Trans City Life Insurance Company, an Arizona Corporation - Page 24

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          from the Trust at any time, without any further act or notice or            
          satisfaction of any condition or qualification.                             
               c.  Underlying Business                                                
               The 1988 Agreement was indemnity reinsurance on a                      
          combination coinsurance, modified coinsurance plan.  The business           
          retroceded to petitioner under the 1988 Agreement consisted of              
          two blocks of single premium deferred annuity (SPDA) policies.              
          The first block was insurance written by UPL during 1984,                   
          reinsured by BMA in 1984, retroceded to Guardian in 1984, and               
          retroceded to petitioner under the 1988 Agreement.  The first               
          block consisted of a 52.6316-percent quota share of the block of            
          SPDA policies underlying the reinsurance agreement between UPL              
          and BMA.  The second block was insurance written during 1985 by a           
          subsidiary of UPL, reinsured by UPL in 1985, retroceded to                  
          Guardian in 1985 under an agreement referred to as the New York             
          Retro, and retroceded to petitioner under the 1989 Agreement.               
               Petitioner had no right to terminate or in any way shift or            
          avoid losses that might occur under the 1988 Agreement, and the             
          1988 Agreement did not limit petitioner’s obligation to pay                 
          losses if they occurred.  Petitioner was liable on each contract            
          underlying the Agreement to pay the amount of the benefit that              
          corresponded to the portion of the contract reinsured                       
          (95 percent).  Petitioner was also liable:  (1) To pay a                    
          surrender benefit equal to the surrender and matured endowment              
          benefits paid by Guardian on the portion of the contracts                   
          reinsured and (2) to pay those benefits in the same manner as               





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