Exhibit (g)(i)
FACULTATIVE BULK Y.R.T. NON-REFUND AGREEMENT
CEDING COMPANY: SECURITY EQUITY LIFE INSURANCE COMPANY
Armonk, New York
Referred to as the Ceding Company in this agreement.
REINSURER: ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Minneapolis, MN
Referred to as Allianz Life in this agreement.
ACCEPTED COVERAGES: Individual Life Insurance
EFFECTIVE DATE: January 1, 1996
In Witness Whereof the Ceding Company and Allianz Life have signed, duly
attested and dated hereunder by their respective authorized officers:
SECURITY EQUITY LIFE ALLIANZ LIFE INSURANCE COMPANY
INSURANCE COMPANY OF NORTH AMERICA
/s/ Xxxx Xxxxxxx /s/ Xxxxxx X. Xxxxxx
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Signature Signature
V.P. and Treasurer Senior V.P. and CFO
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Title Title
/s/ Xxxx Gat /s/
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Attested Attested
2nd V.P. - Sales Secy
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Title Title
7 Feb. 96
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Date Date
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TABLE OF CONTENTS
ARTICLE I - BASIS OF REINSURANCE 3
ARTICLE II - TYPE OF REINSURANCE 3
ARTICLE III - FACULTATIVE SUBMISSIONS 3
ARTICLE IV - COMMENCEMENT AND TERMINATION OF LIABILITY 4
ARTICLE V - REINSURANCE PREMIUM RATES 5
ARTICLE VI - AMOUNT AT RISK 6
ARTICLE VII - PAYMENT OF REINSURANCE PREMIUMS 8
ARTICLE VIII - PREMIUM TAXES 9
ARTICLE IX - CLAIMS 9
ARTICLE X - EXTRA-CONTRACTUAL DAMAGES 12
ARTICLE XI - POLICY CHANGES 13
ARTICLE XII - RECAPTURE AND RETENTION CHANGES 14
ARTICLE XIII - INSPECTION OF RECORDS 15
ARTICLE XIV - ERRORS 16
ARTICLE XV - ARBITRATION 16
ARTICLE XVI - INSOLVENCY 19
ARTICLE XVII - ENTIRE CONTRACT PROVISION 20
ARTICLE XVIII - NON-PARTICIPATING AND NON-REFUND 20
ARTICLE XIX - HEADINGS 21
ARTICLE XX - PARTIES TO AGREEMENTS 21
ARTICLE XXI - DURATION OF AGREEMENT 21
ARTICLE XXII - DAC TAX 21
SCHEDULE A - RETENTION LIMITS 23
SCHEDULE B - REINSURANCE CESSION FORM 24
SCHEDULE C - ACCEPTED PLANS OF INSURANCE AND RATES 25
SCHEDULE D - REINSURANCE RATES FOR CONVERSIONS 27
SCHEDULE E - POLICY LIMITS 29
SCHEDULE F - SAMPLE BULK REPORTING FORMS 29
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ARTICLE I - BASIS OF REINSURANCE
Commencing on the Effective Date, the Ceding Company may submit any of its
individual life insurance risks under the Accepted Plans of Insurance as listed
in Schedule C on a facultative basis subject to the provisions of this
agreement. These provisions may be changed or modified by written agreement
between the parties named in Article XX.
ARTICLE II - TYPE OF REINSURANCE
The individual life reinsurance covered by this agreement shall be upon the
yearly renewable term plan for the net amount at risk or on another basis as set
forth in Article VI.
ARTICLE III - FACULTATIVE SUBMISSIONS
In applying to Allianz Life for facultative individual life reinsurance, the
Ceding Company shall use a form in substantial accord with Schedule B of this
agreement. The Ceding Company shall submit complete copies of the original
application, medical examiners' reports, inspection reports, attending
physician's statements plus any other papers or information that may have a
bearing on the insurability of the risk. Upon receipt of such application,
Allianz Life shall examine the papers and promptly notify the Ceding Company of
its decision. Allianz Life shall have the option of accepting, rating, or
rejecting each risk.
The Ceding Company shall also furnish Allianz Life with specimen copies if its
individual life insurance applications, policy forms, rider forms, conditional
receipt, temporary receipt, reinstatement rules, placement requirements, and any
tables of rates and values which may be required for the proper administration
of the insurance reinsured under this agreement. The Ceding Company shall keep
Allianz Life informed with respect to any modifications of such rules,
requirements, or forms under which reinsurance may be desired. The Ceding
Company must follow its written procedures for the delivery of its policies,
including evidence of good health and collection of premiums and be in
compliance with
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relevant laws of all applicable jurisdictions. Exceptions to following the
Ceding Company's written procedures can be granted only by written approval from
Allianz Life.
ARTICLE IV - COMMENCEMENT AND TERMINATION OF LIABILITY
The liability of Allianz Life on individual life facultative reinsurance offers
that are accepted and acknowledged by the Ceding Company shall commence and
terminate simultaneously with that of the Ceding Company notwithstanding the
other provisions of this agreement. The reinsurance shall be subject to the same
terms and conditions as the policy issued by the Ceding Company on the life of
the insured - excluding the provisions governing dividends, cash values, policy
loans, and settlement options. There shall be no reinsurance for interim
insurance nor insurance placed in force under the terms of a conditional receipt
unless and until the Ceding Company has accepted Allianz Life's offer and placed
its policy in force during the lifetime of the insured in accordance with its
written placement procedures. Exceptions to the following written placement
procedures may be granted only by written approval from Allianz Life.
In order for Allianz Life to be liable on any Conditional Receipt or Temporary
insurance Receipt in accordance with the preceding qualifications, the Ceding
Company must have submitted to Allianz Life a copy of the application and
receipt it intends to use with regard to risks reinsured hereunder, and must
have received written acknowledgment from Allianz Life that it intends to be
bound on such receipt as herein stated. The Ceding Company shall give Allianz
Life timely notice of proposed changes to its Conditional Receipt or Temporary
Insurance Receipt or in its practices in issuing Conditional Receipts or
Temporary Insurance Receipts. Allianz Life shall have no liability under such
revised Conditional Receipt, Temporary Insurance Receipt or practices unless the
Ceding Company has received written acknowledgment from Allianz Life that it
intends to be bound by such revision.
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ACCEPTANCE: Acceptance of Allianz Life's offer of reinsurance by the Ceding
Company shall be in accordance with the terns contained in that offer and the
provisions of this agreement. If Allianz Life's offer is not accepted, such
offer shall terminate on the earlier of: (1) the date the Ceding Company
withdraws its application; or (2) the termination date in Allianz Life's offer.
The date of termination will be extended by written request from the Ceding
Company, unless Allianz Life has denied in writing such request.
BULK REPORTS: When a policy on which reinsurance has been accepted by Allianz
Life is paid for, the Ceding Company shall within 60 days of such payment
include the cession on the bulk reporting form. Cessions shall only be accepted
up to twenty-four months following the effective date of the Ceding Company's
Policy.
CONVERSIONS AND INTERNAL REPLACEMENTS: For conversions and internal replacements
issued as new policies, the liability of Allianz Life under the new policy shall
begin immediately subsequent to the termination of Allianz Life's liability
under the Original Policy.
AMOUNT: The amount of reinsurance under this agreement with respect to any
policy reinsured shall be maintained in force without reduction, unless
reinsurance is terminated or reduced as otherwise provided in this agreement.
ARTICLE V - REINSURANCE PREMIUM RATES
STANDARD AND SUBSTANDARD PREMIUMS: Allianz Life anticipates that the yearly
renewable term rates attached in Schedule C will be continued indefinitely for
all individual life reinsurance cessions to which such rates shall apply.
However, if any one or more of such premium rates for any policy year or years
after the first shall be less than the net premium rate or rates based on the
1980 CSO Table at 3% interest for the applicable mortality rating, only the
latter rate or rates shall be guaranteed by Allianz Life.
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FLAT EXTRA PREMIUMS: Refer to Schedule C, attached.
TERM RENEWALS AND TERM CONVERSION PREMIUMS: Refer to Schedule C and Schedule D,
attached.
INTERIM BILLING OF PREMIUMS FOR ADDITIONAL PERIODS: If the original policy is
issued with insurance for an additional period, the reinsurance premium for such
an additional period shall be computed at the second policy year premium rate
and the premium for the first full policy year shall be computed at the first
year rate. A policy fee shall not be payable for additional term periods unless
the policy terminates in the first policy year.
ARTICLE VI - AMOUNT AT RISK
The individual life reinsurance of Allianz Life shall be upon the yearly
renewable term plan for the net amount at risk for which the Ceding Company has
paid premiums.
If the Ceding Company retains a portion of the risk, such retention shall be
maintained unchanged except as allowed in Article XII.
LEVEL TERM PLANS: If the individual life insurance reinsured is issued as a
level term plan, Allianz Life's net amount at risk shall equal the face amount
of life insurance reinsured.
REDUCING TERM PLANS: If the individual life insurance reinsured is issued as a
reducing term plan, Allianz Life's net amount at risk for the first policy year
shall equal the face amount of the life insurance reinsured as of the beginning
of the first policy year. After the first policy year, Allianz Life's net amount
at risk for each of the policy years two through ten, inclusive, shall be
reduced by one-ninth of the difference between (a) the face amount of the life
insurance reinsured as of the beginning of the first
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policy year, and (b) the face amount of the life insurance reinsured as of the
beginning of the tenth policy year.
Allianz Life's net amount at risk for each of the ten policy years, during any
ten policy year period after the first ten policy years, shall be the prior
policy year's net amount at risk, less an amount equal to one-tenth of the
difference between (a) the face amount of the life insurance reinsured as of the
beginning of the policy year immediately preceding the period involved, and (b)
the face amount of the life insurance reinsured as of the beginning of the last
policy year of the period involved.
UNIVERSAL/VARIABLE LIFE PLANS: Allianz Life's net amount at risk for
Universal/Variable Life plans shall be proportionate to the Ceding Company's
actual net amount at risk or a mutually acceptable approximation agreed to in
writing by all parties.
A PLAN OTHER THAN A LEVEL TERM PLAN, REDUCING TERM PLAN, OR UNIVERSAL/VARIABLE
LIFE PLAN: Allianz Life's net amount at risk for the first policy year shall
equal the face amount of the individual life insurance reinsured. After the
first policy year, Allianz Life's net amount at risk for each of the policy
years two through ten, inclusive, shall be reduced by an amount equal to
one-ninth of the cash value of the life insurance reinsured as of the end of the
tenth policy year.
Allianz Life's net amount at risk for each of the ten policy years, during any
ten policy year period after the first ten policy years, shall be the prior
policy year's net amount at risk less an amount equal to one-tenth of the
difference between (a) the cash value of the life insurance reinsured as of the
end of the policy year immediately preceding the period involved, and (b) the
cash value of the life insurance reinsured as of the end of the last policy year
of the period involved.
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ARTICLE VII - PAYMENT OF REINSURANCE PREMIUMS
Reinsurance premiums are to be paid annually at Allianz Life's home office
without regard to the frequency of payment stipulated in the Policy issued by
the Ceding Company.
At the end of each quarter, the Ceding Company shall send Allianz Life a
statement of all reinsurance premiums falling due during the quarter and
premiums for any new reinsurance. The statement shall include data substantially
in accord with that which is set forth in Schedule F.
If a statement shows that a net reinsurance premium balance is payable to
Allianz Life, the Ceding Company shall include with the statement its payment
for the amount of the net balance.
If a statement shows a net balance is payable to the Ceding Company, Allianz
Life shall pay to the Ceding Company the amount of the net balance within thirty
(30) days after the day on which the Ceding Company submitted the quarterly
statement to Allianz Life.
PAYMENTS: The payment of reinsurance premiums in accordance with the provisions
of this section shall be a condition precedent to the liability of Allianz Life
under reinsurance covered by this Agreement. The initial premiums shall be due
as of the date when such reinsurance becomes effective and shall be paid to
Allianz Life not later than sixty (60) days after such due date. Renewal
premiums are due on the respective annual anniversary dates of the policies
reinsured and shall be paid to Allianz Life not later than thirty (30) days
after the first day of the quarter following that in which such premiums fall
due.
Allianz Life shall have the right to terminate the reinsurance for risks for
which reinsurance premiums are in default by giving the Ceding Company thirty
(30) days written notice. The Ceding Company will be liable for the payment of
reinsurance premiums to the effective date of termination. After the effective
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date of termination, an interest charge of 1% per month will be made on the then
accumulated unpaid reinsurance premium.
TERMINATIONS: The Ceding Company will give Allianz Life timely notice of all
policy terminations and changes that affect the reinsurance. Unearned
reinsurance premiums will be refunded except that policy fees are not refundable
on any mid-policy year termination.
ARTICLE VIII - PREMIUM TAXES
Allianz Life shall not reimburse the Ceding Company for any state premium taxes
the latter may be required to pay.
ARTICLE IX - CLAIMS
PROOFS: Copies of proofs or other written matters relating to any claim
reimbursable under this agreement shall be furnished to Allianz Life. With
respect to the claim administration, negotiation, payment, denial, or settlement
of any claim or legal proceeding, the Ceding Company shall act with good faith
and in accord with its standard practices applicable to all claims, whether
reinsured or not.
RECEIPT OF PREMIUM: Receipt by Allianz Life of the initial reinsurance premium
and of each subsequent reinsurance premium, in accordance with the provisions of
Article VII of this agreement, shall be a condition precedent to Allianz Life's
indemnification of the reinsurance to the Ceding Company.
INCONTESTABLE AND CONTESTABLE POLICIES: If a claim is made to the Ceding Company
on a policy which is incontestable, Allianz Life shall accept the decision of
the Ceding Company in payment or settlement of that claim or legal proceeding
and shall indemnify the Ceding Company for Allianz Life's percentage
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of reinsurance liability upon receiving proof of loss and notice the Ceding
Company has paid the claimant. If a claim is made to the Ceding Company on a
policy which is contestable and if the Ceding Company retained more than 50
percent of the insurance, Allianz Life shall abide the issue as it shall be
settled by the Ceding Company for Allianz Life's percentage of reinsurance
liability upon receipt of proof of loss and of payment by Ceding Company to the
claimant. If the Ceding Company retained 50 percent or less of the insurance,
all papers in connection with such claim shall be submitted to Allianz Life for
its advice and counsel on the claim before conceding any liability, making any
settlement, or denying benefits.
CONTEST: The Ceding Company shall promptly notify Allianz Life of its intention
to contest insurance reinsured under this agreement or to assert defenses to a
claim for such insurance. If the Ceding Company's contest of such insurance
results in the reduction of its liability, Allianz Life shall share in such a
reduction in the same proportion that the amount of reinsurance on the life
under this agreement shall bear to the sum of the retained net amount at risk of
the Ceding Company and the net amount at risk of all reinsures, including
Allianz Life, on the date of the death of the insured. If Allianz Life should
decline to participate in the contest or assertion of defenses, Allianz Life
shall then discharge all of its liability by payment of the full amount of its
reinsurance on the policy to the Ceding Company.
INTERPLEADER AND WAIVER OF PREMIUM: Payment of a claim should include amounts
paid by the Ceding Company into a court of appropriate jurisdiction in
connection with a dispute or contest arising out of conflicting claims of
entitlement to policy proceeds or benefits which the Ceding Company admits are
payable. Allianz Life is not liable for double or additional payment of policy
proceeds. Indemnification of Allianz Life's percentage of reinsurance liability
on account of death shall be made in one lump sum, regardless of the Ceding
Company's mode of settlement. In settlement of Allianz Life's percentage of
reinsurance liability for waiver-of-premium disability benefits, Allianz Life
shall pay to the Ceding Company Allianz Life's percentage of the gross premium
waived on an annual basis. Payments made under this section shall be made at the
home office of Allianz Life.
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REINSURANCE LIABILITY: Reinsurance liability shall include indemnification of
the Ceding Company by Allianz Life for amounts attributable to the Ceding
Company's percentage of (a) the contractual benefit on a policy reinsured under
this agreement; and (b) any unusual expenses incurred by or reimbursed by the
Ceding Company, arising from the defense or investigation of a claim for
liability on a policy reinsured under this agreement or from the taking up or
rescinding of such a policy.
In no event shall the following be items of reinsurance liability:
1. routine investigative or administrative expenses, excluding fees and
expenses of commercial inspection agencies;
2. salaries of employees or other internal expenses of the Ceding Company,
other than travel expenses in connection with an investigation;
3. expenses incurred in connection with a dispute or contest arising out
of conflicting claims of entitlement to policy proceeds or benefits
which the Ceding Company admits are payable;
4. expenses, fees, settlement, or judgements arising out of or in
connection with claims made against the Ceding Company for
extra-contractual damages.
ATTORNEY'S FEES, COSTS, AND INTEREST: For purposes of this agreement, attorney's
fees, costs, and interest imposed automatically by statute against the Ceding
Company and arising solely out of a judgement rendered against the Ceding
Company without a determination of fault on the part of the Ceding Company in a
suit for policy benefits reinsured under this agreement shall be considered
items of reinsurance liability.
MISSTATEMENT OF AGE OR SEX: In the event that the amount of insurance provided
by a policy or policies reinsured under this agreement is increased or reduced
because of a misstatement of age or sex
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established after the death of the insured, the reinsurance liability of Allianz
Life shall increase or reduce in an amount equal to the amount of the increase
or reduction of the original insurance multiplied by the proportion represented
by Allianz Life's percentage immediately prior to the discovery of such
misstatement of age or sex. Reinsurance in force with Allianz Life shall be
reformed on the basis of the adjusted amounts, using values applicable to the
correct age and sex. Any adjustment in reinsurance premiums required by such
reformation shall be made without interest.
INTEREST: If the Ceding Company pays or reimburses interest on the contractual
benefit of a policy reinsured under this agreement, then Allianz Life shall
indemnify the Ceding Company for Allianz Life's percentage of such interest.
ARTICLE X - EXTRA-CONTRACTUAL DAMAGES
Extra-contractual damages include punitive damages, consequential damages,
compensatory damages and damages for emotional distress. In no event shall
Allianz Life participate in such damages which are awarded against the Ceding
Company as a result of an act, omission or course of conduct committed by the
Ceding Company or its Agent in connection with the insurance reinsured under
this agreement. Allianz Life shall, however, pay its share of statutory
penalties awarded against the Ceding Company in connection with insurance
reinsured under this agreement if Allianz Life elected to join in the contest of
the coverage in question.
The parties recognize that circumstances may arise in equity which would require
Allianz Life, to the extent permitted by law, to share proportionately in
certain assessed damages. Such circumstances are difficult to define in advance,
but generally would be those situations in which Allianz Life was an active
party and directed, consented to, or ratified in writing the act, omission, or
course of conduct which ultimately results in the assessment of punitive,
statutory, and/or compensatory damages. In such
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situations, the Ceding Company and Allianz Life would share such damages so
assessed in proportions to the risk insured.
For the purposes of this provision, the following definitions shall apply:
Punitive Damages are those damages awarded as a penalty, the amount of which is
not governed, nor fixed by statute;
Statutory Penalties are those amounts which are awarded as a penalty, but fixed
in amount by statute;
Compensatory Damages are those amounts awarded to compensate for the actual
damages sustained, and are not awarded as a penalty, nor fixed in amount by
statute.
ARTICLE XI - POLICY CHANGES
CHANGES: If any change is made in the plan of the original policy reinsured with
Allianz Life, including any change in status caused by the application of a
nonforfeiture provision, a corresponding change shall be made in the
reinsurance. If a change is made in the underwriting classification of the
original policy reinsured with Allianz Life, a corresponding change shall be
made in the reinsurance subject to the prior approval of Allianz Life if the
original policy was facultatively submitted to Allianz Life.
The parties hereto may from time to time agree, in writing, that other methods
of changing or reducing the reinsurance with Allianz Life shall apply in a given
case without otherwise affecting the terms of this agreement.
If, for any reason, the net amount at risk increases due to a policy change, the
increased amount of insurance must meet all conditions and requirements of new
business issued under this agreement.
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REDUCTIONS AND TERMINATIONS: If a policy of life insurance issued by the Ceiling
Company is terminated or reduced, the reinsurance with respect to that policy
shall be reduced in like amount as of the same date and time.
If any portion of insurance retained by the Ceding Company is reduced or
terminated, the reinsurance with respect to other policies issued on the same
life shall be simultaneously reduced or terminated, so that the Ceding Company
maintains their original retention. In such cases, the reinsurance to be reduced
or terminated shall be determined by the chronological order in which it was
effected, the first effected being the first reduced or terminated, and so on.
Two or more policies issued on the same date shall be considered one policy.
If the reinsurance on any particular policy has been ceded to more than one
reinsurer, the reduction shall be applied to all reinsurers on such policy in
proportion to the amounts originally ceded to each reinsurer. In no case shall
the Ceding Company be required to assume a risk in excess of its regular
retention limit at the time of issue of the original policy under which
reinsurance is being terminated.
REINSTATEMENTS: If a policy reinsured hereunder lapses for nonpayment of premium
and is reinstated in accordance with the written terms and rules of the Ceding
Company, Allianz Life shall automatically reinstate its reinsurance under such
policy. The Ceding Company shall pay Allianz Life all reinsurance premiums in
arrears in connection with the reinstatement with interest at the same rate and
in the same manner as the Ceding Company received under its policy.
Reinstatement rules of the Ceding Company must be submitted to Allianz Life as
required in Article III.
ARTICLE XII - RECAPTURE AND RETENTION CHANGES
If the Ceding Company increases its retention limits, the Ceding Company may
reduce the reinsurance on all risks except those on which it kept amounts that
were less than the maximum retention limits in effect
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when the original insurance was issued. The retention limits of the Ceding
Company as of the effective date of this agreement are shown in Schedule A.
Special reduced or zero limits for specific underwriting hazards or impairments
not described in Schedule A shall not be considered to be maximum limits of
retention. The amounts recaptured will be sufficient to increase the Ceding
Company's retention to the new limits. If there are other reinsurers, the
reduction on each risk will be divided according to each reinsurer's portion of
the total reinsurance on the risk. If the reinsurance is reduced on any risk,
similar reductions shall be made on all risks eligible for recapture. The Ceding
Company shall give written notice to Allianz Life ninety (90) days prior to the
effective date of its increase in retention for new issues. Recapture available
hereunder shall be effected not less than ninety (90) days after written notice
is received by Allianz Life. The reinsurance in force shall then be reduced as
provided herein upon the later of the anniversary date next following, or the
twentieth anniversary date.
The above recapture provisions do not apply to risks that are accruing benefits
under the waiver of premium provisions of the policy; these risks must be
recaptured as soon as they are no longer collecting waiver of premium benefits.
The reduction in reinsurance due to recapture of accidental death benefits will
be effective on the first policy anniversary following the written notice to
recapture.
ARTICLE XIII - INSPECTION OF RECORDS
Allianz Life may, at any time with reasonable notice, inspect all books,
documents and procedures which relate to reinsurance under this agreement. Such
inspection shall take place in the offices of the Ceding Company or that of its
agent or broker during normal business hours.
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ARTICLE XIV - ERRORS
Except for a violation of Article IV on Commencement & Termination of Liability,
if either the Ceding Company or Allianz Life shall fail to perform an obligation
under this agreement and such failure shall be the result of an error on the
part of the Ceding Company or Allianz Life, such error shall be corrected by
restoring both the Ceding Company and Allianz Life to the positions they would
have occupied had no such error occurred; an "error" is a clerical mistake made
inadvertently and excludes errors of judgement and all other forms of error.
This provision shall apply only to clerical errors relating to the
administration of reinsurance covered by this agreement and not to the
administration of the insurance provided by the Ceding Company to its insured.
Any negligent or deliberate acts or omissions by the Ceding Company regarding
the insurance provided are the responsibility of the Ceding Company and its
liability insurer, if any, but not that of Allianz Life.
There is a mutual obligation on both the Ceding Company and Allianz Life to
ensure that all errors are identified and corrected in an equitable manner at
the earliest possible date.
ARTICLE XV - ARBITRATION
It is the intention of the Ceding Company and Allianz Life that the customs and
practices of the insurance and reinsurance industry shall be given full effect
in the operation and interpretation of this agreement. The parties agree to act
in all things with good faith. If Allianz Life or the Ceding Company cannot
mutually resolve a dispute which arises out of or relates to this agreement, the
dispute shall be decided through arbitration as set forth in this provision. The
arbitrators shall base their decision on the terms and conditions of this
agreement and, if necessary, on the customs and practices of the insurance and
reinsurance industry rather than solely on a strict interpretation of the
applicable law. There shall be
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no appeal from the arbitrators' decision, and the parties may reduce that
decision to judgement. This article shall survive the termination of this
agreement.
To initiate arbitration, either the Ceding Company or Allianz Life shall notify
the other party in writing of its desire to arbitrate, stating the nature of its
dispute and the remedy sought. The party to which the notice is sent shall
respond to the notification in writing within ten (10) working days of its
receipt.
ARBITRATORS: The arbitration hearing shall be before a panel of three
arbitrators, each of whom must be a present or former officer of a life
insurance company. An arbitrator may not be a present or former officer,
attorney or consultant of the Ceding Company, Allianz Life or either party's
affiliates.
SELECTION OF ARBITRATORS: The Ceding Company and Allianz Life shall each name
three (3) candidates to serve as an arbitrator. The Ceding Company and Allianz
Life shall each choose one candidate from the other party's list and these two
candidates shall serve as the first two arbitrators. If one or more candidates
so chosen shall decline to serve as an arbitrator, the party which named such
candidate shall add an additional candidate to its list and the other party
shall again choose one candidate from the list. This process shall continue
until two arbitrators have been chosen and have accepted. The Ceding Company and
Allianz Life shall each present their initial lists of three (3) candidates by
written notification to the other party within twenty-five (25) working days of
the date of the mailing of the notification initiating the arbitration. Any
subsequent additions to the list which are required shall be presented within
ten (10) working days of the date the naming party receives notice that a chosen
candidate has declined to serve.
The two arbitrators shall then select the third arbitrator from the four (4)
candidates remaining on the lists of the Ceding Company and Allianz Life within
fourteen (14) days of the acceptance of their positions as arbitrators. If the
two arbitrators cannot agree on the choice of the third, then this choice shall
be referred back to the Ceding Company and Allianz Life. The Ceding Company and
Allianz Life shall take turns
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striking the name of one of the candidates from the remaining four (4)
candidates until only one candidate remains. If the candidate so chosen shall
decline to serve as the third arbitrator, the candidate whose name was stricken
last shall be nominated as the third arbitrator. This process shall continue
until a candidate has been chosen and has accepted. This candidate shall serve
as the third arbitrator. The first turn at striking the name of a candidate
shall belong to the party that is initiating the arbitration. Once chosen, the
arbitrators are empowered to decide all substantive and procedural issues by a
majority of votes.
COMMUNICATIONS: It is agreed that each of the three arbitrators should be
impartial regarding the dispute and should resolve the dispute on the basis
described in this provision. Therefore, at no time will either the Ceding
Company or Allianz Life contact or otherwise communicate with any person who has
been designated as a candidate to serve as an arbitrator concerning the dispute,
except upon the basis of jointly-drafted communications provided by both the
Ceding Company and Allianz Life to inform those candidates actually chosen as
arbitrators of the nature and facts of the dispute. Likewise, any written or
oral arguments provided to the arbitrators concerning the dispute shall be
coordinated with the other party and shall be provided simultaneously to the
other party or shall take place in the presence of the other party.
HEARING: The arbitration hearing shall be held on the date fixed by the
arbitrators. In no event shall this date be later than six (6) months after the
appointment of the third arbitrator. As soon as possible, the arbitrators shall
establish pre-arbitration procedures as warranted by the facts and issues of the
particular case. At least ten (10) working days prior to the arbitration
hearing, each party shall provide the other party and the arbitrators with a
detailed statement of the facts and arguments it will present at the arbitration
hearing. The arbitrators may consider any relevant evidence; they shall give the
evidence such weight as they deem it entitled to after consideration of any
objections raised concerning it. The party initiating the arbitration shall have
the burden of proving its case by a preponderance of the evidence. Each party
may examine any witnesses who testify at the arbitration hearing. Within twenty
(20)
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working days after the end of the arbitration hearing, the arbitrators shall
issue a written decision. In their decision the arbitrators shall apportion the
costs of arbitration, which shall include, but not be limited to their own fees
and expenses as they deem appropriate.
ARTICLE XVI - INSOLVENCY
In the event of insolvency of the Ceding Company, all reinsurance claims payable
shall be paid directly to its liquidator, receiver, or statutory successor
without diminution because of the insolvency of the Ceding Company or because
such liquidator, receiver, or statutory successor has failed to pay all or a
portion of any claim.
NOTICE: in the event of insolvency of the Ceding Company, the liquidator,
receiver, or statutory successor shall give Allianz Life written notice of the
pendency of a claim on a policy reinsured within a reasonable time, in no event
to exceed one year, after such claim is filed in the insolvency proceeding.
INVESTIGATION: During the pendency of a claim, Allianz Life may investigate such
claim and interpose in the name of the Ceding Company, its liquidator, receiver
or statutory successor, but at its own expense, in the proceeding where such
claim is to adjudicated, any defense or defenses which Allianz Life may deem
available to the Ceding Company or its liquidator, receiver, or statutory
successor.
The expense thus incurred by Allianz Life shall 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 Allianz Life.
Where two or more reinsurers are involved in the same claim and a majority in
interest elect to interpose a defense or defenses to such claim, the expense
shall be apportioned as though such expense had been incurred by the Ceding
Company.
19
CANCELLATION OPTION: In the event of insolvency of Allianz Life, the Ceding
Company, upon written notice within ninety (90) days, may at its option cancel
this agreement effective retroactively to the date of such insolvency as it
relates to the renewal of existing reinsurance. Allianz Life shall then make
proper financial adjustment from the effective cancellation date and remain
liable for the payment of any claim which had occurred prior to the date of
cancellation whether or not due proof of such claim had actually been received
by such date.
RIGHT TO OFFSET: In the event of the insolvency of either the Ceding Company or
Allianz Life, any amounts owed by Allianz Life to the Ceding Company and by the
Ceding Company to Allianz Life with respect to this agreement, shall be offset,
as permitted by law, against each other with the balance to be paid by the
appropriate party.
ARTICLE XVII - ENTIRE CONTRACT PROVISION
This agreement represents the entire agreement between Allianz Life and the
Ceding Company and supersedes, with respect to its subject matter, any prior
oral or written agreements between the parties. No modification of any provision
of this agreement shall be effective unless set forth in a written amendment to
this agreement which is executed by both parties. A waiver shall constitute a
waiver only with respect to the particular circumstances for which it is given
and not a waiver of any future circumstance.
ARTICLE XVIII - NON-PARTICIPATING AND NON-REFUND
Allianz Life does not participate in dividends, if any, that are payable nor
does it pay any refunds resulting from the experience of policies reinsured
under this agreement.
20
ARTICLE XIX - HEADINGS
Paragraph headings and Article headings are not controlling or binding
provisions of this agreement.
ARTICLE XX - PARTIES TO AGREEMENTS
This is an agreement solely between the Ceding Company and Allianz Life. The
acceptance of reinsurance hereunder shall not create any right or legal
relationship whatsoever between Allianz Life and the insured or the beneficiary
under any policies of the Ceding Company which may be reinsured hereunder.
ARTICLE XXI - DURATION OF AGREEMENT
This agreement shall be unlimited as to its duration but may be amended at any
time in writing by mutual consent of the two parties as signed by a Vice
President or other senior officer. This agreement may be terminated as to
further new reinsurance by either party with ninety (90) days written notice to
the other. Such terminations as to new reinsurance shall not affect existing
reinsurance which shall remain in force as long as such policies shall remain in
force and reinsurance premiums are paid when due, regardless of any change in
ownership, merger or acquisition of either company.
ARTICLE XXII - DAC TAX
The Ceding Company and Allianz Life hereby agree to the following pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulation issued December 1992, under
Section 848 of the Internal Revenue Code of 1986.
1. The term "party" will refer to either the Ceding Company or Allianz
Life as appropriate.
2. The terms used in this Article are defined by reference to Regulation
1.848-2 in effect December 1992.
21
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 Section 848(c)(1).
4. 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.
5. Allianz Life will submit a schedule to the Ceding Company by April 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 stating that Allianz Life will report such
net consideration in its tax return for the preceding calendar year.
6. The Ceding Company may contest such calculation by providing an
alternative calculation to Allianz Life by May 1 of the year following
the end of the taxable year. If the Ceding Company does not notify
Allianz Life by May I, the net considerations reported in the
respective tax returns will be the value as defined in Item 5 above.
7. If the Ceding Company contests Allianz Life's calculation of the net
consideration, the parties will act in good faith to reach an agreement
on the correct amount within thirty (30) days of the date the Ceding
Company submits its alternative calculation. If the Ceding Company and
Allianz Life reach agreement on an amount of the net consideration,
each party shall report such amount in their respective tax returns for
the previous calendar year.
22
SCHEDULE A
RETENTION LIMITS
SECURITY EQUITY
LIFE RETENTION
All Ages $125,000
23
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA SCHEDULE B ALLIANZ (LOGO)
00 XXXXXXXX XXXXXX XXXXX ___ NEW BUSINESS CESSION
XXXXXXXXXXX, XX 00000-0000 ___ AMENDED CESSION
___ COINSURANCE __ YRT
Automatic Faculative Fac-Oblig. REINSURANCE APPLICATION Participating Non-Participating
___ ____ ____ U. S.__ CANADIAN ___ ___ _____
Ceding Company Agency Application No. Date
Insured's Name Age Birthdate State of Birth State of Residence
Social Security #
Occupation Height Weight Medical Non-Medical Male Female
___ ___ ___ ___
INSURANCE INFORMATION LIFE RIDER DISABILITY ACC. DEATH PLAN
Previous Insurance in force by us
Substandard Rating
Obtained by us
Issuing new insurance for
Substandard rating
Obtained by us
Required Reinsurance
Has risk submitted to us previously formally or informally? __ No _ Yes: __War
Clause ___ No __Yes: __Aviation Clause __No ___Yes
We are reporting the following codes to M.I.B:
This case has/has not been submitted elsewhere for reinsurance, and we have/have
not been refused coverage on this risk. Reason for declination:
REMARKS:
CESSION OF REINSURANCE COMPOSITE __ SMOKER __ NONSMOKER __ PREFERRED ___
LIFE RIDER WP/DISABILITY ACC- DEATH PLAN
Current Issue Base
Retained by us
Reinsurance Rider
Rating
Policy Number Policy Date Reserve Basis Allianz Life Reinsurance Number
Prel. Term From: Dis: Xxx. Prem. waived-Plan Dis: Xxx. Prem. waived-Rider Expiry
Date DIS. Expiry Date A.D. A.N.B A.L.B ___ _____
PREMIUMS (To be completed at your option)
TOT.
POLICY BASE RIDER REG SUB FLAT TOT. TOT. NET
YEAR AGE AMOUNT AMOUNT ULAR STANDARD EXTRA WP/DIS A.D. PREM. COINS PREM
SIGNED FOR THE CEDING COMPANY
_____________________________
The above cession is accepted subject to all provisions of the reinsurance
agreement.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
By: ______________________
Title
__________________________ ____________________________________ FSA
State Date Vice President - Reinsurance Actuary
SCHEDULE C
ACCEPTED PLANS OF INSURANCE AND RATES
PLANS OF INSURANCE:
All Individual Life Plans.
INDIVIDUAL LIFE REINSURANCE: The rates shown in this schedule apply to
reinsurance cessions of $20,000 or more. The total YRT reinsurance premium on
standard cessions consists of the appropriate YRT rate per $1,000 (attached)
multiplied by the following percentage: Nonsmoker = 70%, Smoker = 1.35%. The YRT
premium will be applied to the net amount at risk only.
SUBSTANDARD TABLE EXTRAS: Substandard table extras will be reinsured at 25% per
table multiplied by the appropriate YRT rate.
FLAT EXTRA: On substandard cessions involving flat extra premiums payable for
periods of more than five years, the reinsurance flat extra premium in the first
year is zero and in renewal years is 90% of the gross flat extra premium charged
by the Ceding Company. When the flat extra premium is payable for five years or
less, the reinsurance flat extra premium in all policy years is 90% of the gross
flat extra premium charged by the Ceding Company.
DIVIDENDS: Allianz Life will not participate in dividends.
EXPENSE CHARGES: The Ceding Company will retain all expense charges.
CASH VALUE: Allianz Life will not participate in cash values.
DEFICIENCY RESERVES: Allianz Life will not set up deficiency reserves on its
portion of the risk.
25
75/80
MALE
POLICY YEAR
ISSUE AGE 0-80
75/80
FEMALE
POLICY YEAR
ISSUE AGE 0-80
SCHEDULE D
YEARLY RENEWABLE TERM PREMIUMS, PREMIUMS FOR BENEFIT COVERAGES
AND SUBSTANDARD FLAT EXTRAS
FOR
CONVERSIONS
For the purpose of determining duration and appropriate YRT rates, conversions
shall be considered as continuations of the original insurance. The rates and
provisions listed in Schedule C will apply to conversions.
27
SCHEDULE E
POLICY LIMITS:
MINIMUM CESSION SIZE: The minimum initial amount to be reinsured for facultative
business is $20,000.
TRIVIAL AMOUNTS: Reinsurance may be terminated at the option of the Ceding
Company on any cession where the net amount at risk reinsured becomes less than
$3,000 providing it has been in force three years.
28
SCHEDULE F
SAMPLE BULK REPORTS
STATUTORY RESERVES: reported quarterly in substantial accord with the
information listed below.
TAX RESERVES: end of year tax reserves reported annually in substantial accord
with the information listed below.
STATUTORY AND TAX RESERVES
Life Subst.
Valuation Basis Plan Count Amount Reserve Reserve
--------------------------------------------------------------------------------
80 CSO ALB 4% CRVM RIP ART 1,567 3,465,978 6,453 0
80 CSO ANB 5,5% NL Curtate UL 10,946 10,863,572 953,456 3,948
Additional information needed if applicable to agreement:
1. Deficiency Reserves for Coinsurance Agreements
2. Face and Reserve Amounts for ADB Riders
3. Reserve Amounts for Waiver of Premium Riders
29
BULK IN FORCE LISTING:
Name
Of I S S U Flat Ex.
Policy Plan Issue Insured Birth ST N E M N Issue Life Rate / # Face
Number Code Date Last, First, M. Date CD S X C W Age Rtg. of Yrs. Amt
Current Net Net Net
Policy Cession Ceded Life Life AD WD Total
Number Amt. NAR Prem. Comm. Prem. Prem. Prem.
TOTAL:
Automatic YRT: Ceded Count
Ceded NAR
Facultative YRT: Ceded Count
Ceded NAR
Automatic COINS: Ceded Count
Ceded NAR
Facultative COINS: Ceded Count
Ceded NAR
Description of Columns #6 - 10:
Column #6/ST CD-State of Residence
Column #7/INS-Insurance Type (YRT or COINS)
Column #8/SEX-Sex (Male or Female)
Column #9/SMC-Smoker Code (Smoker, Nonsmoker, Composite, or Preferred)
Column #10/UNW-Underwriting Code (Facultative or Automatic)
BULK POLICY EXHIBIT DETAIL LISTING
**Xxxx Amount**
Policy Plan Issue Name of Birth Ins. Und. Transaction Trans.
Number Code Date Insured Date Before After Type Type Description Effective Date
Last, First MI
Desired Transaction Descriptions:
Ceded In Error
Conversion
Conversion Termination
Conversion New Issue
Deaths
Expirys
ET1 or Reduced Paid Up
Face Amount Increase/Decrease
Increase Due to COLA/IBR
Lapses (Including Conversion
Terminations)
Maturities
Name Change/Correction
Natural Changes
New Business
Not Taken/Issue Cancellation
Policy Date Change/Correction
Recapture
Reduced Amount
Reduced Rating
Reinstatements
Surrenders
NEW BUSINESS LISTING
Name
Of I S S U Flat Ex.
Policy Plan Issue Insured Birth ST N E M N Issue Life Rate / # Face
Number Code Date Last, First, M. Date CD S X C W Age Rtg. of Yrs. Amt
Net Net Original
Policy Cession Life Life AD WD Issue
Number Amt. Prem. Comm. Prem. Prem. Date*
TOTAL:
Automatic YRT: Ceded Count
Ceded Cession Amount
Facultative YRT: Ceded Count
Ceded Cession Amount
Automatic COINS: Ceded Count
Ceded Cession Amount
Facultative COINS: Ceded Count
Ceded Cession Amount
Description of Columns #6 - 10:
Column #6/ST CD-State of Residence
Column 7/INS-Insurance Type (YRT or COINS)
Column #8/SEX-Sex (Male or Female)
Column #9/SMC-Smoker Code (Smoker, Nonsmoker, Composite, or Preferred)
Column #10/UNW-Underwriting Code (Facultative or Automatic)
NOTE: *Original Issue Date is used for Conversion New Issues only. This field
should show the issue date of the original policy.
BULK POLICY EXHIBIT SUMMARY LISTING
AUTOMATIC FACULTATIVE
MONTH TO DATE YEAR TO DATE MONTH TO DATE YEAR TO DATE
COUNT RISK COUNT RISK COUNT RISK COUNT RISK
YRT:
BALANCE FWD
NEW BUSINESS
NOT TAKEN/CEDED IN ERROR
REINSTATEMENTS
NATURAL CHGS
OTHER INCREASES
OTHER DECREASES
DEATHS
MATURITIES
EXPIRYS
SURRENDERS
LAPSES (INCLUDING CONVERSION TERMINATIONS)
CONVERSION NEW ISSUE
RECAPTURES
CURRENT IN FORCE
COINSURANCE:
BALANCE FWD
NEW BUSINESS
NOT TAKEN/CEDED IN ERROR
REINSTATEMENTS
NATURAL CHGS
OTHER INCREASES
OTHER DECREASES
DEATHS
MATURITIES
EXPIRYS
SURRENDERS
LAPSES (INCLUDING CONVERSION TERMINATIONS)
CONVERSION NEW ISSUE
RECAPTURES
CURRENT IN FORCE
BULK STATEMENT OF REINSURANCE PREMIUMS
Name
Of I U Current
Policy Insured Issue Issue ST N N Life Ceded Flat Life AD WD
Number Last, First, M. Date Age CD S W Rtg. NAR Extra Prem. Prem. Prem.
Net Net
Policy AD Total Transaction
Number Comm. Prem. Prem. Desc./Eff. Date
TOTAL:
Automatic YRT: FIRST YEAR PREMIUM
RENEWAL PREMIUM
Facultative YRT: FIRST YEAR PREMIUM
RENEWAL PREMIUM
Automatic COINS: FIRST YEAR PREMIUM FIRST YEAR COMMISSION
RENEWAL PREMIUM RENEWAL COMMISSION
Facultative COINS: FIRST YEAR PREMIUM FIRST YEAR COMMISSION
RENEWAL PREMIUM RENEWAL COMMISSION
Description of Columns #5 - 7:
Column #5/ST CD-State of Residence
Column #6/INS- Insurance Type (YRT or COINS)
Column #7/UNW-Underwriting Code (Facultative or Automatic)
