- 34 -
death or surrender so that the losses associated with these
policies exceeded the investment income due petitioner,
petitioner would lose money.
e. Right To Withhold
The 1989 Agreement provided that Guardian would pay
petitioner an initial consideration equal to the total reserves
on policies in force at the start of the agreement. Petitioner
was obligated to pay Guardian cash if the EAB was negative by
more than $1 million. Petitioner could offset negative
experience refunds against positive experience refunds within the
same calendar year.
The 1989 Agreement allowed both Guardian and petitioner to
withhold certain funds from each other. The 1989 Agreement
permitted Guardian to withhold funds equal to the coinsurance
reserves on the reinsured policies. The 1989 Agreement permitted
petitioner to elect to withhold funds equal to the ceding
commission. When petitioner and Guardian signed the 1989
Agreement, each elected to exercise its right to withhold funds
and made no cash payments.
All moneys due either Guardian or petitioner were to be
netted against each other, and interest was required to be paid
on the funds withheld. Cash settlements were required when the
netted amounts exceeded the right of either party to withhold
funds.
Page: Previous 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 NextLast modified: May 25, 2011