pay any excess of the GMMB over the account value.
4. Payment of reinsurance proceeds will be made in a single sum regardless of
the elected mode of settlement.
ARTICLE VI
REPORTING
---------
1. The Reinsured will provide the Reinsurer with information necessary to
account for the business reinsured properly, as specified in this section.
2. On a monthly basis, the Reinsured will submit a report substantially in
accord with Schedule B. The Reinsured agrees to provide or make available
to the Reinsurer such documentation as may be necessary to support the
items reported.
3. Not later than fifteen (15) days after the end of each quarter, the
Reinsured will submit a report substantially in accord with Schedule C.
4. Termination Because of Non-Payment of Premium
When reinsurance premiums are delinquent. the Reinsurer shall have the
right to terminate the reinsurance policies on the statement by giving the
Reinsured thirty (30) days written notice. As of the close of this
thirty-day period, all of the Reinsurer's liability will terminate for:
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A. The policies described in the preceding sentence and
B. The policies where the reinsurance premiums became delinquent during the
thirty-day period.
5. Reinstatement of' a Delinquent Statement
The Reinsured may reinstate the terminated policies within sixty (60) days
after the effective date of termination by paying the unpaid reinsurance
premiums for the policies in force prior to the termination. However, the
Reinsurer will not be liable for any claim incurred between the date of
termination and the date of reinstatement. The effective date of
reinstatement will be the day the Reinsurer receives the required back
premiums.
6. Currency: The reinsurance premiums and benefits payable under this
Agreement will be payable in the lawful money of the United States.
7. Not later than fifteen (15) days after the end of each calendar year, the
Reinsured will submit a report in accord with Schedule D.
ARTICLE VII
ANNUITIZATION
-------------
1. Any annuitized policy (going into pay-out status under an immediate annuity
option offered in the contract) shall be deemed to be recaptured by the
Reinsured and the Reinsurer shall have no further liability for the
annuitized policy,
Any partially annuitized policy will be treated as a partial withdrawal and
the guaranteed minimum death benefit will continue to be reinsured. There
will be no refund of reinsurance premiums paid nor reserves paid by the
Reinsurer.
ARTICLE VIII
GENERAL PROVISIONS
------------------
1. Reinsurance Conditions. The reinsurance is subject to the same limitations
and conditions as the insurance under the policy or policies written by the
Reinsured on which the reinsurance is based.
2. The Reinsured and the Reinsurer may each offset any amounts due from one
party against any amount owed to the other under the terms and provisions
of this Agreement.
3. Expenses. In no event will the Reinsurer have any liability for any
extra-contractual damages which are rendered against the Reinsured as a
result of acts, omissions or course of conduct committed by the Reinsured
in connection with the annuity contracts reinsured under this Agreement.
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4. Oversights. If there is an unintentional oversight or misunderstanding in
the administration of this Agreement by either company, it can be corrected
provided the correction takes place promptly after the oversight or
misunderstanding is first discovered. Both companies will be restored to
the position they would have occupied had the oversight or misunderstanding
not occurred. Interest at a rate of 6% annually will be payable on any
amounts due to either party as a result of the oversight or
misunderstanding.
5. Inspection. At any reasonable time, the Reinsurer may inspect at the
Reinsured's Home Office the original papers and any and all other books or
documents relating to or affecting reinsurance under this Agreement.
It is agreed by the Reinsurer that any information that is made available
for inspection under this section of the Agreement shall be kept
confidential and under no circumstances may this information be disclosed
to, or made available for inspection by, any third party without the prior
consent of the Reinsured.
6. Assignment of transfer. In no event shall either the Reinsured or the
Reinsurer assign any of its rights, duties or obligations under this
agreement without the prior written approval of the other party. Such
approval shall not unreasonably be withheld.
In no event shall either the Reinsured or the Reinsurer transfer either the
policies reinsured under this Agreement or the reinsurance without the
prior written approval of the other party. Such approval shall not
unreasonably be withheld.
7. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby. This Agreement shall be construed in accordance
with the applicable federal law and the laws of the State of Massachusetts.
8. Premium Taxes. The Reinsurer will not be liable for premium taxes on direct
annuity premiums received by the Reinsured.
9. Insolvency of the Reinsured. In the event of the declared insolvency of the
Reinsured, and the appointment of a domiciliary liquidator, receiver,
conservator or statutory successor for the Reinsured, this reinsurance
shall be payable immediately upon demand, with reasonable provision for
verification, directly to the Reinsured or its domiciliary liquidator,
receiver, conservator or statutory successor, on the basis of the liability
of the Reinsured as a result of claims allowed against the Reinsured by any
court of competent jurisdiction or any liquidator, receiver, conservator or
statutory successor having authority to allow such claims without
diminution because of the insolvency of the Reinsured or because the
liquidator, receiver, conservator or statutory successor of the Reinsured
has failed to pay all or a portion of any claim.
Every liquidator, receiver, conservator or statutory successor of the
Reinsured or guaranty fund or association shall give written notice to the
Reinsurer of the pendency of a claim involving the Reinsured indicating
which of the policies would involve possible liability on
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the part of the Reinsurer to the Reinsured or its domiciliary liquidator,
receiver, conservator or statutory successor, within a reasonable amount of
time after the claim is filed in the conservation, liquidation,
receivership or other proceeding.
During the pendency of any claim, the Reinsurer may investigate the same
and interpose, at its own expense, in the proceeding where that claim is to
be adjudicated, any defense or defenses that it may deem available to the
Reinsured, to its policyholder, or to any liquidator, receiver or statutory
successor of the Reinsured or guaranty fund or association. The expenses
thus incurred by the Reinsurer will be chargeable, subject to approval of
the applicable court, against the Reinsured as part of the expense on
conservation or liquidation to the extent of a pro rata share of the
benefit which may accrue to the Reinsured as a result of the defense
undertaken by the Reinsurer.
This reinsurance shall be payable directly by the Reinsurer to the
Reinsured or to its domiciliary liquidator, receiver, conservator or
statutory successor, except as expressly required otherwise by applicable
insurance law.
10. Insolvency of the Reinsurer. In the event the Reinsurer becomes insolvent
or suffers an impairment of capital to the extent that the Reinsurer cannot
perform its obligations under this Agreement, the Reinsured will have the
option to recapture the reinsurance under this Agreement on or after the
date of the Reinsurer's insolvency by giving its liquidator, receiver or
statutory successor written notice of such recapture.
The liquidator, receiver or statutory successor will return to the
Reinsured any unearned reinsurance premiums as of the effective date of
recapture.
However, if the Reinsured exercises its option to recapture under this
Agreement, then the Reinsured must recapture the entire reinsurance under
this Agreement and the Reinsured must pay the Reinsurer an amount equal to
its unamortized acquisition cost on this Agreement.
ARTICLE IX
RECAPTURE
---------
Except to the provisions in Articles VII and VIII, business reinsured under this
Agreement will not be eligible for recapture unless both parties agree to such
recapture, as evidenced by a fully executed written recapture agreement
ARTICLE X
ARBITRATION
-----------
1. Any controversy or claim arising out of or relating to this agreement will
be settled by arbitration.
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2. There must be three arbitrators who will be active, prior or retired
officers of life insurance companies other than the contracting companies
or their subsidiaries or affiliates. Each of the contracting companies will
appoint one of the arbitrators and these two arbitrators will select the
third.
In the event either contracting company is unable to choose an arbitrator
within thirty (30) days after the other contracting company has given
written notice of its arbitrator appointment, the contracting company which
has given written notice may choose two arbitrators who shall in turn
choose a third arbitrator before entering arbitration. If the two
arbitrators are unable to agree upon the selection of a third arbitrator
within thirty (30) days following their appointment, each arbitrator shall
nominate three candidates within ten days thereafter, and the final
selection shall be made by a court of competent jurisdiction from among the
submitted names (three each) or any other persons the court finds to be a
qualified and impartial arbitrator.
3. With regard to (2) above, arbitration must be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association
which will be in effect on the date of delivery of demand for arbitration.
4. Each contracting company must pay part of the arbitration expenses as
allocated by the arbitrators.
5. The award agreed by the arbitrators will be final and binding upon the
parties, and judgment may be entered upon it in any court having
jurisdiction.
ARTICLE XI
LETTERS OF CREDIT
-----------------
It is the intention of all parties that this Article shall set forth the terms
and conditions under which any letter(s) of credit required hereunder shall be
held in trust.
If a jurisdiction of the United States will not permit the Reinsured, in the
statements required to be filed with its regulatory authority(ies), to receive
full credit as admitted reinsurance for the Reinsurer's share of losses and
reserves for GMDB and GMMB reserves, if any, the Reinsured shall forward to the
Reinsurer a statement of the Reinsurer's share of such reserves. Upon receipt of
such statement, the Reinsurer shall promptly provide the Reinsured with a
"clean", unconditional and irrevocable Letter of Credit, in the amount specified
in the statement submitted with terms and bank acceptable to the regulatory
authority(ies) having jurisdiction.
"Losses", as used in this Article, shall mean the sum of all losses paid and
allocated loss adjustment expenses paid by the Reinsured but not yet recovered
from the Reinsurer, plus reserves for losses and allocated loss adjustment
expenses outstanding, plus reserves for losses incurred but not reported as
determined by the Reinsured.
8
The Reinsurer hereby agrees that the Letter of Credit will provide for automatic
extension of the Letter of Credit without amendment for one year from the date
of expiration of said letter or any future expiration date unless thirty (30)
days prior to any expiration of issuing bank shall notify the Reinsured by
Registered Mail that the issuing bank elects not to consider the Letter of
Credit renewed for any additional period. An issuing bank, not a member of the
Federal Reserve system or not chartered in the State of Massachusetts, shall
provide sixty (60) days notice to the Reinsured prior to any expiration.
Notwithstanding any other provision of this Agreement, the Reinsured or its
successors in interest may draw upon such credit at any time for one or more of
the following purposes only:
1. To pay the Reinsurer's share or to reimburse the Reinsured for the
Reinsurer's share of any losses and reserves as stipulated in the statement
submitted by the Reinsured to the Reinsurer;
2. To make refund of any sum which is in excess of the actual amount required
to pay the Reinsurer's share of any losses and reserves as stipulated in
the statement submitted by the Reinsured to the Reinsurer;
3. To withdraw, for the uses and purposes specified herein which remain
executory after such withdrawal, the balance of such credit if the
Reinsured has received effective notice of non-renewal of the Letter of
Credit and the Reinsurer's liability remains unliquidated and undischarged
thirty (30) days prior to the expiry date of the Letter of Credit;
4. To pay or reimburse itself for the Reinsurer's share of any other amounts
the Reinsured claims are due under this Agreement.
At semi-annual intervals, or more frequently as determined by the Reinsured, but
never more frequently then quarterly, the Reinsured shall prepare a specific
statement, for the sole purpose of amending the Letter of Credit, of the
Reinsurer's share of any losses and reserves.
If the state shows that the Reinsurer's share of losses plus reserves exceeds
the balance of credit as of the statement date, the Reinsurer shall, within
thirty (30) days after receipt of notice of such excess, secure delivery to the
Reinsured of an amendment to the Letter of Credit increasing the amount of
credit by the amount of such difference. If the statement shows, however, that
the Reinsurer's share of losses plus reserves is less than the balance of credit
as of the statement date, the Reinsured shall, within thirty (30) days after
receipt of written request from the Reinsurer, release such excess credit by
agreeing to secure an amendment to the Letter of Credit reducing the amount of
credit available by the amount of such excess credit.
The bank shall have no responsibility whatsoever in connection with the
propriety of withdrawals made by the Reinsured or the disposition or funds
withdrawn, except to assure that withdrawals are made only upon the order of
properly authorised representatives of the Reinsured. The Reinsured shall incur
no obligation to the bank in acting upon the credit, other than as appears in
the express terms thereof.
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The rights and obligations of the Reinsurer and the Reinsured, as set forth in
this Article, shall not be diminished in any manner whatsoever by the insolvency
of any party hereto.
ARTlCLE XII
IMPROPER SOLICITATION OF POLICY OWNERS
--------------------------------------
l. The parties agree not to contact the owners of the policies for the purpose
or soliciting surrender of the policies. However, the Reinsured
specifically reserves the right to allow conversion of the policies
reinsured under this Agreement to other programs to meet the changing
business needs in the market place of the Reinsured. To the extent the
Reinsured offers such a conversion program, the Reinsured will offer to the
Reinsurer the opportunity to reinsure the death benefits of the new
program.
2. Neither the Reinsured nor the Reinsurer will cause or permit the existence
of this Reinsurance Agreement to be communicated to any current or
prospective policyholder without the prior written approval of either
party. In the event this provision is violated, either party may terminate
this Agreement without notice.
ARTICLE XIII
DURATION OF AGREEMENT
---------------------
1. This Agreement may be terminated with respect to new policies at any time
after the fifth anniversary of the effective date of this Agreement. Either
party may then terminate this Agreement by giving ninety (90) days' written
notice of termination. The day the notice is deposited in the mail
addressed to an Officer of either company will be the first day of the
notice period.
2. During the ninety day period, this Agreement will continue to remain in
force.
3. After termination, the Reinsurer's liability for all reinsurance which
became effective prior to the termination of this Agreement will terminate
when the Reinsured's liability terminates.
ARTICLE XIV
INTERMEDIARY CLAUSE
-------------------
Ballantyne, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Ltd., ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇. ▇▇▇▇▇▇, ▇▇▇▇ lAX
is hereby recognized as the Intermediary negotiating this Agreement for all
business hereunder. All communications (including but not limited to notices,
statements, premiums, refunds, allowances, taxes, claims, claim adjustments and
refunds) relating thereto shall be transmitted to the Reinsured or to the
Reinsurer through Ballantyne, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Ltd. Payments by the Reinsured
to the Intermediary shall be deemed to constitute payment to the Reinsurer.
Payments by the Reinsurer to the Intermediary shall be deemed only to constitute
payment to the Reinsured to the extent that such payments are actually received
by the Reinsured.
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ARTICLE XV
EXECUTION
---------
In witness of the above, this Agreement is signed in duplicate at the dates and
places indicated and shall be effective as of. December 31, 1996 for all the
business inforce.
Riuione Adriatica di Sicurta IL Annuity and Insurance Company
at Trieste, Italy at Indianapolis, Indiana
on May 12, 1997 on May 12, 1997
By: ___________________________ By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Title: Title: President and Chief Executive Officer
By: ___________________________ By: ________________________________
Title: Title:
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SCHEDULE A
BUSINESS REINSURED
------------------
The policyowners must purchase contracts from the Reinsured consistent with its
normal. procedures and practices.
2. Form Nature and Type Form Number
-------------------- -----------
Variable Annuity See Attachment I
3. Additional Forms
The prospectus and the prospective fund descriptions will be submitted to the
Reinsurer for review and inclusion in this agreement.
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SCHEDULE B
MONTHLY REPORTING
-----------------
1. Premiums due the Reinsurer
2. Claims payable by the Reinsurer
3. Current Account Value by fund.
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SCHEDULE C
QUARTERLY REPORTING
-------------------
Due fifteen days after each quarter end:
1. Annualized unit return on each fund.
2. Direct premium received by the Reinsured split by new premium and additional
premium on existing policy.
3. Current account value split by fund, by sex, and by attained age.
4. Net amount at risk for both GMDB and GMMB split by attained age and sex.
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SCHEDULE D
ANNUAL REPORTING
----------------
Notification of any change in fund structure, e.g., addition or deletion of
fund, change in investment policy or fund manager, etc.
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SCHEDULE E
PROSPECTUSES
Prospectuses for the annuity plans covered under this Agreement.
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Attachment 1
Policy Form Number
1. VA-95
2. VA-95 IN
3. VA-95 FL
4. VA-95 IN ID
5. VA-95 KA
6. VA-95 IN MA
7. VA-95 MN R8/96
8. VA-95 IN OK
9. VA-95 OR
10. VA-95 PA
11. VA-95 TX
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RAS Treaty No. 1193
[BMS Logo]
AMENDMENT NO.1
to the
AUTOMATIC ANNUITY REINSURANCE AGREEMENT
between
IL ANNUITY AND INSURANCE COMPANY
OF INDIANAPOLIS, INDIANA
(A MASSACHUSETTS CORPORATION)
(hereinafter referred to as the Reinsured)
RIUNIONE ADRIATlCA Dl SICURTA, S.p.A.
OF TRIESTE, ITALY
(hereinafter referred to as the Reinsurer)
Effective: December 31, 1996
This Amendment, between the Reinsured and the Reinsurer is attached to and
becomes a part of the Automatic Annuity Reinsurance Agreement effective December
31, 1996 referred to above.
With effect from July 1st, 1997:
1. Article I is replaced by the attached Article I.
2. Article IV is replaced by the attached Article IV.
3. Article V is replaced by the attached Article V.
4. Article XI is replaced by the attached Article XI.
5. Attachment 1 of Schedule A is replaced by the attached Attachment 1 of
Schedule A.
6. Schedule B is replaced by the attached Schedule B.
7. Schedule C is replaced by the attached Schedule C.
All other terms and conditions remain unchanged.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
in duplicate by their duly authorised officers.
In Indianapolis, Indiana In Trieste, Italy
this 18th day of May, 1998 this 5th day of May, 1998
IL ANNUITY AND INSURANCE RIUNIONE ADRIATICA DI
COMPANY SICURTA S.p.A
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ President ___________________________________
and Chief Executive Officer signature title
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[BMS Logo]
ARTICLE I AUTOMATIC REINSURANCE
---------------------
1. Insurance. The Reinsured will cede and the Reinsurer will accept as
reinsurance the guaranteed minimum death benefit (GMDB) and the guaranteed
minimum living benefit (GMLB) and Enhanced Death Benefit (both Issue Date
Surrender Charge and Premium Date Surrender Charge option) provided
according to the terms of the policies written by the Reinsured as shown in
Schedule A.
2. Policies. The policies reinsured in Schedule A are Deferred Variable
Annuity policies. Only those policies approved in the state in which they
are issued will be covered.
3. Residency. The annuitant must be a resident of the United States.
ARTICLE IV REINSURANCE PREMIUMS
--------------------
The monthly risk premium rate shall be in accordance with the following Table:
------------------------------------------- ------------ -------------
OPTIONS ANNUAL MONTHLY
------------------------------------------- ------------ ------------- -----------------------------------------------
GMLB/GMDB (Issue Date S.C.) 16.50bp 1.3750bp applied to Visionary & Visionary Choice
products
------------------------------------------- ------------ ------------- -----------------------------------------------
GMLB/GMDB (Prem Date S.C.) 14.50bp 1.2083bp applied to Visionary Choice product
------------------------------------------- ------------ ------------- -----------------------------------------------
Enhanced DB (Issue Date S.C.) 24.75bp 2.0625bp applied to Visionary Choice product
------------------------------------------- ------------ ------------- -----------------------------------------------
Enhanced DB (Prem Date S.C.) 20.25bp 1.6875bp applied to Visionary Choice product
------------------------------------------- ------------ ------------- -----------------------------------------------
The monthly risk premium to be paid by the Reinsured to the Reinsurer shall be
calculated by multiplying the risk premium rate for each policy option cited in
the above Table by one-half the sum of the account values for each policy option
at the beginning and at the end of the month. Account values, as used in this
Agreement, shall mean the aggregate value of all reinsured policies for each
policy option. The total monthly premium shall be the sum of all average account
values multiplied by their appropriate risk premium rates in accordance with the
Table set out in this Article.
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ARTICLE V CLAIMS
------
1. All reinsurance claim settlements are subject to the terms and conditions
of the policies under which the Reinsured is liable.
2. At the time of death, for options GMLB/GMDB (both the Issue Date Surrender
Charge and the Premium Date Surrender Charge options) as specified in
Article IV above, if it is within the surrender charge period, the
Reinsurer will pay any excess of the GMDB over the cash surrender value.
Otherwise, the Reinsurer will pay the excess of the GMDB over the account
value. At the time of death, for the Enhanced Death Benefit options (both
the Issue Date Surrender Charge and the Premium Date Surrender Charge
options), if it is within the surrender charge period, the Reinsurer will
pay any excess of the Enhanced Death Benefit paid (highest account value at
any triennial anniversary date) over the cash surrender value. Otherwise,
the Reinsurer will pay the excess of the Enhanced Death Benefit paid
(highest account value at any triennial anniversary date) over the account
value.
3. On the maturity date, as provided by the reinsured policies, the Reinsurer
will pay any excess of the GMLB over the account value.
4. Payment of reinsurance proceeds will be made in a single sum regardless of
the elected mode of settlement.
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ARTICLE XI LETTERS OF CREDIT
-----------------
It is the intention of all parties that this Article shall set forth the terms
and conditions under which any letter(s) of credit required hereunder shall be
held in trust.
If a jurisdiction of the United States will not permit the Reinsured, in the
statements required to be filed with its regulatory authority(ies), to receive
full credit as admitted reinsurance for the Reinsurer's share of losses and
reserves for GMLB/GMDB and Enhanced Death Benefit (both for Issue Date Surrender
Charge and Premium Date Surrender Charge options), if any, the Reinsured shall
forward to the Reinsurer a statement of the Reinsurer's share of such reserves.
Upon receipt of such statement, the Reinsurer shall promptly provide the
Reinsured with a "clean", unconditional and irrevocable Letter of Credit, in the
amount specified in the statement submitted with terms and bank acceptable to
the regulatory authority(ies) having jurisdiction.
"Losses", as used in this Article, shall mean the sum of all losses paid and
allocated loss adjustment expenses paid by the Reinsured but not yet recovered
from the Reinsurer, plus reserves for losses and allocated loss adjustment
expenses outstanding, plus reserves for losses incurred but not reported as
determined by the Reinsured.
The Reinsurer hereby agrees that the Letter of Credit will provide for automatic
extension of the Letter of Credit without amendment for one year from the date
of expiration of said letter or any future expiration date unless thirty (30)
days prior to any expiration of issuing bank shall notify the Reinsured by
Registered Mail that the issuing bank elects not to consider the Letter of
Credit renewed for any additional period. An issuing bank, not a member of the.
Federal Reserve system or not chartered in the State of Massachusetts, shall
provide sixty (60) days notice to the Reinsured prior to any expiration.
Notwithstanding any other provision of this Agreement, the Reinsured or its
successors in interest may draw upon such credit at any time for one or more of
the following purposes only:
1. To pay the Reinsurer's share or to reimburse the Reinsured for the
Reinsurer's share of any losses and reserves as stipulated in the statement
submitted by the Reinsured to the Reinsurer;
2. To make refund of any sum which is in excess of the actual amount required
to pay the Reinsurer's share of any losses and reserves as stipulated in
the statement submitted by the Reinsured to the Reinsurer;
3. To withdraw, for the uses and purposes specified herein which remain
executory after such withdrawal, the balance of such credit if the
Reinsured has received effective notice of non- renewal of the Letter of
Credit and the Reinsurer's liability remains unliquidated and undischarged
thirty (30) days prior to the expiry date of the Letter of Credit;
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4. To pay or reimburse itself for the Reinsurer's share of any other amounts
the Reinsured claims are due under this Agreement.
At semi-annual intervals, or more frequently as determined by the Reinsured, but
never more frequently then quarterly, the Reinsured shall prepare a specific
statement, for the sole purpose of amending the Letter of Credit, of the
Reinsurer's share of any losses and reserves.
If the statement shows that the Reinsurer's share of losses plus reserves
exceeds the balance of credit as of the statement date, the Reinsurer shall,
within thirty (30) days after receipt of notice of such excess, secure delivery
to the Reinsured of an amendment to the Letter of Credit increasing the amount
of credit by the amount of such difference. If the statement shows, however,
that the Reinsurer's share of losses plus reserves is less than the balance of
credit as of the statement date, the Reinsured shall, within thirty (30) days
after receipt of written request from the Reinsurer, release such excess credit
by agreeing to secure an amendment to the Letter of Credit reducing the amount
of credit available by the amount of such excess credit.
The bank shall have no responsibility whatsoever in connection with the
propriety of withdrawals made by the Reinsured or the disposition of funds
withdrawn, except to assure that withdrawals are made only upon the order of
properly authorised representatives of the Reinsured. The Reinsured shall incur
no obligation to the bank in acting upon the credit, other than as appears in
the express terms thereof.
The rights and obligations of the Reinsurer and the Reinsured, as set forth in
this Article, shall not be diminished in any manner whatsoever by the insolvency
of any party hereto.
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ATTACHMENT 1 OF SCHEDULE A
--------------------------
APPROVED POLICY FORM NUMBERS (AS OF 2/4/98)
-------------------------------------------
A. VISIONARY PRODUCTS
------------------
1. VA-95
2. VA-95 IN
3. VA-95 FL
4. VA-95 IN ID
5. VA-95 KA
6. VA-95 IN MA
7. VA-95 MN R8/96
8. VA-95 IN OK
9. VA-95 OR
10. VA-95 PA
11. VA-95 TX
B. VISIONARY CHOICE PRODUCTS
-------------------------
1 VCA-97
2. VCA-97 CA
3. VCA-97 CT
4. VCA-97 WV
5. VCA-97 NE
6. VCA-97 ND
7. VCA-97 OK
8. VCA-97 WI
9. VCA-97 NM
10. VCA-97 PA
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SCHEDULE B
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MONTHLY REPORTING
-----------------
1. Premiums due to the Reinsurer - breakdown by:
(i) GMLB/GMDB (Issue Date S.C.)
(ii) GMLB/GMDB (Prem Date S.C.)
(iii) Enhanced DB (Issue Date S.C.)
(iv) Enhanced DB (Prem Date S.C.)
2. Claims Payable by the Reinsurer - breakdown by:
(i) GMLB
(ii) GMDB
(iii) Enhanced Death Benefit.
3. Current Account Value by fund, and by:
(i) GMLB/GMDB (Issue Date S.C.)
(ii) GMLB/GMDB (Prem Date S.C.)
(iii) Enhanced DB (Issue Date S.C.)
(iv) Enhanced DB (Prem Date S.C.)
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SCHEDULE C
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MONTHLY REPORTING
-----------------
Due fifteen days after each quarter end:
1. Annualized unit return on each fund (for both Visionary and Visionary
Choice).
2. Direct Premiums received by the Reinsured split by first year premium
and renewal premium on existing policy (for both Visionary and
Visionary Choice).
3. Current account value by fund, by sex, by attained age, and by
GMLB/GMDB and Enhanced Death Benefit.
4. Net amount at risk by GMLB/GMDB and Enhanced Death Benefit, by attained
age and sex.
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ARTICLE LV - REINSURANCE PREMIUM (AMENDMENT)
-------------------------------
The monthly risk premium rate shall be in accordance with the following Table:
-------------------------------------- -------------- ----------------- ----------------------------------------------
OPTIONS ANNUAL MONTHLY PRODUCTS
-------------------------------------- -------------- ----------------- ----------------------------------------------
GMLB/GMDB (Issue Date S.C.)(1) 16.50bp 1.3750bp Applied to Visionary & Visionary Choice
Products
-------------------------------------- -------------- ----------------- ----------------------------------------------
GMLB/GMDB (Issue Date S.C.)(2) 19.00bp 1.5833bp Applied to Visionary & Visionary Choice
Products
-------------------------------------- -------------- ----------------- ----------------------------------------------
GMLB/GMDB (Prem. Date S.C.)(1) 14.50bp 1.2083bp Applied to Visionary Choice product
-------------------------------------- -------------- ----------------- ----------------------------------------------
GMLB/GMDB (Prem. Date S.C.) (2) 16.30bp 1.3583bp Applied to Visionary Choice product
-------------------------------------- -------------- ----------------- ----------------------------------------------
Enhanced DB (Issue Date S.C.) 24.75bp 2.0625bp Applies to Visionary Choice product
-------------------------------------- -------------- ----------------- ----------------------------------------------
Enhanced DB (Prem. Date S.C.) 20.25bp 1.6875bp Applies to Visionary Choice product
-------------------------------------- -------------- ----------------- ----------------------------------------------
1. GMLB/GMDB where the Living Benefit Date equals to the later of age 70 or 10
years from issue
2. GMLB/GMDB where the Living Benefit Date equals to 10 years from issue
The monthly risk premium to be paid by the Reinsured to the Reinsurer shall be
calculated by multiplying the risk premium rate for each policy option cited in
the above Table by one-half the sum of the account values for each policy option
at the beginning and at the end of the month. Account Values, as used in this
Agreement, shall mean the aggregate value of all reinsured policies for each
policy option. The total monthly premium shall be the sum of all average account
values multiplied by their appropriate risk premium rates in accordance with the
Table set out in this Article.
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