4614-00-00
AUTOMATIC AND FACULTATIVE RISK PREMIUM REINSURANCE AGREEMENT
BETWEEN
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(HEREINAFTER CALLED THE "CEDING COMPANY")
WORCESTER, MASSACHUSETTS, USA
and
RGA REINSURANCE COMPANY
(HEREINAFTER CALLED THE "REINSURER")
ST. LOUIS, MISSOURI, USA
THIS AGREEMENT IS EFFECTIVE NOVEMBER 1, 1999
TABLE OF CONTENTS
ARTICLE TITLE PAGE
------- ----- ----
I PARTIES TO THE AGREEMENT 3
II COMMENCEMENT, TERMINATION AND CONTINUANCE OF REINSURANCE 3
III SCOPE 4
IV COVERAGE 5
V LIABILITY 6
VI RETENTION AND RECAPTURE 7
VII REINSURANCE PREMIUMS AND ALLOWANCES 7
VIII RESERVES 8
IX TERMINATIONS AND REDUCTIONS 8
X POLICY ALTERATIONS 8
XI POLICY ADMINISTRATION AND PREMIUM ACCOUNTING 9
XII CLAIMS 10
XIII ARBITRATION 11
XIV INSOLVENCY 13
XV RIGHT TO INSPECT 13
XVI UNINTENTIONAL ERRORS, MISUNDERSTANDINGS OR OMISSIONS 13
XVII CHOICE OF LAW, FORUM AND LANGUAGE 14
XVIII ALTERATIONS TO THE AGREEMENT 14
XIX EXECUTION OF THE AGREEMENT 15
SCHEDULES
---------
I REINSURANCE SPECIFICATIONS 16
II RETENTION 20
III BUSINESS COVERED 21
IV REINSURANCE PREMIUMS 22
V LIMITS 29
VI SAMPLE STATEMENT SPECIFICATIONS 30
VII SAMPLE POLICY EXHIBIT 31
VIII DEFINITIONS 32
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ARTICLE I - PARTIES TO THE AGREEMENT
Reinsurance required by the Ceding Company will be assumed by the Reinsurer as
described in the terms of this 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.
The current general and special Policy conditions, the premium schedules, and
underwriting guidelines of the Ceding Company, applying to the business covered
by this Agreement as set out in the Schedules, will form an integral part of
this Agreement. Additions or alterations to any of these conditions or schedules
will be reported to the Reinsurer without delay. In the case of significant
changes, both parties to the Agreement must agree to the new reinsurance
conditions.
ARTICLE II - COMMENCEMENT, TERMINATION AND CONTINUANCE OF REINSURANCE
1. AGREEMENT COMMENCEMENT
Notwithstanding the date on which this Agreement is signed, this
Agreement will take effect as from the date shown in the attached
Schedule I, and applies to business taking effect on and after this date.
2. AGREEMENT TERMINATION
This Agreement will be in effect for an indefinite period and 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.
During the ninety (90) day period, this Agreement will continue to
operate in accordance with its terms.
3. POLICY TERMINATION
If a Policy is terminated by death, lapse, surrender or otherwise, the
reinsurance will terminate on the same date. If premiums have been paid
on the reinsurance for a period beyond the termination date, refunds will
follow the terms as shown in Schedule I.
If a Policy continues in force without payment of premium during any days
of grace pending its surrender, whether such continuance be as a result
of a Policy provision or a practice of the Ceding Company, the
reinsurance will also continue without payment of premium and will
terminate on the same date as the Ceding Company's risk terminates.
If the Policy continues in force because of the operation of an Automatic
Premium Loan provision, or other such provision by which the Ceding
Company receives compensation for its risk, then the reinsurance will
also continue and the Ceding Company will pay the Reinsurer the
reinsurance premium for the period to the date of termination.
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4. CONTINUATION OF REINSURANCE
On termination of this Agreement in accordance with the provisions in
Paragraph two of this Article, the reinsurance ceded will remain in force
subject to the terms and conditions of this Agreement until their natural
expiry.
ARTICLE III - SCOPE
1. RETENTION OF THE CEDING COMPANY
The type and amount of the Ceding Company's retention on any one life is
as shown in Schedule I. In determining the amounts at risk in each case,
any additional death benefits on the same life (e.g. additional term
insurance or family income benefits) will be taken into account, as will
the amounts at risk under any other existing policies, at the time of
commencement, of the policy ceded under this Agreement.
The Ceding Company may alter its retention in respect of future new
business at any time. The Ceding Company will promptly notify the
Reinsurer of such alteration and its effective date.
2. CURRENCY
All reinsurance to which the provisions of this Agreement apply will be
effected in the same currencies as that expressed in the Original
Policies and as shown in Schedule I.
3. THE REINSURER'S SHARE
The Reinsurer's Share is as shown in Schedule I.
4. BASIS OF REINSURANCE
Plans of insurance listed in Schedule I will be reinsured on the basis
described in Schedule I, using the rates given in the Rate Table as shown
in Schedule I.
5. REINSURANCE ALLOWANCES
The Reinsurer will pay to the Ceding Company the reinsurance allowance,
if any, as shown in Schedule I. If any reinsurance premiums or
installments of reinsurance premiums are returned to the Ceding Company,
any corresponding reinsurance allowance previously credited to the Ceding
Company will be reimbursed to the Reinsurer.
6. PREMIUM RATE GUARANTEE
Premium Rate Guarantees, if any, are as shown in Schedule I.
7. POLICY FEES
Policy fees, if any, are as shown in Schedule I.
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8. TAXES
Taxes, if any, are shown in Schedule I.
9. EXPERIENCE REFUND OR PROFIT COMMISSION
If an experience refund or profit commission is payable under this
Agreement, the conditions and formula are as shown in Schedule I.
10. EXPENSE OF THE 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.
ARTICLE IV - COVERAGE
AUTOMATIC PROVISIONS
For each risk on which reinsurance is ceded, the Ceding Company's
retention at the time of issue will take into account both currently
issued and previously issued policies.
The Ceding Company must cede and the Reinsurer must automatically accept
reinsurance, if all of the following conditions are met for each life:
1. RETENTION
The Ceding Company has retained its limit of retention as shown in
Schedule I; and
2. PLANS AND RIDERS
The basic plan or supplementary benefit, if any, is shown in
Schedule I; and
3. AUTOMATIC ACCEPTANCE LIMITS
The underwriting class, age, minimum reinsurance amount, binding
amounts and jumbo limits fall within the automatic limits as shown
in Schedule I; and
4. UNDERWRITING
The risk is underwritten according to the Ceding Company's
Standard Guidelines; and
The Ceding Company has never made facultative application for
reinsurance on the same life to the Reinsurer or any other
Reinsurer; and
5. RESIDENCE
The risk is a resident of the Countries, as shown in Schedule I.
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AUTOMATIC PROVISIONS (CONTINUED)
If, for a given application, the Ceding Company cannot comply with the
automatic reinsurance conditions described above, or if the Ceding
Company submits the application to other Reinsurers for their facultative
assessment, the Ceding Company can submit this application to the
Reinsurer on a facultative basis.
FACULTATIVE PROVISIONS
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 to
the Reinsurer.
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 initial
and ultimate risk amounts for which reinsurance is being requested, or in
the case of indexed amounts, the basis of the indexing.
On a timely basis, the Reinsurer will submit a written decision to the
Ceding Company. 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.
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.
ARTICLE V - LIABILITY
The liability of the Reinsurer for all claims within automatic cover and all
claims arising after facultative acceptance as described in Article IV, will
commence simultaneously with that of the Ceding Company and will cease at the
same time as the liability of the Ceding Company ceases.
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ARTICLE VI - RETENTION AND RECAPTURE
If the Ceding Company changes its limit of retention as shown in Schedule I,
written notice of the change will promptly be given to the Reinsurer. At the
option of the Ceding Company, a corresponding reduction may be made in the
reinsurance in force under this Agreement, on all lives, on which the Ceding
Company has maintained its maximum limit of retention, provided that all
eligible business is reduced on the same basis. The Ceding Company may apply the
new limits of retention to existing reinsurance and reduce and recapture
reinsurance inforce in accordance with the following rules:
1. No recapture will be made unless reinsurance has been in force for the
minimum period shown in Schedule I.
2. Recapture will become effective on the policy anniversary date following
written notification of the Ceding Company's intent to recapture.
3. 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. No recapture will be allowed in any class of fully
reinsured business or in any classes of risks for which the Ceding
Company established special retention limits less than the Ceding
Company's maximum retention limits for the plan, age, and mortality
rating at the time the policy was issued.
4. If any reinsurance is recaptured, all reinsurance eligible for recapture,
under the provisions of this Article, must be recaptured.
5. If there is reinsurance with other reinsurers on risks eligible for
recapture, the necessary reduction is to be applied to each company in
proportion to the total outstanding reinsurance.
6. 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 yearly renewable term reinsurance
calculated using the minimum statutory mortality rates and maximum
statutory interest rate for each year of issue.
ARTICLE VII - REINSURANCE PREMIUMS AND ALLOWANCES
1. LIFE REINSURANCE
Premiums for Life and Supplemental Benefit reinsurance will be as shown
in Schedule I.
2. SUBSTANDARD PREMIUMS
Premiums will be increased by any (flat) extra premium or substandard
premium as shown in Schedule I, charged the insured on the face amount
initially reinsured.
3. JOINT POLICY PREMIUMS
In the case of joint policy premiums, if any, the premium rate payable to
the Reinsurer will be as shown in Schedule I.
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4. SUPPLEMENTAL BENEFITS
The Reinsurer will receive a proportionate share of any premiums for
additional benefits as shown in Schedule I, as well as for any extra
premiums the Ceding Company may collect for the coverage of special risks
(traveling, climate, occupation, etc.). This share will be based on the
ratio between the amount at risk and the total initial benefits insured
and will remain constant throughout the entire period of premium payment.
ARTICLE VIII - RESERVES
Reserve requirements of the Ceding Company, if any, are as shown in Schedule I.
ARTICLE IX - 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 inforce.
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.
6. When a policy is reinstated, reinsurance will be reinstated as if the
lapse or reduction had not occurred.
ARTICLE X - POLICY ALTERATIONS
1. REINSTATEMENT
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.
2. EXTENDED TERM AND REDUCED PAID-UP ADDITIONS
Changes as a result of extended term or reduced paid-up insurance will be
handled like reductions.
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3. EXCHANGES OR CONVERSIONS
An exchange or conversion is a new policy replacing a policy issued
earlier by the Ceding Company or a change in an existing policy that is
issued or made either:
1. Under the terms of the original policy, or,
2. Without the same new underwriting information the Ceding Company
would obtain in the absence of the original policy,
3. Without a suicide exclusion period, or contestable period of equal
duration, to those contained in new issues by the Ceding Company,
or
4. Without the payment of the same allowances in the first year, that
the Ceding Company would have paid in the absence of the original
policy.
Exchanges or 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 exchange conversion. Premiums will be as shown in Schedule I.
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 in Schedule I.
ARTICLE XI - POLICY ADMINISTRATION AND PREMIUM ACCOUNTING
1. ACCOUNTING PERIOD AND PREMIUM DUE
The Ceding Company will submit accounts to the Reinsurer, for reporting
new business, alterations, termination, renewals, claims, and premium
due, as shown in Schedule I.
2. ACCOUNTING ITEMS
The accounts will contain a list of premiums due for the current
accounting period, explain the reason for each premium payment, show
premium subtotals adequate to use for premium accounting, including first
year and renewal year premiums and allowances. The account information
should provide the ability to evaluate retention limits, premium
calculations and to establish reserves.
3. REINSURANCE ADMINISTRATION REQUIREMENTS
Reinsurance Administration Requirements are as shown in Schedule I.
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4. PAYMENT OF BALANCES
The Ceding Company will pay any balance due the Reinsurer, at the same
time as the account is rendered, but in all cases, by the Accounting and
Premium Due frequency as shown in Schedule I. The Reinsurer will pay a
balance due the Ceding Company, at the same time as the account is
confirmed, however, at the latest, within thirty (30) days after receipt
of the statement of account. Should the Reinsurer be unable to confirm
the account in its entirety, the confirmed portion of the balance will be
paid immediately. As soon as the account has been fully confirmed, the
difference will be paid immediately by the debtor. All balances not paid
within thirty (30) days of the due date shown on the statement will be in
default.
5. BALANCES IN DEFAULT
The Reinsurer will have the right to terminate this Agreement, when
balances are in default, by giving 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
this ninety (90) day notice of termination, resulting from default as
described in paragraph four of this Agreement, 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 balances in
default are received within the ninety (90) day time period, the
Agreement will remain in effect. The interest payable on balances in
default is stipulated as shown Schedule I.
6. OFFSET
Any amounts due, by either of the parties to this Agreement, whether they
arise out of this Agreement, or out of any other reinsurance relationship
between the parties, may be offset against the claims of the other party.
This right will continue to exist after the termination of this
Agreement, or of any business relationship between parties.
7. FLUCTUATIONS IN EXCHANGE RATES
If the premium due periods allowed for the payment of balances are
exceeded by either party, the debtor will bear the currency risk, in the
event of any subsequent alteration in the exchange rate, by more than
five percent, unless the debtor is not responsible for the delay in
payment.
ARTICLE XII - CLAIMS
1. NOTICE
The Ceding Company will promptly notify the Reinsurer of all claims.
2. PROOFS
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.
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3. PAYMENT OF BENEFITS
The Reinsurer will 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 recommendation before admission of
any liability on the part of the Ceding Company.
If the amount of insurance changes because of a misstatement of rate
classification, the Reinsurer's share of reinsurance liability will
change proportionately.
4. CONTESTED CLAIMS
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.
5. CLAIMS EXPENSES
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,
from the date it notifies the Ceding Company it declines to be a party.
6. EXTRA CONTRACTUAL OBLIGATIONS
In no event will the following categories of expenses or liabilities be
reimbursed:
a. Routine investigative or administrative expenses;
b. Salaries of employees or other internal expenses of the Ceding
Company or the original issuing companies;
c. Extra contractual damages, including punitive damages and
exemplary damages; or
d. Expenses incurred in connection with a dispute or contest arising
out of conflicting or any other claims of entitlement to policy
proceeds or benefits.
ARTICLE XIII - ARBITRATION
1. GENERAL
The parties agree to act in all things with the highest good faith.
However, if the parties cannot mutually resolve a dispute or claim, which
arises out of, or in connection with this Agreement, including formation
and validity, and whether arising during, or after the period of this
Agreement, the dispute or claim will be referred to arbitration tribunal
(a group of three arbitrators), and settled through arbitration.
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1. GENERAL (CONTINUED)
The arbitrators will be individuals, other than from the contracting
companies, including those who have retired, with more than ten (10)
years insurance or reinsurance experience within the industry.
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.
2. NOTICE
To initiate arbitration, either party will notify the other party by
Certified Mail of its desire to arbitrate, stating the nature of the
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.
3. PROCEDURE
Each of the two parties will appoint one arbitrator, and these two
arbitrators will select the third arbitrator. Upon the selection of the
third arbitrator, the arbitration tribunal will be constituted, and the
third arbitrator will act as Chairman of the tribunal.
If either party fails to appoint an arbitrator within sixty (60) days
after the other party has given notice of appointing an arbitrator, then
the Arbitration Association, as shown in Schedule I, will appoint an
arbitrator for the party that has failed to do so.
The party that has failed to appoint an arbitrator will be responsible
for all expenses levied by the Arbitration Association, for such
appointment. Should the two arbitrators be unable to agree on the choice
of the third arbitrator, then the appointment of this arbitrator is left
to the Arbitration Association. Such expense shall be borne equal by each
party to this Agreement.
The tribunal, may in its sole discretion make orders and directions as it
considers to be necessary for the final determination of the matters in
dispute. Such orders and directions may be necessary with regard to
pleadings, discovery, inspection of documents, examination of witnesses
and any other matters relating to the conduct of arbitration. The
tribunal, will have the widest discretion permissible under the law, and
practice of the place of arbitration, when making such orders or
directions.
4. ARBITRATION COSTS
All costs of the arbitration will be determined by the tribunal, which
may take into account the law and practice of the place of arbitration,
and in what manner arbitration costs will be paid, and by whom.
5. PLACE OF ARBITRATION
The place of arbitration is as shown in Schedule I.
6. ARBITRATION SETTLEMENT
The award of the tribunal, will be in writing, and binding upon the
consenting parties.
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ARTICLE XIV - INSOLVENCY
In the event of the insolvency of the Ceding Company, all reinsurance will be
payable directly to the liquidator, receiver, or statutory successor of the
Ceding Company without diminution.
In the event of insolvency of the Ceding Company, the liquidator, receiver, 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 liquidator,
receiver, 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, expense will be apportioned in accordance with the
terms of the
reinsurance agreement as though such expense had been incurred by
the Ceding Company.
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 or with respect to any other claim of one party against the other, are
deemed mutual debts or credits, as the case may be, and will be offset, and only
the balance will be allowed or paid.
ARTICLE XV - RIGHT TO INSPECT
Upon request, the Ceding Company will furnish the Reinsurer with detailed
information concerning the risks reinsured under this Agreement. In particular
the Reinsurer will be entitled to request that:
1. Copies of the whole or part of any documents relating to the risks and
their reinsurance be made available to the Reinsurer at its own expense;
2. During the Ceding Company's normal office hours, these documents will be
made available to a representative of the Reinsurer who will be named in
advance; notification of such visits will normally be given two weeks in
advance and even in urgent cases at least forty-eight hours in advance;
and
3. The Reinsurer will have this right of inspection as long as one of the
two parties to this Agreement is claiming from the other.
ARTICLE XVI - UNINTENTIONAL ERRORS, MISUNDERSTANDINGS OR OMISSIONS
It is expressly understood and agreed that if failure to comply with any terms
of this Agreement is hereby shown to be the result of an unintentional error,
misunderstanding or omission, on the part of either the Ceding Company or the
Reinsurer, both the Ceding Company and the Reinsurer, will be restored to the
position they would have occupied, had no such error, misunderstanding or
omission occurred, subject always to the correction of the error,
misunderstanding or omission.
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ARTICLE XVII - CHOICE OF LAW, FORUM, AND LANGUAGE
1. CHOICE OF LAW AND FORUM
This Agreement, will in all respects be governed by, and construed in
accordance with the law and exclusive jurisdiction of the Courts, as
shown in Schedule I.
2. LANGUAGE
The Parties hereto acknowledge and agree that, even though they may
execute this Agreement in both an English version and in another
language, as shown in Schedule I, the version as shown in Schedule I will
control for all legal purposes in the event of any inconsistency between
or disagreement between the two versions.
ARTICLE XVIII - ALTERATIONS TO THE 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 alterations to the provisions of this Agreement will be made by Amendment,
Addenda or by correspondence attached to the Agreement embodying such
alterations as may be agreed upon and signed by both parties. These documents
will be regarded as part of this Agreement and will be equally binding.
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ARTICLE XIX
EXECUTION OF THE AGREEMENT
IN WITNESS OF THE ABOVE,
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
OF
WORCESTER, MASSACHUSETTS
AND
RGA REINSURANCE COMPANY
OF
ST. LOUIS, MISSOURI, USA
HAVE BY THEIR RESPECTIVE OFFICERS EXECUTED AND DELIVERED THIS AGREEMENT IN
DUPLICATE ON THE DATES INDICATED BELOW:
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
By: /s/ By: /s/
------------------------------ ------------------------------
Title: AVP - Life Product Champion Title: AVP & Actuary
--------------------------- ---------------------------
Date: 11/8/00 Date: 11/13/2000
---------------------------- ----------------------------
RGA REINSURANCE COMPANY
By: /s/
------------------------------
Title: Sales V.P.
---------------------------
Date: 10-31-00
----------------------------
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SCHEDULE I - REINSURANCE SPECIFICATIONS
COMMENCEMENT, TERMINATION AND CONTINUANCE OF REINSURANCE, ARTICLE II:
1. EFFECTIVE DATE: This Agreement applies to policies
with applications received by the
Ceding Company on and after
November 1, 1999.
2. POLICY TERMINATION: REFUNDS: Unearned premium will be refunded on
lapses, terminations and death.
SCOPE, ARTICLE III:
1. RETENTION OF THE
CEDING COMPANY See Schedule II, Retention
2. CURRENCY: United States Dollars ("US$")
3. THE REINSURER'S SHARE: See Schedule V, First Dollar Quota
Share
4. BASIS OF REINSURANCE: Risk Premium (YRT)
5. REINSURANCE ALLOWANCE: See Schedule IV, Reinsurance
Premiums
6. PREMIUM RATE GUARANTEE: See Schedule IV, Reinsurance
Premiums
7. POLICY FEES: See Schedule IV, Reinsurance
Premiums
8. TAXES:
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).
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SCOPE, ARTICLE III: (CONTINUED)
8. TAXES: (CONTINUED)
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. 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 will report such amount in their respective tax returns for
the previous calendar year.
PREMIUM TAX: Premium Tax will not be reimbursed.
9. EXPERIENCE REFUND OR PROFIT
COMMISSION: See Schedule IV, Reinsurance
Premiums
COVERAGE, ARTICLE IV:
1. RETENTION: See Schedule II, Retention
2. PLAN(S) AND RIDER(S): See Schedule III, Business Covered
3. AUTOMATIC ACCEPTANCE LIMITS: See Schedule V, Limits
4. UNDERWRITING CLASS: See Schedule IV, Reinsurance
Premiums
17
COVERAGE, ARTICLE IV:(CONTINUED)
5. RESIDENCE: United States, Canada, Puerto Rico
or Guam
RETENTION AND RECAPTURE, ARTICLE VI:
MINIMUM RECAPTURE PERIOD: Ten (10) years, Single Life Twenty
(20) years, Second to Die
REINSURANCE PREMIUMS AND ALLOWANCES, ARTICLE VII:
1. LIFE REINSURANCE: See Schedule IV, Reinsurance
Premiums
2. SUBSTANDARD PREMIUMS: See Schedule IV, Reinsurance
Premiums
3. JOINT POLICY PREMIUMS: See Schedule IV, Reinsurance
Premiums
4. SUPPLEMENTARY BENEFITS: See Schedule IV, Reinsurance
Premiums
RESERVES, ARTICLE VIII:
The Ceding Company agrees to post on its books any deficiency reserves on
the coverage reinsured under this Agreement.
POLICY ALTERATIONS (ARTICLE X):
1. EXCHANGE OR CONVERSIONS: See Schedule IV, Reinsurance
Premiums
2. RE-ENTRY'S: See Schedule IV, Reinsurance
Premiums
POLICY ADMINISTRATION AND PREMIUM ACCOUNTING, (ARTICLE XI):
1. ACCOUNTING PERIOD AND Annually in Advance
PREMIUM DUE:
2. ACCOUNTING ITEMS: See Schedule VI, Sample Statement
Specifications and Schedule VII,
Sample Policy Exhibit
3. REINSURANCE ADMINISTRATION: Self Administration (Client
Administers)
18
POLICY ADMINISTRATION AND PREMIUM ACCOUNTING, (ARTICLE XI): (CONTINUED)
4. BALANCES IN DEFAULT:
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:
a. Renewal premiums are not paid within sixty (60) days of the due
date.
b. Premiums for new business are not paid within one hundred twenty
(120) days of the date the policy is issued.
ARBITRATION (ARTICLE XIII):
1. ARBITRATION ASSOCIATION: American Arbitration Association
2. PLACE OF ARBITRATION: St. Louis, Missouri, USA
CHOICE OF LAW, FORUM AND LANGUAGE (ARTICLE XVII):
1. CHOICE OF LAW AND FORUM: Missouri, USA
2. LANGUAGE: English
19
SCHEDULE II - RETENTION
EFFECTIVE NOVEMBER 1, 1999
1. The Ceding Company's Retention Limits for the Single Life Variable
Universal Life Plan, Vel Plus Single Life, Variable Universal Life Plan and
the Second-to-Die Variable Universal Life Plans are 15% of the retention
schedule below:
2. The Ceding Company's Retention Limits for the First Union Fully
Underwritten business is 10% of the retention schedule below:
STANDARD-TABLE H TABLE J-TABLE P & FLAT
AGE & FLAT EXTRAS OF $20 OR LESS EXTRAS OVER $20
--- ---------------------------- ----------------------
0 $ 500,000 $ 250,000
1 - 60 $ 2,000,000 $ 250,000
61 - 70 $ 1,000,000 $ 500,000
71 - 80 $ 500,000 $ 250,000
81 - 89 $ 500,000 (up to Table F) $ 0
AVIATION (Includes policies with an Aviation Exclusion Clause.
Exception is pilots of regularly scheduled passenger,
charter and cargo airlines) Maximum retention is
$500,000.
SPECIAL In cases which are borderline for ratings, we may
choose not to hold our full retention
For survivorship contracts the Ceding Company's retention schedule is the same
as for single life. The retention for a survivorship case is based on the
age/rating of the healthier insured. If both insureds are equally healthy the
retention is based on the older insured.
20
SCHEDULE III - BUSINESS COVERED
EFFECTIVE NOVEMBER 1, 1999
PLAN(S)
Single Life Variable Universal Life Plan (Policy Form #1033-99)
Vel Plus Single Life Variable Universal Life Plan (Policy Form #1023-93)
Second-to-Die Variable Universal Life Plan (Policy Form #1034-99)
First Union Fully Underwritten Business (#1036-99)
RIDER(S)
Waiver of Charges Rider
Other Insured Rider
Term Rider for Primary Insured
Accelerated Death Benefit Rider
21
SCHEDULE IV - REINSURANCE PREMIUMS
EFFECTIVE NOVEMBER 1, 1999
LIFE:
Business Covered, as shown in Schedule III 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.
The Life Reinsurance premium 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. The Ceding
Company will have the right to immediate recapture of all reinsurance
business for which the overall percentage increase in reinsurance premium
rates is greater than the overall percentage increase in current cost of
insurance rates.
Reinsurance premiums will be determined according to the amount reinsured
with the Reinsurer per insured life as follows. The life reinsurance
premium will be calculated in the case of life risks, by multiplying the
appropriate life premium rate, from the attached Rate Table labeled
below, for the age of the insured, at the beginning of the policy year,
by the amount at risk reinsured for that policy year, multiplied by the
applicable pay percentage as shown below. The same procedure will apply
for single premium policies and for paid up policies.
RATE UNDERWRITING YEARS
PLAN(S) TABLE CLASS 1+
------- ----- ------------ -----
Single Life Variable Universal Life Plan
(Policy Form #1033-99)
Vel Plus Single Life Variable Universal Life Plan Preferred Non-Smoker 32%
(Policy Form #1023-93) Standard Non-Smoker 48%
Preferred Smoker 90%
First Union Fully Underwritten Business S-1 Standard Smoker 110%
(Form #1036-99)
All Policy Fees will be retained by the Ceding Company
SUBSTANDARD PREMIUMS:
SUBSTANDARD TABLE EXTRA
Premiums will be increased by any (flat) extra premium or substandard
premium charged the insured on the face amount initially reinsured. For
substandard table ratings, premiums will be increased by the following
percent per table:
25%
22
SUBSTANDARD PREMIUMS: (CONTINUED)
FLAT EXTRA PREMIUMS
The premium will be increased by any flat extra premium charged the
insured on the face amount initially reinsured, less total allowances as
shown below:
FIRST YEAR PERMANENT FIRST YEAR TEMPORARY
PAYABLE 6 YEARS OR MORE: PAYABLE 1 - 5 YEARS: RENEWAL:
------------------------ -------------------- --------
100% 20% 20%
JOINT POLICY PREMIUMS:
PLAN(S) RATE TABLE UNDERWRITING CLASS YEARS 1+
------- ---------- ------------------ --------
Second-to-Die Variable Universal Life Plans S-1* Preferred Non-Smoker 32%
(Form #1034-99) Standard Non-Smoker 48%
Preferred Smoker 90%
Standard Smoker 110%
*For all Second-to-Die Plans, apply the S-1 rates times the pay percents then
frasierize utilizing the formula in Schedule S-2. A minimum premium of $0.15 per
thousand will apply in renewal years.
SUPPLEMENTAL BENEFITS:
RIDERS
The annual premium to be paid to the Reinsurer for reinsurance of Waiver
of Charges benefits will be the rates charged the insured, less the
applicable allowances as shown below:
FIRST YEAR ALLOWANCE RENEWAL YEAR ALLOWANCE
-------------------- ----------------------
100% 20%
The annual premium to be paid to the Reinsurer for reinsurance of Other
Insured Rider and the Term Rider for the Primary Insured will be based on
the appropriate rate from the attached rate tables for the base plan,
less the same allowances as the base plan to which the rider is attached.
The Accelerated Death Benefit Rider will be the same as for the base plan
to which the rider is attached.
23
RE-ENTRY'S:
Re-Entry's are not covered under this Agreement.
CONVERSIONS OR EXCHANGES:
If any business covered under this Agreement is subsequently converted or
exchanged to any other plan reinsured by the Reinsurer, then such
business will 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 or exchanged. If the
Agreement including the new rates requires policy fees, then they will
also apply to the new plan.
If any business covered under this Agreement is subsequently converted or
exchanged to a plan that is not reinsured with the Reinsurer, under a
specific document, then such business will be reinsured with the
Reinsurer, at the rates and policy fees as shown below. Rates will be
determined at point in scale, based on the original policy that is being
converted or exchanged.
Rate Table S-3
EXPERIENCE REFUND OR PROFIT COMMISSION:
Experience Refund or Profit Commission are not covered under to this
Agreement.
24
SCHEDULE IV - REINSURANCE PREMIUMS
SCHEDULE S-1
25
RGA REINSURANCE COMPANY
**75-80 BASIC MORTALITY TBLS
OMITTED 8 PAGES
26
SCHEDULE IV - REINSURANCE PREMIUMS
SCHEDULE β-β
ββ
β-β
JOINT LAST SURVIVOR PREMIUMS
1. The premiums for this business shall be calculated using the βββββββ
method AND THE SINGLE LIFE RATES INCLUDED IN RATE TABLE S-1. The single
life rates shall be adjusted for substandard mortality by adding 25% per
underwriting table and any flat extra charges to the appropriate single
life rate. The substandard single life rates shall not exceed $950 per
thousand.
2. The single life rates calculated as described in Section 1 above shall be
converted to joint last survivor rates using the methodology described in
Section 3 below.
3. METHOD FOR CALCULATING JOINT LAST SURVIVOR PREMIUMS
Definition of Terms:
(a) Qx,n = single life rate per thousand in duration n for an insured
whose policy was issued at issue age x
(b) Qx,y,n = joint last survivor rate per thousand in duration n for
two insureds whose policies were issued at issue ages x and y
STEP 1
Calculate qx,n for each insured for durations 1 to n.
qx,n = Qx,n divided by 1000.
STEP 2
Calculate px,n for each insured for durations (n-1) and n.
px,n = (1-qx,1) X (1-qx,2) x...x (1-qx,n).
STEP 3
Calculate px,y,n for durations (n-1) and n.
px,y,n = px,n + py,n - ((px,n) X (py,n))
STEP 4
Calculate qx,y,n for duration n. Let px,y,0 = 1.
Qx,y,n = 1 - px,y,n
------
px,y,n-1
STEP 5
Qx,y,n - 1000 X qx,y,n.
28
SCHEDULE IV - REINSURANCE PREMIUMS
SCHEDULE S-3
29
RGA REINSURANCE COMPANY
**RP-98
OMITTED 6 PAGES
30
SCHEDULE V - LIMITS
EFFECTIVE NOVEMBER 1, 1999
REINSURER'S SHARE:
Single Life Variable Universal Life Plan (Policy Form #1033-99),
Vel Plus Single Life Variable Universal Life Plan (Policy Form #1023-93)
Second-to-Die Variable Universal Life Plan (Policy Form #1034-99)
35%
First Union Fully Underwritten business (Form #1036-99)
90%
AGE LIMITS:
0 - 85 years
MINIMUM REINSURANCE AMOUNT:
$50,000
BINDING LIMITS:
$15,000,000 to the Pool, including Ceding Company's retention
JUMBO LIMIT:
$35,000,000
31
SCHEDULE VI - REINSURANCE SPECIFICATIONS
SAMPLE STATEMENT SPECIFICATIONS
The following information should appear on each Statement and Inforce listing:
- 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) Country of Residence
- Underwriting Classification (i.e. Preferred, Standard, etc.)
- Smoking Class (i.e. Smoker, Non Smoker, etc.)
- Indication if Business is Facultative or Automatic
- Indication if Business is Risk Premium or Coinsurance
- Policy Number(s)
- Plan Code(s) / Kind Code(s): Cession Series
- Original Face Amount of the Policy(s)
- Amount(s) Ceded to the Reinsurer
- Amount of Premium being Paid; separated for Supplementary
Benefits
- The Amount of any Reinsurance Premium Allowances
- Any Extra Premiums concerned. Example: $5 / 1000 5 YRS
- Effective Date and Duration of any Policy(s) Change, Reissue,
or Termination
32
SCHEDULE VII - REINSURANCE SPECIFICATIONS
SAMPLE POLICY EXHIBIT
POLICY SUMMARY NUMBER OF REINSURANCE
CLASSIFICATION POLICIES AMOUNT
-------------- --------- -----------
Inforce as of Last Report 878 $ 410,220,973
New Issues 2 $ 516,666
Reinstatements 3 $ 483,334
Increases $ 500,000
Decreases - Still Inforce $ 133,332
Rollover - In 0 $ 0
DEDUCT BY:
Death 0 $ 0
Surrender 1 $ 250,000
Lapse 4 $ 1,000,001
Conversion - Out 0 $ 0
Decreases - Termination 3 $ 299,999
Inactive - Pending 0 $ 0
Not Taken 0 $ 0
Inforce as of Current Report 875 $ 410,037,641
33
SCHEDULE VIII - DEFINITIONS
ASSUME - To accept or take over a risk, the converse of cede.
AUTOMATIC REINSURANCE - A
reinsurance agreement under which the Reinsurer is
obligated to accept or assume risks which meet certain specific criteria based
on the Ceding Company's underwriting.
BINDING LIMIT - The amount of risk over the Ceding Company's retention, which
can be ceded automatically if all automatic conditions are met.
CASH VALUE - The amount of money which the policy owner will receive as a refund
if the policy owner cancels coverage and returns the policy to the company.
CEDE - To transfer an insurance risk from the company originally issuing the
policy to another insurance company known as the Reinsurer.
CEDING COMPANY - A CEDING INSURER is an insurer which underwrites and issues an
original, principal policy to an insured and contractually transfers (cedes) a
portion of the risk to the Reinsurer. A CEDING REINSURER is a Reinsurer which
transfers (cedes) a portion of the underlying reinsurance to a
retrocessionnaire.
CONDITIONAL RECEIPT - A provision included in some life insurance policies
providing coverage from the date of application to the date at which the policy
is either issued or declined.
EXCESS REINSURANCE - A form of reinsurance under which recoveries are available
when a given loss exceeds the Ceding Company's retention (excess of loss
reinsurance) defined in this Agreement.
EXPERIENCE REFUND OR PROFIT COMMISSION - A provision found in some
reinsurance
agreements which provides for profit sharing. Parties agree to a formula for
calculating profit, an allowance for the Reinsurer's expenses, and the Ceding
Company's share of such profit after expenses.
EXTRA CONTRACTUAL OBLIGATIONS (ECO) - A generic term that, when used in a
reinsurance agreement, refers to damages awarded by a court against an insurer
which are outside the provisions of the insurance policy, due to the insurer's
bad faith, fraud or gross negligence in the handling of a claim.
FACULTATIVE - Reinsurance under which the Ceding Company has the option
(faculty) of submitting and the Reinsurer has the option of accepting or
declining individual risks. This Agreement merely reflects how individual
facultative reinsurance will be handled.
FLAT EXTRA PREMIUM - A method for rating substandard risks used when the extra
risk is considered to be constant. The underwriter assesses a specific extra
premium for each $1,000 of insurance. Flat extra ratings usually apply to
applicants in hazardous occupations or avocations, aviation, or with certain
physical impairments of a temporary nature.
INDEXING - The adjustment of the Ceding Company's retention and the reinsurance
limit by a measure of inflation such as the Consumer Price Index.
INDIVIDUAL CESSION ADMINISTRATION - A reinsurance arrangement where the
Reinsurer sets up individual records for each cession and calculates the
reinsurance premium, inforce, and reserve information for its financial reports.
JUMBO LIMIT - The limit placed on an amount of coverage that may be inforce, or
applied for in all companies, on an individual life for automatic reinsurance
purposes. If such insurance exceeds the limit, the Ceding Company must submit
the risk to the Reinsurer for facultative review.
MINIMUM REINSURANCE AMOUNT - The smallest cession that the Reinsurer will accept
automatically. The minimum size is set to avoid the expenses associated with
small cessions.
34
ORIGINAL POLICY(S) - Insurance contracts between the Ceding Company and the
Insured(s).
POLICY RESERVE - A liability account that identifies the amount of assets that,
together with the future premiums to be received from inforce policies, is
expected to be sufficient to pay future claims on those inforce policies. Also
called a legal reserve or a statutory reserve.
POOL - A method of allocating reinsurance among several Reinsurers. Using this
method, each Reinsurer receives a specified percentage of each risk ceded into
the pool. A REINSURANCE POOL is a multi-Reinsurer agreement under which each
Reinsurer in the group or pool assumes a specified portion of each risk ceded to
the pool.
PREMIUM - (Written/Unearned/Earned) - WRITTEN PREMIUM is premium registered on
the books of an insurer or Reinsurer at the time a policy is issued and paid.
Premium for a future exposure period is said to be UNEARNED PREMIUM. For the
individual policy, written premium minus unearned premium equals earned premium.
EARNED PREMIUM is income for the accounting period while unearned premium will
be income in a future accounting period.
PUNITIVE DAMAGES - A term that, when used in
reinsurance agreements, refers to
damages awarded by a court against an insured or against an insurer in addition
to compensatory damages. Punitive damages are intended to punish the insured or
the insurer for willful and careless misconduct and to serve as a deterrent.
When the award is against an insurer, it is usually related to the conduct of
the insurer in the handling of a claim.
QUOTA SHARE - A form of reinsurance in which premiums and losses are shared
proportionately between the Ceding Company and the Reinsurer, in which the same
percentage applies to all policies reinsured.
RATE - The premium rate is the amount of premium charged per exposure unit, e.g.
per $l,000.
RECAPTURE - The process by which the Ceding Company recovers the liabilities
transferred to the Reinsurer.
REINSURER - A company which contractually assumes all or part of the Ceding
Company's risk.
RETENTION - The dollar amount or percentage of each loss retained by the Ceding
Company under this
reinsurance agreement. The Ceding Company's retention is not
reinsured in any way.
RISK - Insurance on an individual life.
RISK PREMIUM REINSURANCE - Another name for Yearly Renewable Term (YRT)
reinsurance. A form of reinsurance under which the risks, but not the permanent
plan reserves, are transferred to the Reinsurer for a premium that varies each
year with the amount at risk and the ages of the insureds. Under the YRT method,
the Ceding Company will transfer the Reinsurer the mortality risk on either a
net amount at risk basis or on an approximation of the net amount at risk basis.
SELF-ADMINISTRATION - A reinsurance arrangement where the Ceding Company
provides the Reinsurer with periodic reports for reinsurance ceded giving
premium, inforce, reserve, and any other information required by the Reinsurer
for financial reports. Self Administration is also known as Bulk or Bordereaux.
STANDARD GUIDELINES - The underwriting guidelines intended to be applied to all
applications for insurances of the type(s) reinsured under this agreement.
SUBSTANDARD RISKS - Those insureds who, under the terms of the Ceding Company's
standard guidelines, do not meet criteria for issuance at standard premium
rates.
SUBSTANDARD TABLE EXTRA - Substandard table extra ratings usually apply to
physically impaired lives. The rates will increased by a factor as shown in
Schedule I for each table of additional mortality.
35
SUM AT RISK OR NET AMOUNT AT RISK - The excess of the death benefit of a policy
over the cash value.
TERMINATION - The formal ending of a
reinsurance agreement by its natural
expiry, cancellation or commutation by both parties. Terminations can be either
on a cutoff or runoff basis. Under cutoff provisions, the parties' obligations
are fixed as of the agreed cutoff date. Otherwise, obligations incurred while
the agreement was inforce are run off to their natural extinction, provisions,
the parties' obligations are fixed as of the agreed cutoff date. Otherwise,
obligations incurred while the agreement was inforce are run off to their
natural extinction.
YEARLY RENEWABLE TERM - Another name for Risk Premium Reinsurance.
36
THE WORDING ON THE NEXT PAGE HAS BEEN APPROVED BY βββ βββββββ. IT IS TO BE USED
WHEN THE CLIENT WANTS PROTECTION IN CASE OF RATING DOWNGRADE OF RGA.
1
RIGHT OF TERMINATION (REINSURER SUBJECT TO U.S. TAX LAW)
The Company shall have the right to terminate this agreement pursuant to the
terms of this provision if any petition as described in subsection i. below is
filed by or against RGA Re or RGA Re's A. M. Best's rating drops below [B+].
Upon any such event occurring, RGA Re will promptly notify the Company. Within
30 days of receiving such notice, the Company may at its own option and upon
written notice to RGA Re or RGA Re's liquidator, receiver or statutory successor
terminate this Agreement with no obligation to pay any further premiums as to
new business as of the Termination Date or cede any new business to RGA Re.
Additionally, upon such event, all insurance which has been ceded to RGA Re
under this Agreement may, at the Company's option, be recaptured immediately and
completely by the Company. Alternatively, RGA Re may place assets in a trust as
soon as practicable in an amount equal to the statutory reserves of the policies
reinsured under this Agreement. The type of assets, and the rights and duties of
both parties will be in accordance with the appropriate insurance regulations of
the state of xxxxxxxx. RGA Re will bear all costs related to the trusts.
If the Company elects to exercise its option to terminate this Agreement,
termination shall be effective the earlier of:
i. The date on which a petition for winding-up, liquidation, rehabilitation,
supervision, or any other such petition is filed; or
ii. The date on which RGA Re's insolvency has been established; or
iii. The date on which RGA Re's A. M. Best's rating drops below [B+].
(hereinafter the occurrence of any such event referred to as the "Termination
Date").
Any undisputed debts or credits arising from this Agreement, in favor or against
either the Company or RGA Re, which are in existence at the Termination Date,
shall be deemed mutual debts or credits and shall be offset subject to
applicable law.
If reinsurance is recaptured, the Company will pay RGA Re the following
recapture fee:
Let P denote the gross reinsurance premium rate per $1,000 in policy year n,
where n=0,1,2,...,9.
If the special termination occurs in policy year n, the fee payable will be:
(XX%) (100%-10%) (P) (Amount of reinsurance in force under this
Agreement / 1000).
"XX%" is the applicable percentage for policy year n shown in Exhibit II,
Paragraph 1.
No fee is payable after policy year 9.
2
RGA REINSURANCE LETTER TO βββββ ββββββββ
OMITTED 1 PAGE
4614-00-01
AMENDMENT
to the
AUTOMATIC & FACULTATIVE RISK PREMIUM AGREEMENT EFFECTIVE NOVEMBER 1, 1999
between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(Hereinafter called the "Ceding Company")
Worcester, Massachusetts
and
RGA REINSURANCE COMPANY
(Hereinafter called the "Reinsurer")
St. Louis, Missouri
THIS AMENDMENT IS EFFECTIVE NOVEMBER 1, 1999
CANCELLATION OF WAIVER OF CHARGES AND OTHER INSRUED RIDERS, AND FRASIERIZED
MINIMUM PREMIUM APPLIES TO ALL YEARS
I. As of the effective date of this Amendment, the Waiver of Charges Rider
and Other Insured Rider will not be ceded under this Agreement. All
references to the above riders are hereby deleted.
II. As of the effective date of this Amendment, the attached Schedule IV -
Reinsurance Premiums, Joint Policy Premiums, is hereby added to this
Agreement to show that the Frasierized minimum applies to all years.
III. All provisions of the Automatic and Facultative Risk Premium Agreement
not specifically modified herein remain unchanged.
IN WITNESS WHEREOF, both parties have executed this Addendum in duplicate as
follows:
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
By: /s/ By: /s/
------------------------------- ------------------------------
Title: Vice President Title: Vice President
---------------------------- ---------------------------
Date: 3/5/02 Date: 3-6-02
----------------------------- ----------------------------
RGA REINSURANCE COMPANY
By: /s/
-------------------------------
Title: Vice President
----------------------------
Date: 12-28-00
-----------------------------
1
JOINT POLICY PREMIUMS:
PLAN(S) RATE TABLE UNDERWRITING CLASS YEARS 1+
------- ---------- ------------------ --------
S-1* Preferred Non-Smoker 32%
Second-to-Die Variable Universal Life Plans Standard Non-Smoker 48%
(Form #1034-99)
Preferred Smoker 90%
Standard Smoker 110%
* For all Second-to-Die Plans, apply the S-1 rates times the pay percents then
frasierize utilizing the formula in Schedule S-2. A minimum premium of $0.15
per thousand will apply to all years.
2
4614-01-00
ADDENDUM
to the
AUTOMATIC AND FACULTATIVE RISK PREMIUM
REINSURANCE AGREEMENT DATED
NOVEMBER 1, 1999
between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY, WORCESTER, MASSACHUSETTS, USA
(hereinafter called the "Ceding Company")
and
RGA REINSURANCE COMPANY, ST. LOUIS, MISSOURI, USA
(hereinafter called the "Reinsurer")
THIS ADDENDUM IS EFFECTIVE JANUARY 1, 2001
I. ADDITION OF FACULTATIVE SINGLE PREMIUM VARIABLE UNIVERSAL LIFE (SPVUL)
PLANS
Effective January 1, 2001, the attached Schedule III - Business Covered,
is hereby added to this Agreement which now includes SPVUL plans accepted
by the Reinsurer on a facultative basis.
II. The rates for the SPVUL plans are the same as those for the single life
plans, Rate Table S-1 in Schedule IV, Reinsurance Premiums of the
original Agreement.
III. All provisions of the Automatic and Facultative Risk Premium Reinsurance
Agreement not specifically modified herein remain unchanged.
IN WITNESS WHEREOF, both parties have executed this Addendum in duplicate as
follows:
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
By: /s/ By: /s/
------------------------------- ------------------------------
Title: Vice President Title: Vice President
---------------------------- ---------------------------
Date: 3/5/02 Date: 3-6-02
----------------------------- ----------------------------
RGA REINSURANCE COMPANY
By: /s/
-------------------------------
Title: Vice President
----------------------------
Date: 3-1-01
-----------------------------
1
SCHEDULE III - BUSINESS COVERED
EFFECTIVE JANUARY 1, 2001
Single Premium Variable Universal Life (facultative only, policy number 1030-96)
Single Premium Variable Universal Life (facultative only, policy number 1030-99)
2
4614-02-00
ADDENDUM
to the
AUTOMATIC AND FACULTATIVE RISK PREMIUM REINSURANCE AGREEMENT
EFFECTIVE NOVEMBER 1, 1999
between
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(Hereinafter called the "Ceding Company")
Worcester, Massachusetts, USA
and
RGA REINSURANCE COMPANY
(Hereinafter called the "Reinsurer")
St. Louis, Missouri, USA
This Addendum is Effective January 1, 2001
ADDITION OF SINGLE LIFE AND SECOND-TO-DIE VARIABLE UNIVERSAL LIFE PLANS
(AGENCY AND BROKER PLANS)
I. As of the effective date of this Addendum, the attached Schedule III -
Business Covered, is hereby added to this Agreement which now includes
the above agency and broker plans.
II. The rate basis (Schedule IV - Reinsurance Premiums) for the above plans
is the same as the Single Life Variable Universal Life plan and the
Second-to-Die Variable Universal Life plan found in the base Agreement.
III. The attached Schedule V - Limits is hereby added to this Agreement, which
now includes the limits for the above plans.
IV. All provisions of the Automatic and Facultative Risk Premium Reinsurance
Agreement not specifically modified herein remain unchanged.
IN WITNESS WHEREOF, both parties have executed this Addendum in duplicate as
follows:
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
By: /s/ By: /s/
------------------------------- ------------------------------
Title: Vice President Title: Vice President
---------------------------- ---------------------------
Date: 3/5/02 Date: 3-6-02
----------------------------- ----------------------------
RGA REINSURANCE COMPANY
By: /s/
-------------------------------
Title: Vice President
----------------------------
Date: 1-31-01
-----------------------------
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SCHEDULE IIII - BUSINESS COVERED
EFFECTIVE JANUARY 1, 2001
PLAN(S)
AGENCY AND BROKER PLANS:
Single Life Variable Universal Life Plan (Policy Form #1018-93)
Single Life Variable Universal Life Plan (Policy Form #1026-94)
Second-to-Die Variable Universal Life Plan (Policy Form #1027-95)
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SCHEDULE V - LIMITS
EFFECTIVE JANUARY 1, 2001
REINSURER'S SHARE:
30%
AGE LIMITS:
0 - 85 years
MINIMUM REINSURANCE AMOUNT:
$50,000
BINDING LIMITS:
$15,000,000 to the Pool, including Ceding Company's retention
JUMBO LIMIT:
$35,000,000
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