Exhibit 10(s)
REINSURANCE AGREEMENT
BETWEEN
GOLDEN AMERICAN LIFE INSURANCE COMPANY
WEST CHESTER, PENNSYLVANIA
REFERRED TO AS THE "CEDING COMPANY"
AND
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
DES MOINES, IOWA
REFERRED TO AS THE "REINSURER"
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TABLE OF CONTENTS
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Page
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ARTICLE I GENERAL PROVISIONS 3
ARTICLE II REINSURANCE PREMIUMS 6
ARTICLE III COMMISSIONS AND ALLOWANCES 7
ARTICLE IV FEE PAYMENTS 8
ARTICLE V BENEFIT PAYMENTS 9
ARTICLE VI RESERVE ADJUSTMENTS 11
ARTICLE VII ADJUSTMENT FOR TRANFERS INVOLVING THE FIXED ACCOUNT 12
ARTICLE VIII ACCOUNTING AND SETTLEMENTS 13
ARTICLE IX DURATION AND RECAPTURE 15
ARTICLE X TERMINAL ACCOUNTING AND SETTLEMENT 17
ARTICLE XI ARBITRATION 18
ARTICLE XII INSOLVENCY 19
ARTICLE XIII EXECUTION AND EFFECTIVE DATE 20
SCHEDULE A ANNUITIES AND RISKS REINSURED 21
SCHEDULE B QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS 22
SCHEDULE C MODIFIED COINSURANCE RESERVE INVESTMENT CREDIT 25
SCHEDULE D MINIMUM GUARANTEED DEATH BENEFIT (MGDB) RISK CHARGES 26
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REINSURANCE AGREEMENT
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This Agreement is made and entered into by and between Golden American Life
Insurance Company (hereinafter referred to as the "Ceding Company") and
Equitable Life Insurance Company of Iowa (hereinafter referred to as the
"Reinsurer").
The Ceding Company and the Reinsurer mutually agree to reinsure on the terms and
conditions stated herein. This Agreement is an indemnity reinsurance agreement
solely between the Ceding Company and the Reinsurer, and performance of the
obligations of each party under this Agreement will be rendered solely to the
other party. In no instance will anyone other than the Ceding Company or the
Reinsurer have any rights under this Agreement, and the Ceding Company will be
and remains the only party hereunder that is liable to any insured, policy owner
or beneficiary under any annuity reinsured hereunder.
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ARTICLE I
GENERAL PROVISIONS
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1) ANNUITIES AND RISKS REINSURED. The Reinsurer agrees to indemnify the Ceding
Company for, and the Ceding Company agrees to reinsure with the Reinsurer,
according to the terms and conditions hereof, the portion of the risks
under the annuities described in Schedule A attached hereto.
2) COVERAGES AND EXCLUSIONS. Only the variable annuities described in Schedule
A are reinsured under this Agreement, as that schedule may from time to
time be amended.
3) PLAN OF REINSURANCE. This indemnity reinsurance will be on a
modified-coinsurance basis. The Ceding Company will retain, control and own
all assets held in relation to the Modified Coinsurance Reserve.
4) EXPENSES. The Reinsurer will bear no part of the expenses incurred in
connection with the annuities reinsured hereunder, except as otherwise
provided herein.
5) ANNUITY CHANGES. The Ceding Company must provide written notification to
the Reinsurer of any change which affects the original terms or conditions
of any annuity which results in a change in the Ceding Company's liability
corresponding to any annuity reinsured hereunder not later than ninety (90)
days after the change takes effect. The Reinsurer will (a) assume that
portion of any increase in the Ceding Company's liability, resulting from
the change, which corresponds to the portion of the annuities reinsured
hereunder, and (b) receive credit for that portion of any decrease in the
Ceding Company's liability, resulting from the change, which corresponds to
the portion of the annuities reinsured hereunder.
6) NO EXTRACONTRACTUAL DAMAGES. The Reinsurer does not indemnify the Ceding
Company for, and will not be liable for, any extracontractual damages or
extracontractual liability of any kind whatsoever resulting from fraud,
oppression, bad faith, strict liability, or negligent, reckless or
intentional wrongs on the part of the Ceding Company or its directors,
officers, employees and agents. The following types of damages are examples
of damages that would be excluded under this Agreement for the conduct
described above: actual damages, damages for emotional distress, and
punitive or exemplary damages.
7) ANNUITY ADMINISTRATION. The Ceding Company will administer the annuities
reinsured, however, the Reinsurer reserves the right to participate in
claims administration. The Ceding Company retains final authority relating
to claims administration issues.
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8) INSPECTION. At any reasonable time, the Reinsurer or its representatives
may inspect, with proper notice, during normal business hours, at the
principal office of the Ceding Company, the original papers and any and all
other books or documents relating to or affecting reinsurance under this
Agreement. The Reinsurer or its representatives will not use any
information obtained through any inspection pursuant to this Paragraph for
any purpose not relating to reinsurance hereunder.
9) TAXES. The allowance for any premium taxes paid in connection with the
annuities reinsured hereunder is included in the Commissions and
Allowances, described in Article III. The Reinsurer will not reimburse the
Ceding Company for any other taxes paid by the Ceding Company in connection
with the annuities reinsured hereunder.
10) PROXY TAX REIMBURSEMENT. Pursuant to Internal Revenue Code of 1986 as
amended ("The Code") Section 848, insurance companies are required to
capitalize and amortize specified policy acquisition expenses. The amount
capitalized is determined by proxy based on a percentage of "reinsurance
premiums" as defined in regulations relating to The Code Section 848. The
Reinsurer and the Ceding Company agree that any costs which would result
from The Code Section 848 are not subject to reimbursement hereunder.
11) ELECTION TO DETERMINE SPECIFIED POLICY ACQUISITION EXPENSES. The Ceding
Company and the Reinsurer agree that the party with net positive
consideration for any tax year under this Agreement will capitalize
specified policy acquisition expenses with respect to annuities reinsured
under this Agreement without regard to the general deductions limitation of
Section 848(c)(l) of The Code. The Ceding Company and the Reinsurer will
exchange information pertaining to the amount of net consideration under
this Agreement each year to ensure consistency. The Ceding Company will
submit a schedule to the Reinsurer by May 1 of each year presenting its
calculation of the net consideration for the preceding taxable year. The
Reinsurer may contest the calculation in writing within thirty (30) days of
receipt of the Ceding Company's schedule. Any differences will be resolved
between the parties so that consistent amounts are reported on the
respective tax returns for the preceding taxable year. This election to
capitalize specified policy acquisition expenses without regard to the
general deductions limitation is effective for all taxable years during
which this Agreement remains in effect.
12) CONDITION. The reinsurance hereunder is subject to the same limitations and
conditions as the annuities issued by the Ceding Company which are
reinsured hereunder, except as otherwise provided in this Agreement.
13) MISUNDERSTANDINGS AND OVERSIGHTS. If any failure to pay amounts due or to
perform any other act required by this Agreement is unintentional and
caused by misunderstanding or oversight, the Ceding Company and the
Reinsurer will adjust the situation to what it would have been had the
misunderstanding or oversight not occurred.
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14) ADJUSTMENTS. If the Ceding Company's liability under any of the annuities
reinsured hereunder is changed because of a misstatement of age, sex or any
other material fact, the Reinsurer will (a) assume that portion of any
increase in the Ceding Company's liability, resulting from the change,
which corresponds to the portion of the annuities reinsured hereunder, and
(b) receive credit for that portion of any decrease in the Ceding Company's
liability, resulting from the change, which corresponds to the portion of
the annuities reinsured hereunder.
15) REINSTATEMENTS. If an annuity reinsured hereunder is surrendered or
annuitized, and is subsequently reinstated while this Agreement is in
force, the reinsurance for such annuity will be reinstated automatically.
The Ceding Company will pay the Reinsurer the Reinsurer's proportionate
share of all amounts received by the Ceding Company in connection with the
reinstatement of the annuity, plus any amounts previously refunded to the
Ceding Company by the Reinsurer in connection with the lapse of the
annuity, less any amount previously paid by Ceding Company to the Reinsurer
in connection with the lapse of the annuity.
16) ASSIGNMENT. The Ceding Company may not assign any of its rights, duties or
obligations under this Agreement without prior written consent of the
Reinsurer, unless such assignment is between the Ceding Company and its
affiliates. The Reinsurer may not assign any of its rights, duties, or
obligations under this Agreement without prior written consent of the
Ceding Company, unless such assignment is between the Reinsurer and its
affiliates.
17) AMENDMENTS AND WAIVER. Any change or modification to this Agreement will be
null and void unless made by amendment to the Agreement and signed by both
parties. Any waiver will constitute a waiver only in the circumstances for
which it was given and will not be a waiver of any future circumstances.
18) ENTIRE AGREEMENT. The terms expressed herein constitute the entire
agreement between the parties with respect to the annuities reinsured
hereunder. There are no understandings between the parties with respect to
the annuities reinsured hereunder other than as expressed in this
Agreement.
19) CURRENT PRACTICES. The Ceding Company will not materially change, alter or
otherwise compromise its claims paying or administrative practices with
respect to the annuities reinsured hereunder without prior written consent
of the Reinsurer.
20) CONFIDENTIALITY. All parties agree to keep confidential the specifications
and details of this agreement except for required disclosure to regulatory
authorities or by subpoena or court order.
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ARTICLE II
REINSURANCE PREMIUMS
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REINSURANCE PREMIUMS. The Ceding Company will pay the Reinsurer Reinsurance
Premiums on all annuities reinsured under this Agreement in an amount equal to a
quota share, as defined in Schedule A, of the gross premiums collected and
deposited into the Variable Separate Accounts during the Accounting Period by
the Ceding Company. The Reinsurance Premiums paid to the Reinsurer by the Ceding
Company will be remitted to the Reinsurer at the end of the Accounting Period
during which the gross premiums were collected by the Ceding Company and the
Reinsurer will treat any such Reinsurance Premiums as paid premium for annual
statement purposes, regardless of the mode of collection by the Ceding Company
on the annuities reinsured hereunder.
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ARTICLE III
COMMISSIONS AND ALLOWANCES
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1) PREMIUM TAX. The Reinsurer shall reimburse the Ceding Company for all
premium taxes incurred on the Reinsurance Premiums.
2) COMMISSIONS. The Reinsurer shall reimburse the Ceding Company for all
commissions incurred and costs of special promotions incurred on the
Reinsurance Premiums and on that portion of the Account Value in the
Variable Separate Accounts of the annuities reinsured hereunder which
correspond to the portion of the annuities reinsured hereunder as of the
end of the current Accounting Period. Commissions will be net of a quota
share of commission chargebacks on policies reinsured hereunder. Should any
new commission schedules become effective while this Agreement is in
effect, such schedules shall be incorporated by reference and shall be
payable by the Reinsurer concurrently with the obligation of the Ceding
Company.
3) ALLOWANCE FOR EXPENSES. The Reinsurer will pay the Ceding Company an
Allowance for Expenses for each Accounting Period equal to the sum of a)
plus b) plus c) plus d) plus e) plus f), where:
a) equals the product of i) times ii), where:
i) equals $12.50 times the quota share percentage of the annuities
reinsured hereunder, as described in Schedule A; and
ii) equals the number of annuities reinsured hereunder and described
in Schedule A, that are inforce at the end of the current
Accounting Period;
b) equals the product of i) times ii), where:
i) equals $75.00 times the quota share percentage of the annuities
reinsured hereunder, as described in Schedule A; and
ii) equals the number of annuities reinsured hereunder and described
in Schedule A, that were issued during the current Accounting
Period;
c) equals the product of i) times ii), where:
i) equals 0.0030; and
ii) equals that amount of the Reinsurance Premiums received on
non-qualified policies received during the current Accounting
Period;
d) equals the product of i) times ii), where:
i) equals 0.0180; and
ii) equals the amount of the Reinsurance Premiums received during the
current Accounting Period
e) equals the product of i) times ii), where:
i) risks charges from Schedule D for the cost of Minimum Guaranteed
Death Benefits (MGDB) in excess of the policyholders' account
values; and
ii) equals the quota share of the average Account Value in the
Variable Separate Accounts of annuities reinsured hereunder.
Average Account Value is equal to one-half the sum of the Account
Value reinsured hereunder at the beginning of the current
Accounting Period and the Account Value reinsured hereunder at
the end of the current Accounting Period;
f) equals a quota share of any rider charges deducted during the current
accounting period for any VAGLB Riders attached to annuities reinsured
hereunder. See Schedule A, below, for information on VAGLB and Living
Benefits.
g) amounts in a) i) and b) i) above will be adjusted annually on January
1, for inflation at the change in the Consumer Price Index (CPI-U as
determined by Department of Labor and published in the Wall Street
Journal).
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ARTICLE IV
FEE PAYMENTS
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FEE PAYMENTS BY CEDING COMPANY TO REINSURER.
The Ceding Company will pay to the Reinsurer the product of 1) times 2), where:
1) equals 0.000375; and
2) equals the quota share of the average Account Value in the Variable
Separate Accounts of annuities reinsured hereunder. Average Account
Value is equal to one-half the sum of the Account Value reinsured
hereunder at the beginning of the current Accounting Period and the
Account Value reinsured hereunder at the end of the current Accounting
Period;
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ARTICLE V
BENEFIT PAYMENTS
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1) BENEFIT PAYMENTS. Benefit Payments, referred to in this Agreement, means
the Reinsurer's quota share of:
a) Claims, as described in Paragraph 2 below,
b) Cash Surrenders, as described in Paragraph 3 below,
c) Partial Withdrawals, as described in Paragraph 4 below, and
d) Annuity Benefits, as described in Paragraph 5 below.
2) CLAIMS. The Reinsurer will pay the Ceding Company Claims. The term
"Claims," as used in this Agreement, means that portion of the death
benefits paid by the Ceding Company on annuities reinsured hereunder which
is equal to the Reinsurer's quota share of the death benefits payable on
those annuities less any amounts recovered from other reinsurers. Claims do
not include any minimum guaranteed death benefits nor guaranteed living
benefits paid under guaranteed living benefit riders beyond the
policyholder's account value.
3) CASH SURRENDERS. The Reinsurer will pay the Ceding Company that portion of
the Cash Surrenders paid by the Ceding Company on annuities reinsured
hereunder which corresponds to the portion of the annuities reinsured
hereunder.
4) PARTIAL WITHDRAWALS. The Reinsurer will pay the Ceding Company that portion
of Partial Withdrawals paid by the Ceding Company on annuities reinsured
hereunder which corresponds to the portion of the annuities reinsured
hereunder.
5) ANNUITY BENEFITS. The Reinsurer's obligation for Annuity Benefits paid by
the Ceding Company on annuities reinsured hereunder will be satisfied in
full by the payment to the Ceding Company of that portion of the Account
Value, as of the date of annuitization, which corresponds to the portion of
the annuities reinsured hereunder.
6) NOTICE. The Ceding Company will notify the Reinsurer at the end of each
Accounting Period regarding Benefit Payments on annuities reinsured
hereunder. The reinsurance claim and copies of notification, claim papers,
and proofs will be furnished to the Reinsurer upon request.
7) LIABILITY AND PAYMENT. The Reinsurer will accept the decision of the Ceding
Company with respect to Benefit Payments on annuities reinsured hereunder.
The Reinsurer will pay its proportionate share of Benefit Payments in a
lump sum to the Ceding Company without regard to the form of settlement by
the Ceding Company.
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8) CONTESTED CLAIMS. The Ceding Company will advise the Reinsurer of its
intention to contest, compromise or litigate Benefit Payments involving
annuities reinsured hereunder. The Reinsurer will pay its share of the
expenses of such contests, in addition to its share of Benefit Payments, or
it may choose not to participate. If the Reinsurer chooses not to
participate, it will discharge its liability by payment to the Ceding
Company of the full amount of its liability, prior to any contests, on the
annuity reinsured hereunder.
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ARTICLE VI
RESERVE ADJUSTMENTS
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1) MODIFIED COINSURANCE RESERVE ADJUSTMENT.
a) The Modified Coinsurance Reserve Adjustment will be computed each
Accounting Period equal to the result of i) minus ii) plus iii) minus
iv) minus v) minus vi), where:
i) equals the Modified Coinsurance Reserve, determined in accordance
with Paragraph 2 below, at the end of the current Accounting
Period;
ii) equals a quota share of the amount transferred from the fixed
account to the Variable Separate Accounts for the annuities
reinsured hereunder during the current Accounting Period;
iii) equals a quota share of the amount transferred from the Variable
Separate Accounts to the fixed account for the annuities
reinsured hereunder during the current Accounting Period;
iv) equals the Modified Coinsurance Reserve, determined in accordance
with Paragraph 2 below, at the end of the preceding Accounting
Period;
v) equals the Modified coinsurance Reserve Investment Credit, as
described in Schedule C.
vi) equals a quota share of the Living Benefits allocated to the
Separate Account during the current Accounting Period for
annuities reinsured hereunder that are inforce at the end of the
Accounting Period. For the purposes of this adjustment, Living
Benefits paid for annuities that are terminated during the
Accounting Period are excluded.
b) For any Accounting Period in which the amount computed in a) above is
positive, the Reinsurer will pay the Ceding Company such amount. For
any Accounting Period in which the amount computed in a) above is
negative, the Ceding Company will pay the Reinsurer the absolute value
of such amount.
2) MODIFIED COINSURANCE RESERVE. The term "Modified Coinsurance Reserve," as
used in this Agreement, means a quota share of the statutory reserve
excluding any additional reserves held for minimum guaranteed death
benefits or held for VAGLB Riders that the Ceding Company holds with
respect to that portion of the annuities reinsured hereunder. The statutory
reserve will be determined by the Commissioners Annuity Reserve Valuation
Method, or as required by law.
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ARTICLE VII
ADJUSTMENT FOR TRANSFERS INVOLVING THE FIXED ACCOUNT
----------------------------------------------------
1) The Ceding Company will pay the Reinsurer an amount equal to the product of
a) times b) where:
a) equals a quota share of the net amount transferred from Variable
Separate Accounts to fixed accounts with an interest rate guaranteed
by the Ceding Company grouped by policy duration, for the annuities
reinsured hereunder during the current Accounting Period; and
b) equals the applicable exchange factor for each policy duration
described in Paragraph 3 below.
2) The Reinsurer will pay the Ceding Company an amount equal to the product of
a) times b) where:
a) equals a quota share of the net amount transferred from fixed accounts
with an interest rate guaranteed by the Ceding Company to Variable
Separate Accounts grouped by policy duration, for the annuities
reinsured hereunder during the current Accounting Period; and
b) equals the applicable exchange factor for each policy duration
described in Paragraph 3 below.
3) The exchange factors for each policy duration are shown below:
POLICY DURATION (YEARS) EXCHANGE FACTOR
1 0.0775
2 0.0625
3 0.0500
4 0.0400
5 0.0300
6+ 0.0200
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ARTICLE VIII
ACCOUNTING AND SETTLEMENTS
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1) QUARTERLY ACCOUNTING PERIOD. Each Accounting Period under this Agreement
will be a calendar quarter, except that:
a) the initial Accounting Period runs from the Effective Date of this
Agreement through the last day of the calendar quarter during which
the Effective Date of this Agreement falls, and
b) the final Accounting Period runs from the end of the preceding
Accounting Period until the terminal accounting date of this Agreement
as described in Article X, Paragraph 2). The amounts in Article III,
Paragraphs 3) a) i), 3) e) i) and Article IV Paragraph 1) will be
adjusted on a pro-rata basis for time periods less than a calendar
quarter.
2) QUARTERLY ACCOUNTING REPORTS. Quarterly accounting reports in the form of
Schedule B will be submitted to the Reinsurer by the Ceding Company for
each Accounting Period not later than forty-five (45) days after the end of
each Accounting Period. Such reports will include information on the amount
of Reinsurance Premiums, Allowance for Commissions and Expenses, Benefit
Payments, Modified Coinsurance Reserve, Modified Coinsurance Reserve
Adjustment, and the increase in the CARVM Allowance for the Reinsured
Policies.
3) CARVM ALLOWANCE. CARVM Allowance for purposes of this treaty is defined to
be the difference between the ceded Policies Account Value and the base
CARVM Reserves. The base CARVM reserve is the CARVM reserve calculated not
considering the Minimum Guaranteed Death Benefit and any Guaranteed Living
Benefit provision.
4) QUARTERLY SETTLEMENTS.
a) Within sixty (60) days after the end of each Accounting Period, the
Ceding Company will pay the Reinsurer the sum of:
i) Reinsurance Premiums, determined in accordance with Article II,
plus
ii) the Fee Payments, determined in accordance with Article IV, plus
iii) any Modified Coinsurance Reserve Adjustment payable to the
Reinsurer, determined in accordance with Article VI, Paragraph
1), plus
iv) any adjustments to the Reinsurer for Transfers Involving the
Fixed Account determined in accordance with Article VII Paragraph
1).
b) Simultaneously, the Reinsurer will pay the Ceding Company the sum of:
i) the amount of Benefit Payments, as described in Article V, plus
ii) the Allowance for Commissions and Expenses, determined in
accordance with Article III, plus
iii) any Modified Coinsurance Reserve Adjustment payable to the Ceding
Company, determined in accordance with Article VI, Paragraph 1),
plus
iv) any adjustments to the Ceding Company for Transfers Involving the
Fixed Account, determined in accordance with Article VII
Paragraph 2).
c) Simultaneously, the Ceding Company will transfer the increase in the
CARVM Allowance of the Reinsured Policies to the Reinsurer. The
Reinsurer will transfer an equal amount of mutually acceptable assets
to the Ceding Company.
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5) AMOUNTS DUE QUARTERLY. Except as otherwise specifically provided in this
Agreement, all amounts due to be paid to either the Ceding Company or the
Reinsurer under this Agreement will be determined on a net basis as of the
last day of each Accounting Period and will be due as of such date and
payable within sixty (60) days after the end of the Accounting Period.
6) ANNUAL ACCOUNTING PERIOD. The Ceding Company will provide the Reinsurer
with annual accounting reports within forty-five (45) days after the end of
the calendar year for which such reports are prepared. These reports will
contain sufficient information about the annuities reinsured hereunder to
enable the Reinsurer to prepare its annual financial reports and to verify
the information reported in Schedule B, and will include Page 7, Page 26
and Schedule S of the Annual Statement.
7) ESTIMATIONS. If the amounts, as described in Paragraph 3 above, cannot be
determined by the dates described in Paragraph 4 above, on an exact basis,
such payments will be paid in accordance with a mutually agreed upon
formula which will approximate the actual payments. Adjustments will then
be made to reflect actual amounts when they become available.
8) DELAYED PAYMENTS. For purposes of Paragraph 4 above, if there is a delayed
settlement of a payment due, there will be an interest penalty, at the
appropriate London Interbank Offering Rate (LIBOR) plus 0.5%. For purposes
of this Paragraph, a payment will be considered overdue sixty (60) days
after the date such payment is due. The interest penalty will be applied
for the number of days such payment is made in excess of such date which is
sixty (60) days past the payment due date.
9) OFFSET OF PAYMENTS. All monies due either the Ceding Company or the
Reinsurer under this Agreement will be offset against each other, dollar
for dollar, regardless of any insolvency of either party.
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ARTICLE IX
DURATION, RECAPTURE AND TERMINATION
-----------------------------------
1) DURATION. Except as otherwise provided herein, this Agreement is unlimited
in duration.
2) REINSURER'S LIABILITY. The liability of the Reinsurer with respect to any
annuity reinsured hereunder will begin simultaneously with that of the
Ceding Company, but not prior to the Effective Date of this Agreement. The
Reinsurer's liability with respect to any annuity reinsured hereunder will
terminate on the earliest of: (i) the date such annuity is recaptured in
accordance with paragraph 4 below, (ii) the date the Ceding Company's
liability on such annuity is terminated; or (iii) the date this Agreement
is terminated under paragraph 3 below. Termination of the Reinsurer's
liability is subject to payments in respect of such liability in accordance
with the provisions of Article X of this Agreement. In no event should the
interpretation of this Paragraph imply a unilateral right of the Reinsurer
to terminate this Agreement for any annuity reinsured hereunder. However,
the Reinsurer and/or the Ceding Company may, upon ninety (90) days prior
written notice to the other party, terminate this Agreement as to annuities
not yet written by the Ceding Company as of the effective date of such
termination.
For any annuity reinsured hereunder with a VAGLB Rider, the Reinsurer's
liability will terminate on the earliest date, if any, that the annuity's
accumulation value becomes or equals zero, not withstanding the above
conditions.
3) TERMINATION FOR NONPAYMENT OF REINSURANCE PREMIUMS OR OTHER AMOUNTS DUE. If
the Ceding Company fails to pay the Reinsurance Premiums or any other
amounts due to the Reinsurer pursuant to this Agreement within ninety (90)
days after the end of any Accounting Period, the Reinsurer may terminate
this Agreement, subject to thirty (30) days prior written notice to the
Ceding Company. If the Reinsurer fails to pay any amounts due to the Ceding
Company pursuant to this Agreement within ninety (90) days after the end of
any Accounting Period, the Ceding Company may terminate this Agreement,
subject to thirty (30) days prior written notice to the Reinsurer.
4) RECAPTURE. Any group of annuities reinsured hereunder will be eligible for
recapture on any date which is mutually agreed upon in writing by the
Reinsurer and the Ceding Company, with the approval of the Insurance
Department of the domestic state regulating the Reinsurer.
5) TERMINATION. All business written prior to termination of this agreement is
vested ("Vested Business") for purposes of payment due under this
agreement. As such, payment shall continue to be made on all Vested
Business after termination of this agreement in accordance with the terms
of same. Any new business written subsequent to the termination of this
agreement shall not be subject of any payments under this agreement.
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6) NOTICE OF TERMINATION. This agreement may be terminated without cause by
other party by giving written notice of termination to the other party via
certified mail return receipt requested at the following addresses:
If to Equitable Life Insurance Company of Iowa:
909 Locust Street, P.O. Box 1635, Des Moines, IA 50306
If to Golden American Life Insurance Company:
1475 Dunwoody Drive, West Chester, PA 19380
7) INTERNAL REPLACEMENTS. For the purpose of this Agreement, Internal
Replacement shall mean any instance in which an annuity or any portion of
the cash value of an annuity reinsured under this agreement is used to
acquire via an exchange a new annuity written by the Ceding Company, its
affiliates, successors or assigns resulting from a formal program directly
soliciting existing policyowners to participate in such exchange.
If an Internal Replacement results in a new annuity covered by this
Agreement, the Reinsurer will participate on quota share basis in any
expenses and any waiver or reduction of policy charges, fees, or loads
associated with that program. In addition, no replacement adjustment will
be made.
If an Internal Replacement results in a new annuity contract which is not
covered this Agreement, the Reinsurer will not participate in any expenses
or any waiver or reduction of policy charges, fees, or loads associated
with that program. In addition, a replacement adjustment will be paid by
the Ceding Company to the Reinsurer equal to the product of a) times b),
where:
a) equals the amount internally replaced by annuities that are not
covered by this Agreement, during the current Accounting Period; and
b) equals 0.015.
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ARTICLE X
TERMINAL ACCOUNTING AND SETTLEMENT
----------------------------------
1) TERMINAL ACCOUNTING. In the event that this Agreement is terminated in
accordance with Article IX, Paragraphs 3 or 4, or Article XII, a Terminal
Accounting and Settlement will take place.
2) DATE. The terminal accounting date will be the earliest of:
a) the effective date of recapture pursuant to any notice of recapture
given under this Agreement,
b) the effective date of termination pursuant to any notice of
termination given under this Agreement, or
c) any other date mutually agreed to in writing.
3) SETTLEMENT. The Terminal Accounting and Settlement will consist of:
a) The quarterly settlement as provided in Article VIII, Paragraph 3,
computed as of the terminal accounting date as if the Agreement were
still in effect; and
b) Payment by the Ceding Company to the Reinsurer of a Terminal Reserve
equal to the Modified Coinsurance Reserve on the annuities reinsured
hereunder as of the terminal account date; and
c) Payment by the Reinsurer to the Ceding Company of a Terminal Reserve
Adjustment equal to the Modified Coinsurance Reserve on the annuities
reinsured hereunder as of the terminal accounting date; and
If the calculation of the Terminal Accounting and Settlement produces an
amount owing to the Ceding Company, such amount will be paid by the
Reinsurer to the Ceding Company. If the calculation of the Terminal
Accounting and Settlement produces an amount owing to the Reinsurer, such
amount will be paid by the Ceding Company to the Reinsurer.
4) TERMINAL CARVM ALLOWANCE. At Terminal Settlement, the Reinsurer will
transfer the Terminal CARVM Allowance on the annuities reinsured as of the
terminal account date. Simultaneously, the Ceding Company will transfer an
equal amount of mutually acceptable assets to the Reinsurer.
5) SUPPLEMENTARY ACCOUNTING AND SETTLEMENT. In the event that, subsequent to
the Terminal Accounting and Settlement as provided above, a change is made
with respect to any amounts due, a supplementary accounting will take place
pursuant to Paragraph 3 above. Any amount owed to the Ceding Company or to
the Reinsurer by reason of such supplementary accounting will be paid
promptly upon the completion thereof.
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<PAGE>
ARTICLE XI
ARBITRATION
-----------
1) GENERAL. All disputes and differences between the Ceding Company and the
Reinsurer on which an agreement cannot be reached will be decided by
arbitration. The arbitrators will construe this Agreement from the
standpoint of practical business and equitable principles and the customs
and practices of the insurance and reinsurance business, rather than from
the standpoint of strict law. The parties intend that the arbitrators will
make their decision with a view to effecting the intent of this Agreement.
2) METHOD. Three arbitrators will decide any differences. They must be
impartial and present or former officers of life insurance companies other
than the parties to this Agreement or any company owned by, or affiliated
with, either party. One of the arbitrators will be appointed by the
Reinsurer, another by the Ceding Company, and the two arbitrators thus
selected will select a third arbitrator before arbitration begins. Should
one of the parties decline to select an arbitrator within thirty (30) days
after the date of a written request to do so, or should the two arbitrators
selected by the parties not be able to agree upon the choice of a third,
the appointment(s) will be left to the President of the American
Arbitration Association or its successor. The arbitrators will decide by a
majority of votes and their decision will be final and binding upon the
parties. The costs of arbitration, including the fees of the arbitrators,
will be shared equally by the parties unless the arbitrators decide
otherwise. Any counsel fees incurred by a party in the conduct of
arbitration will be paid by the party incurring the fees.
3) ARBITRATION SITE. In event of arbitration, the arbitration hearing shall
take place in Atlanta, Georgia, unless otherwise agreed to in writing by
both the Ceding Company and the Reinsurer.
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<PAGE>
ARTICLE XII
INSOLVENCY
----------
INSOLVENCY. In the event of the Ceding Company's insolvency, any payments due to
the Ceding Company from the Reinsurer pursuant to the terms of this Agreement
will be made directly to the Ceding Company or its conservator, liquidator,
receiver or statutory successor. Such payments will be made by the Reinsurer on
the basis of the liability of the Ceding Company under the annuities reinsured
without diminution because of the insolvency of the Ceding Company. The
conservator, liquidator, receiver or statutory successor of the Ceding Company
will give the Reinsurer written notice of the pendency of a claim against the
Ceding Company on any annuity reinsured within a reasonable time after such
claim is filed in the insolvency proceeding. During the pendency of any such
claim, the Reinsurer may investigate such claim and interpose in the Ceding
Company's name (or in the name of the Ceding Company's conservator, liquidator,
receiver or statutory successor), in the proceeding where such claim is to be
adjudicated, any defense or defenses which the Reinsurer may deem available to
the Ceding Company or its conservator, liquidator, receiver or statutory
successor. The expense thus incurred by the Reinsurer will be chargeable,
subject to court approval, against the Ceding Company as a part of the expense
of liquidation to the extent of a proportionate share of the benefit which may
accrue to the Ceding Company solely as a result of the defense undertaken by the
Reinsurer.
In the event of the Reinsurer's insolvency, this treaty will terminate, and the
terminal accounting and settlement described in Article X will occur. Any
payments due the Reinsurer from the Ceding Company pursuant to the terms of this
Agreement will be made directly to the Reinsurer or its conservator, liquidator,
receiver or statutory successor. Any amounts owed by the Reinsurer to the Ceding
Company will be payable without diminution because of the insolvency of the
Reinsurer. The conservator, liquidator, receiver or statutory successor of the
Reinsurer will give the Ceding Company written notice of the pendency of a claim
against the Reinsurer on any annuity reinsured within a reasonable time after
such claim is filed in the insolvency proceeding.
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<PAGE>
ARTICLE XIII
EXECUTION AND EFFECTIVE DATE
----------------------------
In witness of the above, this Agreement is executed in duplicate on the dates
indicated below with an Effective Date of January 1, 2000.
GOLDEN AMERICAN LIFE EQUITABLE LIFE INSURANCE
INSURANCE COMPANY COMPANY OF IOWA
("Ceding Company") ("Reinsurer")
on June 30, 2000 on June 30, 2000
By: /s/ David L. Jacobson By: /s/ Randy Von Fumetti
---------------------------------- ------------------------------------
Title: Senior Vice President Title: Senior Vice President
------------------------------- ---------------------------------
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<PAGE>
SCHEDULE A
ANNUITIES AND RISKS REINSURED OR EXCLUDED
-----------------------------------------
ANNUITIES AND RISKS REINSURED. The amount of reinsurance under this Agreement
will be a mutually determined quota share percentage for specified contracts of
the Ceding Company's net liability with respect to the Variable Separate
Accounts.
ANNUITIES AND RISKS EXCLUDED. Variable Separate Accounts are defined to exclude
amounts in the fixed or separate accounts with an interest rate guaranteed by
the Ceding Company. "VAGLB" (Variable Annuity Guaranteed Living Benefits) as
used in this agreement, refers to certain optional riders attached to annuities
reinsured hereunder. A listing of the applicable form numbers is shown below.
"Living Benefits" as used in this agreement, refers to benefits paid under such
riders.
VALGB Rider Form # Description
------------------ -----------
GA-RA-1047 Minimum Guaranteed Income Benefit Rider
GA-RA-1045 Minimum Guaranteed Accumulation Benefit Rider
GA-RA-1048 Minimum Guaranteed Withdrawal Benefit Rider
"Net liability," as used in this Agreement, means the Ceding Company's liability
on the annuities reinsured hereunder, excluding any liability resulting from any
Guaranteed Living Benefit riders attached to such annuities, less amounts
recovered from other reinsurance, including the pre-existing Paine Webber
Coinsurance Treaty.
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<PAGE>
SCHEDULE B
QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS
--------------------------------------------
FROM CEDING COMPANY TO REINSURER
Accounting Period: ___________
Calendar Year: ___________
Date Report Completed: ___________
1) Reinsurance Premiums (Article II)
2) Benefit Payments (Article V)
a) Claims
b) Amounts Recovered from other reinsurers
c) Cash Surrender Values
d) Annuity Benefits
Benefit Payments = a) - b) + c) + d)
3) Modified Coinsurance Reserve Adjustment (Article VI)
a) Modified Coinsurance Reserve (end of current Accounting Period)
b) Quota share of transfers from Fixed Account to Variable Separate
Accounts during the current Accounting Period
c) Quota share of transfers from Variable Separate Accounts to Fixed
Account during the current Accounting Period
d) Modified Coinsurance Reserve (end of preceding Accounting Period)
e) Equals a) - b) + c) - d)
f) Modified Coinsurance Reserve Investment Credit (Schedule C)
Modified Coinsurance Reserve Adjustment = e) - f)
4) Commissions and Allowances (Article III)
5) Fee Payments (Article IV)
6) Adjustment for Transfers Involving the Fixed Account (Article VII)
a) Adjustment to Reinsurer for transfers out of the Fixed Account
b) Adjustment to Ceding Company for transfers into the Fixed Account
Adjustment for Transfers Involving the Fixed Account = a) - b)
7) Cash Settlement = l) - 2) - 3) - 4) + 5) - 6)
8) Transfer for increase in CARVM Allowance
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<PAGE>
SUPPLEMENTAL INFORMATION
<TABLE>
<CAPTION>
Number of Account Premium Received During Period
Annuities Value Reserve
Reinsured Reinsured Reinsured Qualified Non-Qualified
--------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Beginning of Period
+ New Issues
- Terminations
End of Period
</TABLE>
ALLOWANCE FOR COMMISSION AND EXPENSE (ARTICLE III)
a. quota share of premium taxes paid on annuities reinsured hereunder
b. quota share of commissions paid on annuities reinsured hereunder
c. $12.50 x CPI factor x quota share of annuities reinsured hereunder
d. Number of annuities reinsured hereunder
e. $75 x CPI factor x quota share of annuities reinsured hereunder
f. Number of reinsured annuities issued during the current Accounting
Period
g. 0.0030 (from Article III, paragraph 3) c) i))
h. Quota share of Reinsurance Premiums received on non-qualified
contracts during the current Accounting period
i. 0.018 (from Article III, paragraph 3) d) i))
j. Reinsurance Premiums received during the current Accounting Period
k. MGDB risk charges (from Article III, paragraph 3) e))
l. quota share of the Average Account Value on annuities reinsured
hereunder
m. quota share of the any rider charges (from Article III, paragraph 3)
f))
n. Commission and Expense Allowance
= a+b+(c*d)+(e*f)+(g*h)+(i*j)+(k*l)+m
FEE PAYMENTS (ARTICLE IV)
a. 0.000375 (from Article IV, Paragraph 1))
b. quota share of the Average Account Value on annuities reinsured
hereunder
c. Fee Payments
= a*b
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<PAGE>
DATA FOR CALCULATING PAYMENT FOR TRANSFERS INVOLVING THE FIXED ACCOUNT
Transfers Transfers
to Fixed from Fixed
Duration Account Account
1
2
3
4
5
6+
Total
SUPPLEMENTAL DATA PROVIDED BY THE CEDING COMPANY
1) Reinsurer's portion of M & E charges collected during the current
Accounting Period on the policies reinsured hereunder.
2) Reinsurer's portion of Administrative Charges collected during the
current Accounting Period on the policies reinsured hereunder.
3) Reinsurer's portion of Surrender Charges collected during the current
Accounting Period on the policies reinsured hereunder.
4) Reinsurer's portion of Deferred Loads collected during the current
Accounting Period on the policies reinsured hereunder.
5) Reinsurer's portion of First Year Commissions paid during the current
Accounting Period on the policies reinsured hereunder.
6) Reinsurer's portion of Renewal Commissions paid during the current
Accounting Period on the policies reinsured hereunder.
7) Miscellaneous inforce information required by the Reinsurer to develop
GAAP Amortization Schedules for the policies reinsured hereunder.
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<PAGE>
SCHEDULE C
MODIFIED COINSURANCE RESERVE INVESTMENT CREDIT
----------------------------------------------
MODIFIED COINSURANCE RESERVE INVESTMENT CREDIT. The Modified Coinsurance Reserve
Investment Credit is equal to the portion of the sum of all accrued investment
income and capital gains and losses, realized and unrealized, on the Ceding
Company's Variable Separate Accounts for the current Accounting Period which
corresponds to the portion of the variable annuities reinsured hereunder.
For the annuities reinsured hereunder, the Modified Coinsurance Reserve
Investment Credit will be adjusted for income taxes or changes in any provision
for taxes, and investment management fees or any other fund level charges. It
will not be reduced for mortality and expense risk charges or administrative
charges as defined in the annuity contracts.
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<PAGE>
SCHEDULE D
MINIMUM GUARANTEED DEATH BENEFIT (MGDB) RISK CHARGES
----------------------------------------------------
For annuities under this agreement, Option 1 shall mean annuities issued with a
"7% Solution" enhanced death benefit, Option 2 shall mean annuities issued with
an "Annual Ratchet" or "5.5% Solution" enhanced death benefit, Option 3 shall
mean annuities issued with a "Standard" death benefit, Option 4 shall mean
annuities issued with a "Max 7" enhanced death benefit, and Option 5 shall mean
annuities issued with a Max 5.5" enhanced death benefit, as described in the
prospectus and the contract.
Type of Death Benefit MGDB Risk Charge
--------------------- ----------------
Option 1 0.1250%
Option 2 0.0500%
Option 3 0.0375%
Option 4 0.1375%
Option 5 0.0625%
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