Recoveries from any form of insurance or reinsurance which protect the Company against claims, the subject matter of this Article, shall inure to the benefit of this Agreement.
ARTICLE XV SUBROGATION
The Reinsurer shall be credited with subrogation; i.e., reimbursement obtained by the Company, less the actual cost of obtaining such reimbursement, including actual amounts paid to attorneys, and excluding salaries of officials and employees of the Company or the Underwriting Manager, on account of claims and settlements involving reinsurance hereunder. The Company hereby agrees to enforce its rights to subrogation relating to any expense, if it is in the Company’s economic best interest, a part of which expense was sustained by the Reinsurer, and to prosecute all claims arising out of such rights.
ARTICLE XVI COMMUTATION
The Company shall notify the Reinsurer of all claims hereunder which have not been finally settled at the end of three (3) years following the end of the Agreement Year in which they occurred. The Reinsurer may then, or at any time thereafter, request that its liability with respect to one or more of such claims be commuted. In such event the Company and the Reinsurer shall appoint a mutually acceptable Actuary or Appraiser to investigate, determine and capitalize such claim or claims. Payment by the Reinsurer of its share of the amount ascertained to be the capitalized value of such claim or claims shall constitute a complete and final release of the Reinsurer with respect to the claim or claims so capitalized. Any expenses incurred in connection with the commutation of claims, as provided herein, shall be paid proportionately by the Reinsurer.
ARTICLE XVII CLAIMS FUND
A Claims Fund shall be established by the Underwriting Manager for paying claims which are subject to this Agreement and shall be accumulated and maintained by withholding 90% of the net premium and funding on a cash-call basis, as necessary. The Company and the Reinsurer shall each receive their proportionate share of the remaining 10% of the net premium.
Net Premium as used herein shall mean the Gross Premium plus additions, less ceding allowance plus return premium for cancellations, reductions.
The Underwriting Manager shall deposit and maintain the Claims Fund in an interest-bearing account. The account shall be set up for the benefit of the Company and the Reinsurer, while not necessarily in the name of the Reinsurer and monthly reports shall be submitted to the participants of the Claims Fund. Interest earned on the claims funds will accrue to the benefit of the Company and the Reinsurer on a proportional basis, as outlined in ARTICLE XXXII EXECUTION.
Eighteen (18) months after the expiration of this agreement, an initial calculation will be done to identify the balance remaining in the Claims Fund for the said underwriting year.
Thereafter, further calculations, distributions and funding calls shall be made showing the results for such period on a monthly basis until all losses which occurred with respect to this Agreement are satisfied, at which time any remaining balance in the Claims Fund will be promptly released to the Reinsurer.
ARTICLE XVIII OFFSET
Except in the case of Insolvency, the Company or the Reinsurer shall have, and may exercise at any time and from time to time, the right to offset any balance or balances, whether on account of premiums or on account of losses or otherwise, due from one party to the other under the terms of this Agreement.
ARTICLE XIX TERRITORY
This Agreement shall only apply to policies issued to insured’s domiciled in the United States of America and the District of Columbia.
ARTICLE XX OVERSIGHTS
If nonpayment of premiums, claims, or any other non-performance of duties is shown to be unintentional and the result of misunderstanding or oversight on the part of either the Company or the Reinsurer, the Agreement shall be not breached thereby. Rather, as soon as practical, there shall be adjustments in premiums payable and claims incurred during any one reinsurance period and both the Company and the Reinsurer shall be restored to the positions which they would have occupied had there been no misunderstanding or oversight during that time.
ARTICLE XXI ACCESS TO RECORDS
The Reinsurer, or its duly appointed representatives, shall have the right at any reasonable time to examine all records in the possession of the Company and/or the Underwriting Manager referring to business effected hereunder.
ARTICLE XXII INSOLVENCY
In the event of the insolvency of the ceding Company, all reinsurance made, ceded, renewed or otherwise becoming effective under this Agreement shall be payable by the Reinsurer directly to the ceding Company or to its liquidator, receiver, or statutory successor on the basis of the liability of the ceding Company under the contract or contracts reinsured without diminution because of the insolvency of the ceding Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim.
In the event of insolvency of the Company, the liquidator, receiver or statutory successor shall give the Reinsurer written notice of the pendency of a claim on a policy reinsured within a reasonable time after the claim is filed in the solvency proceeding. During the pendency of the claim, the Reinsurer may investigate the claim, and in a proceeding where the claim is to be adjudicated, the Reinsurer may, at the Reinsurer s own expense, interpose in the name of the Company (its liquidator, receiver or statutory successor) any defense or defenses which the Reinsurer may deem available to the Company or its liquidator, receiver or statutory successor.
The expense thus incurred by the Reinsurer shall be chargeable, subject to court approval, against the Company as part of the expense of liquidation to the extent of a proportionate share of the amount of reinsurance which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.
ARTICLE XXIII ARBITRATION
If any dispute shall arise between the Reinsurer and the Company either before or after termination of this Agreement, with reference to the interpretation of this Agreement or the rights of either party with respect to any transaction under this Agreement, the dispute shall be referred to three arbitrators, one to be chosen by each party and the third by the two so chosen. If either party refuses or neglects to appoint an arbitrator within 30 days after the receipt of written notice from the other party requesting it to do so, the requesting party may nominate two arbitrators who shall choose the third. In the event the two arbitrators do not agree on the selection of the third arbitrator within 30 days after both arbitrators have been named, then the third arbitrator shall be selected pursuant to the commercial arbitration rules of the American Arbitration Association. If the American Arbitration Association fails to appoint the third arbitrator within 30 days after it has been requested to do so, either party may request a justice of the court of general jurisdiction of the state in which the arbitration is to be held to appoint the third arbitrator.
The arbitrators shall be officials or former officials of other insurance or reinsurance companies which are affiliated with neither the Reinsurer nor the Company. The arbitration shall take place in the State of New York and arbitration proceedings are to be governed by rules of the American Arbitration Association and the New York State Arbitration Law. The arbitrators shall consider this Agreement an honorable engagement rather than merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of the law. The decision of a majority of the arbitrators shall be final and binding on both the Reinsurer and the Company and judgment upon the award rendered by the arbitrators may be entered into any court having jurisdiction thereof.
Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the expenses of the arbitration.
ARTICLE XXIV – CONTROLLING LAW
This Agreement shall be governed by and construed in accordance with the laws of the state of New York.
ARTICLE XXV SEVERABILITY
If any part, term, or provision of this treaty shall be held void, illegal, or unenforceable, the validity of the remaining portion or portions shall not be affected thereby.
ARTICLE XXVI UNAUTHORIZED REINSURERS
A. If the Reinsurer is unauthorized in any state of the United States of America or in the District of Columbia, the Reinsurer agrees to fund its share of the Company s ceded unearned premium and losses outstanding and loss adjustment expense reserves (including IBNR) by:
1. Clean, irrevocable and unconditional letters of credit issued and confirmed, if confirmation is required by the insurance regulatory authorities involved, by a bank or banks meeting the NAIC Securities Valuation Office credit standards for issuers of letters of credit and acceptable to said insurance regulatory authorities; and/or
2. Escrow accounts for the benefit of the Company; and/or
3. Cash advances;
if, without such funding, a penalty would accrue to the Company on any financial statement it is required to file with the insurance regulatory authorities involved. The Reinsurer, at its sole option, may fund in other than cash if its method and form of funding are acceptable to the insurance regulatory authorities involved.
B. With regard to funding in whole or in part by letters of credit, it is agreed that each letter of credit will be in a form acceptable to the insurance regulatory authorities involved, will be issued for a term of at least one year, and will include an evergreen clause, which automatically extends the term for at least one additional year at each expiration date unless written notice of non-renewal is given to the Company not less than 30 days prior to said expiration date. The Company and the Reinsurer further agree, notwithstanding anything to the contrary in this Agreement, that said letters of credit may be drawn upon by the Company or its successors in interest at any time, without diminution because of the insolvency of the Company or the Reinsurer, but only for one or more of the following purposes:
1. To reimburse the Company for the Reinsurer s share of unearned premiums, returned to the Company on account of the cancellation of Original Reinsurance Contract(s), unless paid in cash by the Reinsurer.
2. To reimburse the Company for the Reinsurer s share of any other losses and/or loss adjustment expenses paid under the terms of the Original Reinsurance contract(s), unless paid in cash by the Reinsurer.
3. To reimburse the Company for the Reinsurer s share of any other amounts claimed to be due hereunder, unless paid in cash by the Reinsurer.
4. To fund a cash account in an amount equal to the Reinsurer s share of any ceded unearned premium and/or losses outstanding and loss adjustment expenses reserves (including IBNR) funded by means of a letter of credit which is under non-renewal notice, if said letter of credit has not been renewed or replaced by the Reinsurer 10 days prior to its expiration date.
5. To refund to the Reinsurer any sum in excess of the actual amount required to fund the Reinsurer s share of the Company s ceded unearned premium and/or losses outstanding and loss adjustment expense reserves (including IBNR), if so requested by the Reinsurer.
In the event that the amount drawn by the Company on any letter of credit is in excess of the actual amount required for Items (1), (2), or (4) above, or in the case of Item (3), the actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn.
ARTICLE XXVII TAXES
In consideration of the terms under which this Agreement is issued, the Company undertakes not to claim any deduction of the premium hereon when making Canadian tax returns or when making tax returns, other than income or profit tax returns, to any state or territory of the United States of America or to the District of Columbia.
ARTICLE XXVIII FEDERAL EXCISE TAX
(Applicable to those Reinsurers, excepting Underwriters at Lloyd s London and other Reinsurers exempt from Federal Excise Tax, who are domiciled outside the United States of America.)
A. The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the applicable percentage of the premium payable hereon (as imposed under Section 4371 of the Internal Revenue Code) to the extent such premium is subject to the Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder the Reinsurer will deduct the applicable percentage from the return premium payable hereon and the Company or its agent should take steps to recover the tax from the United States Government.
ARTICLE XXIX CONFIDENTIALITY
Except as otherwise provided herein, the Company and Reinsurer each agree that all information communicated to it by the other, whether before the effective date or during the term of this Agreement, shall be used only for purposes of this Agreement, shall be received in strict confidence, and that no such information shall be disclosed by the recipient party, its agent or employees without the prior written consent of the other party. Each party agrees to take all reasonable precautions to prevent the disclosure to outside parties of such information, except as may be necessary by reason of legal, accounting or regulatory requirements beyond the reasonable control of the Company or the Reinsurer as the case may be.
ARTICLE XXX ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties with respect to the matters set forth herein and no amendment, alteration or modification of this Agreement shall be valid unless expressed in a written instrument duly executed by each of the parties hereto.
ARTICLE XXXI INTERMEDIARY
D.W. Van Dyke and Company of Connecticut, Inc., 323 Riverside Avenue, Westport, Connecticut 06880, is hereby recognized as the Intermediary negotiating this Agreement for all business hereunder. All communications (including but not limited to notices, statements, premiums, return premiums, commissions, taxes, loss adjustment expense, recoveries and loss settlements) relating thereto shall be transmitted to the Company or Reinsurer through the office of D.W. Van Dyke and Company of Connecticut, Inc. Payment by the Company to the Intermediary shall be deemed to constitute payment to the Reinsurer. Payment by the Reinsurer to the Intermediary shall be deemed only to constitute payment to the Company to the extent that such payments are actually received by the Company.
ARTICLE XXXII EXECUTION
IT IS AGREED that the Reinsurer hereon, shall have a 15% share of 85% of the reinsured liabilities as identified within this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives.
Signed for and on behalf of: GERBER LIFE INSURANCE COMPANY
In __________________________ this ______________ day of ______________, 2000.
By:
Title:
Signed for and on behalf of: PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
In __________________________ this ______________ day of ______________, 2000.
By:
Title:
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