Exhibit (g)(v)
YEARLY RENEWABLE TERM
REINSURANCE AGREEMENT
EFFECTIVE AS OF
SEPTEMBER 1, 1996, FOR FACULTATIVE REINSURANCE
AND
MARCH 1, 1997, FOR AUTOMATIC REINSURANCE
BETWEEN
SECURITY EQUITY LIFE INSURANCE COMPANY
OF
ARMONK, NEW YORK,
REFERRED TO IN THIS AGREEMENT AS "SECURITY EQUITY," AND
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
OF
FORT XXXXX, INDIANA,
REFERRED TO IN THIS AGREEMENT AS "LINCOLN."
INSPECTED BY /s/ EIC
--------------
DATE 5/21/97
DOC 961863.AGM
CCN/AGMT. NO. 3509 / 4
TABLE OF CONTENTS
Reinsurance Coverage 1
Automatic Reinsurance 1
Facultative Reinsurance 2
Continuations 3
Terms of Reinsurance 4
Payments by Security Equity 5
Payments by Lincoln 6
Reinsurance Administration 6
Settlement of Claims 6
Reinstatements 8
Reductions in Insurance 8
Increases in Policy Net Amount at Risk 8
Changes in Retention 9
Assignment of Reinsurance 10
Material Changes 10
Errors 11
Audits of Records and Procedures 11
Arbitration 11
Insolvency of Security Equity 12
Offset 13
Parties to the Agreement 13
Commencement and Termination 13
Entire Agreement 14
Deferred Acquisition Cost Tax Election 14
Definitions 15
Execution 17
LIFE BENEFITS SCHEDULE 19
EXHIBIT I-A 22
EXHIBIT I-B 23
ADMINISTRATION SCHEDULE 24
PREMIUM SCHEDULE 28
ARBITRATION SCHEDULE 30
INCREASING POLICY ADDENDUM 32
REINSURANCE COVERAGE
A. Security Equity agrees to cede, and Lincoln agrees to accept,
reinsurance of the Policies specified in the Life Benefits Schedule.
(The term "Policies" and certain other terms used in this Agreement are
defined in the "Definitions" article.)
B. The death benefits provided by the Policies are reinsured. Supplemental
benefits are reinsured if and as specified in applicable Addenda.
C. Security Equity agrees to either
(l) cede reinsurance of a Policy to Lincoln as Automatic
Reinsurance;
(2) submit the Policy to Lincoln for consideration as Facultative
Reinsurance; or
(3) cede reinsurance of a Policy as a Continuation.
AUTOMATIC REINSURANCE
A. Security Equity agrees to cede the Reinsurance Amount of a Policy as
Automatic Reinsurance if the following conditions are met:
(1) it retains its Retention on the insured life when the Policy
is issued;
(2) it underwrites and issues the Policy in accordance with its
normal individual life; insurance underwriting rules and
practices previously disclosed to Lincoln;
(3) the sum of (a) and (b) does not exceed the sum of its
Retention and the Automatic Limit, where (a) equals the amount
of individual life insurance issued by Security Equity then in
force on the insured life, or in the case of individual life
insurance with increasing death benefits, the Ultimate Amount
of such policies, and (b) equals the amount of life insurance
currently being applied for from Security Equity, or in the
case of individual life insurance with increasing death
benefits, the Ultimate Amount;
(4) the sum of (a) and (b) does not exceed the Participation
Limit, where (a) equals the amount of individual life
insurance then in force on the insured life in all companies,
or in the case of individual life insurance with increasing
death benefits, the Ultimate Amount of such policies, and (b)
equals the amount currently applied for
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on the insured life from all companies, or in the case of
individual life insurance with increasing death benefits, the
Ultimate Amounts;
(5) it has not submitted a facultative application to Lincoln or
any other insurance or reinsurance company for reinsurance of
the current application; and
(6) the Policy is not a Continuation.
B. Policies issued pursuant to any special underwriting program adopted by
Security Equity may be ceded as Automatic Reinsurance only with
Lincoln's consent to reinsure such Policies.
C. A Policy shall not be ceded as Automatic Reinsurance if the Reinsurance
Amount of the Policy is less than the minimum cession amount specified
in the Administration Schedule.
FACULTATIVE REINSURANCE
A. Security Equity agrees to submit Policies not satisfying the conditions
for Automatic Reinsurance, and Policies which it does not wish to cede
as Automatic Reinsurance, for consideration by Lincoln as Facultative
Reinsurance. Security Equity may also submit for consideration as
Facultative Reinsurance any individual life insurance issued on a
Policy form that is not specified in the Life Benefits Schedule
provided reinsurance terms and conditions are established and agreed
upon by means of the Facultative Reinsurance application process.
B. Policies issued pursuant to Security Equity's Guaranteed, Issue or
Simplified Issue special underwriting programs may be ceded to Lincoln
as Facultative Reinsurance, provided Security Equity has issued such
Policies in accordance with the Underwriting Guidelines set forth in
Exhibits 1-A and I-B and has accepted Lincoln's facultative offer to
reinsure.
C. An application for Facultative Reinsurance shall be made in the manner
set forth in the Administration Schedule. Copies of all information
which Security Equity has pertaining to the insurability of the
proposed insured, including written summaries of any such information
which cannot be copied, shall accompany the application.
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D. Upon receipt of an application, Lincoln agrees to promptly examine the
underwriting information and communicate
(1) an offer to reinsure the Policy as applied for;
(2) an offer to reinsure the Policy other than as applied for;
(3) an offer to reinsure the Policy subject to the satisfaction of
additional underwriting requirements;
(4) a request for additional underwriting information; or
(5) its unwillingness to make an offer to reinsure the Policy.
E. To accept an offer to reinsure made by Lincoln, Security Equity agrees
to (1) satisfy any conditions stated in the offer to reinsure and (2)
follow the procedure for placing reinsurance into effect as specified
in the Administration Schedule.
F. Security Equity agrees to inform Lincoln immediately of any additional
information pertaining to the insurability of a proposed insured which
is brought to Security Equity's attention before the completion of the
procedures for accepting Lincoln's offer to reinsure. Upon its receipt
of such information, Lincoln may withdraw or modify its earlier offer
to reinsure.
G. The terms of an offer to reinsure shall supercede the terms of this
Agreement to the extent of any conflicts between the parties.
Otherwise, reinsurance of a Policy ceded as Facultative Reinsurance
shall be in accordance with the terms of this Agreement.
CONTINUATIONS
A. If Security Equity issues a Continuation of a Policy within its normal
continuation rules and practices, it agrees to reinsure the
Continuation with Lincoln. Reinsurance shall continue (1) under the
reinsurance agreement between Security Equity and Lincoln which
provides reinsurance of the Policy form of the Continuation or (2)
under this Agreement if there is no such agreement.
B. A Policy which is a Continuation of a Policy that was not previously
reinsured with Lincoln may only be reinsured under this Agreement with
the written consent of Lincoln and the original reinsurer.
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C. If the original Policy was ceded to Lincoln as Facultative Reinsurance
and Security Equity approves an increase in the face amount of the
Continuation based upon receipt of any new information pertaining to
the insurability of the proposed insured, Security Equity agrees to
submit the Continuation to Lincoln for consideration as Facultative
Reinsurance. In such case, Lincoln shall only be bound to reinsure the
Continuation in accordance with its offer to reinsure the Continuation.
D. Reinsurance at issue of the Continuation shall not exceed the Reinsured
Net Amount at Risk of the original Policy immediately prior to the
issuance of the Continuation.
E. Premiums payable for reinsurance of a Continuation shall be calculated
using the rate schedule applicable to the Policy form of the
Continuation as specified in the Premium Schedule. If there is no rate
schedule applicable to the Policy form of the Continuation, reinsurance
premiums shall be payable using the rate schedule applicable to the
original Policy.
F. If the Continuation results in a change in the life status of the
insured risk from a single-insured plan to a joint- or multiple-insured
plan, Lincoln must consent to the Continuation.
TERMS OF REINSURANCE
A. The plan of reinsurance shall be yearly renewable term reinsurance of
the Reinsured Net Amount at Risk of a Policy.
B. Reinsurance of a Policy shall commence on the Policy date, except (1)
in the case of Facultative Reinsurance, reinsurance shall commence on
the Policy date only if Lincoln's offer to reinsure is the best offer
of reinsurance received by Security Equity as determined by Security
Equity's published reinsurance placement rules in effect as of such
date, and (2) if a premium receipt is issued by Security Equity in
connection with an application for the Policy, reinsurance shall
commence prior to the Policy date only if and as specified in a Premium
Receipt Addendum.
C. Security Equity agrees not to use Lincoln's name in connection with the
sale of the Policies.
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D. In no event shall reinsurance under this Agreement be in force with
respect to a Policy unless the issuance and delivery of the Policy is
in compliance with the laws of all applicable jurisdictions and
Security Equity's corporate charter.
E. Security Equity agrees to maintain reinsurance of a Policy in force in
accordance with the terms of this Agreement for as long as its Policy
remains in force.
PAYMENTS BY SECURITY EQUITY
A. Security Equity agrees to pay Lincoln premiums for reinsurance of a
Policy equal to the appropriate rate specified in the Premium Schedule
times the Reinsured Net Amount at Risk of the Policy.
B. The Premium Schedule specifies other monetary amounts which Security
Equity agrees to take into account when calculating the amount due
Lincoln.
C. Reinsurance premiums shall be due and payable as specified in the
Administration Schedule.
D. The payment of reinsurance premiums shall be a condition precedent to
the liability of Lincoln under this Agreement. If reinsurance premiums
are not paid when due, Lincoln may give Security Equity thirty (30)
days' written notice of its intent to terminate reinsurance because of
Security Equity's failure to pay reinsurance premiums. Reinsurance of
all Policies having reinsurance premiums in arrears shall terminate as
of the date to which reinsurance premiums had previously been paid
unless all premiums in arrears are paid before the end of the thirty
(30) day notice period. If reinsurance on any Policy terminates because
of Security Equity's failure to pay reinsurance premiums, reinsurance
of Policies with premiums subsequently becoming due shall automatically
terminate as of the date on which new reinsurance premiums become due.
E. So that Lincoln need not maintain deficiency reserves in connection
with reinsurance premiums payable pursuant to this Agreement, the
premium rates specified in the Premium Schedule shall only be
guaranteed for one Policy year. Nevertheless, Lincoln shall anticipate
continuing to accept reinsurance on the basis of such rates for all
Policies originally ceded pursuant to such rates.
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PAYMENTS BY LINCOLN
A. Lincoln agrees to pay Security Equity the Reinsured Net Amount at Risk
of any claim paid by Security Equity pursuant to a Policy in accordance
with the "Settlement of Claims" article.
X. Xxxxxxx agrees to pay the Claims Ratio of any expenses incurred in
connection with Policy claims except as set forth in the "Settlement of
Claims" article.
C. The Premium Schedule specifies other monetary amounts that Lincoln
agrees to pay Security Equity pursuant to this Agreement.
REINSURANCE ADMINISTRATION
The methods for placing reinsurance into effect, for paying reinsurance
premiums, and for notifying Lincoln of Policy lapses, reinstatements,
reductions, Continuations, increases in the Reinsured Net Amount at
Risk; and of other changes affecting reinsurance shall be specified in
the Administration Schedule.
SETTLEMENT OF CLAIMS
A. Security Equity agrees to give Lincoln prompt written notice of its
receipt of any claim on a Policy and to keep Lincoln informed of any
legal proceedings or settlement negotiations in connection with a
claim. Copies of written materials relating to such claim, legal
proceedings or negotiation shall be furnished to Lincoln upon request.
B. Security Equity's obligation to provide notice of a claim on a Policy
shall not be construed as a condition precedent to Lincoln's obligation
to pay the claim. Security Equity's failure to provide notice shall be
considered a breach of a promise which may entitle Lincoln to damages.
C. Security Equity agrees to act in accord with its standard practices
applicable to all claims in enforcing the terms and conditions of the
Policies and with respect to the administration, negotiation, payment,
denial, or settlement of any claim or legal proceeding.
X. Xxxxxxx agrees to accept the good faith decision of Security Equity in
payment or settlement of any claim for which Lincoln has received the
required notice. Lincoln agrees to pay Security Equity the Reinsured
Net Amount at Risk on which reinsurance premiums have been computed
upon
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receiving proper evidence that Security Equity has paid a Policy claim.
Payment of the Reinsured Net Amount at Risk on account of death shall
be made in one lump sum.
X. Xxxxxxx'x liability shall include indemnification of the Claims Ratio
of any expenses incurred by Security Equity in defending or
investigating a Policy claim with the exception of
(1) salaries of employees or other internal expenses of Security
Equity;
(2) routine investigative or administrative expenses;
(3) expenses incurred in connection with a dispute arising out of
conflicting claims of entitlement to proceeds of a Policy that
Security Equity admits are payable;
(4) any gratuitous payments made by Security Equity; and
(5) any punitive damages awarded against Security Equity, and
expenses incurred in connection with such damages, that are
based on the acts or omissions of Security Equity or its
agents.
X. Xxxxxxx agrees to hold Security Equity harmless from certain expenses
and liabilities that result from Lincoln's own acts or omissions as
provided in this section. For this purpose, Lincoln agrees to indemnify
Security Equity for Lincoln's equitable share of those punitive and
exemplary damages awarded against Security Equity, and expenses
incurred in connection with a claim for such damages, if (1) Lincoln
actively participated in the acts or omissions, including the decision
to deny a claim for Policy benefits, and (2) those acts or omissions
serve as a material basis for the punitive or exemplary damages.
Lincoln's equitable share shall be determined by an assessment of
Lincoln's participation in the particular case.
G. If Security Equity should contest or compromise any claim and the
amount of Security Equity's liability is thereby reduced, Lincoln's
liability shall be reduced by the Claims Ratio of the reduction.
H. If Security Equity should recover monies from any third party in
connection with or arising out of any Policy, Security Equity agrees to
pay Lincoln the Claims Ratio of the recovery.
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I. If the amount of insurance provided by a Policy is increased or reduced
because of a misstatement of age or sex, Lincoln's liability shall be
increased or reduced by the Claims Ratio of the amount of the increase
or reduction.
J. If Security Equity pays interest on a claim, Lincoln agrees to pay the
interest on the Reinsured Net Amount at Risk computed at the same rate
and for the same period as that paid by Security Equity, but in no
event later than the date the claim is finally adjudicated by Security
Equity.
K. If Security Equity is required to pay penalties and interest imposed
automatically by statute, Lincoln shall indemnify Security Equity for
the Claims Ratio of such penalties and interest.
REINSTATEMENTS
A. If Security Equity reinstates a lapsed Policy in accordance with the
terms of the Policy and Security Equity's underwriting rules and
practices, Lincoln agrees to reinstate reinsurance of the Policy
automatically unless Lincoln's offer to reinsure the Policy specifies
that reinsurance of the Policy may only be reinstated as Facultative
Reinsurance.
B. If Security Equity collects premiums in arrears from the policyholder
of a reinstated Policy, it agrees to pay Lincoln all corresponding
reinsurance premiums in arrears in connection with the reinstatement,
plus Lincoln's Proportionate Share of any interest received by Security
Equity in connection with the reinstatement.
REDUCTIONS IN INSURANCE
If individual life insurance on a life reinsured under this Agreement
terminates, the Reinsurance Amount shall be reduced as specified in the
Administration Schedule.
INCREASES IN POLICY NET AMOUNT AT RISK
A. If the Policy Net Amount at Risk on a Policy increases and the increase
is subject to Security Equity's underwriting approval, the Reinsured
Net Amount at Risk of the Policy shall only increase if the conditions
of either the "Automatic Reinsurance" or "Facultative Reinsurance"
articles are satisfied.
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B. If the Policy Net Amount at Risk on a Policy increases causing the
Reinsured Net Amount at Risk to exceed the Reinsurance Amount, and the
increase is not subject to Security Equity's underwriting approval,
Lincoln agrees to accept a portion of such increases only if and as
specified in an Increasing Policy Addendum.
CHANGES IN RETENTION
A. If Security Equity increases its Retention on new Policies, it agrees
to notify Lincoln in writing within sixty (60) days of such increase.
The notice shall specify the new Retention and the Effective Date
thereof.
B. Whenever Security Equity increases its Retention on new Policies, it
also agrees to indicate in its notice whether it wishes to (1) continue
its previous Retention on in force Policies or (2) increase its
Retention on in force Policies and recapture reinsurance. If Security
Equity elects (2), Security Equity's new Retention on an in force
Policy shall be calculated using the insured's age, mortality class,
Policy form, and country of residence at issue of the Policy.
C. If Security Equity elects to increase its Retention on in force
Policies pursuant to section B, its new Retention for such Policies
shall become effective on the later of (1) the reinsurance renewal date
of the Policy first following the effective date of its new Retention
for new Policies and (2) the Policy anniversary date specified in the
Administration Schedule. If Security Equity fails to initiate recapture
of reinsurance within one hundred and eighty (180) days of when the
first of its Policies becomes eligible for recapture, its election to
recapture reinsurance shall be considered waived.
D. If an in force Policy is subject to a waiver of premium claim on the
date the Policy qualifies for a new Retention, the new Retention shall
nonetheless become effective on such date for purposes of life
reinsurance.
E. Security Equity may only elect to increase its Retention on in force
Policies if
(1) it maintained a Retention greater than $0 at the time the
Policy was issued and retained its Retention at such time;
(2) it increases its Retention on all eligible in force Policies;
and
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(3) it retains the insurance recaptured from Lincoln at its own
risk without benefit of any proportional or nonproportional
reinsurance other than catastrophe accident reinsurance.
F. Notwithstanding the preceding:
(1) the recapture of the Reinsurance Amount shall be limited to
Lincoln's portion of all reinsurance ceded by Security
Equity on the Policy; and
(2) if Security Equity gives notice of its intent to increase its
Retention on in force Policies within five (5) years following
a merger with another insurance company or the date it accepts
the Policies by means of an assignment, the new Retention
applicable to such Policies shall be limited to one hundred
and fifty percent (150%) of the original reinsured's
pre-merger or preassignment Retention.
G. For purposes of this article, Continuations shall be considered issued
on the issue date of the original Policy.
ASSIGNMENT OF REINSURANCE
If Security Equity sells, assumption reinsures or otherwise transfers
the Policies to another insurer, it agrees to require that the other
insurer assume all rights and obligations of Security Equity under this
Agreement. Lincoln may object to any such transfer that would result in
a material adverse economic impact to Lincoln. If Lincoln so objects,
Security Equity and Lincoln agree to mutually calculate a termination
charge that shall be paid by Security Equity to Lincoln upon the
transfer and this Agreement shall be terminated with respect to all
Policies transferred by Security Equity.
MATERIAL CHANGES
A. Security Equity agrees to notify Lincoln in writing of any anticipated
Material Change in any terms or conditions of the Policies, in Security
Equity's underwriting rules and practices applicable to the Policies or
in Security Equity's claims practices and procedures.
B. In the event of a Material Change to the Policies, to Security Equity's
underwriting rules and practices or to its claims practices and
procedures, Lincoln may at its option
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(1) continue to reinsure the Policies under current terms;
(2) reinsure Policies under modified terms to reflect the Material
Change; or
(3) consider future Policies as issued in a Policy form that is not
reinsured under this Agreement.
ERRORS
A. Any Error by either Security Equity or Lincoln in the administration of
reinsurance under this Agreement shall be corrected by restoring both
Security Equity and Lincoln to the positions they would have occupied
had no Error occurred. Any monetary adjustments made between Security
Equity and Lincoln to correct an Error shall be without interest.
B. When a party claims that an Error should be corrected pursuant to
section A, that party agrees to investigate whether other instances of
the Error have also occurred and agrees to report its findings to the
other party.
AUDITS OF RECORDS AND PROCEDURES
A. Lincoln or Security Equity may audit, at any reasonable time and at its
own expense, all records and procedures relating to reinsurance under
this Agreement. The party being audited agrees to cooperate in the
audit, including providing any information requested by the other in
advance of the audit.
B. Upon request, Security Equity agrees to furnish Lincoln with copies of
any underwriting information in Security Equity's files pertaining to a
Policy.
ARBITRATION
A. If Security Equity and Lincoln cannot mutually resolve a dispute that
arises out of or relates to this Agreement, the dispute shall be
decided through arbitration as specified in the Arbitration Schedule.
The arbitrators shall 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 applicable law. There shall be no appeal from their
decision, except that either party may petition a court having
jurisdiction over the parties and the subject matter to reduce the
arbitrators' decision to judgement.
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B. The parties intend this article to be enforceable in accordance with
the Federal Arbitration Act (9 U.S.C. Sections Sections 1 et seq.),
including any amendments to that Act which are subsequently adopted. If
either party refuses to submit to arbitration as required by section A,
the other party may request a United States Federal District Court to
compel arbitration in accordance with the Federal Arbitration Act. Both
parties consent to the jurisdiction of such court to enforce this
article and to confirm and enforce the performance of any award of the
arbitrators.
INSOLVENCY OF SECURITY EQUITY
A. In the event of the insolvency of Security Equity, all reinsurance
shall be payable directly to the liquidator, receiver, or statutory
successor of said Security Equity by Lincoln on the basis of the
liability of Security Equity under the reinsured policies, without
diminution because of the insolvency of Security Equity.
B. In the event of the insolvency of Security Equity, the conservator,
liquidator, or statutory successor shall give the Lincoln written
notice of the pendency of a claim on a policy reinsured within a
reasonable time after such claim is filed in the insolvency proceeding.
During the pendency of any such claim, Lincoln may investigate such
claim and interpose in the name of Security Equity (its liquidator,
receiver, or statutory successor), but at its own expense, in the
proceeding where such claim is to be adjudicated, any defense or
defenses which Lincoln may deem available to Security Equity or its
liquidator, receiver, or statutory successor.
C. The expense thus incurred by the Lincoln shall be chargeable, subject
to court approval, against Security Equity as part of the expense of
liquidation to the extent of a proportionate share of the benefit which
may accrue to Security Equity solely as a result of the defense
undertaken by the Lincoln. Where two (2) 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 shall be
apportioned in accordance with the terms of the reinsurance agreement
as though such expense had been incurred by Security Equity.
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OFFSET
Any debts or credits, matured or unmatured, liquidated or unliquidated,
regardless of when they arose or were incurred, in favor of or against
either Security Equity or Lincoln with respect to this Agreement or any
other reinsurance agreement between the parties, shall be offset and
only the balance allowed or paid. If either Security Equity or Lincoln
is then under formal insolvency proceedings, this right of offset shall
be subject to the laws of the state exercising primary jurisdiction
over such proceedings.
PARTIES TO THE AGREEMENT
This is an Agreement for indemnity reinsurance solely between Security
Equity and Lincoln. The acceptance of reinsurance under this Agreement
shall not create any right or legal relation whatever between Lincoln
and an insured, policyholder, beneficiary, or any other party to or
under any Policy.
COMMENCEMENT AND TERMINATION
A. This Agreement shall be effective as of the date set forth on the cover
page.
B. Either Security Equity or Lincoln may terminate this Agreement for new
reinsurance by giving ninety (90) days' written notice to the other
party. In such case, Security Equity agrees to continue to cede, and
Lincoln agrees to continue to accept, reinsurance in accordance with
this Agreement of Policies issued prior to the expiration of the ninety
(90) day period. All reinsurance that has been placed in effect prior
to such date shall remain in effect in accordance with the terms of
this Agreement, until the earlier of (1) the termination or expiration
of the Policy and (2) the termination of this Agreement pursuant to
sections C or D below.
C. Reinsurance of a Policy shall terminate as of the reinsurance premium
renewal date on which the Reinsured Net Amount at Risk for such Policy
is less than the automatic termination amount specified in the
Administration Schedule, provided the reinsurance has been in force for
the period specified in the Administration Schedule.
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X. Xxxxxxx may terminate all reinsurance under this Agreement in
accordance with section D of the "Payments by Security Equity" article
if Security Equity fails to pay reinsurance premiums when due.
ENTIRE AGREEMENT
A. This Agreement represents the entire agreement between Security Equity
and Lincoln and supercedes any prior oral or written agreements between
the parties regarding its subject matter.
B. No modification of this Agreement shall be effective unless set forth
in a written amendment executed by both parties.
C. A waiver of a right created by this Agreement shall constitute a waiver
only with respect to the particular circumstance for which it is given
and not a waiver in any future circumstance.
DEFERRED ACQUISITION COST TAX ELECTION
A. Lincoln and Security Equity each acknowledge that it is subject to
taxation under Subchapter "L" of the Internal Revenue Code of 1986 (the
"Code").
B. With respect to this Agreement, Lincoln and Security Equity agree to
the following pursuant to Section 1.848-2(g)(8) of the Income Tax
Regulations issued December 1992, whereby:
(1) Each party agrees to attach a schedule to its federal income
tax return which identifies this Agreement for which the joint
election under the Regulation has been made;
(2) The party with net positive consideration, as defined in the
Regulation promulgated under Code Section 848, for this
Agreement for each taxable year, agrees to capitalize
specified Policy acquisition expenses with respect to this
Agreement without regard to the general deductions limitation
of Section 848(c)(1);
(3) Each party agrees to exchange information pertaining to the
amount of net consideration under this Agreement each year to
ensure consistency; and
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(4) This election shall be effective for the year that this
Agreement was entered into and for all subsequent years that
this Agreement remains in effect.
DEFINITIONS
A. AUTOMATIC LIMIT - the amount specified in the Life Benefits Schedule
used to calculate the maximum Reinsurance Amount that may be ceded as
Automatic Reinsurance.
B. AUTOMATIC REINSURANCE - reinsurance satisfying certain conditions
relating to the reinsurance as specified in the Agreement that is ceded
to Lincoln without obtaining a specific offer to reinsure from Lincoln.
C. CLAIMS RATIO - the Reinsured Net Amount at Risk on which reinsurance
premiums have been computed divided by the Policy Net Amount at Risk
calculated as of the date of the last premium payment.
D. CONTINUATION - a new Policy replacing a Policy or a change in an
existing Policy issued or made either (1) in compliance with the terms
of the Policy or (2) without (a) the same new underwriting information
Security Equity would obtain in the absence of the Policy, (b) a
suicide exclusion or contestable period as long as those contained in
other new issues of Policies, or (c) the payment of the same
commissions in the first year that Security Equity would have paid in
the absence of the original Policy.
E. EFFECTIVE DATE - the date specified on the cover page on which this
Agreement becomes binding on Security Equity and Lincoln.
F. ERROR - any isolated deviation from the terms of this Agreement
resulting from the act or omission of an employee of either Security
Equity or Lincoln whose principal function relates to the
administration of reinsurance, whether such deviation results from
inadvertence or a mistake in judgment. "Error" shall not include any
failure to comply with the terms of an offer of Facultative Reinsurance
or any negligent or deliberate deviation from the terms of this
Agreement.
G. FACULTATIVE REINSURANCE - reinsurance that is ceded to Lincoln only
after Security Equity has obtained and accepted a specific offer to
reinsure made by Lincoln. Such reinsurance may be ceded to Lincoln only
upon the terms
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specified by Lincoln in its offer to reinsure and the terms of this
Agreement that do not conflict with the specific offer to reinsure.
X. XXXXXXX'X PROPORTIONATE SHARE - the Reinsurance Amount divided by the
death benefit of a Policy as of the date of issue or as of the date of
a subsequent change to the Policy that affects the Reinsurance Amount.
I. MATERIAL CHANGE - a change that a prudent insurance or reinsurance
executive would consider as likely to impact upon a party's financial
experience under this Agreement.
J. PARTICIPATION LIMIT - the amount specified in the Life Benefits
Schedule used as a condition for ceding Automatic Reinsurance.
K. POLICY - an individual life insurance contract issued by Security
Equity on any of the Policy forms specified in the Life Benefits
Schedule. A "Policy" shall include any attached riders and endorsements
specified in the Life Benefits Schedule or any Addendum to this
Agreement.
L. POLICY NET AMOUNT AT RISK - on the reinsurance premium renewal date,
the death benefit of a Policy less either the terminal reserve or, in
the case of interest sensitive Policies, the accumulation account or
cash value on the Policy, such difference taken to the nearest dollar.
The terminal reserve or cash value shall be disregarded if a Policy is
on either a level term plan of twenty (20) years or less or on a
decreasing term plan. The basis for determining the Policy Net Amount
at Risk may be modified with the consent of both Security Equity and
Lincoln without the need for a formal amendment of this Agreement.
M. REINSURANCE AMOUNT - the Policy death benefit at issue less any
accumulative value, if applicable, less the Retention on the Policy
times the percentage of Automatic Reinsurance ceded to Lincoln as
specified in the Life Benefits Schedule. For Facultative Reinsurance,
the "Reinsurance Amount" is that amount of the Policy death benefit at
issue for which Security Equity accepts Lincoln's offer to reinsure.
N. REINSURED NET AMOUNT AT RISK - Lincoln's Proportionate Share times the
Policy Net Amount at Risk.
O. RETENTION - the amount specified in the Life Benefits Schedule that is
held by Security Equity at its own risk on a life without the benefit
of proportional reinsurance. In calculating the Retention, the sum
retained by Security
961863.agm Page 16
3509/4
Equity on the life and in force as of the date of issue of the Policy
shall be taken into account.
P. ULTIMATE AMOUNT - the projected maximum Policy Net Amount at Risk that
a Policy could achieve based on reasonable assumptions made about the
operation of certain characteristics of the Policy form.
EXECUTION
Security Equity and Lincoln, by their respective officers, executed
this Agreement in duplicate on the dates shown below. As of the
Effective Date, this Agreement consists of:
- this Yearly Renewable Term Reinsurance Agreement
numbered 4;
- a Life Benefits Schedule;
- an Administration Schedule;
- a Premium Schedule;
- an Arbitration Schedule; and
- an Increasing Policy Addendum.
961863.agm Page 17
3509/4
SECURITY EQUITY LIFE INSURANCE COMPANY
Signed at Armonk, NY
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Title: 2nd Vice President
Date: 7/8/97
By: /s/ X. Xxxxxxx
-----------------------------------
Title: VP & CFO
Date: 7/8/97
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Signed at Fort Xxxxx, Indiana
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------
Second Vice President
Date 3/22/97
By: /s/ Xxxxx Xxxxx
---------------------------
Assistant Secretary
Date May 21, 1997
961863.agm Page 18
3509/4
LIFE BENEFITS SCHEDULE
(Effective as of September 1, 1996, for Facultative Reinsurance
and March 1, 1997, for Automatic Reinsurance)
to
Agreement Number 4
POLICIES REINSURED: Security Equity agrees to cede reinsurance in the
listed percentages of Policies issued on the following Policy forms
with issue dates from and until the dates listed below to insureds
having surnames beginning with the letters of the alphabet shown. Any
Addenda referred to in the last column shall also be applicable to
reinsurance of the Policy.
Percent of
Reinsurance Reinsurance Issue Dates Alpha Applicable
Policy Form Type Ceded to Lincoln From/Until Split Addenda
Individually
Underwritten
Single Life Variable
Universal Life Facultative 100% 09-01-96/-- A-Z IP
Automatic 20 03/01/97/-- A-Z IP
Guaranteed Issue* Facultative 100% 09-01-96/-- A-Z IP
Automatic 20 03/01/97/-- A-Z IP
Simplified Issue** Facultative 100% 09-01-96/-- A-Z IP
Automatic 20 03/01/97/-- A-Z IP
* Guidelines are set forth in Exhibit 1-A.
** Guidelines are set forth in Exhibit 1-B.
961863.agm Page 19
3509/4
RETENTION: Security Equity agrees to hold the following face amounts at
its own risk on a life without the benefit of proportional reinsurance.
In calculating its Retention, amounts retained by Security Equity on
other individual life insurance Policies in force as of the issue date
of the Policy shall be taken into account.
Ages Standard - Table P
All $125,000
The above amount shall be exceed by as much as $25,000 in order to
avoid reinsurance.
AUTOMATIC LIMITS: To bind Automatic Reinsurance, the maximum amount of
life insurance in force with Security Equity on a single life, or in
the case of individual life insurance with increasing death benefits,
the Ultimate Amounts, plus all amounts applied for from Security Equity
on that life, or in the case of individual life insurance with
increasing death benefits, the Ultimate Amounts, may not exceed the sum
of the Retention on the life plus the following amounts.
Guaranteed Issue and Simplified Issue
Ages Standard-Table P Over Table P
20-70 $2,375,000 None
All Other Plans
Ages Standard-Table D Tables E-P Over Table P
20-80 $4,875,000 $4,875,000 None
81-85 1,875,000 None None
Over 00 Xxxx Xxxx Xxxx
000000.xxx Page 20
3509/4
PARTICIPATION LIMITS: To bind Automatic Reinsurance, the sum of (1) the
maximum amount of individual life insurance in force on the insured in
all companies or, in the case of individual life insurance with
increasing death benefits, the Ultimate Amounts, as of the Policy Date
of a Policy and (2) the amount then being applied for by all companies,
or in the case of individual life insurance with increasing death
benefits, the Ultimate Amounts, on the insured, may not exceed the
following amounts.
Guaranteed Issue and Simplified Issue
Ages Standard-Table P
20-70 $3,000,000
All Other Plans
Ages Standard-Table D Tables X-X
00-00 $20,000,000 $10,000,000
81-85 10,000,000 None
961863.agm Page 21
3509/4
EXHIBIT I-A
(Effective as of September 1, 1996, for Facultative Reinsurance)
to
Agreement Number 4
GUARANTEED ISSUE GUIDELINES
1. Minimum of twenty-five (25) lives.
2. Actively-at-work for a minimum of five hundred (500) hours
semiannually, and have not been hospitalized or absent from work for
medical reasons for five (5) or more consecutive days in the past three
(3) months.
3. Coverage must be formula driven.
4. One hundred percent (100%) participation based on a clearly defined
class of employees.
5. Owner and beneficiary must be legal residents of the United States or
Canada or a corporation domiciled in the United States or Canada.
6. Annual Guaranteed Issue increases are limited to ten percent (10%).
7. Normal maximum issue age is sixty-five (65).
8. The cumulative increases in death benefit must not exceed the smaller
of the initial face amount or $1,000,000.
961863.agm Page 22
3509/4
EXHIBIT I-B
(Effective as of September 1, 1996, for Facultative Reinsurance)
to
Agreement Number 4
SIMPLIFIED ISSUE GUIDELINES
1. Minimum of ten (10) to fifteen (15) lives depending on age distribution
of group.
2. Actively-at-work for a minimum of five hundred (500) hours
semiannually, and have not been hospitalized or absent from work for
medical reasons for five (5) or more consecutive days in the past three
(3) months.
3. Coverage must be formula driven.
4. Seventy-five percent (75%) participation based on a clearly defined
class of employees.
5. Owner and beneficiary must be legal residents of the United States or
Canada or a corporation domiciled in the United States or Canada.
6. Initial maximum coverage is $2,000,000 per life.
7. Annual guaranteed issue increases are limited to ten percent (10%).
8. Normal maximum issue age is seventy (70).
9. The cumulative increases in death benefit must not exceed the smaller
of the initial face amount or $1,000,000.
1 hereby acknowledge and agree that the above conditions of Simplified Issue are
met for:
Company Name: __________________________________________________________________
State of Issue: ________________________________________________________________
__________________________________________ _______________________
Broker/Agent Name Date
Description of formula for the death benefit: __________________________________
________________________________________________________________________________
________________________________________________________________________________
Business of Corporation:
_______________________________________________________
________________________________________________________________________________
PLEASE SUBMIT A COPY OF THE CENSUS FOR THIS GROUP
961863.agm Page 23
3509/4
ADMINISTRATION SCHEDULE
(Effective as of September 1, 1996, for Facultative Reinsurance
and March 1, 1997, for Automatic Reinsurance)
to
Agreement Number 4
TO PLACE REINSURANCE INTO EFFECT
(1) For Automatic-Reinsurance: Security Equity agrees to cede Automatic
Reinsurance of a Policy by including all required information about the
Policy on the new business segment of the next self administered
statement submitted in accordance with the Reports section below
following issuance of the Policy.
(2) For Facultative Reinsurance: Security Equity agrees to submit an
application form for Facultative Reinsurance in substantial accord with
the attached form. It agrees to allocate reinsurance in accordance with
its published facultative placement rules among those reinsurers making
facultative offers to reinsure a Policy. If according to such rules
Lincoln's offer is the one Security Equity intends to accept, Security
Equity shall cede Facultative Reinsurance of the Policy by including
all required information about the Policy on the new business segment
of the next self-administered statement submitted in accordance with
the REPORTS section below within one hundred and twenty (120) days from
the date of Lincoln's facultative offer or the date specified in
Lincoln's approval of a written request from Security Equity to grant
an extension to the facultative offer.
MINIMUM CESSION REQUIREMENT
There is no minimum cession requirement under this Agreement.
REPORTS
Within thirty (30) days following the end of each month, Security
Equity agrees to send Lincoln the following three (3) reports:
(1) A BILLING STATEMENT containing Policy level detail in a
form mutually acceptable to Security Equity and Lincoln. At a
minimum, it shall contain the data elements specified in the
attached Policy Detail Report. If the Policy contains
supplemental benefits that are also reinsured, each segment of
the Billing Statement shall include supplemental benefit
detail.
961863.agm Page 24
3509/4
The Billing Statement shall be segmented as follows:
- NEW ISSUES and first year premiums due for new
reinsurance.
- BALANCE OF FIRST YEAR POLICIES (Policies previously
reported as new issues) and corresponding balance of
first year reinsurance premiums due for the reporting
period.
- POLICIES WITH RENEWAL REINSURANCE PREMIUMS due during
the reporting period.
- POLICIES THAT HAVE UNDERGONE A CHANGE that affects
reinsurance. Separate segments may be submitted for
any change affecting reinsurance of a Policy,
including
- reissues,
- reinstatements,
- terminations,
- reductions,
- changes in Retention,
- changes in mortality ratings,
- issuance of a Continuation, and
- increases or decreases in the Net Amount at
Risk
(2) A SUMMARY ACCOUNTING REPORT that summarizes all financial
transactions during the reporting period. The report shall
separately total life and supplemental benefits for the first
year reinsurance premiums are due, shall total life and
supplemental benefits for renewal reinsurance premiums due,
and shall identify all adjustments therefrom.
(3) A POLICY EXHIBIT REPORT in substantial accord with the
attached form that indicates in force reinsurance as of the
beginning of the reporting period, increases during the
reporting period (new reinsurance, reinstatements, recoveries,
or other increases) and all decreases during the reporting
period (terminations, reductions, surrenders, death claims or
other decreases); and the resulting in force reinsurance as of
the end of the reporting period.
Security Equity agrees to send Lincoln within ten (10) working days
following each quarter-end a RESERVE REPORT in substantial accord with
the attached form.
Lincoln may request a change in the reporting requirements in order to
obtain data it reasonably needs to properly administer this Agreement
or to prepare its financial statements.
961863.agm Page 25
3509/4
REINSURANCE PREMIUMS DUE
Reinsurance premiums are payable annually in advance and are due with
the reports submitted pursuant to the REPORTS section above.
INCREASE IN LIMIT OF RETENTION
If Security Equity elects to increase its Retention on in force
Policies, the increased Retention may not become effective for a Policy
until the Policy's tenth (10th) anniversary date.
REDUCTIONS IN INSURANCE
(1) For purposes of this section only, the term "Policy" shall refer to
any life insurance issued by Security Equity on the insured person,
whether or not reinsured with Lincoln.
(2) If life insurance retained by Security Equity on an insured person
reduces because a Policy on that life lapses or reduces in accordance
with the terms of a policy, the Reinsurance Amount shall be reduced as
of the effective date of the termination or reduction in insurance to
restore, as far as possible, the Retention of Security Equity on the
life.
(3) Reinsurance shall first be reduced on the specific Policy that was
terminated or reduced. The balance, if any, of the reduction in the
Reinsurance Amount shall be applied to reinsurance of other policies on
the life beginning with the first Policy issued.
(4) Notwithstanding the preceding, the reduction of the Reinsurance
Amount shall not exceed the amount of the reduction times Lincoln's
share of the total reinsurance on the life prior to the reduction and
shall not include any Policy ceded as Facultative Reinsurance on which,
at the time of issue, Security Equity retained less than its Retention
on the life.
AUTOMATIC TERMINATION
Reinsurance of a Policy shall continue regardless of the reduction of
the amount of Reinsured Net Amount at Risk and reinsurance shall not
automatically terminate as set forth in section C of the "Commencement
and Termination" article.
961863.agm Page 26
3509/4
CLAIMS ADMINISTRATION
Claims shall be individually reported as incurred using a form in
substantial accord with the attached form. Security Equity may take
credit for unearned reinsurance premiums from the date of death to the
next Policy paid to date on its next billing statement.
961863.agm Page 27
3509/4
________ NON-MEDICAL LINCOLN NATIONAL LIFE INSURANCE CO. LOGO
------------------------------------------------------------------------------------------------------------------------------
STATE OF
______________ ___ _________ _____ _________ __________ _________ _________
INSURED'S NAME SEX BIRTHDATE BIRTH RESIDENCE OCCUPATION ISSUE AGE AGE BASIS
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
______________ ___ _________ _____ _________ __________ _________ _________
JOINT INSURED SEX BIRTHDATE BIRTH RESIDENCE OCCUPATION ISSUE AGE JOINT AGE
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
______________________ __________ ___________ _______________ ______ ____________ _____________
ORIGINAL POLICY NUMBER ISSUE DATE DATE OF APP SHORT TERM FROM PLAN(S) RATE BOOK ED RESERVE BASIS
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Check Reins. Prem. Type ________ SMOKER
CEDING COMPANY _________ NON-SMOKER __________ AGGREGATE __________ OTHER PREF
------------------------------------------------------------------------------------------------------------------------------
Life
BASE PLAN TERM RIDER DIS ADB Will Policy Contain:
PREVIOUS IN FORCE $ ___________ $ _________ $________ $ _________ - Aviation Exclusion Provision
PREVIOUS RETAINED ___________ _________ ________ _________ - Guaranteed Insurability Option
ISSUED THIS POLICY ___________ _________ ________ _________ - Increasing Insurance Rider
RETAINED THIS POLICY ___________ _________ ________ _________ - Term Insurance Dividend Option
IF SUBSTANDARD ___________ _________ ________ _________ (Is option limited to cash value __ Yes ___ No)
INSURED THIS CESSION ___________ _________ ________ _________ - Check if Applicant has withheld MIB Authorization
FACULTATIVE UNDERWRITING DATA
Underwriting Papers: Check Appropriate Column
---------------------------------------------------------------------
Date Not
Attached Outstanding Obtained
-------- ----------- --------
Application _____ _____ _____
Examination _____ _____ _____
HOS _____ _____ _____
EKG(s) _____ _____ _____
X-Ray _____ _____ _____
1A - Blood Study _____ _____ _____
APS Dr. ________ _____ _____ _____
Dr. ________ _____ _____ _____
IR _____ _____ _____
Questionnaires _____ _____ _____
Financial Data _____ _____ _____
Other (describe) __________________________________
---------------------------------------------------------------------
Reason for submitting Facultatively
___ Other Automatic Limit ___ Medical Reasons
___ Financial Reasons ___ Other Non-Medical
Describe _______________________________________
Has money been accepted with the Application: ___ Yes ____ No
Is risk being submitted to other Reinsurer: ____ Yes ____ No
Other companion cases also submitted:
Remarks:
E: Unless otherwise stated, LNL's offer to reinsure is valid for 120 days
from date of facultative underwriting action.
Underwriter ___________
Date __________________
TRANSACTION TYPE MUST BE INDICATED
POLICY DETAIL REPORT
_________________. 19 ___
For each Policy show:
- Client Policy Number
- Effective Date of Tape or
Statement
- Automatic/Facultative Indicator
- Name
- Last Name
- First Name
- Middle Initial
- Gender
- Date of Birth
- Smoker Indicator
- Original Plan Code
- Issue Age
- Table Rating
- Flat EXTRA 1 Premium
- Length of Flat EXTRA 1 (YR)
- Flat EXTRA 2 Premium
- Length of Flat EXTRA 2 (YR)
- Current Amount Reinsured
- Issue Month/Day/ Century/Year
- Termination Date
- Reinstate Date
- Coverage Face
- Direct Face Issued
- Life Standard Premium
- Life Substandard Premium
- Gross Flat EXTRA 1 Premium
- Gross Flat EXTRA 2 Premium
- W.P. Premium
- ADB Premium
- Policy Fee
- Dividend
- Life Standard Allowance
- Life Substandard Allowance
- Gross Flat EXTRA 1 Allowance
- Gross Flat EXTRA 2 Allowance
- W.P. Allowance
- ADB Allowance
ADDITIONAL DATA ITEMS (not required)
- Par/Nonpar Indicator
- State of Residency
- Type of Evidence
- Underwriting Indicator
- Social Security Number
- Coverage Sequence Number
- Account Number
- XXX/MCX/RPR
- ER/NR
- Age Basis
- Gross Premium
- Allowance
- Tax Interest Rate
- Status Code
- Years From Issue to Conversion
- Reinsurance Premium Mode
- Retention Indicator
- Retention Amount
- Cash Value
- First Year/Renewal Indicator
SPECIAL PRODUCTS (only required if
applicable)
- Joint Insured Name
- Joint Last name
- Joint First Name
- Joint Middle Initial
- Term Additions Indicator
- Accelerated Benefit Indicator
- Purchase Options
Policy Exhibit
_________________, 19
Risk Premium Reinsurance
-----------Current Period------------ -------------- Year-lo-Date-----------
Number Amount Number Amount
of Policies of Reinsurance of Policies of Reinsurance
----------- -------------- ----------- --------------
In-force Beg. of Period In-force Beg. of Year
Issues - Automatic Issues - Automatic
Issues - Facultative Issues - Facultative
Cancellations (NTO's) Cancellations (NTO's)
Reinstates from Cancels Reinstates from Cancels
Other Increases Other Increases
(Include other reinstatements) (Include other reinstatements)
Total Increases Total Increases
Deaths Deaths
Recaptures Recaptures
Expiries & Maturities Expiries & Maturities
Lapses & Surrenders Lapses & Surrenders
Other Decreases in Coverage Other Decreases in Coverage
Total Decreases Total Decreases
In-force End of Period In-force Year-to-Date
Quarterly Reserve Report
Mean Reserves as of End of ___________________________ Quarter, 19__
Risk Premium Reinsurance
Life
Accidental Death Benefits _________________________
Waiver of Premium _________________________
Mortality Table _________________________
Rate of Interest _________________________
LINCOLN NATIONAL REINSURANCE LOGO
A part of LINCOLN NATIONAL CORPORATION
FRAUD STATEMENT REQUIRED BY SOME STATES Any person who knowingly and with intent
to defraud any insurance company or other person files a statement of claim
containing any materially false information, or conceals for the purpose of
misleading, information concerning any fact material thereto, commits a
fraudulent insurance act, which is a crime.
This form should be completed and forwarded to: Individual Life Reinsurance
Claim Administration Lincoln National Life Reinsurance Company
P. X. Xxx 000
Xxxx Xxxxx, XX 00000
(000) 000-0000
Fax (000) 000-0000
INSURANCE DEATH CLAIM
1. TO GIVE PRELIMINARY NOTICE OF DEATH COMPLETE ITEMS 1-4b and 11.
Date __________, 19_________________
2. a. Name of Insured____________
b. Date of Birth______________
x. Xxxx of Death______________
d. State of Residence_________
e. Cause of Death ____________
3. If any policies are CONTESTABLE or involve ADB, have you initiated a
claim investigation?
[ ] No [ ] Yes
4. LIST ALL POLICIES you have on this insured, including terminated
policies and date of termination. Indicate whether any policies have
been reinstated within the past two years.
a. Do you have policies issued, but NOT REINSURED WITH LINCOLN
NATIONAL? [ ] No [ ] Yes
(If so, please complete the following for EACH policy)
HAS YOUR POLICY
LAPSED WITHIN
FACE RETENTION DATE OF LAST TWO YEARS
YOUR AMOUNT FOR AGE, TERMINATION ------------------ FACE AMOUNT NOT
POLICY DATE OF ---------- PLAN & REINSURED ----------- Date INSURED NOT NUM
NUMBER ISSUE LIFE ADB RATE ELSEWHERE LIFE AUD Reinstated LIFE AUD
----------------------------------------------------------------------------------------------------------
$ $ $ $ $ $
----------------------------------------------------------------------------------------------------------
[ ] No [ ] Yes
----------------------------------------------------------------------------------------------------------
[ ] No [ ] Yes
----------------------------------------------------------------------------------------------------------
[ ] No [ ] Yes
----------------------------------------------------------------------------------------------------------
b. POLICIES INSURED WITH LINCOLN NATIONAL. Were any of these policies
issued as a result of a CONVERSION, EXCHANGE OR REPLACEMENT of other
Life Coverage in your company? [ ] No [ ] Yes (If yes, furnish former
policy no., issue date, plan, amount, termination date and name of
prior insurer.)
Did any of these policies replace Life coverage from another company?
[ ] No [ } Yes (If yes, was there full and complete underwriting by
your company? [ ] No [ ] Yes
HAS YOUR POLICY
LAPSED WITHIN
FACE RETENTION DATE OF LAST TWO YEARS FACE AMOUNT NOT
YOUR AMOUNT FOR AGE, TERMINATION -------------------- INSURED NOT NUM
POLICY DATE OF ---------- PLAN & REINSURED ----------- Date ---------------
NUMBER ISSUE LIFE ADB RATE ELSEWHERE LIFE AUD Reinstated LIFE ADD
-----------------------------------------------------------------------------------------------------------------
$ $ $ $ $ $
-----------------------------------------------------------------------------------------------------------------
[ ] No [ ] Yes
-----------------------------------------------------------------------------------------------------------------
[ ] No [ ] Yes
-----------------------------------------------------------------------------------------------------------------
[ ] No [ ] Yes
-----------------------------------------------------------------------------------------------------------------
[ ] No [ ] Yes
-----------------------------------------------------------------------------------------------------------------
Amount Reinsured with LNRC $ $
------------------
Total Issued $ $ Plus Amounts reinsured elsewhere $ $
Less Total Terminated Plus Your Retention
Insured Now in Force Total
------------------ ------------------
$ $ -___________These should agree_______________- $ $
$ $ $ $
-----------------------------------------------------------------------------------------------------------------
5. TO ESTABLISH CLAIM FOR REINSURANCE REIMBURSEMENT, COMPLETE QUESTIONS
1-11. Date ___________. 19 ___
For INCONTESTABLE POLICIES WITHOUT ADB
- If amount reinsured is $25,000 or less
- COMPLETE this Reinsurance Death Claim Form only
- If amount reinsured is greater than $25,000
- COMPLETE this Reinsurance Death claim form
- ATTACH Proofs of Death
- ATTACH Application Parts 1, 2, 3 and Underwriting
Worksheet if ceded automatically.
For CONTESTABLE AND/OR ADB POLICIES
- COMPLETE the Reinsurance Death Claim Form
- ATTACH Proof of Death
- ATTACH any Investigation Reports not previously forwarded
- ATTACH Application and Underwriting file Including the
Underwriting Worksheet If ceded automatically
Life Accidental Death
----------------------------------
6. Are you awaiting our advice before making a claim decision? [ ] No [ ] Yes [ ] No [ ] Yes
7. Has your claim been approved for payment in full? If so, send a copy of your worksheet. [ ] No [ ] Yes [ ] No [ ] Yes
8. Has settlement been sent to your beneficiary? [ ] No [ ] Yes [ ] No [ ] Yes
9. Memorandum __________________________________________
10. Reimbursement is requested on the following:
Lincoln National Policy No. Life Benefit Due Accidental Death Benefit Due
--------------------------------------------------------------------------------
$ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Requested $ $
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11. Your Company Name_________________________
Signature_________________________________
Title_____________________________________
Telephone No. ( )_____Ext.______________
PREMIUM SCHEDULE
(Effective as of September 1, 1996, for Facultative Reinsurance
and March 1, 1997, for Automatic Reinsurance)
to
Agreement Number 4
STANDARD REINSURANCE PREMIUMS
Basic Reinsurance-Premium Rates: The annual reinsurance premium rates for
reinsurance ceded under this Agreement shall be Security Equity's attached rates
charged the insured per thousand dollars of Reinsured Net Amount At Risk times
the following percentages:
Plan Reinsurance Effective Durations
Type From/Until All
Individually
Underwritten
Single Life Variable
Universal Life Facultative 09-01-96/10-31-96 105%
11-01-96/ -- 103
Automatic 03-01-97/ -- 103
Guaranteed Issue Facultative 09-01-96/ -- 145
Automatic 03-01-97/ -- 145
Simplified Issue Facultative 09-01-96/ -- 118
Automatic 03-01-97/ -- 118
ADDITIONAL AMOUNTS PAID BY SECURITY EQUITY:
(1) Substandard Premiums: For Policies written on substandard risks, the
appropriate premium rate shall be adjusted by multiplying the rate by
twenty-five percent (25%) for each table assessed the risk and adding such
amount to the reinsurance premiums due.
(2) Temporary Flat Extra-Premiums: Security Equity agrees to pay Lincoln a
temporary flat extra premium equal to the product of the flat extra premium
assigned by Security Equity or Lincoln on the Policy times the initial Reinsured
Net Amount at Risk minus an allowance of ten percent (10%) for all renewal years
such premium is payable.
961863.agm Page 28
3509/4
(3) Permanent Flat Extra-Premiums: Security Equity agrees to pay Lincoln any
permanent flat extra premium paid calculated on the initial Reinsured Net Amount
at Risk minus an allowance of seventy-five percent (75%) for the first year such
premium is payable and ten percent (10%) for all renewal years such premium is
payable.
(4) Continuations: Premiums payable for reinsurance of a Continuation shall be
based on the age at issue and duration from issue of the original Policy. If the
premium scale applicable to a Continuation contains a Policy fee, Security
Equity agrees to pay a first year Policy fee on the Continuation if a Policy fee
was not paid at issue of the original Policy.
ADDITIONAL AMOUNTS PAID BY LINCOLN:
(1) Premium Taxes: Lincoln shall not reimburse Security Equity for state premium
taxes.
(2) Experience Refunds: Lincoln shall not pay an experience refund to Security
Equity.
(3) Unearned Premiums: Lincoln agrees to refund, without interest, any
reinsurance premiums unearned as of the date of death of an insured person or as
of the date of a reduction of reinsurance pursuant to the "Reductions" article.
961863.agm Page 29
3509/4
SECURITY EQUITY LIFE INSURANCE
MORTALITY RATES
VARIABLE UNIVERSAL LIFE
MALE NON-SMOKER
ISSUE AGE 20-85
SECURITY EQUITY LIFE INSURANCE
MORTALITY RATES
VARIABLE UNIVERSAL LIFE
MALE SMOKER
ISSUE AGE 20-85
SECURITY EQUITY LIFE INSURANCE
MORTALITY RATES
VARIABLE UNIVERSAL LIFE
FEMALE NON-SMOKER
ISSUE AGE 20-85
SECURITY EQUITY LIFE INSURANCE
MORTALITY RATES
VARIABLE UNIVERSAL LIFE
FEMALE SMOKER
ISSUE AGE 20-85
ARBITRATION SCHEDULE
(Effective as of September l, 1996, for Facultative Reinsurance
and March 1, 1997, for Automatic Reinsurance)
to
Agreement Number 4
To initiate arbitration, either Security Equity or Lincoln agrees to notify the
other party in writing of its desire to arbitrate, stating the nature of its
dispute and the remedy sought. The party to which the notice is sent agrees to
respond in writing to the notification within ten (10) days of its receipt.
The arbitration hearing shall be held before a panel of three arbitrators, each
of whom must be a present or former officer of a life insurance company. An
arbitrator may not be a present or former officer, attorney, or consultant of
Security Equity or Lincoln, or either's affiliates.
Security Equity and Lincoln agree to each name five (5) candidates to serve as
an arbitrator. Each agree to choose one candidate from the other's list, and
these two candidates shall serve as the first two arbitrators. If one or more
candidates so chosen decline to serve as an arbitrator, the party that named the
candidate shall add an additional candidate to its list, and the other party
agrees to again choose one candidate from the list. This process shall continue
until two arbitrators have been chosen and have accepted. Security Equity and
Lincoln agree to present their initial lists of five (5) candidates by written
notification to the other party within twenty-five (25) days of the date of the
mailing of the notification initiating the arbitration. Any subsequent additions
to the list which are required shall be presented within ten (10) days of the
date the naming party receives notice that a candidate who has been chosen
declines to serve.
The two arbitrators shall select the third arbitrator from the eight (8)
candidates remaining on the lists of Security Equity and Lincoln within fourteen
(14) days of the acceptance of their positions as arbitrators. If the two
arbitrators cannot agree on the choice of a third, then this choice shall be
referred back to Security Equity and Lincoln. Security Equity and Lincoln agree
to take turns striking the names of the remaining candidates from the initial
eight (8) candidates until only one candidate remains. If the candidate so
chosen shall decline to serve as the third arbitrator, the candidate whose name
was stricken last shall be nominated as third arbitrator. This process shall
continue until a candidate has been chosen and accepted. This candidate shall
serve as the third arbitrator. The first turn at striking the name of a
candidate shall belong to the party that is responding to the other party's
initiation of arbitration. Once chosen, the arbitrators are empowered to decide
all substantive and procedural issues by a majority of votes.
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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 the
"Arbitration" article. At no time shall either Security Equity or Lincoln
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
Security Equity and Lincoln to inform those candidates actually chosen as
arbitrators of the nature and facts of the dispute. Likewise, any written or
oral arguments provided to the arbitrators concerning the dispute shall be
coordinated with the other party and shall be provided simultaneously to the
other party or shall take place in the presence of the other party. Further, at
no time shall any arbitrator be informed that he or she has been named or chosen
by one party or the other.
The arbitration hearing shall be held on the date and in the location set by the
arbitrators. In no event shall this date be later than six (6) months after the
appointment of the third arbitrator. As soon as possible, the arbitrators shall
establish prearbitration procedures as warranted by the facts and issues of the
particular case. At least ten (10) days prior to the arbitration hearing, each
party agrees to 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 and agree to give the
evidence such weight as they deem appropriate after consideration of any
objections raised concerning it. The party initiating the arbitration shall 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. Within twenty
(20) days after the end of the arbitration hearing, the arbitrators shall issue
a written decision that sets forth their findings and any award to be paid as a
result of the arbitration, except that the arbitrators may not award punitive or
exemplary damages. In their decision, the arbitrators shall apportion the costs
of arbitration, which shall include, but not be limited to, their own fees and
expenses.
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INCREASING POLICY ADDENDUM
(Effective as of September 1, 1996, for Facultative Reinsurance
and March 1, 1997, for Automatic Reinsurance)
to
Agreement Number 4
The provisions of the Agreement shall apply in all respects to reinsurance of an
Increasing Policy except as otherwise set forth in this Addendum.
This Addendum is referred to as "IP" in the "Applicable Addendum" column of the
POLICIES REINSURED section of the Life Benefits Schedule.
1. DEFINITIONS
1.1. Increasing Policy - a Policy, including any attached riders or
endorsements, that provides an increasing death benefit where the increases are
not subject to Security Equity's underwriting approval.
1.2. Maximum Amount - One hundred and fifty percent (150%) of the Reinsurance
Amount.
2. TERMS OF REINSURANCE
2.1. Security Equity's Retention for Increasing Policies shall be set forth in
the Life Benefits Schedule.
2.2. Lincoln agrees to automatically accept Lincoln's Proportionate Share of all
increases on the Increasing Policy up to, but not to exceed, the Maximum Amount.
2.3. For purposes of changes in Retention, increases in an Increasing Policy's
Net Amount at Risk shall be considered issued on the issue date of the original
Policy.
SELIC/LINCOLN NATIONAL REINSURANCE AGREEMENT
#9386727
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