Letter of Intent for Excess of Loss Reinsurance between Annuity & Life Reassurance, Ltd. and XL Life Ltd
Summary
Annuity and Life Reassurance, Ltd. (ALRe) and XL Life Ltd (XL) have agreed to a four-year reinsurance arrangement covering Lifetime Minimum Interest Guarantee (LMIG) losses on VisionMark annuities. ALRe will pay XL a nonrefundable premium of $1.5 million, and XL will reimburse ALRe for LMIG losses exceeding $33 million, up to a maximum of $10 million. The agreement is subject to ALRe board approval and includes provisions for litigation recovery, quarterly settlements, and commutation after litigation outcomes. The agreement is effective January 1, 2002.
EX-10.20 3 w57255ex10-20.txt LETTER OF INTENT Exhibit 10.20 Letter of Intent between Annuity & Life Re and XL LIFE LTD CEDING COMPANY Annuity and Life Reassurance, Ltd. ("ALRe") REINSURER XL Life Ltd ("XL") MODE Excess of Loss Cover BENEFIT REINSURED Lifetime Minimum Interest Guarantee losses ("LMIG Losses") of the VisionMark annuities issued by IL Annuity and Insurance Company. Transamerica Occidental Life Insurance Company previously ceded the VisionMark product to ALRe in modified coinsurance retrocession agreement number 0676-01 dated October 1, 1998. Transamerica Occidental Life Insurance Company assumed the VisionMark product from IL Annuity and Insurance Company under modified coinsurance agreement number 3313-01, effective January 1, 1997. LMIG Losses are ALRe's share of the excess of all benefits (excluding surrender charges) incurred to VisionMark policyholders after taking into account the LMIG, less the benefits (excluding surrender charges) that would have been incurred to VisionMark policyholders without the LMIG. PREMIUM ALRe will pay XL US$1,500,000 within 60 days of the Effective Date of this agreement. This premium is nonrefundable. EFFECTIVE DATE January 1, 2002 COVERAGE PERIOD Four (4) years commencing at Effective Date. Losses payable hereunder incurred within the Coverage Period may be reimbursed after the Coverage Period. AMOUNT OF BENEFIT REINSURED XL will reimburse ALRe for LMIG Losses incurred by ALRe during the Coverage Period that are in excess of the Retention, subject to the Maximum Reimbursement. Incurred LMIG Losses are measured on an U.S. GAAP basis and include paid claims as well as changes in reserve attributable to LMIG benefits. It is the intent of this quarterly settlement process that XL, at any valuation date, will have reimbursed ALRe only to the extent that the LMIG Losses actually paid by ALRe exceed the Retention. MAXIMUM REIMBURSEMENT US$10,000,000 over the life of this agreement RETENTION US$33,000,000 of Incurred LMIG Losses attributable to January 1, 2001 and later RECOVERY RIGHT FROM LITIGATION PROCEEDINGS XL has a first right of recovery from any benefit (amounts paid or reserved or offset) that ALRe may receive as a result of arbitration or litigation under the October 1, 1998 treaty between ALRe and Transamerica Occidental. XL may recover an amount up to the benefits paid to ALRe under this agreement, accumulated with interest at a quarterly rate of 1.5%, compounded quarterly. ACCOUNTING Quarterly cash settlements are due within 30 days of XL's receipt of the quarterly loss report. COMMUTATION This agreement will be commuted after a successful outcome by ALRe in the litigation proceedings and a return to XL of all LMIG Losses reimbursed by XL. In any commutation, XL will retain the nonrefundable Premium. OTHER PROVISIONS (to include, but not be limited to the following): Definitions Access to records Arbitration (Bermuda 1993 Act) Insolvency Offset ALRe to warrant accuracy of Reserves and Incurred Losses Governing Law (Bermuda) 30 Day due diligence period for final approval and final wording Adjustment to Limit clause WORDING To be agreed CONDITION PRECEDENT This transaction must be approved by ALRe's Board of Directors. Agreed to on behalf of: Agreed to on behalf of: ANNUITY AND LIFE REASSURANCE, LTD. XL LIFE LTD By: /s/ Richard Tucker By: /s/ Paul Giordano Name: Richard Tucker Name: Paul Giordano Title: Senior Vice President Title: Executive Vice President & Secretary Date: February 28, 2002 Date: March 13, 2002
