This Automatic Reinsurance Agreement
(hereinafter referred to as the "Agreement")
is made between
First Life America Corporation,
a Kansas insurance company
and
Wilton Reassurance Company
a Minnesota insurance company
Effective January 1, 2005
Table of Contents
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ARTICLE 1 - PREAMBLE
1.1 Parties to the Agreement
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ARTICLE 2 - AUTOMATIC REINSURANCE
2.1 General Conditions
2.2 Retained Amounts
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ARTICLE 3 - COMMENCEMENT OF LIABILITY
3.1 Commencement of Liability
3.2 Conditional Receipt or Temporary Insurance
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ARTICLE 4 - REINSURED RISK AMOUNT
4.1 Life
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ARTICLE 5 - PREMIUM ACCOUNTING
5.1 Policy Premiums
5.2 Payment of Premiums
5.3 Delayed Payment
5.4 Failure to Pay Premiums
5.5 Premium Rate Guarantee
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ARTICLE 6 - REDUCTIONS, TERMINATIONS
AND CHANGES
6.1 Reductions and Terminations
6.2 Increases
6.3 Risk Classification Changes
6.4 Reinstatement
6.5 Nonforfeiture Benefits
6.6 Cash Surrenders
6.7 Policy Loans
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ARTICLE 7 - CLAIMS
7.1 General
7.2 Claims Management
7.3 Notice
7.4 Proofs
7.5 Claims Cooperation and Contestable Claims
7.6 Form of Payment; Contractual Interest
7.7 Claim Expenses
7.8 Misrepresentation or Suicide
7.9 Misstatement of Age or Sex
7.10 Extra-Contractual Damages
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ARTICLE 8- RESERVES
8.1 Credit for Reinsurance
8.2 Reserve Methodology and Reporting
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ARTICLE 9 - RETENTION LIMIT CHANGES
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ARTICLE 10 - RECAPTURE
10.1 No Recapture Right
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ARTICLE 11 - GENERAL PROVISIONS
11.1 Currency
11.2 Premium Tax
11.3 Dividends
11.4 Minimum Cession
11.5 Inspection of Records
11.6 Compliance
11.7 Certain Representations
11.8 Business Continuity
11.9 Underwriting Continuity
11.10 Interest Rate
11.11 Utmost Good Faith
11.12 Assignment and Transfer
11.13 No Waiver
11.14 Survival
11.15 Governing Law
11.16 Entire Agreement
11.17 Severability
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ARTICLE 12 - DAC TAX
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ARTICLE 13 - OFFSET
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ARTICLE 14 - INSOLVENCY
14.1 Definition
14.2 Insolvency of the Ceding Company
14.3 Insolvency of the Reinsurer
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ARTICLE 15 - ERRORS AND OMISSIONS
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ARTICLE 16 - DISPUTE RESOLUTION
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ARTICLE 17 - ARBITRATION
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ARTICLE 18 - CONFIDENTIALITY
18.1 General
18.2 Non-Public Personal Information
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ARTICLE 19 - DURATION OF AGREEMENT
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ARTICLE 20 - EXECUTION
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Exhibits
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A - RETENTION LIMITS
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B - PLANS COVERED AND BINDING LIMITS
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C - POLICY PREMIUMS, EXPENSES AND RATES
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D - SELF - ADMINISTERED REPORTING
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ARTICLE 1
Preamble
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PARTIES TO THE AGREEMENT 1.1
This is a coinsurance agreement for indemnity reinsurance (the "Agreement")
solely between First Life America Corporation, a Kansas life insurance company
(the "Ceding Company"), and Wilton Reassurance Company, a Minnesota insurance
company (the "Reinsurer"), collectively referred to as the "parties."
The acceptance of risks under this Agreement will create no right or legal
relationship between the Reinsurer and the insured, owner or beneficiary of any
insurance policy or other contract of the Ceding Company.
The Agreement will be binding upon the Ceding Company and the Reinsurer and
their respective successors and assigns.
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Article 2
Automatic Reinsurance
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GENERAL CONDITIONS 2.1
On and after the effective date of this Agreement, the Ceding Company will
automatically cede to the Reinsurer a portion of the life insurance policies
listed in Exhibit B.
The Reinsurer will automatically accept its share of the above-referenced
policies up to the limits shown in Exhibits B, provided that:
a. the Ceding Company keeps its full retention as specified in Exhibit A or
otherwise holds its full retention on a life under previously issued
inforce policies. If the Ceding Company is already on risk for its required
retention under previously issued policies, the Reinsurer will
automatically accept reinsurance for newly-issued policies according to the
Automatic Binding Limits set out in Exhibit B provided the Ceding Company
has applied the same underwriting standards, guidelines and procedures to
such policies it would have applied if the Ceding Company were to have
retained all risks under such policies without regard to this Agreement or
other reinsurance;
b. in rating, pricing and issuing the policies ceded hereunder, the Ceding
Company applies without exception or waiver the published underwriting
standards, rules, manuals, guidelines and procedures disclosed to the
Reinsurer in connection with the placement of this reinsurance (the
"Business Guidelines"). Unless the Reinsurer consents in writing, (i)
underwriting and pricing with respect to the policies reinsured under this
Agreement will be accomplished strictly in accordance with the Business
Guidelines without exception, modification or waiver and (ii) failure to so
apply the Business Guidelines will result in exclusion of risks from the
scope of the reinsurance provided hereunder;
c. the total of the new ultimate amount of reinsurance required including
contractual increases, and the amount already reinsured on that life under
this Agreement and all other agreements between the Reinsurer and the
Ceding Company, does not exceed the Automatic Binding Limits set out in
Exhibit B;
d. policies issued comply with the maximum issue age limits and residency
requirements, if any, stated in Exhibits B;
e. the application is on a life that has not been submitted on a facultative,
facultative obligatory or initial inquiry basis to any reinsurer within the
last 5 years, unless the reason for any prior facultative submission was
solely for capacity that may now be accommodated within the terms of this
Agreement;
f. each policy provides for the maximum normal periods of suicide and
contestability protection permitted by applicable law;
g. business assumed by the Ceding Company acting in the capacity of a
retrocessionaire, with the exception of business assumed from an affilate
of the originating company (at either the time of issue of the policy or
subsequent retrocession of the policy), is not covered;
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h. plans with expiration dates of 5 years or less are not eligible for
automatic coverage under this reinsurance;
i. in addition to other conditions and limitations of coverage set forth in
this Agreement, this Agreement does not cover the following unless
specified elsewhere: (i) noncontractual conversions, rollovers, exchanges
or group conversions; (ii) policies issued under any program where full
current evidence of insurability consistent with the amount of insurance is
not obtained, or where conventional selection criteria consistent with the
Business Guidelines are not applied in underwriting the risk; including,
without limitations, group life, worksite marketing COLI/BOLI/TOLI and FOLI
coverages; and (iii) any conversion of a previously issued policy that had
been reinsured with another reinsurer.
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RETAINED AMOUNTS 2.2
The Ceding Company may not further reinsure amounts it has retained on the
business covered under this Agreement, on any basis, without the prior written
consent of the Reinsurer.
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ARTICLE 3
Commencement of Liability
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COMMENCEMENT OF LIABILITY 3.1
The Reinsurer's liability for any policy accepted in accordance with the terms,
conditions and limitations of this Agreement will commence at the same time as
the Ceding Company's contractual liability therefor.
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CONDITIONAL RECEIPT OR TEMPORARY INSURANCE 3.2
Reinsurance coverage under a conditional receipt or temporary insurance
provision is limited to the Reinsurer's share of amounts within the Conditional
Receipt or Temporary Insurance Limits specified in Exhibit B. The Reinsurer will
accept liability provided that the Ceding Company has followed its normal
cash-with-application procedures for such coverage.
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ARTICLE 4
Reinsured Risk Amount
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LIFE 4.1
The reinsured net amount at risk is equal to the policy face amount multiplied
by the Reinsurer's share as defined in Exhibit B. The Ceding Company will
maintain a quota share retention on each policy, up to the maximum limits of its
retention per life for the insured's issue age, as shown in Exhibit A.
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ARTICLE 5
Premium Accounting
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PREMIUMS 5.1
The policy premium rates, commissions, fees and expenses for business reinsured
under this Agreement are shown in Exhibit C. The Ceding Company will notify the
Reinsurer of any change in the premiums, fees or charges for the underlying
policies due to developing experience or otherwise.
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PAYMENT OF PREMIUMS 5.2
The Ceding Company shall pay to the Reinsurer the Reinsurer's share of policy
premiums. Such reinsurance premium amounts are payable monthly as collected by
the Ceding Company. The Ceding Company will calculate the amount of reinsurance
premium due and, within 15 days after the end of each calendar month, will send
the Reinsurer a statement containing the information shown in Exhibit C,
including, without limitation, the amount of reinsurance premiums due for that
period, applicable fees, commissions, expenses and taxes. If an amount is due
the Reinsurer for such period, the Ceding Company will remit that amount
together with the statement. If an amount is due the Ceding Company for such
period, the Reinsurer will remit such amount within 45 days of receipt of the
statement.
All payments due under this Agreement shall be made in U.S. dollars.
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DELAYED PAYMENT 5.3
Premium balances that remain unpaid for more than 60 days after the Remittance
Date will accrue interest. The Remittance Date is defined as 15 days after the
end of the reporting period.
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FAILURE TO PAY PREMIUMS 5.4
Performance of the Ceding Company's obligations to pay reinsurance premiums is a
condition precedent to the liability of the Reinsurer for reinsurance covered by
this Agreement. In the event that reinsurance premiums are not paid within 60
days of the Remittance Date, the Reinsurer will have the right to terminate the
reinsurance under all policies having reinsurance premiums in arrears. If the
Reinsurer elects to exercise its right of termination, it will give the Ceding
Company 15 days' written notice of its intention. Such notice will be sent by
certified mail.
If all reinsurance premiums in arrears, including any that become in arrears
during the 15 day notice period, are not paid before the expiration of the
notice period, the Reinsurer will be relieved of all liability under those
policies as of the last date to which premiums have been paid for each, less any
cash values or recapture/reserve amounts due. Reinsurance on policies on which
reinsurance premiums subsequently fall due will automatically terminate as of
the last date to which premiums have been paid for each policy, unless
reinsurance premiums on those policies are paid on or before their Remittance
Dates.
Terminated reinsurance may be reinstated, subject to approval by the Reinsurer,
within 15 days of the date of termination, and upon payment of all reinsurance
premiums in arrears including any interest accrued thereon. The Reinsurer will
have no liability for any claims incurred between the date of termination and
the date of the reinstatement of the reinsurance. The right
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to terminate reinsurance will not prejudice the Reinsurer's right to collect
premiums for the period during which reinsurance was in force prior to the
expiration of the 15 days' notice.
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ARTICLE 6
Reductions, Terminations and Changes
Whenever a change is made in the status, plan, amount or other material feature
of a policy reinsured under this Agreement, the Reinsurer will, upon receipt of
notification of the change, provide adjusted reinsurance coverage in accordance
with the provisions of this Agreement. The Ceding Company will notify the
Reinsurer of any such change within thirty (30) days of its effective date.
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REDUCTIONS AND TERMINATIONS 6.1
In the event of the reduction, lapse, or termination of a policy or policies
reinsured under this Agreement or any other agreement, the Ceding Company will
reduce or terminate reinsurance on that life. The reinsured amount on the life
with all reinsurers will be reduced, effective on the same date, by the amount
required such that the Ceding Company maintains its retention as defined under
this Agreement.
The reinsurance reduction will apply first to the policy or policies being
reduced and then, on a chronological basis, to other reinsured policies on the
life, beginning with the oldest policy. If a fully retained policy on a life
that is reinsured under this Agreement is terminated or reduced, the Ceding
Company will reduce the existing reinsurance on that life by a corresponding
amount, with the reinsurance on the oldest policy being reduced first. If the
amount of reduction exceeds the risk amount reinsured, the reinsurance on the
policy or policies will be terminated.
The Reinsurer will refund any unearned reinsurance premiums net of allowances.
However, the reinsured portion of any policy fee will be deemed earned for a
policy year if the policy is reinsured during any portion of that policy year.
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INCREASES 6.2
Contractual and noncontractual increases and decreases are not permitted under
this reinsurance without the Reinsurer's prior written consent.
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RISK CLASSIFICATION CHANGES 6.3
Risk classification changes are not permitted under this reinsurance.
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REINSTATEMENT 6.4
If a policy reinsured on an automatic basis is reinstated in accordance with its
terms and in accordance with Ceding Company rules and procedures, the Reinsurer
will, upon notification of reinstatement, reinstate the reinsurance coverage.
Upon reinstatement of the reinsurance coverage, the Ceding Company will pay the
contractual reinsurance premiums plus accrued interest for the period and at the
interest rate which it receives on premiums in arrears.
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NONFORFEITURE BENEFITS 6.5
a. Extended Term
If the original policy lapses and extended term insurance is elected under the
terms of the policy, reinsurance will continue on the same basis as under the
original policy until the expiry of the extended term period.
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b. Reduced Paid-up
If the original policy lapses and reduced paid-up insurance is elected under the
terms of the policy, the amount reinsured will be reduced.
The amount reinsured and the amount retained will be reduced proportionately.
The reinsurance premiums will be calculated in the same manner as reinsurance
premiums were calculated on the original policy.
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CASH SURRENDERS 6.6
The Reinsurer will reimburse the Ceding Company for its proportionate share of
the cash surrender amount payable by the Ceding Company upon surrender of the
policy without consideration of any policy loans.
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POLICY LOANS 6.7
The Reinsurer does not participate in policy loans or other forms of
indebtedness on policies reinsured under this Agreement.
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ARTICLE 7
Claims
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GENERAL 7.1
Claims covered under this Agreement include only contractual death claims, which
are those due to the death of the insured on a policy reinsured under this
Agreement and any additional benefits specified in Exhibit B which are provided
by the underlying policy and are reinsured under this Agreement. The Reinsurer
will not participate in any payments made by the Ceding Company on a gratuitous
or ex-gratia basis (i.e., payments which the Ceding Company is not required to
make under applicable policy terms) and will not be liable for payment of any
additional amounts or damages attributable to the non-contractual acceleration
or discount of any benefits, claims, losses or other amounts relating to the
policies reinsured hereunder, whether liquidated, unliquidated, contingent,
non-contingent or otherwise and whether arising by operation of law or
otherwise.
The total reinsurance recoverable from all companies will not exceed the Ceding
Company's total contractual liability on the policy less the amount retained.
The maximum reinsurance death benefit payable to the Ceding Company under this
Agreement is the risk amount specifically reinsured with the Reinsurer.
Claim amounts are normally credited in the reinsurance accounts for the relevant
accounting period. On special request, however, the Reinsurer will remit its
share of the claim immediately after liability has been admitted by the Ceding
Company after deduction of any balance due to the Reinsurer. The Ceding Company
shall not deduct claims from the premium statement sent to the Reinsurer without
the Reinsurer's prior written consent.
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CLAIMS MANAGEMENT 7.2
The Ceding Company is responsible for the settlement of claims in a prudent and
professional way in accordance with policy conditions and the Business
Guidelines and otherwise in accordance with the provisions of this Article 7 and
applicable law. Without limiting the foregoing, in managing claims arising under
the policies reinsured hereunder the Ceding Company will ensure that (i) the
underlying policy was in force (any claim occurring prior to the policy
documentation being finalized or after the policy has lapsed, however short that
period may be, would be an example of an ex gratia payment if made by the Ceding
Company), (ii) appropriate checks have been made for fraud and misrepresentation
at application and (iii) all required proofs of claim have been received and are
reliable.
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NOTICE 7.3
The Ceding Company will notify the Reinsurer as soon as possible after it
receives a claim on a policy reinsured under this Agreement.
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PROOFS 7.4
The Ceding Company will promptly provide the Reinsurer with proper claim proofs,
including a copy of the proof of payment by the Ceding Company and a copy of the
insured's death certificate in a mutually-agreed format. In addition, as
requested by the Reinsurer, the Ceding Company will provide to the Reinsurer a
copy of all relevant documents and other information in connection with the
claim and the underlying policy as may be reasonably requested by the Reinsurer.
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CLAIMS COOPERATION AND CONTESTABLE CLAIMS 7.5
Any settlement made by the Ceding Company is binding upon the Reinsurer to the
extent of its liability under the terms of this Agreement.
The Reinsurer shall have the right to audit the claims payment practices and may
prescribe claims notice dollar thresholds if it reasonably determines that the
Ceding Company's claims payment practices and procedures are materially
inconsistent with the descriptions thereof contained in the Business Guidelines.
After receipt of all required documentation concerning a claim (or any claim for
which the Ceding Company recommends denial, compromise, contest or litigation)
and after completing its initial investigation with respect thereto, the Ceding
Company will promptly notify the Reinsurer of its recommendation and will
promptly and fully disclose to the Reinsurer all information relating to such
claim and will make all related documents and information available to the
Reinsurer.
The Reinsurer will have ten (10) working days to review information provided by
the Ceding Company with respect to any such death claim and notify the Ceding
Company in writing of its non-binding recommendation as well as of its decision
to accept participation in any settlement, denial, contest, compromise, or
litigation as may have been recommended by the Ceding Company. In the absence of
material misstatements or omissions in information provided to the Reinsurer,
the Reinsurer's decision to accept participation in a contest, compromise or
litigation will be final and binding on the Reinsurer.
If the Reinsurer affirmatively accepts participation in any denial, contest or
litigation proposed by the Ceding Company, and such denial, contest or
litigation, as the case may be, results in a reduction or increase in liability,
the Reinsurer will share in any such reduction or increase in proportion to its
share of the risk on the contested policy. The Ceding Company will promptly
advise the Reinsurer of all significant developments in the claim investigation,
including notification of any legal proceedings against it in response to denial
of the claim.
Subject to compliance with the foregoing and without prejudice to its other
rights, if the Reinsurer does not affirmatively accept such participation or
otherwise fails to reply with respect to a proposed denial, contest or
litigation within the required timeframe, the Reinsurer will then fulfill its
obligation fully under this agreement as to the claim by paying to the Ceding
Company its full share of the reinsurance amount, and will not share in any
subsequent reduction or increase in liability attributable to such contest.
The Ceding Company will promptly notify the Reinsurer in the event that any
other reinsurer shall notify the Ceding Company of its determination not to
participate in any denial, contest or litigation proposed by the Ceding Company
or shall indicate for any reason a refusal to pay reinsurance amounts asserted
by the Ceding Company to be due with respect to any claim.
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FORM OF PAYMENT; CONTRACTUAL INTEREST 7.6
Life benefit payments will be made in a single sum, regardless of the Ceding
Company's settlement options. The Reinsurer will pay its proportionate share of
any interest required under the subject policy to be paid by the Ceding Company
on the death proceeds until the date of settlement.
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CLAIM EXPENSES 7.7
The Reinsurer will pay its share of reasonable out-of-pocket claim investigation
and legal expenses connected with the litigation or settlement of contractual
liability claims unless the Reinsurer has discharged its liability pursuant to
Section 7.5 above. If the Reinsurer has so discharged its liability, the
Reinsurer will not participate in any expenses incurred thereafter.
The Reinsurer will not reimburse the Ceding Company for routine claim and
administration expenses, including but not limited to the Ceding Company's home
office expenses, compensation of salaried officers and employees and any legal
expenses other than third party expenses incurred by the Ceding Company. Claim
investigation expenses do not include expenses incurred by the Ceding Company as
a result of a dispute or contest arising out of conflicting claims of
entitlement to policy proceeds or benefits.
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MISREPRESENTATION OR SUICIDE 7.8
If the Ceding Company returns premium to the policyowner or beneficiary as a
result of misrepresentation or suicide of the insured, the Reinsurer will refund
net reinsurance premiums received on that policy without interest to the Ceding
Company in lieu of any other form of reinsurance benefit payable under this
Agreement.
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MISSTATEMENT OF AGE OR SEX 7.9
In the event of a change in the amount of the Ceding Company's liability on a
reinsured policy due to a misstatement of age or sex, the Reinsurer's liability
will change proportionately. The face amount of the policy reinsured will be
adjusted from the inception of the policy and any difference will be settled
without interest.
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EXTRA-CONTRACTUAL OBLIGATIONS 7.10
For purposes of this Agreement, "Extra Contractual Obligations" are any
obligations, incurred by the Ceding Company, its affiliates, directors,
officers, employees, agents or other representatives other than contractual
obligations arising under the express written terms and conditions of a policy
and include, but are not limited to, punitive damages, bad faith damages,
compensatory damages, and other damages or statutory penalties which may arise
from willful and/or negligent acts, errors or omissions by the Ceding Company or
its affiliates, directors, officers, employees agents or other representatives.
The Reinsurer is not liable for Extra Contractual Obligations, including related
expenses, associated with the denial or contest of any claim under any policy
reinsured unless it was an active party, and directed or consented to the act or
course of conduct that led directly to the imposition of the Extra Contractual
Obligations. In these situations, the Ceding Company and the Reinsurer will
share in Extra Contractual Obligations, in equitable proportions, but all
factors being equal, the division of any assessments would be in proportion to
the total risk accepted by each party for the plan of insurance involved.
Notwithstanding anything stated in this Article 7.10 to the contrary, the
Reinsurer has not accepted and will not be liable under this Agreement for any
Extra Contractual Obligations or expenses incurred by the Ceding Company as a
result of any negligence, fraud or wrongful act, error or omission by any
employee or officer of the Ceding Company or an agent or other representative
representing the Ceding Company in implementing the
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claims handling action agreed upon by the Ceding Company and the Reinsurer.
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ARTICLE 8
Reserves
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CREDIT FOR REINSURANCE 8.1
If Reinsurer at any time is not licensed or accredited in the Ceding Company's
current state of domicile and by virtue thereof the Ceding Company is not able
to receive statutory reserve credit for reinsurance in such state, the Reinsurer
and Ceding Company agree to make all reasonable efforts to qualify the
reinsurance provided hereunder for statutory reserve credit through the
provision by the Reinsurer of appropriate collateral or other approaches. In
such event, the Reinsurer will have the right at its option to substitute one or
more forms of such collateral with other forms as would qualify reinsurance
provided hereunder for statutory reserve credit and the Ceding Company agrees
that it will cooperate with the Reinsurer in such regard, including, promptly
taking any such actions as may be reasonably requested by the Reinsurer in
respect of the release of collateral in connection with the substitution of
other adequate collateral amounts.
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RESERVE METHODOLOGY AND REPORTING 8.2
The Reinsurer will use its own reserve methodology for purposes of calculating
any statutory reserves required to be held for businesses reinsured under this
Agreement.
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ARTICLE 9
Retention Limit Changes
If the Ceding Company changes its maximum retention limits as shown in Exhibit
A, it will provide the Reinsurer with written notice of the intended changes
thirty (30) days in advance of their effective date.
A change to the Ceding Company's maximum retention limits will not affect the
reinsured policies in force except as specifically provided elsewhere in this
Agreement. Furthermore, unless agreed between the parties, an increase in the
Ceding Company's retention schedule will not effect an increase in the total
risk amount that it may automatically cede to the Reinsurer.
The Ceding Company's quota share percentage retained as shown in Exhibit A will
remain unchanged for new and inforce business unless otherwise negotiated
between the parties.
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ARTICLE 10
Recapture
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NO RECAPTURE RIGHT
Unless otherwise agreed in writing, policies reinsured hereunder will not be
eligible for recapture, whether due to an increase in the Ceding Company's
retention or otherwise.
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ARTICLE 11
General Provisions
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CURRENCY 11.1
All payments and reporting by both parties under this Agreement will be made in
United States dollars.
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PREMIUM TAX 11.2
The Reinsurer will reimburse the Ceding Company for premium taxes pursuant to
Exhibit C.
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DIVIDENDS 11.3
The Reinsurer will not reimburse the Ceding Company for dividends to
policyholders.
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MINIMUM CESSION 11.4
The Ceding Company will not cede a policy to the Reinsurer unless the amount to
be reinsured at issue exceeds the Initial Minimum Cession amount shown in
Exhibit B.
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INSPECTION OF RECORDS 11.5
The Reinsurer, or its duly appointed representatives, will have access to all
records, whether written or electronic, of the Ceding Company concerning the
business reinsured hereunder for the purpose of inspecting, auditing and
photocopying those records. Such access will be provided at the office of the
Ceding Company (or as to electronic records, at the Reinsurer's request,
electronically) and will be during reasonable business hours. Assuming the
Reinsurer has continued to perform the undisputed portion of its obligations
under this Agreement, the Ceding Company may not withhold access to information
and records on the grounds that the Reinsurer is in breach. The Reinsurer's
right of access as specified above will survive until all of the Reinsurer's
obligations under this Agreement have terminated or been fully discharged.
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COMPLIANCE 11.6
The Ceding Company will perform underwriting, pricing, claims and administrative
services with respect to the policies reinsured hereunder (i) except as
otherwise provided in this Agreement, at its own expense and without any rights
to reimbursement from the Reinsurer; (ii) with levels of skill, diligence and
expertise relative to the risks being underwritten commensurate with generally
accepted best practices with respect thereto; and (iii) in conformance with
applicable law and regulation and the requirements of the subject policies.
This Agreement applies only to the issuance of insurance by the Ceding Company
in jurisdictions in which it is properly licensed.
The Ceding Company represents that, to the best of its knowledge, it is in
compliance with all state and federal laws applicable to the business reinsured
under this Agreement, including, without limitation, the requirements of the USA
Partiot Act and the United States Department of Treasury's officer of Foreign
Asset Control ("OFAC") and that the policies reinsured hereunder have been
issued and delivered and will be performed
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by the Ceding Company in accordance with applicable law and regulation
(including laws and regulations pertaining to required insurable interests). In
no event shall the Reinsurer be liable for any reinsurance or reinsurance claim
with respect to any underlying policy or coverage unless the issuance of such
underlying policy or coverage by the Ceding Company satisfies all applicable
OFAC regulatory requirements.
It is the Ceding Company's responsibility to ensure that its practice and
applicable forms are in compliance with current Medical Information Bureau (MIB)
guidelines.
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CERTAIN REPRESENTATIONS 11.7
The Ceding Company has disclosed to the Reinsurer all information known to the
Ceding Company which is material to the risks reinsured hereunder and provided
documents and materials for use in connection with its assessment of the risks
covered hereunder (together, the "Risk Evaluation Materials"). The Ceding
Company warrants that:
(i) all factual information contained in the Risk Evaluation Materials was
to the best of the Ceding Company's knowledge, materially true,
complete and accurate as at the time of disclosure and not materially
misleading (whether by omission or otherwise); and
(ii) to the best of the Ceding Company's knowledge, there has been no
material change in the Risk Evaluation Materials between the
respective "as of" dates of the Risk Evaluation Materials and the
final execution date of this Agreement.
The Ceding Company will provide to the Reinsurer all further information and
data of which it is aware that is material to the risks assumed by the Reinsurer
under this Agreement.
To the Ceding Company's best knowledge and other than as specifically set forth
in Exhibit B, premiums due under the terms of the policies reinsured hereunder
have not been financed or provided for under the terms of any (a) charitable
giving or life insurance securitization program, whether or not involving a
charitable institution as a direct or indirect beneficiary, (b) corporate, bank
or similar entity-owned life insurance program, or (c) other undertaking
involving in substance premium financing in which the proceeds of death benefits
with respect to the policies are reasonably expected to be required directly or
indirectly in order to repay the amount of the underlying financing, whether as
made available by or with the consent of the Ceding Company, any affiliate
thereof, or any agent or representative of the Ceding Company or any such
affiliate or any third party.
The Ceding Company makes no representations and warranties as to the future
experience or profitability arising from the policies reinsured hereunder. The
representations and warranties set forth in this Section 12.6 will not terminate
or expire until all liabilities and obligations with respect to policies
reinsured hereunder have been discharged or terminated in full.
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BUSINESS CONTINUITY 11.8
This Agreement has been entered into on the basis that the Ceding Company will
adhere to the marketing and distribution, policyholder service and
administration and claims management policies and procedures as described to the
Reinsurer and referenced in the Business Guidelines. The parties acknowledge
that changes to, or the Ceding Company's failure to comply with, the Business
Guidelines could materially affect the Reinsurer's
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experience as to the policies reinsured hereunder and Reinsurer's reasonable
expectations in entering into this Agreement.
The Ceding Company will make prompt and full disclosure to the Reinsurer of any
material change in the Business Guidelines applicable to the policies reinsured
hereunder and the Reinsurer shall have the right to approve any change in the
Business Guidelines (solely as applied to the policies reinsured hereunder) as
may be reasonably expected to materially affect the mortality or persistency
attributes of the business ceded hereunder. Depending on the significance of
such change, the Reinsurer may require that appropriate adjustments be made to
the terms and conditions of the reinsurance provided hereunder, including,
without limitation, the price or scope of risks covered hereunder.
--------------------------------------------------------------------------------
UNDERWRITING CONTINUITY 11.9
The Ceding Company affirms that true and complete copies of the retention
schedule, underwriting guidelines, issue rules, premium rates and policy forms
applicable to the policies reinsured hereunder and in use as of the effective
date have been supplied to the Reinsurer (the "Policy Materials"). The Ceding
Company will promptly notify the Reinsurer of any proposed material changes in
the Policy Materials and this Agreement will not extend to policies or coverages
issued pursuant to such changes unless the Reinsurer has consented in writing to
accept policies subject to such changes.
--------------------------------------------------------------------------------
INTEREST RATE 11.10
If, under the terms of this Agreement, interest is accrued on amounts due either
party, such interest will be calculated at a rate equal to 1% per month
determined the date the payment becomes due, except as specified elsewhere in
this Agreement.
--------------------------------------------------------------------------------
UTMOST GOOD FAITH 11.11
All matters with respect to this Agreement require the exercise of the utmost
good faith of each of the parties.
--------------------------------------------------------------------------------
ASSIGNMENT AND TRANSFER 11.12
Neither this Agreement nor any new or inforce reinsurance covered under this
Agreement, may be sold, assigned or transferred in whole or in part by the
Ceding Company or the Reinsurer without the other party's written consent.
Notwithstanding the foregoing, the Reinsurer shall not be prohibited from
further transfer of risks accepted hereunder on a retrocession or other basis,
provided that any transfer shall not relieve the Reinsurer of its obligations
under the Agreement.
--------------------------------------------------------------------------------
NO WAIVER 11.13
No waiver by either party of any violation or default by the other party in the
performance of any promise, term, or condition of this Agreement will be
construed to be a waiver of any other or subsequent default in performance of
the same or any other promise, term or condition of this Agreement.
--------------------------------------------------------------------------------
SURVIVAL 11.14
All provisions of this Agreement will survive its termination to the extent
necessary to carry out the purpose of this Agreement or to ascertain and
23
enforce the parties' rights and obligations hereunder existing at the time of
termination.
--------------------------------------------------------------------------------
GOVERNING LAW 11.15
This Agreement will be governed in accordance with the internal laws of the
State of Kansas.
--------------------------------------------------------------------------------
ENTIRE AGREEMENT 11.16
This Agreement constitutes the entire agreement between the parties with respect
to the business reinsured hereunder. There are no understandings between the
parties other than as expressed in this Agreement. Any change or modification to
this Agreement will be null and void unless made by amendment to this Agreement
and signed by both parties.
--------------------------------------------------------------------------------
SEVERABILITY 11.17
If any provision of this Agreement is determined to be invalid or unenforceable,
such determination will not impair or affect the validity or the enforceability
of the remaining provisions of this Agreement.
24
ARTICLE 12
DAC Tax
--------------------------------------------------------------------------------
DAC TAX
The parties to this Agreement agree to the following provisions pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulations effective December 29, 1992,
under Section 848 of the Internal Revenue Code of 1986, as amended:
a. The term `party' refers to either the Ceding Company or the Reinsurer, as
appropriate.
b. The terms used in this Article are defined by reference to Regulation
Section 1.848-2, effective December 29, 1992.
c. 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 Section 848(c)(1).
d. Both parties agree to exchange information pertaining to the amount of net
consideration under this Agreement each year to ensure consistency, or as
otherwise required by the Internal Revenue Service.
e. The Ceding Company will submit a schedule to the Reinsurer by April 1 of
each year with its calculation of the net consideration for the preceding
calendar year in the form attached in Exhibit F. 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. The
Reinsurer may contest such calculation by providing an alternative
calculation to the Ceding Company in writing within 45 days of the
Reinsurer's receipt of the Ceding Company's calculation. If the Reinsurer
does not so notify the Ceding Company within the required timeframe, the
Reinsurer will report the net consideration as determined by the Ceding
Company in the Reinsurer's tax return for the previous calendar year.
f. 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 within thirty (30) days of the date the Reinsurer
submits its alternative calculation. If the Ceding Company and the
Reinsurer reach an agreement on an amount of net consideration, each party
will report the agreed upon amount in its tax return for the previous
calendar year.
g. Both the Ceding Company and the Reinsurer represent and warrant that they
are subject to United States taxation under either Subchapter L or Subpart
F of Part III of Subchapter N of the Internal Revenue Code of 1986, as
amended.
25
ARTICLE 13
Offset
--------------------------------------------------------------------------------
OFFSET
The Ceding Company and the Reinsurer will have the right to offset or recoup any
balances, whether on account of premiums, allowances, credits, claims or
otherwise due from one party to the other under this Agreement or under any
other agreement between the Ceding Company and the Reinsurer.
The right of offset will not be affected or diminished because of the insolvency
of either party. The rights provided under this Article 13 are in addition to
any rights of offset and recoupment that may exist at common law.
The parties' offset and recoupment rights are valid and may be enforced
notwithstanding any other provision of this Agreement including, without
limitation, the provisions of Article 10. The commencement of any action to
challenge the enforceability of this Article 13 will constitute a breach of the
terms of this Agreement for which the non-breaching party may, upon written
notice to the breaching party and in addition to pursuing any other available
remedies, immediately terminate this Agreement with respect to new business.
26
ARTICLE 14
Insolvency
--------------------------------------------------------------------------------
DEFINITION 14.1
A party to this Agreement will be deemed insolvent when it:
a. applies for or consents to the appointment of a receiver, rehabilitator,
conservator, liquidator or statutory successor of its properties or assets;
or
b. is adjudicated as bankrupt or insolvent; or
c. files or consents to the filing of a petition in bankruptcy, seeks
reorganization to avoid insolvency or makes formal application for any
bankruptcy, dissolution, liquidation or similar law or statute; or
d. becomes the subject of an order to rehabilitate or an order to liquidate as
defined by the insurance code of the jurisdiction of the party's domicile.
--------------------------------------------------------------------------------
INSOLVENCY OF THE CEDING COMPANY 14.2
In the event of the insolvency of the Ceding Company, all reinsurance payments
due under this Agreement will be payable directly to the liquidator,
rehabilitator, receiver, or statutory successor of the Ceding Company, without
diminution because of the insolvency, for those claims allowed against the
Ceding Company by any court of competent jurisdiction or by the liquidator,
rehabilitator, receiver or statutory successor having authority to allow such
claims.
In the event of insolvency of the Ceding Company, the liquidator, rehabilitator,
receiver, or statutory successor will give written notice to the Reinsurer of
all pending claims against the Ceding Company on any policies reinsured within a
reasonable time after such claim is filed in the insolvency proceeding. While a
claim is pending, the Reinsurer may investigate and interpose, at its own
expense, in the proceeding where the claim is adjudicated, any defense or
defenses that it may deem available to the Ceding Company or its liquidator,
rehabilitator, 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 that 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 elects to interpose a defense or defenses to any such claim, the
expense will be apportioned in accordance with the terms of this Agreement as
though such expense had been incurred by the Ceding Company.
The Reinsurer will be liable only for the amounts reinsured and will not be or
become liable for any amounts or reserves to be held by the Ceding Company on
policies reinsured under this Agreement.
27
--------------------------------------------------------------------------------
INSOLVENCY OF THE REINSURER 14.3
In the event of the Reinsurer's insolvency, the Ceding Company may cancel the
Agreement for future new business and will notify the Reinsurer in writing of
its intent. The parties agree to waive the notification period for this
cancellation, and the effective date will be no earlier than the effective date
of the Reinsurer's insolvency.
In addition, in the event of the insolvency of the Reinsurer, the Ceding Company
may provide the Reinsurer or its authorized representative with written notice
of its intent to recapture all reinsurance inforce under this Agreement. The
effective date of a recapture due to insolvency will be at the election of the
Ceding Company but may not be earlier than the date on which the Reinsurer's
insolvency is established by the authority responsible for such determination.
Any recapture fee will be mutually agreed upon by the Ceding Company and the
Reinsurer or its authorized representative.
28
ARTICLE 15
Errors and Omissions
--------------------------------------------------------------------------------
ERRORS AND OMISSIONS
This Article 15 will apply only to oversights, misunderstandings or clerical
errors relating to the administration of reinsurance covered by this Agreement
and not to the placement or administration of the insurance provided by the
Ceding Company to its insureds. Examples of such administrative errors or
oversights may include miscalculation of a net amount at risk or late reporting
of a policy or termination (other than as specifically addressed below).
Any unintentional or accidental failure to comply with the administrative terms
of this Agreement which can be shown to be the result of an oversight,
misunderstanding or clerical error by either the Ceding Company or the Reinsurer
will not be deemed to be a breach of this Agreement but in no event shall the
liability for the Reinsurer under this Agreement be extended to cover any
excluded risks or exceed the limits specified herein.
For greater certainty, the circumstances to which this Section 16.1 shall not
apply shall include, but not be limited to:
a. any failure to arrange for the required facultative cession under this
Agreement due to the Ceding Company's practice of conducting a limited
search of its records for other prior in force insurance or reinsurance on
the same individual insured;
b. any errors, omissions, oversights as a result of non-negotiated waivers of
regular requirements by either the Ceding Company, its agents or
representatives in the approval, issuance and administration of the
insurance; and
c. any error or oversight discovered more than seven (7) years following the
termination or expiry of the last cession under this Agreement.
The Reinsurer will not be responsible for negligent or deliberate acts of the
Ceding Company or for repetitive errors in administration thereby.
Upon discovery, the error will be promptly corrected so that both parties are
restored to the position they would have occupied had the oversight,
misunderstanding or clerical error not occurred, including interest. Should it
not be possible to restore both parties to this position, the party responsible
for the oversight, misunderstanding or clerical error will be responsible for
any resulting liabilities and expenses.
The responsible party will perform a prudent review of its records to identify
other errors and omissions of the same or similar category. Failing prompt
correction or curative response, the Reinsurer reserves the right to limit its
liability to the policies reinsured hereunder as have been properly and
correctly reported.
LATE REPORTED POLICIES: The Reinsurer will not automatically accept any Late
Reported Policies. A "Late Reported Policy" is any policy first reported to the
Reinsurer that has been issued for more than three years.
LATE REPORTED TERMINATIONS: If a policy is terminated but is a Late Reported
Termination, the Reinsurer will only refund the last 3 years' premium. Late
Reported Terminations are terminations first reported to the Reinsurer more than
three years from the termination date.
29
ARTICLE 16
Dispute Resolution
--------------------------------------------------------------------------------
DISPUTES
In the event of a dispute arising out of or relating to this agreement, the
parties agree to the following process of dispute resolution. Within 15 days
after the Reinsurer or the Ceding Company has first given the other party
written notification of a specific dispute, each party will appoint a designated
company officer to attempt to resolve the dispute. The officers will meet at a
mutually agreeable location as soon as possible and as often as necessary, in
order to gather and furnish the other with all appropriate and relevant
information concerning the dispute. The officers will discuss the problem and
will negotiate in good faith without the necessity of any formal arbitration
proceedings. During the negotiation process, all reasonable requests made by one
officer to the other for information will be honored. The designated officers
will decide the specific format for such discussions.
If the officers cannot resolve the dispute within 30 days of their first
meeting, the dispute will be submitted to formal arbitration, unless the parties
agree in writing to extend the negotiation period for up to an additional 30
days.
30
ARTICLE 17
Arbitration
--------------------------------------------------------------------------------
ARBITRATION
If the Ceding Company and Reinsurer are unable to resolve any dispute arising in
any way from this Agreement, including but not limited to the formation or
breach thereof, pursuant to Article 16, the matter will be referred to
arbitration in accordance with the provisions of this Article 17.
Arbitration shall be initiated by the delivery, by certified mail, return
receipt requested, of a written demand for arbitration by one party to the other
(the "Demand"). The Demand shall set forth the nature of the dispute, the claims
asserted and the relief sought. The Respondent shall respond to the Demand
within 30 days of receiving the Demand by delivering a response (the
"Response"), by certified mail, return receipt requested, which shall set forth
the Respondent's statement of the nature of the dispute and its defenses to the
Petitioner's claims asserted, or the relief sought, in the Demand. The Response
also shall set forth the Respondent's claims against the Petitioner, if any, and
the relief sought by the Respondent.
The arbitration shall be held in New York, New York or other place as the
parties may mutually agree. Except to the extent that they conflict with any
term or provision of this Article 17, the arbitration shall be conducted in
accordance with the Procedures for the Resolution of U.S. Insurance and
Reinsurance Disputes of the Insurance and Reinsurance Dispute Resolutions Task
Force, dated September 1999 (the "Procedures"). Unless otherwise indicated, the
defined terms contained in this Article shall have the meaning ascribed thereto
in the Procedures.
The arbitration shall be conducted before a three person Panel comprised of (i)
current or former officers or directors of life insurance or reinsurance
companies, or (ii) professionals with no less than twenty years of experience in
or serving the life insurance or reinsurance industries.
Within 60 days of the initiation of the arbitration, the parties shall (i) each
designate one Disinterested and neutral arbitrator as its party arbitrator, and
provide the respective arbitrator's contact information (including address,
telephone, fax and email information), and (ii) exchange a copy of each
arbitrator's curriculum vitae and a completed questionnaire containing all of
the information sought in the βββββ US "Umpire Questionnaire" form. (If either
party refuses or neglects to appoint an arbitrator within the 60-day period, the
other party may appoint the second arbitrator.) As soon as practicable, but no
less than 30 days following their appointment, the two party arbitrators shall
appoint another Disinterested and neutral person who shall serve as the third
arbitrator and umpire. The party-appointed arbitrators may consult, in
confidence, with the party who appointed them concerning the appointment of the
umpire.
If the two party-appointed arbitrators fail to select an umpire within the time
specified above, each party shall exchange, within ten days, ten names of
persons chosen from the lists maintained by βββββ US for the purpose of umpire
selection. Within seven days of the exchange of such names, the party-appointed
arbitrators shall send the Umpire Questionnaire to the umpire candidates with a
joint request to the candidates to return copies of their completed Umpire
Questionnaires to each party arbitrator within 20 days. If any individual fails
to return a completed Umpire Questionnaire within the required time period or
refuses to serve on the Panel, then the selection
31
process shall continue with the remaining names. Within ten days of the return
of the Umpire Questionnaires, each party shall select three names from the other
party's list and notify the other party of such selection. Within ten days of
such notice, each party shall rank the six selected umpire candidates in order
of preference, with the number "one" being the most preferred, and notify the
other party of such ranking. The individual with the lowest total numerical
ranking shall act as umpire. If the ranking results in a tie, the parties shall
draw lots from among the candidates tied for the lowest numerical rank. The
individual chosen by lot shall act as umpire.
As soon as possible after the appointment of the Panel, the Panel will conduct
the organizational meeting in accordance with the Procedures, at which time it
will establish a pre-hearing schedule and dates for the hearing. In addition to
the items identified in the Procedures, the pre-hearing schedule shall set
deadlines for (i) any amendment to the Demand or the Response, for cause shown,
(ii) the exchange of exhibits that each party intends to introduce into evidence
at the hearing, which exchange shall be made no later than 15 days before the
hearing, and (iii) each party's submission to the Panel, prior to the hearing,
of its proposed form of order that identifies precisely the nature of the relief
sought from the Panel.
The Panel shall render its decision and award within 30 days of the completion
of the hearing. Insofar as not in conflict with the express terms of this
Agreement, it is the intention of the parties that customs and practices of the
life and reinsurance industries may be considered by the Panel in resolving any
ambiguities inherent in this Agreement or its operation. (In the absence of any
such ambiguity, the express terms of this Agreement will control).
The Panel will award the remedy sought by the party seeking relief to the extent
the remedy is provided for in this Agreement or otherwise reasonably compensates
the damaged party for the economic effect of any demonstrated breach. Such
remedies may include, but shall not be limited to, awards of monetary damages,
equitable revisions to the terms or provisions of the Agreement, including
adjustments to premiums or allowances paid or to be paid hereunder, or any
appropriate combination of the foregoing.
The Reinsurer has entered into this Agreement relying on the Ceding Company's
representations and warranties and its agreement to comply with the terms and
provisions of this Agreement, including representations, warranties and
covenants concerning the Risk Evaluation Materials and the Business Guidelines.
In any case in which the Panel concludes that the Reinsurer has reasonably
demonstrated a material breach of the provisions of Article 11.6 (Compliance),
Article 11.7 (Certain Representations), Article 11.8 (Business Continuity) or
Article 11.9 (Underwriting Continuity) of this Agreement, then, in lieu of any
other damages or remedy therefore, at its option, the Reinsurer may require that
the policies reinsured hereunder that are subject to such breach be excluded
from the scope of the reinsurance provided hereby. In any such case, the parties
will make payments designated by the Panel as constituting returns of net
premiums and claims amounts previously paid in connection with the subject
policies, provided, however, that the Panel shall determine and designate an
amount that Reinsurer will retain as reasonable compensation for capital and
administrative costs incurred by the Reinsurer in reinsuring the subject
policies reinsured hereunder prior to exclusion. The Panel shall not have the
authority to award punitive or exemplary damages.
Decisions of the Panel will be final and binding upon the parties and their
respective successors and assigns and each party hereby consents to the entry
32
of a judgment confirming or enforcing the award in the United States District
Court for the Southern District of New York and/or in any other court of
competent jurisdiction.
Within 20 days after the transmittal of an award, any party, upon notice to the
other parties, may request the Panel to correct any clerical, typographical, or
computational errors in the award. The other parties shall be given ten days to
respond to the request. The Panel shall dispose of the request within 20 days
its receipt of such request and any response thereto. The Panel shall not be
empowered to redetermine the merits of any claim already decided.
Unless the Panel decides otherwise, each party shall (i) bear its own fees and
expenses in connection with the arbitration, including the fees of its appointed
arbitrator and any outside counsel and witness fees, and (ii) share equally in
the fees for the umpire and the costs of the arbitration, such as hearing rooms,
court reporters, etc.
33
ARTICLE 18
Confidentiality
--------------------------------------------------------------------------------
GENERALLY 18.1
The Ceding Company and the Reinsurer agree that Customer and Proprietary
Information will be treated as confidential. Customer Information includes, but
is not limited to, medical, financial, and other personal information about
proposed, current, and former policyowners, insureds, applicants, and
beneficiaries of policies issued by the Ceding Company. Proprietary Information
includes, but is not limited to, business plans and trade secrets, mortality and
lapse studies, underwriting manuals and guidelines, applications and contract
forms, and the specific terms and conditions of this Agreement.
Customer and Proprietary Information will not include information that:
a. is or becomes available to the general public through no fault of the party
receiving the Customer or Proprietary Information (the "Recipient");
b. is independently developed by the Recipient;
c. is acquired by the Recipient from a third party not covered by a
confidentiality agreement; or
d. is disclosed under a court order, law or regulation.
The parties will not disclose such information to any other parties unless
agreed to in writing, except as necessary for retrocession purposes or other
secondary risk transfer, as requested by external auditors, as required by court
order, or as required or allowed by law or regulation.
The Ceding Company acknowledges that the Reinsurer can aggregate data with other
companies reinsured with the Reinsurer as long as the data cannot be identified
as belonging to the Ceding Company.
--------------------------------------------------------------------------------
NON-PUBLIC PERSONAL INFORMATION 18.2
The Reinsurer and its representatives and service providers will protect the
confidentiality of Non-Public Personal Information, as defined below, by:
a. holding all Non-Public Personal Information transmitted to them by or on
behalf of the Ceding Company in strict confidence;
b. maintaining appropriate measures that are designed to protect the security,
integrity and confidentiality of Non-Public Personal Information;
c. using Non-Public Personal Information only in the ordinary course of its
business to carry out Reinsurer's obligations under this Agreement; and
d. disclosing Non-Public Personal Information to third parties only as
necessary to perform services under the Agreement, for purposes of
retrocession or further risk transfer or as may be required or permitted by
law.
"Non-Public Personal Information" is non-public personally identifiable medical,
financial, and other personal information about proposed, current and former
applicants, policy owners, contract holders, insureds, annuitants, claimants,
and beneficiaries of policies reinsured hereunder or contracts
34
issued by the Ceding Company, and their representatives. Non-Public Personal
Information does not include de-identified personal data. The Ceding Company
will obtain, if required by any law, appropriate consent to the collection, use
and disclosure of Non-Public Personal Information, from each insured to enable
the parties to fully exercise their rights and perform their obligations under
this Agreement.
35
ARTICLE 19
Duration of Agreement
--------------------------------------------------------------------------------
DURATION
This Agreement is indefinite as to its duration.
The Reinsurer may terminate this Agreement with respect to the reinsurance of
new business by giving 30 days written notice of termination to the Ceding
Company. The first day of the notice period is deemed to be the date the
document is postmarked.
The Ceding Company may terminate this Agreement with respect to the reinsurance
of new business by giving 365 days written notice of termination to the
Reinsurer. The first day of the notice period is deemed to be the date the
document is postmarked but shall not be prior to January 1, 2006.
During the notification period, the Ceding Company will continue to cede and the
Reinsurer will continue to accept policies covered under the terms of this
Agreement. Reinsurance coverage on all reinsured policies will remain in force
until the termination or expiry of the policies or until the contractual
termination of reinsurance under the terms of this Agreement, whichever occurs
first.
This Agreement will automatically terminate for new business without notice if
the net premium reinsured hereunder is less than the amount specified in Exhibit
B (Dormant Agreement Termination).
36
ARTICLE 20
Execution
--------------------------------------------------------------------------------
This Agreement is effective as of January 1, 2005, and applies to all eligible
policies with issue dates on or after such date (and to eligible policies
applied for on or after such date that were backdated for up to six (6) months
to save age). This Agreement has been made in duplicate and is hereby executed
by both parties.
FIRST LIFE AMERICA CORPORATION WILTON REASSURANCE COMPANY
By: /s/ ββββ βββ βββββββ By: /s/ βββββ βββββ
------------------------------ -------------------------------
Name: ββββ βββ βββββββ Name: βββββ βββββ
Title: President Title: Vice President
Date: March 31, 2006 Date: March 16, 2006
Location: Topeka, KS Location: Wilton, CT
Attest: Attest:
/s/ βββββ ββββββ /s/ ββββ ββββββββ
---------------------------------- -----------------------------------
Name: βββββ ββββββ Name: ββββ ββββββββ
Title: Accounting Clerk Title: Vice President
Date: March 31, 2006 Date: March 16, 2006
Location: Topeka, KS Location: ββββββ, ββ
ββ
EXHIBIT A
Retention Limits
It is understood that the amount retained by the Ceding Company includes its
retention under any in-force policies without the benefit of other reinsurance.
--------------------------------------------------------------------------------
A.1
Life Insurance - Maximum Limits of Retention
Issue Ages Company Retention
-------------------- -------------------------
50-85 $12,500
-------------------- -------------------------
The Ceding Company will retain fifty percent (50%) of each policy up to the
maximum dollar retention limits set forth above and cede fifty percent (50%) to
the Reinsurer. No further reinsurance of the Company Retention without the
Reinsurer's prior written consent.
38
EXHIBIT B
Plans Covered and Binding Limits
The business automatically reinsured under this Agreement is defined as follows.
--------------------------------------------------------------------------------
PLANS B.1
Subject to the other terms, conditions and limitations of this Agreement,
policies issued on plans with effective dates within the applicable period shown
below may qualify for automatic reinsurance under the terms of this Agreement:
Golden Eagle Simplified Issue Whole Life
--------------------------------------------------------------------------------
BASIS B.2
The Reinsurer's share will be fifty percent (50%) of the total face amount of
each policy on a first dollar quota share basis. This share amount will not
exceed the Reinsurer's share of the maximum Automatic Binding Limits specified
in Exhibit B.3.
--------------------------------------------------------------------------------
AUTOMATIC ISSUE LIMITS B.3
Issue Ages Maximum Policy Face Amount
---------------- ----------------------------
50-85 $25,000
---------------- ----------------------------
The maximum automatic issue amounts above include the Ceding Company's
retention.
--------------------------------------------------------------------------------
MAXIMUM ISSUE AGE B.4
85 Age Nearest Birthday
--------------------------------------------------------------------------------
RESIDENCY B.5
This agreement includes risks in the following territories: the United States,
its Territories and Canada.
--------------------------------------------------------------------------------
CONDITIONAL RECEIPT OR TEMPORARY INSURANCE AGREEMENT B.6
The amount of such coverage provided by the Reinsurer will be limited to its
share of the following amounts provided by the Ceding Company's Conditional
Receipt or Temporary Insurance Agreement but not to exceed the lesser of (i) the
Reinsurer's share of $1000 or (ii) the Reinsurer's share of the amount of life
insurance provided by the Conditional Receipt or Temporary Insurance Agreement.
--------------------------------------------------------------------------------
CESSION LIMITS B.7
(a) Minimum Initial Cession: $1,250 per life. See Section 12.3
(b) Dormant Agreement Termination Amount: first year reported premiums of less
than $50,000 for two consecutive calendar quarters. See Section 20.1
39
EXHIBIT C
Policy Premiums, Expenses and Rates
--------------------------------------------------------------------------------
LIFE C.1
Plans covered under this Agreement will be reinsured on a 50/50 quota share
basis.
--------------------------------------------------------------------------------
POLICY COMMISSIONS, FEES, EXPENSES AND TAXES C.2
Commissions: The Reinsurer shall pay its share of the actual commissions
paid by the Ceding Company up to a maximum reimbursement of
the following percentages applied to the Reinsurer's share
of the policy premium:
----------------- -------------- -------------- -------------- --------------
Issue Age Year 1 Years 2-3 Years 4-10 Years 11+
----------------- -------------- -------------- -------------- --------------
50 - 80 110% 8% 8% 2%
----------------- -------------- -------------- -------------- --------------
81 - 85 65% 8% 8% 2%
----------------- -------------- -------------- -------------- --------------
Gross commissions to be annualized during the first policy
year and will be charged back on death or lapse whether or
not the Ceding Company has been able to recover any such
commissions from agents. For deaths occurring during the
first 6 months, 50% of the commission paid by the Reinsurer
to the Ceding Company will be recoverable by the Reinsurer
with the recovery percentage grading evenly to 0% after 11
months. For a lapse during the first twelve months after
policy issuance, 50% of the commission will be recoverable.
The Reinsurer will not be responsible for any uncollectible
agent debit balances. Reinsurer consent required for any
affiliate distribution agreement.
The Reinsurer and the Ceding Company will work together to
reprice the business reinsured hereunder on mutually
agreeable terms with an expected effective date for the
repricing to be January 1, 2006. However, the parties are
under no obligation to agree on repricing terms. If the
parties are unable to agree on repricing terms, the
remaining terms and conditions of this Agreement will remain
in effect. Pending repricing, aggregate ceded premiums not
to exceed $750,000. Policies bound after the aggregate ceded
premium cap of $750,000 has been reached are not reinsured
hereunder.
Policy Fees: The Ceding Company will pay the Reinsurer its proportionate
share of the policy fee.
Expenses: The Reinsurer will only participate in the following
expenses and only for the following specified amounts:
Policy Issuance: $25.50 per policy (equal to Reinsurer's 50%
share of $51.00 per policy issued)
40
Per $1,000 Face Amount Issued: $0.45 (equal to Reinsurer's
50% share of $0.90 per 1,000 reinsured)
1st Year Premium: 14.1% (equal to Reinsurer's 50% share of
28.2% of 1st year premium ceded)
Policy Maintenance: $9.00 per policy (equal to Reinsurer's
50% of the expense assumption of $18.00 per policy inforce).
There will be no expense inflation adjustment.
--------------------------------------------------------------------------------
RECAPTURE C.4
The business reinsured hereunder is not eligible for recapture.
--------------------------------------------------------------------------------
RIDERS AND BENEFITS C.5
No riders are reinsured hereunder.
41
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POLICY PREMIUM RATES C.6
42
EXHIBIT D
Self-Administered Reporting
--------------------------------------------------------------------------------
REPORTING REQUIRED D.1
The Ceding Company will self-administer all reinsurance reporting.
Timely and accurate reporting of treaty-related information is a material
element of the Ceding Company's responsibilities under this Agreement.
Consistent and material non-compliance with reporting requirements, including
extended delays, shall constitute a material breach of this Agreement entitling
the Reinsurer to rescind the coverage provided hereby. First time reporting must
be received no later than 12 months after commencement of reinsurance for the
Reinsurer to be considered on the risk
The Ceding Company uses an Excel spreadsheet to administer its ceded
reinsurance. The Ceding Company will cooperate with the Reinsurer and its
representatives in developing efficient and reliable data interfaces for the
regular reporting of data under this Agreement and will apprise the Reinsurer
when it makes material changes to its processing of information hereunder.
The information and data to be supplied by the Ceding Company will be delivered
in the format specified in this Schedule F and otherwise as mutually agreed. The
Ceding Company agrees that it will deliver electronically to the Reinsurer in
formats to be mutually agreed each of the following reports in the frequency and
by the times specified below as well as such other information concerning the
business and policies reinsured as the Reinsurer shall request from time to
time. For electronic files, in the event of delays or significant changes in the
information provided, particularly in file layouts and in data vlaues, the
Reinsurer must be informed at least one month in advance of the change. The
expectation is that the structure of these files is stable from period to
period. Information must meet the quality standards set out by the Reinsurer in
terms of timeliness, accuracy and consistency.
The following specifies the reports, required frequency and detailed
specifications of seriatim policy data file elements:
Periodic Reports
1. New Business Monthly, 15 days after month end
2. First Year Monthly, 15 days after month end
(Other than New Business)
3. Renewal Year Monthly, 15 days after month end
4 Changes and Terminations Monthly, 15 days after month end
5. In Force Quarterly, 15 days after quarter end
(Listing of each in-force
policy)
6. Accounting Information Monthly, 15 days after month end (see attached
form F.2)
7. Statutory Reserve
Information Quarterly, 21 days after quarter end (see
attached form F.3)
8. Policy Exhibit Information Monthly, 15 days after month end (see attached
form F.4)
9. Reserve Certification Annually, October 31
(See attached Form F.3)
10. Tax Reserve Certification Annually, June 1
(See attached Form F.4)
11. DAC Tax Reporting
(See attached Form F.6) Annually, April 1
12. All Board of Director Materials At the same time that they are provided to
the Ceding Company's directors.
Specifications
1. New Business
This report will include new issues only, the first time the policy is reported
to the Reinsurer. Automatic and Facultative business will be identified
separately.
2. First Year - Other than New Business
This report will include policies previously reported on the new business detail
and still in their first duration, or policies involved in first year premium
adjustments.
3. Renewal Year
All policies with renewal dates within the Accounting Period will be listed.
4. Changes and Terminations
43
Policies affected by a change during the current reporting period will be
included in this report. Type of change or termination activity must be clearly
identified for each policy.
The Ceding Company will identify the following transactions either by separate
listing or unique transaction codes: Terminations, Reinstatements, Changes,
Conversions, and Replacements. For Conversions and Replacements, the Ceding
Company will report the original policy date, as well as the current policy
date.
5. In Force
This is a detailed report of each policy in force.
6. Accounting Information
Premiums and allowances will be summarized for Life coverages, Benefits, and
Riders by the following categories: First Year and Renewals.
7. Statutory Reserve Information
Statutory reserves will be summarized for Life coverages, Benefits and Riders.
The Ceding Company will specify the reserve basis used.
8. Policy Exhibit Information
This is a summary of transactions during the current period and on a
year-to-date basis, reporting the number of policies and reinsured amount.
9. Reserve Certification
The Ceding Company will provide a reserve summary for business reinsured under
this agreement and its X-factors to the Reinsurer on an annual basis, along with
a detailed description of its reserving assumptions and any changes in these
assumptions applicable to each calendar year. This annual report will also
include the Ceding Company's Actuarial Report in support of its X factor
Opinion.
10. Tax Reserve Certification
The Ceding Company will provide a tax reserve summary for business reinsured
under this agreement including reserve basis, table, interest rate and method.
Accrued DAC Tax reporting per F.6.
11. Seriatim Policy Data File Elements are listed on form F.5.
12. Concentrations
The Ceding Company will notify the Reinsurer when it is aware that a group of
individuals is written where the concentration of the group in a given zip code
and/or postal code is greater than $25 million as measured by the sum of the Net
Amount at Risk to be ceded to the Reinsurer.
13. Certain Other Reporting Commitments
See the specific reporting obligations set forth in Sections 5.1 and 5.2,
Article 7 (preamble), Article 8, Article 10, Sections 12.6 and 12.7, Article 13.
44
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FORM OF SUMMARY ACCOUNTING REPORT AND POLICY EXHIBIT INFORMATION D.2
Wilton Re
SELF ADMINISTERED REINSURANCE SUMMARY REPORTING FORM
Ceding Company Reinsurer
Treaty/Account # Reporting Period
Coin YRT Mod Co Other Interest Sensitive: Yes No
--- --- --- --- --- ---
Reinsurance Premium Mode: Monthly Quarterly Annual //
---- ---- ----
In Advance In Arrears
---- ----
Reinsurance Reporting Mode: Monthly Quarterly Annual
---- ---- ----
Contact Date Phone #
----------------------------------------------------------------------------------------------------
SECTION I - ACCOUNTING
--------------------------------------------------- ------------ -------------
* * Premiums * * * * Allowances * * * *Other * *
*
--------------------------------------------------- --------------------------
------------ ------------- ---------- -------------------------- -------------
First Year Renewal Year First Renewal Year Net
Year
------------ ------------- ---------- ------------- ------------ -------------
Life
------------ ------------- ---------- ------------- ------------ -------------
ADB
------------ ------------- ---------- ------------- ------------ -------------
Waiver of Premium
------------ ------------- ---------- ------------- ------------ -------------
TOTAL
----------- --------- ------------ ------------- ---------- ------------- ------------ -------------
----------------------------------------------------------------------------------------------------
SECTION II - RESERVE INFORMATION
----------------------------------------------------------------------------------------------------
Amount of Rein (000) Reserves Reinsured
----------- --------- Issue ------------- ---------- ------------- ------------ -------------
Life ADB Year Life ADB Waiver Subst'd Deficiency
----------- --------- ------------ ------------- ---------- ------------- ------------ -------------
----------- --------- ------------ ------------- ---------- ------------- ------------ -------------
----------- --------- ------------ ------------- ---------- ------------- ------------ -------------
----------- --------- ------------ ------------- ---------- ------------- ------------ -------------
----------------------------------------------------------------------------------------------------
SECTION III - POLICY EXHIBIT INFORMATION
Current Period Year to Date
------------- ---------- ------------ -------------
No. of Amt. of * No. of Amt. of *
Policies Rein Policies Rein (000)
(000)
------------- ---------- ------------ -------------
A. Inforce Beg. of Period A.
------------- ---------- ------------ -------------
1. New Business 1.
------------- ---------- ------------ -------------
2. Conversions/Replacements On 2.
------------- ---------- ------------ -------------
3. Reinstatements 3.
------------- ---------- ------------ -------------
4. Other Increases 4.
------------- ---------- ------------ -------------
5. Not Takens 5.
------------- ---------- ------------ -------------
a) Total Inc (1+2+3+4-5) a)
------------- ---------- ------------ -------------
6. Deaths 6.
------------- ---------- ------------ -------------
7. Conversions/Replacements Off 7.
------------- ---------- ------------ -------------
8. Lapses 8.
------------- ---------- ------------ -------------
9. Surrenders 9.
------------- ---------- ------------ -------------
10. Expiry 10.
------------- ---------- ------------ -------------
11. Recaptures 11.
------------- ---------- ------------ -------------
12. Other Decreases 12.
------------- ---------- ------------ -------------
b) Total Dec (6+7+8+9+10+11+12) b)
------------- ---------- ------------ -------------
B. Inforce End of Period B.
------------- ---------- ------------ -------------
45
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FORM OF STATUTORY RESERVE REPORT AND ANNUAL RESERVE CERTIFICATION D.3
Valuation Statutory Reserves for Business Ceded to Wilton Re
Company Name
Treaty Reference
Inforce and Reserves at: MM/DD/YYYY
Plan: Type: SM/NSM/AGGR/TOTAL
Inforce Reinsured Amount:
Inforce Number of Policies:
Valuation Reserve at: MM/DD/YYYY
Type
Reserve Amount Reserve Basis
(Table, interest
rate and method
Active Life Reserve
Unearned Premium Reserve
Disabled Life Reserve
Incurred But Not Reported (IBNR)
Due and Unpaid Claims (D&U)
In Course Of Settlement Claims (ICOS)
Other** (specify)
Total
** If credit for deficiency reserves is being taken, please specify under
"other"
As the valuation actuary of the above named company I certify that the
information above is correct as shown. *
Name:
Signature:
Actuarial Designation:
Date:
* Required only for Year-End Valuation Reserves
46
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FORM OF ANNUAL TAX RESERVE CERTIFICATION D.4
Tax Reserve Certification for Business Ceded to Wilton Re
Company Name
Treaty Reference
Inforce and Reserves at: MM/DD/YYYY
Plan: Type: SM/NSM/AGGR/TOTAL
Inforce Reinsured Amount:
Inforce Number of Policies:
Tax Reserve at: MM/DD/YYYY
Type
Reserve Amount Reserve Basis
(Table, interest
rate and method)
Active Life Reserve
Unearned Premium Reserve
Disabled Life Reserve
Incurred But Not Reported (IBNR)
Due and Unpaid Claims (D&U)
In Course Of Settlement Claims (ICOS)
Other** (specify)
Total
** If credit for deficiency reserves is being taken, please specify under
"other"
47
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PERIODIC SERIATIM POLICY FILE DATA ELEMENTS D.5
Data Data Description
ADB Premium* Amount of ADB premium
Benefit Type Defines the benefit type
Date of Birth Insured's date of birth
Direct Face Amount Amount of direct writer's policy face
Disability/Waiver Allowance* Amount of Waiver allowance
Disability/Waiver Premium* Amount of Waiver premium
Flat Extra Allowance* Amount of flat extra allowance
Flat Extra Period Duration in years of flat extra
Flat Extra Premium* Amount of flat extra premium
Insured's Full Name Last Name, First Name, Middle Name
Issue Age Age of insured at policy issue as
determined by treaty's age basis
method
Joint Issue Age Insurance Age for a joint case using
the Joint Equal Age basis method
Joint Last Survivor Age Basis Method used for calculating the
insurance age(s) for a JLS product
Joint Life Indicator Whether policy has joint life coverage
Net Amount At Risk Amount of current net risk (NAR)
Plan Code Code associated to plan name
Plan Name Client plan name
Policy Fee* Amount of policy fee
Policy Issue Date Month, day and year policy issued
Policy Number Unique policy identifier
Reinsured Face Amount Amount of reinsurance face
Reporting Date Client billing period
Residence State Primary state of residence of insured
Retained Amount Amount of policy face retained by
direct writer
Second Insured's Name (Joint) Last Name, First Name, Middle Name
Sex Insured's sex
Smoker Code Code identifying the smoker class of the
insured indicating the applicable rate
table utilized
Social Security Number Government issued identifier
Standard Allowance* Amount of standard allowance
Standard Premium* Amount of standard premium
Substandard Allowance* Amount of substandard allowance
Substandard Premium* Amount of substandard premium
Table Rating Percentage of standard mortality
assigned to a life by the underwriter
Transaction Code Code assigned by client to identify the
specific type of reinsurance transaction
Treaty Code Unique code assigned by client to
identify the contract or set of rates that
the coverage applies to
Underwriting Risk Classification Underwriter's determination of the
classification of an insured (i.e. Standard,,
Preferred, etc.)
Zip Code Postal code of insured
48
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ANNUAL DAC TAX CERTIFICATION D.6
DAC TAX NET CONSIDERATION*
FOR THE YEAR ENDING [ ]
Type of Business:[ ]Individual Life & Health:[ ]Annuities:[ ] Group Credit/Life
Traety Reference Number:
Treaty Effective Date:[Enter Date]
Reinsurer:[Enter Reinsurer]
--------------------------------------------------------------------------------
DAC TAX CALCULATION
Reinsurance Premiums: [Enter Premium]
Less Deductions from Reinsurance Premiums
Commission and Expense Allowances [Enter]
Death Claims [Enter]
Claim Interest [Enter]
Surrender Benefits [Enter]
Dividends [Enter]
Experience Refunds [Enter]
Premium Taxes [Enter]
Other # [Enter]
Total Deductions: [Enter Deductions]
Net Consideration: [Enter]
* To be reported in conformity with Section 848 of the Internal Revenue Code
# Includes items such as modco adjustments, claim investigation/legal expenses,
waiver of premium claims, etc.
Ceding Company:[Enter Ceding Company]
Signed by:[Enter]
Title:[Enter]
Signature:
-----------------------------------------
49
