EXHIBIT (7)
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XX Xxxxxx XX CNA 11
AUTOMATIC AND FACULTATIVE YEARLY RENEWABLE TERM AGREEMENT
Between
PACIFIC LIFE INSURANCE COMPANY
Newport Beach, California
(hereinafter called the CEDING COMPANY)
and
SWISS RE LIFE & HEALTH AMERICA INC.
New York, New York
(hereinafter called the REINSURER)
This Agreement is Effective July 1, 1999
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1
Article Table of Contents Page
------- ----------------- ----
I Automatic Coverage 4
II Facultative Reinsurance 5
III Facultative-Obligatory Reinsurance 6
IV Guaranteed Capacity Reinsurance 7
V Premiums 8
VI Administration 9
VII Reserves 11
VIII DAC Tax Regulations 12
IX Errors and Omissions 13
X Expense of Original Policy 14
XI Changes in Retention and Recapture Privileges 15
XII Terminations and Reductions 16
XIII Reinstatement, Exchanges, Extended Term and Reduced Paid-Up
Insurance, Conversions 17
XIV Liability 18
XV Claims 19
XVI Arbitration 20
XVII Insolvency 21
XVIII Right to Inspection 22
XIX Duration of Agreement 23
XX Increasing Net Amount at Risk Policies and Riders 24
XXI Temporary Insurance Agreement 25
XXII Offset 26
XXIII Parties to the Agreement 27
XXIV Execution of Agreement 28
2
Exhibit
-------
A Limits of Retention
B Policy Plans Reinsured
C Premiums and Allowances
D Limits
E Statement Specifications
F Sample Policy Exhibit
G Temporary Insurance Agreement
H Facultative-Obligatory Request Form
I Guaranteed Capacity Reinsurance
3
Reinsurance required by the CEDING COMPANY will be assumed by the REINSURER as
described in the terms 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
amendment to this agreement and signed by both parties.
Article I
Automatic Coverage
------------------
A. For each risk on which reinsurance is ceded, the CEDING COMPANY will retain
its full published retention at the time of issue, taking into account both
currently issued and previously issued policies.
B. The CEDING COMPANY may cede and the REINSURER will automatically accept
reinsurance, if all of the following conditions are met for each life:
1. The CEDING COMPANY has retained its limit of retention as shown in
Exhibit A.
2. The amount does not exceed the automatic binding limits shown in
Exhibit D.
3. The sum of the amount of insurance already in force and applied for on
that life, in all companies, does not exceed the Jumbo Limit as shown
in Exhibit D.
4. The CEDING COMPANY has not made facultative application on the current
life to any reinsurer unless the case was issued and reinsured
standard or subsequently re rated to standard.
5. The risk is conventionally underwritten.
6. The Policy Plans reinsured are shown in Exhibit B.
7. The risk is a resident of the United States, Canada, Puerto Rico or
Guam.
4
Article II
Facultative Reinsurance
-----------------------
A. The CEDING COMPANY will have the option to submit any case facu1tatively
which it does not wish to cede automatically or which it may not cede
automatically under the provisions of Article I.
B. The CEDING COMPANY will send copies of the original applications, all
medical reports, inspection reports, attending physician's statement and
any additional information pertinent to the insurability of the risk.
C. The CEDING COMPANY will also notify the REINSURER of any underwriting
information requested or received after the initial request for reinsurance
is made. For policies which contain automatic increase provisions, the
CEDING COMPANY will inform the REINSURER of the highest risk amount, in the
first 15 years for which reinsurance is being requested.
D. On a timely basis, the REINSURER will submit a written decision. In no case
will the REINSURER'S offer on facultative submissions be open after 120
days have elapsed from the date of the REINSURER'S offer to participate in
the risk. Acceptance of the offer and delivery of the policy according to
the rules of the CEDING COMPANY must occur within 120 days of the final
reinsurance offer. Unless the REINSURER explicitly states in writing that
the final offer is extended, the offer will be automatically withdrawn at
the end of day 120.
E. The REINSURER will not be liable for proceeds paid under the CEDING
COMPANY'S conditional receipt or temporary insurance agreement for risks
submitted on a facultative basis except as provided in Article XXI.
F. The Policy Plans reinsured are shown in Exhibit B.
G. The risk is a resident of the United States, Canada, Puerto Rico or Guam.
H. The CEDING COMPANY may cede Waiver of Premium or Waiver of Cost only if
reinsurance for the benefits is specifically requested in the facultative
submission and an offer by the REINSURER is subsequently made and accepted
by the CEDING COMPANY.
5
Article III
Facultative-Obligatory Reinsurance
----------------------------------
Any policy which doesn't meet the requirements for automatic reinsurance under
this agreement due to the jumbo limits being exceeded, but which otherwise would
qualify for automatic reinsurance, may be ceded on a facultative-obligatory
basis if all of the following conditions are satisfied:
. The CEDING COMPANY has retained its limit of retention as provided in
Exhibit A;
. The amount does not exceed the facultative-obligatory binding limits
as listed below;
. The risk is conventionally underwritten;
. The Policy Plans reinsured are shown in Exhibit B;
. The risk is a resident of the United States;
. Joint life policies with one life uninsurable are eligible and the
CEDING COMPANY will provide information on both lives;
. The REINSURER is notified 48 hours before being bound, on a form
substantially as that shown as Exhibit H; and
. The REINSURER has not responded to the CEDING COMPANY that the
REINSURER lacks the required capacity for reinsurance within the 48
hours described above.
The CEDING COMPANY may cede Waiver of Premium or Waiver of Cost only if it is
specifically requested in the Facultative-Obligatory Notification form, and
then, only to the extent that the Waiver coverage does not exceed $5,000,000.
FACULTATIVE-OBLIGATORY BINDING LIMITS:
--------------------------------------------------------------------------------
Jumbo Limit Exclusions Issue Age Table Ratings Facultative-Obligatory
Binding Limit
--------------------------------------------------------------------------------
Unlimited Aviation 0-75 0-6 $5,000,000
(reduces 50%
for Aviation)
--------------------------------------------------------------------------------
Aviation exclusion applies if other than as a fare paying passenger on
commercial airlines.
If Joint Last Survivor, age and table rating restrictions apply separately to
each life.
6
Article IV
Guaranteed Capacity Reinsurance
-------------------------------
The CEDING COMPANY will retain its available retention in full on any life ceded
under this agreement. If the CEDING COMPANY has used its full retention on the
risk previously, the policy will not be ceded under this agreement. If the
CEDING COMPANY has available retention, the CEDING COMPANY may cede and the
REINSURER will automatically accept Guaranteed Capacity reinsurance, without
adherence to the automatic binding and jumbo restrictions applicable to
automatic reinsurance, if all of the following conditions are met:
.. The CEDING COMPANY will confirm that retention is available at the time an
application is received.
.. The CEDING COMPANY will conventionally underwrite the risk, bind the
Guaranteed Capacity pool and immediately notify each Guaranteed Capacity
pool reinsurers of the case and the binding amount to be ceded on the form
in Exhibit I.
.. The REINSURER will accept its proportionate share of qualifying risks
without the REINSURER underwriting the risk or checking capacity.
.. The CEDING COMPANY will cede each risk proportionately among the
participating Guaranteed Capacity pool Reinsurers.
.. The CEDING COMPANY will notify the REINSURER immediately, if the case is
withdrawn or not taken so the REINSURER can release their capacity.
.. Aviators and professional athletes are excluded.
.. The Policy Plans reinsured are shown in Exhibit B. The risk is a resident
of the United States.
.. Lives previously submitted to the REINSURER Facultative or Facultative
Obligatory by the CEDING COMPANY are excluded.
.. The CEDING COMPANY will retain the option of going Facultative Obligatory,
if such a Facultative Obligatory agreement exist, for additional coverage
above Guaranteed Capacity before the policy is issued.
.. Future applications on lives already covered by Guaranteed Capacity may be
submitted to the REINSURER Facultative or Facultative Obligatory, if such
Facultative or Facultative Obligatory agreements exist.
.. The name of the Guaranteed Capacity REINSURER will not be revealed to the
field force, the client or other reinsurers.
.. Guaranteed Capacity will not be used if the life qualifies for Automatic
reinsurance.
Guaranteed Capacity reinsurance ceded amounts are a function of the CEDING
COMPANY'S unused retention and the REINSURERS proportionate share as stated in
Exhibit I.
7
Article V
Premiums
--------
A. Plans of insurance listed in Exhibit B will be reinsured on the yearly
renewable term basis with the REINSURER participating only in mortality
risks (not cash values, loans, dividends or other features specific to
permanent policies). The mortality risk shall be the net amount at risk on
that portion of the policy which is reinsured with the REINSURER.
B. Premiums for Life Reinsurance and reinsurance of Supplemental Benefits will
be based on the rates and allowances described in Exhibit C.
C. Premiums will be increased by any flat extra premium charged the insured on
the face amount initially reinsured described in Exhibit C.
D. There will be no premium tax reimbursement.
E. The Life Reinsurance rates contained in this Agreement are guaranteed for
one year, and the REINSURER anticipates continuing to accept premiums on
the basis of these rates indefinitely. If the REINSURER deems it necessary
to increase rates, such increased rates cannot be higher than the valuation
net premiums for annually renewable term insurance calculated using the
minimum statutory mortality rates and maximum statutory interest rate for
each year of issue.
8
Article VI
Administration
--------------
A. The CEDING COMPANY will administer the records for the reinsurance ceded to
the REINSURER under this agreement. The CEDING COMPANY will furnish monthly
statements to the REINSURER which contain the following information:
1. A list of all premiums due for the current month, identifying
each policy and explaining the reasons for each premium payment.
2. Premium subtotals adequate for the REINSURER to use for its
premium accounting including first year, renewal year, automatic
and facultative totals.
3. A list of new business, terminations and changes for the current
month. For new business and changes, the CEDING COMPANY must
identify the reinsurance agreement and provide information
adequate for the REINSURER to establish reserves, check retention
limits and check premium calculations.
4. Totals for inforce, new business, changes and each type of
termination, as of the end of the month. "Totals" refer to the
number of policies reinsured and the net amount at risk
reinsured. For bordereau business see sample Policy Exhibit in
Exhibit F.
In addition, the CEDING COMPANY must provide the REINSURER with an
inforce listing of reinsured business at least once a year. This
inforce listing must contain information adequate for the REINSURER to
audit its in force records. (See Exhibit E.)
B. If the CEDING COMPANY chooses to report its reinsurance transactions via
electronic media, the CEDING COMPANY shall consult with the REINSURER to
determine the appropriate reporting format. Should the CEDING COMPANY
subsequently desire to make changes in the data format or the code
structure, the CEDING COMPANY shall communicate such changes to the
REINSURER prior to the use of such changes in reports to the REINSURER.
C. The monthly statements shall be furnished to the REINSURER within thirty
days following the close of each month and will be accompanied by payment
of any net amount due the REINSURER. All premiums not paid within thirty
(30) days of the due date, defined as each policy's 12-month anniversary,
will be in default.
D. Premium for new business, terminations and changes are due at the end of
the month in which the transaction occurs and cover the period from the
transaction date to the end of the calendar quarter. Continuing premium is
due for a calendar quarter period at the end of the first month of the
calendar quarter except for any policy having its anniversary within that
calendar quarter. Continuing premium for such policies is payable in two
segments. Premium from the beginning of the calendar quarter to the policy
anniversary is due at the end of the first month of the calendar quarter.
Premium from the policy anniversary to the end of the calendar quarter is
due at the end of the anniversary month. The quarterly premium is based on
the annual premium divided by 4.
E. The REINSURER reserves the right to charge interest at the Prime Rate plus
2% as stated in the Wall Street Journal on the 1st business day in January
prior to the due date of the premium when:
1. Renewal premiums are not paid within sixty (60) days of the due date.
2. Premiums for new business are not paid within one hundred twenty
(120) days of the date the policy is issued.
9
Administration (Continued)
--------------------------
F. The REINSURER will have the right to terminate this Agreement when premiums
are in default by giving a ninety (90) days written notice of termination
to the CEDING COMPANY. As of the close of the last day of this ninety (90)
day notice period, the REINSURER'S liability for all risks reinsured under
this agreement will terminate. The first day of the ninety (90) day notice
of termination, resulting from default as described in Section C of this
Article, will be the day the notice is received in the mail by the CEDING
COMPANY or if the mail is not used, the day it is delivered to the CEDING
COMPANY. If all premiums in default are received within the ninety (90) day
time period, the Agreement will remain in effect.
10
Article VII
Reserves
--------
The CEDING COMPANY agrees to post on its books any deficiency reserves on the
coverage reinsured under this Agreement.
11
Article VIII
DAC Tax Regulations
-------------------
The CEDING COMPANY and the REINSURER hereby agree to the following pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulations issued December 29, 1992,
under Section 848 of the Internal Revenue Code of 1986, as amended.
1. The term "party" will refer to either the CEDING COMPANY or the REINSURER
as appropriate.
2. The terms used in this Article are defined by reference to Treasury
Regulation Section 1.848-2 in effect as of December 29, 1992. The term "net
consideration" will refer to net consideration as defined in Treasury
Regulation Section 1.848-2(f).
3. 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 IRS Section 848(c)(1).
4. The CEDING COMPANY and the REINSURER agree to exchange information
pertaining to the amount of net consideration under this Agreement each
year to ensure consistency. The CEDING COMPANY and the REINSURER also agree
to exchange information which may be otherwise required by the IRS.
5. The CEDING COMPANY will submit a schedule to the REINSURER by June 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 CEDING COMPANY stating that the
CEDING COMPANY will report such net consideration in its tax return for the
preceding calendar year.
6. The REINSURER may contest such calculation by providing an alternative
calculation to the CEDING COMPANY in writing. 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.
7. 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. If the CEDING COMPANY and the REINSURER reach
agreement on an amount of net consideration, each party shall report such
amount in their respective tax returns for the previous calendar year. If
the CEDING COMPANY and the REINSURER fail to reach agreement on an amount
of net consideration, each party may choose to report their own
determination of net consideration on their respective tax returns.
12
Article IX
Errors and Omissions
--------------------
A. It is expressly understood and agreed that if failure to comply with any
terms of this Agreement is hereby shown to be unintentional or the result of
misunderstanding or oversight on the part of either the CEDING COMPANY or the
REINSURER, both the CEDING COMPANY and the REINSURER shall be restored to the
position they would have occupied had no such error or oversight occurred,
subject always to the correction of the error or oversight.
13
Article X
Expense of Original Policy
--------------------------
The CEDING COMPANY will bear the expense of all medical examinations, inspection
fees and other charges incurred in connection with the original policy.
14
Article XI
Changes in Retention and Recapture Privileges
---------------------------------------------
A. If at any time, the CEDING COMPANY changes its existing retention limits,
as shown in Exhibit A, written notice of the change will promptly be given
to the REINSURER.
B. The CEDING COMPANY may apply the new limits of retention to existing
reinsurance and reduce and recapture reinsurance in force in accordance
with the following rules:
1. The CEDING COMPANY will notify the REINSURER of its intent to
recapture at least thirty (30) days prior to any recaptures.
2. No recapture will be made unless reinsurance has been in force ten
(10) years.
3. Recapture will become effective on the policy anniversary date
following notification of the company's intent to recapture.
4. No recapture will be made unless the CEDING COMPANY retained its
maximum limit of retention for the plan, age and mortality rating at
the time the policy was issued as shown in Exhibits A and D. No
recapture will be allowed in any class of fully reinsured business.
5. If any reinsurance is recaptured all reinsurance eligible for
recapture under the provisions of this Article must be recaptured.
6. If there is reinsurance in other companies on risks eligible for
recapture, the necessary reduction is to be applied to each company in
proportion to the total outstanding reinsurance.
7. The CEDING COMPANY shall first recapture business that was ceded on an
excess basis, then may recapture quota-share business, however, the
CEDING COMPANY must have retained its full retention at the time of
issue on the quota-share business.
15
Article XII
Terminations and Reductions
---------------------------
Terminations or reductions will take place in accordance with the following
rules, in order of priority:
1. The CEDING COMPANY must keep its initial or recaptured retention on the
policy.
2. Termination or reduction of a wholly reinsured policy will not affect other
reinsurance in force.
3. A termination or reduction on a wholly retained case will cause an equal
reduction in existing automatic reinsurance with the oldest policy being
reduced first.
4. A termination or reduction will be made first to reinsurance of partially
reinsured policies with the oldest policy being reduced first.
5. If the policies are reinsured with multiple reinsurers, the reinsurance
will be reduced by the ratio of the amount of reinsurance in each company
to the total outstanding reinsurance on the risk involved.
16
Article XIII
Reinstatement, Exchanges, Extended Term
---------------------------------------
and Reduced Paid-Up Insurance, Conversions
------------------------------------------
A. Reinstatements
--------------
Any Policy originally reinsured in accordance with the terms and
conditions of this Agreement by the CEDING COMPANY may be automatically
reinstated with the REINSURER as long as the policy is reinstated in
accordance with the terms and rules of the CEDING COMPANY. Any policy
originally reinsured with the REINSURER on a facultative basis which has
been in a lapsed status for more than ninety (90) days must be submitted
with underwriting requirements and approved by the REINSURER before it is
reinstated. The CEDING COMPANY will pay the REINSURER its share of amounts
collected or charged for the reinstatement of such policies.
B. Exchanges
---------
Exchanges will be reinsured under this Agreement only if the original
policy was reinsured with the REINSURER; the amount of reinsurance under
this Agreement will not exceed the amount of the reinsurance on the
original policy with the REINSURER immediately prior to the exchange.
Premiums will be determined as follows:
If any business covered under this Agreement is subsequently exchanged to
any other plan reinsured by the REINSURER, then such business shall be
reinsured at the rates as shown in the Agreement covering the new plan.
Rates and allowances or pay percentages applicable to the new plan will be
determined at point in scale based on the original policy that is being
exchanged. If the Agreement including the new rates requires policy fees,
then they shall also apply to the new plan.
C. Extended Term and Reduced Paid-Up Insurance
-------------------------------------------
Changes as a result of extended term or reduced paid-up insurance will be
handled like reductions.
D. Conversions
-----------
Conversions will be reinsured under this Agreement only if the original
policy was reinsured with the REINSURER; the amount of reinsurance under
this Agreement will not exceed the amount of the reinsurance on the
original policy with the REINSURER immediately prior to the conversion.
Premiums will be determined as follows:
If any business covered under this Agreement is subsequently converted to
any other plan reinsured by the REINSURER, then such business shall be
reinsured at the rates as shown in the Agreement covering the new plan.
Rates and allowances or pay percentages applicable to the new plan will be
determined at point in scale based on the original policy that is being
converted. If the Agreement including the new rates requires policy fees,
then they shall also apply to the new plan.
NOTE: An original date policy Reissue will not be treated as a continuation of
the original policy. It will be treated as a new policy and the original
policy will be treated as Not Taken. All premiums previously paid to the
REINSURER for the original policy will be refunded to the CEDING COMPANY.
All premiums will be due on the new policy from the original issue date of
the old policy.
NOTE: Re-entry, e.g., wholesale replacement and similar programs are not covered
under this Article. If Re-entry is applicable to this treaty, then it will
be covered under the Premiums and Allowances Exhibit.
17
Article XIV
Liability
---------
A. This is an Agreement solely between the REINSURER and the CEDING COMPANY.
In no instance will anyone other than the REINSURER or the CEDING COMPANY
have any rights under this agreement, and the CEDING COMPANY will be and
remain solely liable to any insured, policy owner, or beneficiary under any
policy reinsured hereunder.
B. The liability for all automatic, facultative-obligatory and guaranteed
capacity reinsurance as applicable to this agreement and accepted by the
REINSURER under this Agreement will commence simultaneously with that of
the CEDING COMPANY.
C. The REINSURER will not be liable for proceeds paid under the CEDING
COMPANY'S conditional receipt or temporary insurance agreement unless
conditions for coverage under Article XXI, Temporary Insurance Agreement,
of this Agreement are met.
D. Liability for all reinsurance submitted facultatively to the REINSURER will
commence when all of the following conditions have been met:
1. The REINSURER'S offer has been accepted and the CEDING COMPANY has
properly documented its records to reflect this acceptance, and
2. The policy has been delivered and paid for in accordance with the
CEDING COMPANY'S procedures, and
3. No more than one-hundred twenty (120) days have elapsed from the date
of the REINSURER'S final offer unless the REINSURER explicitly states
in writing that the final offer is extended for some further period of
time.
E. The liability of the REINSURER for all reinsurance under this Agreement
will cease simultaneously with the liability of the CEDING COMPANY and will
not exceed the CEDING COMPANY'S contractual liability under the terms of
its policies.
18
Article XV
Claims
------
A. Prompt notice of a claim must be given to the REINSURER. In every case of
loss, copies of the proofs obtained by the CEDING COMPANY will be taken by
the REINSURER as sufficient. Copies thereof, together with proof of the
amount paid on such claim by the CEDING COMPANY will be furnished to the
REINSURER when requesting its share of the claim. The REINSURER shall pay
its share of all payable claims. However, if the amount reinsured with the
REINSURER is more than the amount retained by the CEDING COMPANY and the
claim is contestable, all papers in connection with such claim, including
all underwriting and investigation papers, must be submitted to the
REINSURER for its recommendation before admission of any liability on the
part of the CEDING COMPANY.
B. The CEDING COMPANY will notify the REINSURER of its intention to contest,
compromise, or litigate a claim. Unless it declines to be a party to such
action, the REINSURER will pay its share of any settlement up to the
maximum that would have been payable under the specific policy had there
been no controversy plus its share of specific expenses, except as
specified below.
If the REINSURER declines to be a party to the contest, compromise, or
litigation of a claim, it will pay its full share of the amount reinsured,
as if there had been no contest, compromise, or litigation, and its
proportionate share of covered expenses incurred to the date it notifies
the CEDING COMPANY it declines to be a party.
In no event will the following categories of expenses or liabilities be
reimbursed:
1. Routine investigative or administrative expenses;
2. Salaries of employees or other internal expenses of the CEDING COMPANY
or the original issuing company;
3. Extra contractual damages, including punitive and exemplary damages;
4. Expenses incurred in connection with a dispute or contest arising out
of conflicting or any other claims of entitlement to policy proceeds
or benefits.
C. If the amount of insurance changes because of a misstatement of rate
classification, the REINSURER'S share of reinsurance liability will change
proportionately.
D. For approved Waiver of Premium or Waiver of Cost benefit claims, the
REINSURER will pay the CEDING COMPANY its portion of the amount of gross
premiums waived by the CEDING COMPANY.
E. In the event the REINSURER does not receive notification of acceptance from
the CEDING COMPANY prior to the death occurring, then the CEDING COMPANY
will apply the tie breaker rule on facultative submissions as described
below:
1. The risk will be ceded to the reinsurers with the best offers.
2. If reinsurers are tied with identical offers, the earlier offers will
be ceded the risk.
19
Article XVI
Arbitration
-----------
A. It is the intention of the REINSURER and the CEDING 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 things with the highest good faith. If the
REINSURER or the CEDING COMPANY cannot mutually resolve a dispute which
arises out of or relates to this Agreement, however, the dispute will be
decided through arbitration. The arbitrators will base their decision on
the terms and conditions of this Agreement plus, as necessary, on the
customs and practices of the insurance and reinsurance industry rather than
solely on a strict interpretation of the applicable law; there will be no
appeal from their decision, and any court having jurisdiction of the
subject matter and the parties may reduce that decision to judgment.
B. To initiate arbitration, either the CEDING COMPANY or the REINSURER will
notify the other party by Certified Mail of its desire to arbitrate,
stating the nature of its dispute and the remedy sought. The party to which
the notice is sent will respond to the notification in writing within ten
(10) days of its receipt.
C. There will be three arbitrators who will be current or former officers of
life insurance companies other than the contracting companies. Each of the
contracting companies will appoint one of the arbitrators and these two
arbitrators will select the third. If either party refuses or neglects to
appoint an arbitrator within sixty days, the other party may appoint the
second arbitrator. If the two arbitrators do not agree on a third
arbitrator within sixty days of their appointment, each of the arbitrators
will nominate three individuals. Each arbitrator will then decline two of
the nominations presented by the other arbitrator. The third arbitrator
will then be chosen from the remaining two nominations by drawing lots.
D. It is agreed that each of the three arbitrators should be impartial
regarding the dispute and should resolve the dispute on the basis described
in Section A of this Article. Therefore, at no time will either the CEDING
COMPANY or the REINSURER contact or otherwise communicate with any person
who is to be or has been designated as a candidate to serve as an
arbitrator concerning the dispute, except upon the basis of jointly drafted
communications provided by both the CEDING COMPANY and the REINSURER to
inform the arbitrators of the nature and facts of the dispute. Likewise,
any written or oral arguments provided to the arbitrators concerning the
dispute will be coordinated with the other party and will be provided
simultaneously to the other party or will take place in the presence of the
other party. Further, at no time will any arbitrator be informed that the
arbitrator has been named or chosen by one party or the other.
E. The arbitration hearing will be held on the date fixed by the arbitrators.
In no event will this date be later than six (6) months after the
appointment of the third arbitrator. As soon as possible, the arbitrators
will establish pre-arbitration procedures as warranted by the facts and
issues of the particular case. At least ten (10) 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 may consider any
relevant evidence; they will give the evidence such weight as they deem it
entitled to after consideration of any objections raised concerning it. The
party initiating the arbitration will have the burden of proving its case
by a preponderance of the evidence. Each party may examine any witnesses
who testify at the arbitration hearing.
F. The cost of arbitration will be borne by the losing party unless the
arbitrators decide otherwise.
20
Article XVII
Insolvency
----------
A. In the event of the insolvency of the CEDING COMPANY and the appointment of
a conservator, liquidator, or statutory successor, the portion of any risk
or obligation assumed by the REINSURER shall be payable to the conservator,
liquidator, or statutory successor on the basis of claims allowed against
the insolvent company by any court of competent jurisdiction or by any
conservator, liquidator, or statutory successor of the company having
authority to allow such claims, without diminution because of that
insolvency, or because the conservator, liquidator, or statutory successor
has failed to pay all or a portion of any claims. Payments by the REINSURER
as set forth in this subdivision shall be made directly to the CEDING
COMPANY or to its conservator, liquidator, or statutory successor, except
where the contract of insurance or reinsurance specifically provides
another payee of such reinsurance in the event of the insolvency of the
CEDING COMPANY.
B. In the event of insolvency of the CEDING COMPANY, the conservator,
liquidator, or statutory successor will immediately give written notice to
the REINSURER of all pending claims against the CEDING COMPANY on any
policies reinsured. While a claim is pending, the REINSURER may investigate
and interpose, at its own expense, in the proceedings where the claim is
adjudicated, any defense or defenses which it may deem available to the
CEDING COMPANY or its conservator, liquidator or statutory successor. The
expense 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 which may accrue to
the CEDING 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 elect to interpose a defense or defenses to any
such claim, the expense will be apportioned in accordance with the terms of
the reinsurance agreement as though such expense had been incurred by the
CEDING COMPANY.
21
Article XVIII
Right to Inspect
----------------
The REINSURER may at all reasonable times inspect the CEDING COMPANY'S original
papers, records, books, files, etc., relating to the business under this
Agreement.
22
Article XIX
Duration of Agreement
---------------------
A. This Agreement may be terminated as to new reinsurance at any time by
either party giving ninety (90) days written notice of termination. The day
the notice is mailed to the other party's Home Office, or, if the mail is
not used, the day it is delivered to the other party's Home Office or to an
Officer of the other party will be the first day of the ninety (90) day
period.
B. During the ninety (90) day period, this Agreement will continue to operate
in accordance with its terms.
C. The REINSURER and the CEDING COMPANY will remain liable after termination,
in accordance with the terms and conditions of this Agreement, with respect
to all reinsurance effective prior to termination of this Agreement.
23
Article XX
Increasing Net Amount at Risk Policies and Riders
-------------------------------------------------
I. Whenever the death benefit and/or the net amount at risk on a policy will
be increased at future date(s) without additional underwriting, and these
increasing risks will be automatically reinsured under this Agreement, they
will be handled as shown below. The CEDING COMPANY will use a 15 year
projection to determine whether these policies comply with the binding and
jumbo limits shown in Exhibit D. The 15 year projection will also be used
to determine the CEDING COMPANY'S retention at issue and the percentage of
future increases to be retained. As long as the CEDING COMPANY follows the
procedures as outlined, the REINSURERS will be obligated to assume their
prorata share of all future risk increases.
A. Scheduled Increases (Variable Annual Renewable Term rider. "VART")
------------------------------------------------------------------
1. VART is a rider with coverage amounts that can vary annually and
are scheduled at issue.
2. The CEDING COMPANY'S percentage retention on policies with VART
is the lesser of:
a) initial maximum retention less retained amounts on prior
policies divided by initial total amount including VART and
b) twice initial maximum retention less retained amounts on
prior policies divided by the 15 year highest amount
(VART + base coverage).
3. The total amount is shared prorata between the CEDING COMPANY and
the REINSURER, as shown in the following examples:
a) Example 1: Assume the CEDING COMPANY'S maximum retention at
issue = $2MM. If prior plus initial VART + base = $3MM and
prior plus 15 year highest VART + base amount = $4MM, the
CEDING COMPANY will retain 2/3 initially and 2/3 of all
increases, because 2/3 (is less than) 4/4. So the CEDING
COMPANY'S retention will be 2/3 of $3MM(=$2MM) at issue
growing to 2/3 of $4MM (=$2.67MM) over 15 years.
b) Example 2: Same as above, but if prior plus 15 year highest
VART + base amount = $8MM, the CEDING COMPANY will retain
1/2 initially and 1/2 of all increases, because 2/3 (is more
than) 4/8. So the CEDING COMPANY'S retention will be 1/2 of
$3MM (=$1.5MM) at issue, growing to 1/2 of $8MM (=$4MM) over
15 years.
4. The CEDING COMPANY will report the highest VART amount in the
first 15 years as the VART "face" amount.
5. The CEDING COMPANY will report the current year's VART amount as
the VART "risk" amount.
B. Unscheduled (Increases Whole Life Products)
-------------------------------------------
1. Includes any non-underwritten increase, including Increasing
Whole Life (Flex products) and U.L. products increasing due to
definition of life insurance net amount at risk corridor.
2. The increases will be shared prorata between the CEDING COMPANY
and the REINSURER.
II. For policies with an increasing death benefit and/or net amount at risk
which will be reinsured facultative, the CEDING COMPANY has the
responsibility for clearly identifying the highest net amount at risk in
the first 15 years in order for the REINSURER'S underwriters to underwrite
that highest net amount at risk. The highest net amount at risk reinsured
must never exceed the amount of the REINSURER'S offer.
24
Article XXI
Temporary Insurance Agreement
-----------------------------
A. Subject to the terms, conditions, and limits of this Agreement and
provided the conditions set forth in Section B of this article are
fulfilled, the REINSURER shall reimburse the CEDING COMPANY for Temporary
Insurance Agreement (TIA) reinsurance. TIA reinsurance is defined as
reinsurance on a claim pursuant to a TIA, which either:
(1) the CEDING COMPANY'S total claim liability exceed the appropriate
retention set forth in the Retention Schedule due to the existence of
prior risk retained by the ceding company on the life or
(2) an unconditional offer to reinsure has been made by the REINSURER in
response to a facultative request for reinsurance where the CEDING
COMPANY has proposed to keep less than its full retention as set forth
in the Retention Schedule. An unconditional offer to reinsure is a
final offer made by the REINSURER with no conditions other than
routine requirements such as time for delivery, certificate of health,
etc. In no event shall the REINSURER liability pursuant to this
article exceed the REINSURER quota share under this Agreement unless
the REINSURER has made an unconditional facultative offer for a larger
amount.
B. The following conditions must be satisfied in order for reinsurance of a
TIA to be effective.
(1) The CEDING COMPANY must become liable for a claim pursuant to a TIA
issued on a form in conformity to the appropriate form of the
Temporary Insurance Agreement Exhibit G of this Agreement; and
(2) The TIA must be given in return for an application for a policy form
included in the Policy Plans Reinsured Exhibit which would bear a
policy date in the range covered by this Agreement; and
(3) As of the date of the proposed insured's death, either the policy has
not been submitted facultatively, or, if submitted facultatively then
the following conditions determine the REINSURER'S liability in the
event of a valid TIA claim.
i) If, as of the proposed insured's date of death, the CEDING
COMPANY has not received any unconditional offer to reinsure,
then the automatic reinsurers will reimburse the CEDING COMPANY
for the TIA reinsurance according to their quota shares under
this Agreement; or
ii) If, as of the proposed insured's date of death, the CEDING
COMPANY has received an unconditional offer or offers to reinsure
that at least equal the TIA reinsurance, then the reinsurer(s)
having made the unconditional offer(s) will reimburse the CEDING
COMPANY for the TIA reinsurance. For the purpose of the
comparisons detailed below, a flat rating of $2.50 per thousand
is equivalent to I table rating. In the case of multiple offers
received by the date of death, a lower offer takes precedence
over a higher offer, and in the case of identical offers, an
offer received on an earlier day takes precedence over an offer
received on a later day; or
iii) If, as of the proposed insured's date of death, the CEDING
COMPANY has received an unconditional offer or offers to
reinsure, with such offer(s) failing to at least equal the TIA
reinsurance, then the reinsurer(s) having made the unconditional
offer(s) will reimburse the CEDING COMPANY for the offered
amount(s), with the excess to be shared among the remaining
automatic reinsurers, and each automatic reinsurer's share equal
to A/B, where
A = the automatic reinsurer's quota share under this
Agreement, and
B = the sum of each remaining automatic reinsurer's shares
under this Agreement.
iv) Nothing in the foregoing shall preclude the CEDING COMPANY from
reinsurance reimbursement for a valid TIA claim, up to the full
TIA claim amount, for an amount unconditionally offered by the
REINSURER in response to a facultative request by the CEDING
COMPANY proposing to retain less than its limit of retention. If
the CEDING COMPANY has proposed a specific retention in its
facultative request for reinsurance, that shall be its retention.
If the CEDING COMPANY has not specified a retention in the
facultative request, then its retention shall be 25% of the risk
unless it has documented in its underwriting file that it's
initial evaluation of the risk is higher than table 6, in which
case it shall have no retention.
25
Article XXII
Offset
------
Any debts or credits, matured or unmatured, liquidated or unliquidated, in favor
of or against either the REINSURER or the CEDING COMPANY with respect to this
Agreement are deemed mutual debts or credits, as the case may be, and will be
offset, and only the balance will be allowed or paid. In the event of the
insolvency of the CEDING COMPANY this will not apply.
26
Article XXIII
Parties to the Agreement
------------------------
This is an agreement solely between the REINSURER and the CEDING COMPANY. In no
instance will anyone other than the REINSURER or the CEDING COMPANY have any
rights under this agreement, and the CEDING COMPANY is and will remain solely
liable to any insured, policyowner, or beneficiary under the original policies
reinsured hereunder.
27
Article XXIV
Execution of Agreement
----------------------
In Witness of the above,
PACIFIC LIFE INSURANCE COMPANY
of
Newport Beach, California
and
SWISS RE LIFE & HEALTH AMERICA INC.
of
New York, New York
have by their respective officers executed and delivered this Agreement in
duplicate on the dates indicated below, with an effective date of July 1, 1999.
PACIFIC LIFE INSURANCE COMPANY
By: Attest:
-------------------------------------------- -------------------------------------
Title: Assistant Vice President, Reinsurance Title: Manager, Reinsurance
----------------------------------------- -------------------------------------
Date:
------------------------------------------
SWISS RE LIFE & HEALTH AMERICA INC.
By: Attest:
-------------------------------------------- -------------------------------------
Title: Title:
----------------------------------------- -------------------------------------
Date:
------------------------------------------
28
1999 Reinsurance Rates for Male Aggregate Nonsmokers
(annual rate per thousand of NAR)
--------------------------------------------------------------------------------
Issue
Age 1 2 3 4 5 6 7 8
--------------------------------------------------------------------------------
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
1999 Reinsurance Rates for Male Aggregate Nonsmokers
(annual rate per thousand of NAR)
--------------------------------------------------------------------------------
Issue
Age 9 10 11 12 13 14 15 ULT
--------------------------------------------------------------------------------
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
1999 Reinsurance Rates for Female Aggregate Nonsmokers
----------------------------------------------------------------------------
Issue
Age 1 2 3 4 5 6 7 8
----------------------------------------------------------------------------
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
1999 Reinsurance Rates for Female Aggregate Nonsmokers
----------------------------------------------------------------------------
Issue
Age 9 10 11 12 13 14 15 ULT
----------------------------------------------------------------------------
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
1999 Reinsurance Rates for Male Smokers
-------------------------------------------------------------------------------
Att Issue
Age Age 1 2 3 4 5 6 7 8
-------------------------------------------------------------------------------
15 0
16 1
17 2
18 3
19 4
20 5
21 6
22 7
23 8
24 9
25 10
26 11
27 12
28 13
29 14
30 15
31 16
32 17
33 18
34 19
35 20
36 21
37 22
38 23
39 24
40 25
41 26
42 27
43 28
44 29
45 30
46 31
47 32
48 33
49 34
50 35
51 36
52 37
53 38
54 39
55 40
56 41
57 42
58 43
59 44
60 45
61 46
62 47
63 48
64 49
65 50
66 51
67 52
68 53
69 54
70 55
71 56
72 57
73 58
74 59
75 60
76 61
77 62
78 63
79 64
80 65
81 66
82 67
83 68
84 69
85 70
86 71
87 72
88 73
89 74
90 75
91 76
92 77
93 78
94 79
95 80
96 81
97 82
98 83
99 84
100 85
101 86
102 87
103 88
104 89
105 90
106 91
107 92
108 93
109 94
110+ 95
1999 Reinsurance Rates for Male Smokers
-------------------------------------------------------------------------------
Att Issue
Age Age 9 10 11 12 13 14 15 ULT
-------------------------------------------------------------------------------
15 0
16 1
17 2
18 3
19 4
20 5
21 6
22 7
23 8
24 9
25 10
26 11
27 12
28 13
29 14
30 15
31 16
32 17
33 18
34 19
35 20
36 21
37 22
38 23
39 24
40 25
41 26
42 27
43 28
44 29
45 30
46 31
47 32
48 33
49 34
50 35
51 36
52 37
53 38
54 39
55 40
56 41
57 42
58 43
59 44
60 45
61 46
62 47
63 48
64 49
65 50
66 51
67 52
68 53
69 54
70 55
71 56
72 57
73 58
74 59
75 60
76 61
77 62
78 63
79 64
80 65
81 66
82 67
83 68
84 69
85 70
86 71
87 72
88 73
89 74
90 75
91 76
92 77
93 78
94 79
95 80
96 81
97 82
98 83
99 84
100 85
101 86
102 87
103 88
104 89
105 90
106 91
107 92
108 93
109 94
110+ 95
1999 Reinsurance Rates for Female Smokers
--------------------------------------------------------------------------------
Att Issue
Age Age 1 2 3 4 5 6 7 8
--------------------------------------------------------------------------------
15 0
16 1
17 2
18 3
19 4
20 5
21 6
22 7
23 8
24 9
25 10
26 11
27 12
28 13
29 14
30 15
31 16
32 17
33 18
34 19
35 20
36 21
37 22
38 23
39 24
40 25
41 26
42 27
43 28
44 29
45 30
46 31
47 32
48 33
49 34
50 35
51 36
52 37
53 38
54 39
55 40
56 41
57 42
58 43
59 44
60 45
61 46
62 47
63 48
64 49
65 50
66 51
67 52
68 53
69 54
70 55
71 56
72 57
73 58
74 59
75 60
76 61
77 62
78 63
79 64
80 65
81 66
82 67
83 68
84 69
85 70
86 71
87 72
88 73
89 74
90 75
91 76
92 77
93 78
94 79
95 80
96 81
97 82
98 83
99 84
100 85
101 86
102 87
103 88
104 89
105 90
106 91
107 92
108 93
109 94
110+ 95
1999 Reinsurance Rates for Female Smokers
--------------------------------------------------------------------------------
Att Issue
Age Age 9 10 11 12 13 14 15 ULT
--------------------------------------------------------------------------------
15 0
16 1
17 2
18 3
19 4
20 5
21 6
22 7
23 8
24 9
25 10
26 11
27 12
28 13
29 14
30 15
31 16
32 17
33 18
34 19
35 20
36 21
37 22
38 23
39 24
40 25
41 26
42 27
43 28
44 29
45 30
46 31
47 32
48 33
49 34
50 35
51 36
52 37
53 38
54 39
55 40
56 41
57 42
58 43
59 44
60 45
61 46
62 47
63 48
64 49
65 50
66 51
67 52
68 53
69 54
70 55
71 56
72 57
73 58
74 59
75 60
76 61
77 62
78 63
79 64
80 65
81 66
82 67
83 68
84 69
85 70
86 71
87 72
88 73
89 74
90 75
91 76
92 77
93 78
94 79
95 80
96 81
97 82
98 83
99 84
100 85
101 86
102 87
103 88
104 89
105 90
106 91
107 92
108 93
109 94
110+ 95
Exhibit A
LIMITS OF RETENTION
PACIFIC LIFE INSURANCE COMPANY
PACIFIC LIFE & ANNUITY COMPANY
EFFECTIVE FOR POLICY DATES BEGINNING JULY 1, 1999
I. DIRECT BUSINESS
Prior coverage (including JLS, SI, GI and Assumed, except business assumed
by merger with Pacific Corinthian, as noted below) counts towards maximum
life retention by category based on the policy amount. Prior JLS risk for
each covered individual count towards individual life retention at 100% of
the JLS policy amount. Inforce VART amounts (see below) will count towards
retention based on the highest VART amount in the first 15 policy years.
With regard to the coordination of GI and fully underwritten retention
limits, the maximum retention available is the fully underwritten. In
particular, the GI and fully underwritten retention limits are not added.
Retention for New York (Pacific Life & Annuity Company) business will be
fully integrated; that is, New York will be treated just like any other
state.
A. Individual Life: Fully underwritten, external exchange Simplified
Issue (SI), and joint one life uninsurable:
Issue Age Retention Limit
--------- ---------------
0-80 $3,000,000
81-85(Std-Table D only) $1,500,000
B. Joint Life: Fully underwritten and external exchange Simplified Issue:
Issue Age* Retention Limit
--------- ---------------
16-80 $5,000,000
81-85 (Std-Table D only) $2,500,000
* Based on the higher of the individual ages of the insureds.
C. Individual Life: Guaranteed Issue (GI):
Issue Age Retention Limit
--------- ---------------
All $3,000,000
D. Joint Life: Guaranteed Issue (with SI underwriting on the non-GI life)
Issue Age Retention Limit
--------- ---------------
All $5,000,000
E. Individual Life: International Risks (i.e., primary residency outside
of U.S., Canada, Guam or Puerto Rico)
Issue Age* Retention Limit
--------- ---------------
18-65 (Std-Table D only) $1,500,000 for "Standard"
countries
18-65 (Std-Table D only) $ 500,000 for "$1.50/1000
extra" countries
F. Joint Life: International Risks (i.e., primary residency outside of
U.S., Canada, Guam or Puerto Rico)
Issue Age* Retention Limit
--------- ---------------
18-65 (Std-Table D only) $2,500,000 for "Standard"
countries
18-65 (Std-Table D only) $ 800,000 for "$1.50/1000
extra" countries
* Based on the higher of the individual ages of the insureds.
Exhibit A (Continued)
G. Other Risks/Special Situations Retention Limit
---------------
1. Aviation Risks, Underwritten 50% of scheduled maximums
2. Paid Up Additions (PUA) Both face amount and cash value
are included in the calculation
of NAR
3. Accidental Death Benefit No retention. Fully reinsured
through one carrier only
4. Waiver of Premium (and of Cost) Retained, except may cede face
on request
5. Disability Benefit Rider Retained
6. VART (Rider with scheduled Initial, as above; Over
increase in face amount) 15 years, 2 x initial
7. Guaranteed to Issue Same as Guaranteed Issue
H. Minimum Cession Face Amount
Automatic Underwritten (including International) $100,000
Guaranteed Issue (Automatic & Facultative) $100,000
Facultative & Facultative Obligatory
(including International) $ 75,000
Guaranteed Capacity $ 75,000
The minimum cession face amount is applied separately to each coverage
segment before the risk is allocated among reinsurers. If the coverage
segment is less than (Retention Limit + Minimum Cession) then retain
fully; otherwise retain up to the applicable Retention Limit. For M
Life ceded, there is no minimum cession face amount.
2. ASSUMED BUSINESS/MERGERS
A. For M reinsurance agreements, assumed amount combine with direct
amounts and are subject to the direct retention limits by category.
B. Coverage assumed on an individual cession basis from professional
reinsurers: maximum assumed amount is $250,000 per life for all ages
and ratings. Risk amounts are considered for retention management
purposes.
C. Coverage assumed on a bulk reporting basis from professional
reinsurers: maximum assumed amount is $100,000 per life. Risk amounts
are not considered for retention management purposes.
Business Acquired Through Assumption Reinsurance and Mergers
------------------------------------------------------------
1) Business assumed from CONFEDERATION LIFE: 30% retained, including
Paid Up Additions, subject to the same retention limit as for
Pacific Life originated business.
2) Business assumed by merger with PACIFIC CORINTHIAN: Retention is
the same as for Pacific Corinthian before the merger and is
separate and independent of Pacific Life retention.
Exhibit B
Policy Plans Reinsured
----------------------
All fully underwritten single and joint life fixed and variable permanent
ordinary plans and riders and simplified issues of the CEDING COMPANY'S Select
Estate Maximizer (SEM), product.
This agreement excludes reinsurance of accidental death benefits issued by the
CEDING COMPANY.
Exhibit C
Premiums
--------
Life
----
The basis for calculating the premiums payable for this coverage will be
determined according to the amount reinsured with REINSURER per insured life as
follows:
All policy fees will be retained by the CEDING COMPANY.
For substandard table ratings, premiums will be increased by 25% per table.
The premium will be increased by any flat extra premium charged the insured on
the face amount initially reinsured, less total allowances in the amount of 90%
of any first year permanent (payable six years or more) extra or 10% of any
first year temporary flat extra premium, and 10% of any renewal flat extra
premium.
Aggregated nonsmokers are reported as smoking status "N". Smokers are reported
as smoking status "S". Preferred nonsmokers are reported as smoking status "P".
Residual nonsmokers are reported as smoking status "R".
Single Life Plans
-----------------
The consideration payable for this coverage shall be based on the
appropriate annual life rate from the attached Rate Table, labeled C-1.
Joint Life Plans (Both Lives Insurable)
---------------------------------------
The consideration payable for this coverage shall be based on the
appropriate annual life rate from the attached Rate Table, labeled C-1 and
the calculation shown in the attached Exhibit C-1a.
Joint Life Plans (One Life Uninsurable)
---------------------------------------
The consideration payable for this coverage shall be based on the
appropriate annual life rate from the attached Rate Table, labeled C-1.
Waiver of Premium Disability
----------------------------
The annual premium to be paid to the REINSURER for reinsurance of Waiver of
Premium or Waiver of Cost benefits will be based on the appropriate CEDING
COMPANY rate, less 90% allowance in the first year and 10% allowance in
renewal years.
PACIFIC LIFE Exhibit C-1
MODIFICATIONS TO AGGREGATE NON-SMOKER RATES
Police Select/ Residual/
Year Aggregate Aggregate
------ --------- ---------
1 80.0% 115.0%
2 80.0% 115.0%
3 80.0% 115.0%
4 80.0% 115.0%
5 80.0% 115.0%
6 80.0% 115.0%
7 80.0% 115.0%
8 80.0% 115.0%
9 80.0% 115.0%
10 80.0% 115.0%
11 81.3% 114.0%
12 82.7% 113.0%
13 84.0% 112.0%
14 85.3% 111.0%
15+ 86.7% 110.0%
Select/Aggregate: The discount factor applied to aggregate rates to give select
rates.
Residual/Aggregate: The loading factor applied to aggregate rates to give
residual rates.
Exhibit C-1a
Joint Last Survivor Mortality Calculation
-----------------------------------------
Joint Last Survivor select and ultimate reinsurance mortality rates are
calculated from the single life reinsurance rates found in Rate Table C-1 that
depend on sex, smoker category and substandard ratings.
The JLS rate calculation process is as follows:
1. Extract information on each life: issue age, gender, nonsmoker/smoker,
ratings-table and/or flat.
2. For each life, extract all policy year and attained age reinsurance
mortality rates and adjust for table ratings (*(1 + T*.25)) and/or flat
(+FE*.001). Any permanent ratings should be included for a maximum of 20
years. Any value greater than .5 should be set to .5.
3. The JLS rates for the two lives are calculated from these single life
paired rates. The rates being solved for are q(x,y,t) and this equal
[1-p(x,y,t)].
a) Single life rates are expressed as probabilities of dying in a year,
q(x,t) and q(y,t). The probability of living is defined as p(x,t) =
1-q(x,t) and p(y,t) = 1-q(y,t)
b) tpx is the probability that life x lives from policy issue through the
t th policy year. This is: tpx = p(x, 1)*p(x,2)*p(x,3)....... p(x,t)
c) tpxy is the probability that the second death of x and y has not
occurred as of the end of policy year t, and:
tpxy = tpx + tpy -tpx * tpy
d) p(x,y,t) is the probability that the second death of x and y does not
occur in year t given that it hasn't occurred as of the beginning of
year t.
p(x,y,t) = tpxy
----
(t-l)pxy
e) The JLS probability is q(x,y,t) and equals 1-p(x,y,t).
f) Our final reinsurance rates will be subject to a $0.15 minimum. This
is: max = [1-p(x,y,t), .15].
Exhibit D
Limits
------
SWISS RE'S AUTOMATIC PARTICIPATION PERCENTAGE
---------------------------------------------
SWISS RE'S participation percentage for each risk reinsured shall be as shown
below:
20%
AUTOMATIC BINDING LIMITS
------------------------
The CEDING COMPANY agrees not to automatically bind the REINSURER when the
amount to be ceded to the POOL exceeds the following limits:
Fully Underwritten Single Life Policies
---------------------------------------
Life*
-----
Ages Standard - Table F Tables G - P
------ ------------------ ------------
0-15 $7,000,000 $2,000,000
16-70 $17,000,000 $7,000,000
71-75 $10,000,000 $4,000,000
76-80 $4,000,000 None
81-85 $1,500,000 (to D only) None
The REINSURER'S limit is equal to the above limits multiplied by the
REINSURER'S participation percentage.
* For aviation risks, the maximum amount shall be 50% of the above limits.
Joint Last Survivor Policies
----------------------------
Life*
-----
Ages Standard - Table F Tables G - P
------ ------------------ ------------
16-70 $20,000,000 $10,000,000
71-75 $10,000,000 $5,000,000
76-80 $4,000,000 None
81-85 $2,500,000 (to D only) None
The REINSURER'S limit is equal to the above limits multiplied by the
REINSURER'S participation percentage.
* For Last Survivor policies where one life is deemed uninsurable, the
maximum amount shall be that shown in the single life table above for the
insurable life.
The above Automatic Binding Limits apply for professional athletes (not
team-owned), and entertainers.
Exhibit D (Continued)
JUMBO LIMIT
-----------
A Jumbo risk is one where the amount of insurance already in force and applied
for on the risk in all companies exceeds the following limits:
Fully Underwritten Single Life Policies
---------------------------------------
Life*
-----
Ages Standard - Table F Tables G - P
------ ------------------ ------------
0-15 $30,000,000 $30,000,000
16-70 $50,000,000 $50,000,000
71-75 $50,000,000 $30,000,000
76-80 $30,000,000 None
81-85 $20,000,000 None
Joint Last Survivor Policies
----------------------------
Life*
-----
Ages Standard - Table F Tables G - P
------ ------------------ ------------
16-70 $50,000,000 $50,000,000
71-75 $50,000,000 $30,000,000
76-80 $30,000,000 None
81-85 $20,000,000 None
MINIMUM CESSION LIMIT AND TRIVIAL AMOUNT
1. For each coverage segment, if the total face amount to be reinsured is less
than the Minimum Cession Face Amount shown below, such amount will be fully
retained by the CEDING COMPANY. Once reinsurance has been put inforce, if
the total risk amount (NAR) for any coverage segment which is to be
reinsured falls below the Trivial NAR Amount Cancel Point shown below, such
reinsurance will be terminated. VART riders, identified by a "V" in the
61!1 position of the treaty id, are an exception to the trivial amount
cancel point. There is no cancel point for VART riders.
2. The Minimum Cession Face Amount and the Trivial NAR Amount Cancel Point are
applied separately for each insurance segment; that is, separately for base
coverage and for each rider. The amounts shown below refer to the total
amounts reinsured in the automatic pools, exclusive of reinsurance, if any,
to M Life Insurance Company. For each reinsurer participating in the
automatic pool, the REINSURER'S Minimum Cession Face Amount and the Trivial
NAR Amount Cancel Point are equal to the REINSURER'S percentage
participation in the automatic pool multiplied by the respective amounts as
shown below:
Facultative Cession
Facultative-Obligatory Cessions
Automatic Pool Cession Guaranteed Capacity Cession
---------------------- -------------------------------
Minimum Cession Face Amount $100,000 $75,000
Trivial NAR Amount Cancel Point $ 75,000 $ 50,000
Exhibit D (Continued)
BUSINESS ISSUED FROM M LIFE DISTRIBUTERS
----------------------------------------
1. Cases falling within automatic reinsurance parameters are ceded 50% to M
Life. The CEDING COMPANY keeps the remaining 50% and reinsures the excess
to its automatic pool.
2. For Facultative, Facultative-Obligatory and Guaranteed Capacity
reinsurance, M Life will keep its full retention, if available. Reinsurance
is then obtained in the usual fashion.
Exhibit E
Statement Specifications
------------------------
The following information should appear on each Self-Administered statement and
In-Force listing sent to the REINSURER.
Name of the insured(s)
Date of birth of the insured(s)
The issue age of each insured(s)
The sex of the insured(s)
The insured's state/country of residence
Underwriting Classification
Smoking Class
Indication if business is Facultative or Automatic
Indication if business is YRT or Coinsurance
Policy number(s)
Plan Code (Kind Code)
Face Amount of the policy(s) Amount(s) ceded to the
REINSURER
Amount of premium being paid; separated for Life, WP, ADB,
etc.
The amount of any reinsurance premium allowances
Extra premiums concerned - Example $5/ 1000/ 5 YRS
Effective date and duration of any policy(s) change,
reissue, or termination
Exhibit F
Sample Policy Exhibit
---------------------
Policy Summary Reinsurance
Classification Number or Policies Amount
-------------- ------------------ -----------
Inforce as of Last Report 878 $410,220,973.00
New Issues 2 $516,666.00
Reinstatements 3 $483,334.00
Increases $500,000.00
Decreases-Still Inforce $133,332.00
Rollover-In 0 $0.00
Deduct By:
---------
Death 0 $0.00
Surrender 1 $250,000.00
Lapse 4 $1,000,001.00
Conversion-Out 0 $0.00
Decreases-Cancellation 3 $299,999.00
Inactive-Pending 0 $0.00
Not Taken 0 $0.00
Inforce as of Current Report 875 $410,037,641.00
PACIFIC LIFE INSURANCE COMPANY
Insurance Company 000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Exhibit G
TEMPORARY INSURANCE AGREEMENT -LIFE
This Agreement provides a limited Amount of life Insurance coverage, for a
limited Period of time, subject to the terms of this Agreement Advance payment
in the amount of $_________ in connection with Application No._________ is made
for life Insurance on ____________ (name of proposed insured).
HEALTH QUESTIONS
Has any proposed Insured:
1. within the past 90 days been admitted to a hospital or other medical
facility, been advised to be admitted, or had surgery performed or recommended?
2. within the past 5 years been diagnosed as having, or been treated for heart
trouble, stroke, cancer or AIDS, or had such treatment recommended by a member
of the medical profession? If either of the above Questions is answered YES or
LEFT BLANK, no representative of Pacific life Insurance Company (PL) is
authorized to accept money, and NO COVERAGE will take effect under this
Agreement.
TERMS AND CONDITIONS
AMOUNT OF COVERAGE -$1,000.000 OVERALL MAXIMUM FOR ALL APPLICATIONS OR
AGREEMENTS ($1,500,000 OVERALL FOR SURVIVOR LIFE)
If money has been accepted by PL as advance payment for an application for life
insurance and any Proposed Insured dies while this temporary insurance is in
effect, PL will pay to the designated beneficiary the lesser of (a) the amount
of death benefits, if any, which would be payable under the policy and its
riders if issued as applied for, excluding any accidental death benefits, or (b)
$1,000,000 ($1,500,000 for Survivor life). This total benefit limit applies to
all insurance applied for under this and any other current applications to PL
and any other Temporary Insurance Agreements for life Insurance whether applied
for on the life or lives of one or more Proposed Insureds. (NOTE: No death
benefit is payable under this Agreement for any Last Survivor coverages unless
both Proposed Insureds under such coverages have died.)
DATE COVERAGE BEGINS
Temporary life insurance under this Agreement will begin on the date of this
Agreement but only if the above-numbered application has been completed on the
same date.
DATE COVERAGE TERMINATES -90 DAY MAXIMUM
Temporary life Insurance under this Agreement will terminate automatically on
the earliest of:
a. 90 days from the date of this Agreement, or
b. the date any policy is offered to the Applicant in connection with the
above-numbered application, or
c. five days after the date PL mails notice of termination of coverage and
refund of the advance payment to the premium notice address designated in such
application.
PL reserves the right to terminate this Agreement under any of the following
circumstances:
a. 30 days have elapsed since the date of this Agreement and PL has not received
in its Home Office the report of a medical examination if such examination is
required by PL's underwriting rules; or
b. PL has determined that any Proposed Insured is not insurable as a standard
risk at the time of the application or the medical examination, if later; or
c. there are any errors or omissions on the above-numbered application.
LIMITATIONS
This Agreement does not provide benefits for disability.
Fraud or material misrepresentation in the application or in the answers to the
Health Questions of this Agreement invalidate this Agreement and PL's only
liability is for refund of any payment made.
No one is authorized to accept money on Proposed Insureds under 15 days of age
or over the age of 70 (nearest birthday) on the date of this Agreement, nor will
any coverage take effect.
If any Proposed Insured dies by suicide, PL's liability under this Agreement is
limited to a refund of the payment made.
There is no coverage under this Agreement if the check submitted as payment is
not honored by the bank on first presentation. No one is authorized to waive or
modify any of the provisions of this Agreement.
I HAVE RECEIVED A COPY OF AND HAVE READ THIS AGREEMENT AND DECLARE THAT THE
ANSWERS ARE TRUE TO THE BEST OF MY KNOWLEDGE AND BELIEF. I UNDERSTAND AND AGREE
TO ALL ITS TERMS.
Dated
------------------------ -------------------------------------------
Proposed insured (or parent if proposed
insured is under age 16)
------------------------------ -------------------------------------------
Soliciting Agent Additional proposed insured (if applicable)
------------------------------
Florida License ID Number
NOTICE TO APPLICANT:
You should retain the copy of this Agreement. The original will be retained by
PL. If you do not hear from us regarding the insurance plied for within 100 days
from the date of this Agreement, notify us at 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxxxx
Xxxxx, XX 00000,
Attention: Risk Selection Department.
Any person who, with intent to defraud or knowing that he is facilitating a
fraud against an insurer, submits an application or files a claim containing a
false or deceptive statement is guilty of insurance fraud.
Exhibit H
RISK REINS
[LOGO OF PACIFIC LIFE]
OFFICE MEMORANDUM
_______________________________________________________________________________
DATE:
TO:
FROM:
RE: FAC OB REQUEST
_______________________________________________________________________________
CEDING COMPANY PACIFIC LIFE
REGARDING
DATE OF BIRTH
AMOUNT APPLIED FOR
TOTAL LINE IN-FORCE
PLAN SINGLE JOINT
CEDING COMPANY RETENTION
TOTAL AMOUNT OF REINSURANCE NEEDED
AVIATION RISK
UNDERWRITER
TIME
Exhibit I
Guaranteed Capacity Reinsurance
-------------------------------
If the CEDING COMPANY'S full retention is available the REINSURERS Guaranteed
Capacity proportionate share will be as follows:
Swiss Re Life & Health America Inc.'s
Maximum Share of Guaranteed Capacity
-----------------------------------------------------------------------------------------------------------------------
Single Life Underwriting Class Proportion (Share)
-----------------------------------------------------------------------------------------------------------------------
$1,500,000 Ages 18 to 75 (Standard to Table D or equivalent) 23.076923...%
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Joint Life Underwriting Class Proportion (Share)
-----------------------------------------------------------------------------------------------------------------------
$1,500,000 Ages 18 to 75 (Standard to Table D or equivalent) 23.076923...%
-----------------------------------------------------------------------------------------------------------------------
If the CEDING COMPANY'S full retention is not available the REINSURERS
Guaranteed Capacity share will be proportionately reduced. For example:
Underwriting Class -Ages 18 to 75 (Standard to Table D or equivalent)
-----------------------------------------------------------------------------------------------------------------------
Ceding Company Available Swiss Re Life & Health America Inc.'s
Retention Maximum Share Proportion (Share)
-----------------------------------------------------------------------------------------------------------------------
Single Life Single Life
-----------------------------------------------------------------------------------------------------------------------
$2,500,000 $2,500,000 23.076923...%
-----------------------------------------------------------------------------------------------------------------------
$1,500,000 $1,500,000 23.076923...%
-----------------------------------------------------------------------------------------------------------------------
$ 500 000 $ 500,000 23.076923...%
-----------------------------------------------------------------------------------------------------------------------
Joint Life Joint Life
-----------------------------------------------------------------------------------------------------------------------
$4,500,000 $2,700,000 23.076923...%
-----------------------------------------------------------------------------------------------------------------------
$2,500,000 $1,500,000 23.076923...%
-----------------------------------------------------------------------------------------------------------------------
$ 500 000 $ 300,000 23.076923...%
-----------------------------------------------------------------------------------------------------------------------
The total automatic issue limit to all combined reinsurers in the Guaranteed
Capacity pool will not exceed $13,000,000. The maximum limit, including the
CEDING COMPANY'S retention, will not exceed $16,000,000 for Single Life and
$18,000,000 for Joint Life.
Temporary or permanent flat extra conversion will be one table for each $2.50
per 1,000. For example:
A case rated $10.00 per 1,000 is equivalent to Table D.
A case rated Table B plus $5.00 per 1,000 is equivalent to Table D.
Reinsurance rates for flat extras will be as described elsewhere in the treaty.
Exhibit I
Risk Corrs
[LOGO OF PACIFIC LIFE]
Reinsurance Guaranteed Capacity Notice
REINSURANCE CO:
---------------------------------------------------------------
Amount To Be:
Ceded
------------------------------------------------------------------------
Name Date of Birth
---------------------------------------- -----------------
Name Date of Birth
---------------------------------------- -----------------
Single [_] Joint [_]
Amount applied for with Pacific Life
-----------------------------------------
Pacific Life Retention
-------------------------------------------------------
Pacific Life Rating
Total Inforce and Applied For
------------------------------------
PL Underwriter
------------------------------------
(000) 000-0000 xxx.
Fax (000) 000-0000
------------------------------------
------------------------------
[_] We are releasing our
cession
------------------------------