exv10w3



 





Exhibit 10.3




GROUP SHORT TERM DISABILITY REINSURANCE AGREEMENT



THIS AGREEMENT is between SAFECO LIFE INSURANCE COMPANY of Seattle, Washington (hereinafter
“Insurer”) and DUNCANSON & HOLT SERVICES, INC., a Maine corporation, as Managing Agent (hereinafter
“Managing Agent”) for each of the participating reinsurers collectively referred to in this
Agreement as the American Disability Reinsurance Underwriters Syndicate (ADRUS) and listed in
Appendix A (hereinafter “Reinsurer”).



The Managing Agent represents and warrants that the Reinsurer has authorized the Managing Agent to
enter into, execute and deliver agreements of this sort on its behalf and to exercise all of its
rights and perform all of its obligations under such agreements on its behalf, including but not
limited to, underwriting of policies, collection of premiums, and management of claims in
accordance with the terms of such agreements. All performances required by and for the Reinsurer
under this Agreement shall be conducted through the Managing Agent.



In consideration of the mutual promises set forth below, the parties agree as follows:




ARTICLE I. GENERAL PROVISIONS



The
effective date of this Agreement is January 1, 1999. On and after this date, one hundred
percent (100%) (hereinafter referred to as the “Reinsured Percentage”) of the Insurer’s liability
(hereinafter referred to as “Underlying Risk”) for the group short term disability insurance
policies written on or after January 1, 1999 will be ceded to and reinsured by the Reinsurer. For
group short term disability policies effective prior to
January 1, 1999, the Reinsured Percentage
shall become one hundred percent (100%) as of that date.



Other terms and conditions of this Agreement are as follows:





	A)	 	For risks reinsured under this Agreement, the Insurer will use only those policy forms which
have been approved by the appropriate regulatory authorities. After the Reinsurer has reviewed
and approved copies of these forms, and insurance policies have been accepted by the
Policyholder and administered in accordance with the terms of this Agreement, the Reinsurer
will be liable to the Insurer for the Reinsured Percentage in accordance with the provisions
of the policies reinsured.
	 
	B)	 	The Insurer, by executing this Agreement, represents that it is licensed to do insurance
business in every state, district or territory of the United States, or the District of
Columbia, in which it does business; and that it is licensed to write the group health and
disability insurance policies which are the subject of this Agreement.





 









 






	C)	 	This Agreement represents an exclusive reinsurance arrangement between the parties
for short term disability business. All business quoted using rates provided by the
Reinsurer shall be reinsured under this Agreement. In the event the Reinsurer declines to
accept any policy, the Insurer may reinsure such policy with another reinsurer.
	 
	D)	 	Upon agreement of risk and benefits between Reinsurer and Insurer, any increase in benefit
liability resulting from Insurer’s divergence from same shall be borne by the Insurer. The
Reinsurer does not assume liability for any risk not agreed upon and which is incurred as a
result of errors, intentional or otherwise, in the policy and/or certificate issued:





ARTICLE II. UNDERWRITING





	A)	 	Any reinsurance under this Agreement will be effected only through the express written
consent of the Reinsurer for each case submitted under any disability insurance policy covered
by this Agreement. The Insurer will submit underwriting data to the Reinsurer and the
Reinsurer will inform the Insurer of its decision to accept or reject liability. The Reinsurer
will make available to the Insurer the underwriting data prepared and used in making its
determination. The reinsurer agrees to reinsure all policies in force
on January 1, 1999,
without regard to any policy underwriting.
	 
	 	 	The Reinsurer has the right to approve individuals insured under any policy as a condition
of its acceptance of that policy. The Reinsurer may waive this right for some or all
policies at any time.
	 
	B)	 	The Reinsurer shall keep and maintain appropriate records of evidence of insurability,
including but not limited to the policy, applications, certificates of coverage, medical
forms, and other evidence of insurability, for at least three (3) years. Upon termination of
this Agreement, the Reinsurer will retain and Insurer shall have access to such information
for the later of three (3) years from termination date or the date the last active claim
ceases.
	 
	C)	 	Either the Insurer or the Reinsurer may, at any reasonable time during normal working hours
of the Insurer and upon provision of written notice fourteen (14) days in advance, review and
audit the records of the other party relating to business reinsured under this Agreement.





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ARTICLE III. FINANCIAL RESPONSIBILITIES AND TRANSACTIONS





	A)	 	The Insurer shall remit premium for reinsured group short term disability policies to the
Reinsurer by the tenth (10th) of each month. The monthly report provided will contain all of
the cash activity reported to the Insurer in the previous month in addition to information
mutually agreed to by the Insurer and the Reinsurer.
	 
	 	 	The Insurer will follow all prudent procedures for premium collection and will notify the
Reinsurer of all reinsured policies for which premium is overdue by thirty (30) days of the
due date. The Reinsurer may assess an interest charge equal to the interpolated seven (7) year
value of five (5) year and ten (10) year United States Treasury Bonds on premium overdue by
more than thirty (30) days.
	 
	 	 	If the premium payment period for any policy comprising the Underlying Risk is other than
monthly, the parties to this Agreement shall determine, by mutual consent, the proper method
of reporting, accounting, and transferring of balances.
	 
	 	 	For past due premiums on all reinsured policies for which premiums remain due and unpaid for
thirty (30) days following their due date, the Insurer shall take appropriate action to
terminate all prospective liability in accordance with the policy provisions and shall
institute its usual collection procedures. If the Insurer fails to take appropriate action to
terminate all prospective liability, the Reinsurer reserves the right to terminate
reinsurance of such ceded policies for which premiums remain unpaid for thirty (30) days past
their due date.
	 
	B)	 	For any business sold under this Agreement, the Reinsurer will specify the percentage of
premium to be paid to it for reinsurance of each policy at the time Reinsurer accepts
liability under the terms of the Underwriting Article of this Agreement.
	 
	C)	 	The liability of the Reinsurer shall begin simultaneously with the Reinsurer’s acceptance of
reinsurance for a short term disability insurance policy, subject to the terms of this
Agreement.
	 
	D)	 	The Insurer is responsible for paying all premium taxes concerning any business covered by
this Agreement
	 
	E)	 	Upon provision of written notice fourteen (14) days in advance, each party shall have the
right, at any reasonable time during normal working hours, to inspect, at the office of the
other party, all non-proprietary, non-confidential and non-privileged books, records and
documents relating to policies reinsured under this Agreement.





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	F)	 	If the Insurer fails to pay the consideration described in this Article, the Reinsurer
shall have the right to terminate, from the date up to which the policy premiums have been
paid, its obligation for that portion of the Underlying Risk for which consideration is in
arrears.
	 
	G)	 	The Reinsurer will be bound by the consideration it specifies for a particular policy.
However, on any date that the Insurer has the right to terminate a policy or change the
premium for said policy, the Reinsurer may, with sixty (60) days advance notice, modify the
rate of consideration or terminate reinsurance on the policy. The Insurer shall then be bound
by the modification.
	 
	H)	 	Reinstatement of the reinsurance on ceded policies which have been terminated under any
provision of this Article shall be at the Reinsurer’s discretion.
	 
	I)	 	Each party to this Agreement shall have the right to offset
any balance(s), or any other amounts due relating to this or related agreements. In the event of the insolvency of a party
to this Agreement, offsets shall only be allowed in accordance with the Insolvency Article of
this Agreement.





ARTICLE IV. CLAIMS



The Insurer shall promptly transmit to the Reinsurer all claims, proofs of loss and supplemental
statements of disability submitted on a policy reinsured hereunder. Upon receipt thereof the
Reinsurer will pay the claim and/or recommend other appropriate action. The Reinsurer will not be
liable for any claim received from the Insurer more than one year after this claim has been
received in the Insurer’s office. The Reinsurer may change the reinsurance rate, retroactive to the
last renewal date, if the receipt of a claim reported to the Reinsurer is more than one year after
receipt by the Insurer and if the timely receipt would have caused a different reinsurance rate to
be charged.





	A)	 	All services will be performed in accordance with Appendix B, the Claims Management
Agreement. This Agreement includes administrative procedures particular to the claims
management process and includes, but is not limited to: Authorization to Pay Claims, Claim
Administration Guidelines, Claim Data; Payment of Benefits; Payment of Claim Expenses; Right
to Audit; and is mutually agreed to by the parties of this Agreement.





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	B)	 	The Reinsurer will undertake the defense of any suit, or portion of a suit, which is
based or alleged to be based on claims for benefits under group disability policies covered by
this Agreement where the claim is first commenced after the effective date of this Agreement,
and the underlying policy is effective on or after the effective date
of this Agreement. Except
as otherwise provided in this Agreement, choice of counsel and management of any such suit, or
portion of such suit, shall be agreed upon by the Insurer and the Reinsurer, which will have
the exclusive right to settle any such suit, when in its informed and good faith opinion, it
is appropriate to do so. The Insurer will cooperate with the Reinsurer in the defense of such
suits.
	 
	C)	 	The Insurer and the Reinsurer will notify each other promptly of any litigation brought
against it with respect to the policies covered by this Agreement are.
	 
	D)	 	Claims for Extra-Contractual Amounts. “Extra-Contractual Amounts” are amounts outside of
contractual benefits which may include, but are not necessarily limited to: punitive,
exemplary, compensatory or consequential damages or plaintiffs litigation-related costs and
fees.






	 	i)	 	If extra-contractual amounts are awarded against the Insurer solely as a
result of the Reinsurer’s decision, action, delay or failure to act, the Reinsurer shall
pay one hundred percent (100%) of all such amounts.
	 
	 	ii)	 	If extra-contractual amounts are awarded against the Insurer solely as a
result of Insurer’s decision, action, delay, or failure to act, the Reinsurer shall have
no (0%) percentage of liability for the payment of extra-contractual amounts.
	 
	 	iii)	 	When extra-contractual amounts are awarded against the Insurer as a result of
both the Reinsurer’s and the Insurer’s decision, action, delay or failure to act, the
parties agree to share in the payment of any extra-contractual amounts.
	 
	 	iv)	 	To expedite the resolution of certain claims, amounts other than policy benefits
may be added to a claim settlement.
	 
	 	 	 	Allocation of responsibility for decisions, actions, delays, or failures to act shall be
determined by the parties’ agreement subsequent to good faith negotiation. Said determination
is solely for the purpose of efficient administration of this Agreement and for determining
who shall assume the costs in certain instances. If agreement on such allocation cannot be
reached, the matter shall be addressed in accordance with the Arbitration Article of this
Agreement.
	 
	 	 	 	If any portion of this subsection (D) is deemed to be illegal under any law (decisional or
statutory) or regulation of any Federal, State or local government, insofar as it applies to
that area’s jurisdiction, then said portion is automatically terminated.





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	E)	 	The Reinsurer hereby agrees to provide claim management services for all group short
term disability claims of the Insurer with dates of disability prior to January 1, 1999. For an
initial payment of $230 per claim, and monthly payment of $75 per claim thereafter for the
duration of the claim, Reinsurer shall manage such claims in accordance with the practices and
procedures outlined in the Claims Service Agreement.
	 
	 	 	The Insurer agrees to prefund an account for claim payments sufficient to cover STD payments.
The Insurer can prefund on a weekly basis. The Insurer will also pay a fee of $4,000 which will
be refunded if the reinsured profit margin exceeds 7% for 1999.
	 
	F)	 	The Reinsurer will deposit federal and/or state income tax as requested by the claimant. In
so doing, the Reinsurer does not act as the agent of the Insurer for IRS purposes. The
Reinsurer shall deposit employee FICA on short term disability benefits paid. The Reinsurer
will transfer the liability for the employer matching FICA and issuance of W-2 forms for short
term disability benefits paid back to the employer of the disabled employee.





ARTICLE V. DURATION, RECAPTURE AND TERMINATION





	A)	 	This Agreement shall govern the relationship of the parties until the liability of the
Reinsurer with respect to all policies reinsured hereunder ceases. In accordance with the
provisions of this Article, this Agreement can be terminated by either party with respect to
all prospective acceptances.
	 
	 	 	Any partial or complete prospective termination of this Agreement must be made in writing
prior to October 1st of each year. Termination shall occur on the desired effective date of
termination or ninety days from receipt of notice, whichever is later.
	 
	B)	 	After this Agreement has been inforce for one (1) year from the effective date, the
Insurer may increase or decrease the Reinsured Percentage. The following schedule is the
minimum Reinsured Percentage for each disability policy in effect at the anniversary date of
this Agreement.





	 	 	 	 	 
	Year 1 following notification
	 	 	75	%
	Year 2 Following notification 
	 	 	75	%
	Year 3 following notification and thereafter
	 	 	50	%





Notification must be received by the Reinsurer not later than October 1 of the year
prior to the intended change. The Reinsured Percentage will remain at current Reinsured
Percentage absent any notification. The change in Reinsured Percentage will occur at the next
renewal date of the underlying reinsured policy occurring after the anniversary of the
change. Upon termination of this Agreement, the Insurer may reduce the Reinsured Percentage
to zero percent (0%) five (5) years from the effective date of the termination. Notification
must be provided 90 days in advance.





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	C)	 	The Reinsured Percentage governing any particular claim under a reinsured policy will be
that Reinsured Percentage in effect as of the date of disability.
	 
	D)	 	As of the date termination becomes effective Reinsurer will provide Insurer only with those
necessary claims and financial services required to manage any reinsured business.
	 
	E)	 	If Insurer becomes insolvent, as determined by the state regulatory agency, this
Agreement will terminate automatically as of the date of insolvency as to all prospective
acceptances by the Reinsurer. Liabilities already incurred by the Reinsurer will be
administered in accordance with the Insolvency Article of this Agreement.





ARTICLE
VI. NON-TRANSFERABILITY OF AGREEMENT



Neither the Insurer nor the Reinsurer shall, without prior consent of the other, which shall
not be unreasonably withheld, sell, assign, transfer, or otherwise dispose of this Agreement,
policies or policy liabilities covered by this Agreement, or any interest in such Agreement, by
voluntary or involuntary act, by assumption agreement or otherwise, and any attempt to dispose of
said interests, without said consent, shall be null and void.
Notwithstanding the foregoing,
Insurer or Reinsurer may arrange for a Third Party Administrator to perform some or all of the
obligations hereunder. So doing will not relieve the Insurer or Reinsurer from the obligations
hereunder, though, in the event that the Third Party Administrator does not perform the obligations
as stated herein.




ARTICLE VII. PARTIES TO THIS AGREEMENT





	A)	 	This is an agreement solely between the Insurer and the Reinsurer. The acceptance
of reinsurance hereunder shall not create any right or legal relation whatever between
the Reinsurer and any of Insurer’s policyholders, beneficiaries, representatives, sales
representatives, employees or shareholders.
	 
	B)	 	A failure or delay of either party to this Agreement to enforce any of the provisions of this
Agreement, or to exercise any option which is herein provided, shall in no way be construed to
be a waiver of such provision.





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ARTICLE VIII. CONFIDENTIALITY





	A)	 	The Insurer and the Reinsurer may come into the possession or knowledge of confidential and
proprietary information of the other in fulfilling obligations under this Agreement. Insurer
and the Reinsurer agree to hold such confidential information in strictest confidence and to
take all reasonable steps to ensure that such confidential information is not disclosed in any
form by any means by each of them or by any of their employees or associates to third parties
of any kind, except by advance authorization. “Confidential information” means any information
which (1) is not generally available to the public, or (2) has not been lawfully obtained by
the parties prior to the date of disclosure to it by the other, and includes but is not
limited to:






	 	i)	 	Information or knowledge about each party’s products, processes, services,
finances, customers, research, computer programs, marketing and business plans, claims
management practices, and reserving methodology; and
	 
	 	ii)	 	Any medical and other personal, individually identifiable information about
people or business entities with whom the parties do business, including customers,
prospective customers, vendors, suppliers, individuals covered by insurance plans, and
each party’s producers and employees.






	B)	 	The Insurer and its agents, employees and representatives will not represent themselves, in
writing, as part of the Reinsurer, or refer, in writing, to the Reinsurer in any policy forms
or promotional materials, without the prior written consent of the Reinsurer.





ARTICLE IX. INSOLVENCY



The Reinsurer agrees that all reinsurance under this Agreement shall be payable by the Reinsurer on
the basis of the liability of the Insurer under each policy reinsured under this Agreement without
diminution because of the insolvency of the Insurer, and the Reinsurer assumes liability for such
reinsurance as of the effective dates of such policies. Any such payments by the Reinsurer shall be
made directly to the Insurer or to its liquidator, receiver, or statutory successor. In the event
of the insolvency of the Insurer, the liquidator, receiver or statutory successor of the Insurer
shall give written notice that a claim is pending against the Insurer with respect to policies
comprising the Underlying Risk within a reasonable time after such claim is filed in the insolvency
proceedings. While the claim is pending, the Reinsurer may investigate such claim and interpose, at
its own expense, in the proceeding where such claim is to be adjudicated any defense or defenses
which it may deem available to the Insurer or its liquidator or receiver or statutory successor.
The expense thus incurred by the Reinsurer shall be chargeable, subject to court approval, against
the Insurer as part of the expenses of liquidation to the extent of a proportionate share of the
benefit which may accrue to the Insurer solely as a result of the defense undertaken by the
Reinsurer.




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Where two or more reinsurers are involved and a majority of interest elect to defend a
claim, the expense will be apportioned in accordance with the terms of the reinsurance agreement as
if the expense had been incurred by the Insurer.




ARTICLE X. ARBITRATION





	A)	 	The parties explicitly agree that all differences, whether matters of fact, law or mixed
fact and law, which arise out of the interpretation or execution of this Agreement, will be
decided by arbitration except for those matters which are left to the sole discretion of the
Reinsurer or the Insurer under the terms of this Agreement. The parties explicitly agree that
arbitration shall be the sole and exclusive remedy for all such differences, and that the
arbitrators will determine the interpretation of this Agreement in accordance with the usual
business and reinsurance practices rather than strict technicalities. Three neutral
arbitrators will decide any differences. They must be active or retired officers of life
insurance companies other than the two parties to this Agreement or any of their subsidiaries.
In addition, the officers may not be former employees of the two parties to this Agreement or
any of their subsidiaries. One of the arbitrators is to be appointed by each party to this
Agreement, and the two arbitrators will select a third. If the two are not able to agree on a
third, the choice will be left to the President of the Society of Actuaries or its successor.
The arbitration shall be in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, or its successor and will take place in Portland, Maine. This
Agreement shall be deemed binding upon the arbitrators for matters expressly agreed to herein.
The arbitrators’ decision shall be by majority vote, and no appeal shall be taken from it. The
judgment rendered by the arbitrators may be entered in any court having proper jurisdiction.
Expenses and fees for the arbitrators shall be shared by the Insurer and the Reinsurer in
equal portions.
	 
	B)	 	The arbitrators may award only contractual damages to either party. In no event may
extra-contractual damages, including amounts available under any state or federal Racketeer
Influenced and Corrupt Organization Act (RICO), be awarded to either party under this
Agreement for breach of said agreement. However, the arbitrators may allocate responsibility
for 1) any extra-contractual amounts awarded against the Insurer, or 2) any amounts
representing extra-contractual damages in a settlement, between the Insurer and the Reinsurer
as set forth in the Claims Article of this Agreement.
	 
	C)	 	The procedures specified in this Article shall be the sole and exclusive procedures for
the resolution of disputes between the parties arising out of or relating to this Agreement;
provided, however, that a party may seek a preliminary injunction or other preliminary
judicial relief if in its judgment such action is necessary to avoid irreparable damage.
Despite such action the parties will continue to participate in good faith in the procedures
specified in this Article. All applicable statutes of limitation shall be tolled while the
procedures specified in this Article are pending. The parties will take such action, if any,
required to effectuate such tolling.





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	D)	 	Notwithstanding any other provision of this Article, in the event that either party
seeks, consents to, or acquiesces in the appointment of, or otherwise becomes subject to, any
trustee, receiver, liquidator, or conservator (including any state insurance regulatory agency
acting in such a capacity), the other party shall not be obligated to resolve any claim,
dispute, or cause of action under this Agreement by arbitration and may elect to bring any
action with respect to such claim, dispute or cause of action in any court of competent
jurisdiction.





ARTICLE XI. YEAR 2000 COMPLIANCE



The Insurer and the Reinsurer each separately represents and warrants that it has
established a written project plan and budget to address Year 2000 issues, and that its plan
includes:





	 	i)	 	conducting an inventory and assessment of Year 2000 impacts to its
telecommunications and information systems, related software and hardware,
and its facilities (e.g., buildings and utilities);
	 
	 	ii)	 	conducting a review of the Year 2000 preparedness of its significant business
partners and suppliers;
	 
	 	iii)	 	correcting its Year 2000 problems and testing
and validating its conversion efforts, and
	 
	 	iv)	 	establishing contingency and avoidance plans.




Each party represents and warrants that all of its telecommunications and information systems and
related software and hardware have been found to be Year 2000 compliant, or will be made so on or
before December 31, 1999. The Insurer agrees to cooperate in good faith with the Reinsurer with
respect to Year 2000 issues by sharing information with the Reinsurer about the status and progress
of the Insurer’s Year 2000 compliance work and with respect to testing and validation. Reinsurer
agrees to do the same. For purposes of this section, “Year 2000 compliant” means: manages and
manipulates data involving dates with full representation of year and century (i.e. YYYYMMDD)
both internally and externally to the Database, System or Application; follows standards for
acquisition, storage, presentation, and handling of dates including provisions for leap year and
leap centuries. This applies to data stored and retrieved, reports, screens, and data that is sent
or received.




ARTICLE XII. ERRORS AND OMISSIONS



Inadvertent and harmless delays, errors or omissions made in connection with this Agreement or any
transaction hereunder, except as otherwise stated in this Agreement,
shall not relieve either party
from any liability which would have attached had such delay, error or omission not occurred,
provided that the fault is rectified as soon as possible after discovery.




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ARTICLE XIII. APPLICABLE LAW



This Agreement is governed by the laws of the State of Maine,




ARTICLE XIV. MODIFICATION





	A)	 	This Agreement constitutes the entire understanding between the Reinsurer and the
Insurer. Neither party shall be bound by any other representation made before or after the
date of this Agreement, unless it is made in writing, signed by both parties and expresses
by its terms an intention to modify this Agreement.
	 
	B)	 	In the event that any one or more of the provisions of this Agreement shall, for any
reason, be held to be invalid, illegal or unenforceable, the remaining provisions of this
Agreement shall be unimpaired.




IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in duplicate by
their respective officers duly authorized so to do as of the date set forth above.




	 	 	 
	DUNCANSON &
HOLT SERVICES,	 	SAFECO LIFE INSURANCE
	INC. (Managing
Agent of Reinsurer)	 	COMPANY
(Insurer)
	 
	 	 
	By
/s/ Paul K.
Fields                                

	 	By
                                                                
	 
	 	 
	Title
V P Finance

	 	Title Sn V. P.
	 
	 	 
	Date
8/30/99

	 	Date 11/4/99
	 
	 	 
	Witness

	 	Witness 






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APPENDIX A-20




AGREEMENT YEAR 1999




January 1, 1999 to December 31, 1999



Member Reinsurers who have contracted with Duncanson & Holt Services, Inc., as Managing
Agent of ADRUS and their levels of participation are as follows:




	 	 	 	 	 	 	 	 	 
	 	 	DOLLAR	 	PERCENTAGE
	MEMBER REINSURER	 	PARTICIPATION	 	PARTICIPATION
	Allianz Life Insurance Company of
North America
	 	 	30,000	 	 	 	100.00	%
	 
	 	 	 	 	 	 	 	 
	TOTAL AUTHORIZED PARTICIPATION
	 	$	30,000	 	 	 	100.00	%






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Claims Management Agreement

Appendix B




I. Claims Management Services



In satisfaction of its obligations to assist the Insurer with the processing of claims arising
under policies reinsured in connection with the Group Short Term Disability Reinsurance Treaty
(“the Treaty”), the Reinsurer designates Claims Service International, Inc. (“CSI”) to perform
claims management services in connection with the Treaty as set forth herein. The Insurer shall not
be liable to CSI for the services rendered under the Claims Management Agreement and shall not bear
any of the expenses incurred by CSI in connection with CSI’s performance of services hereunder,
except as may be expressly set forth herein. The obligation of CSI to perform administrative
services in connection with the Treaty shall continue until such time as all reinsured claims have
been paid, unless other agreement is reached and becomes a written part of this Agreement.




II. Standard of Care



CSI will manage claims using the same standard of care, diligence and good faith which
Reinsurer exercises in the performance of its own business and shall be consistent with prudent
claim processing practices in the industry in compliance with applicable laws.




III.
Licenses



CSI will maintain all necessary licenses to perform the functions assigned to it in this Claims
Management Agreement. CSI shall execute any documents reasonably required by the Insurer in order
for the Insurer to comply with laws relating to the third party administration of claims.




IV. Claims Administration Guidelines/Claims Data



The Insurer will direct all policyholders that insured individuals and their assignees must
provide notices of all reinsured disability claims, proofs of loss and any supplemental statements
of disability directly to CSI for processing. CSI will communicate with all parties involved in
the claims management process using the identity of “Claims Advisory Agent” for the Insurer. CSI,
on behalf of the Reinsurer, will use Insurer STD claims forms,




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as modified to name CSI as the Claims Advisory Agent.



CSI will provide the Insurer with copies of all responses to Department of Insurance (DOI)
complaints. The Insurer will not retain individual STD claim files except for copies of responses
to DOI complaints. CSI will retain all individual STD claims files and will store all such files
for a period of ten years after the closure of the file. CSI will destroy all claims files in a
manner to preserve confidentiality. Upon proper request, CSI shall provide access to the books and
records maintained by CSI for the purposes of examination, audit and inspection by any insurance
department which purports to exercise jurisdiction over the business which is subject to the
Treaty.




V. Payment of Claims/Authorization to Pay Claims



Upon receipt of claims, proofs of loss and/or supplemental statements of disability, CSI, on
behalf of the Reinsurer in accordance with Article IV of the Treaty, will pay the claim or will
take appropriate alternative action. The Insurer or the policyholder will provide to CSI all
necessary information to verify eligibility and premium requirements, where such information has
not already been provided to the Reinsurer. CSI shall be responsible for mailing all acknowledgment
letters and claims denial letters.



In the event that CSI determines that a claim should be denied, CSI will send to the claimant a
notice of denial within 10 business days of the determination. Any notice of denial will be sent
directly to claimant and will state the reason for denial. Procedures for appeals are to be included
in the letter to the claimant. A copy of the denial letter shall be forwarded to the policyholder
when applicable.



Beginning
January 1, 1999, CSI will process and pay all claims made against the policies reinsured
under this Treaty for the Insurer. In connection therewith, the Insurer will provide to CSI
signatory authority on a block of the Insurer drafts to be written against a the Insurer bank
account. CSI shall be responsible for mailing, at its expense, all communications that are required
to be mailed to claimants, including checks and EOBs.



CSI shall pay each claim under policies reinsured under the Treaty within the time period allowed
by the state in which the claimant resides. Before suspending any payments, CSI will send to
claimant a letter advising the claimant that benefits will be suspended unless the claimant sends
information which in the judgment of CSI supports the continued payment of benefits. A copy of this
letter shall be forwarded to the policyholder, when applicable.




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VI. Claims Expenses 



All STD claims expenses will paid by the Reinsurer. Normal claim expenses include, but are not
limited to, the following: medical records; Independent Medical Exams; vendor costs; claim
investigation and rehabilitation. It does not include salaries of either the Insurer’s or
Reinsurer’s employees.




VII. Right to Audit 



At its discretion the Insurer, or its designated representative, has the right to conduct
random audits of STD claims reinsured under the Treaty. Such audits shall be conducted by staff of
the Insurer, or its designated representative, at the expense of the Insurer and at the regular
locations of CSI and/or the Reinsurer during normal business hours. Access to all relevant policy
information and case data regarding reinsured claims shall be made available for audit proceedings.
The number of claims to be audited will be determined in the sole discretion of the Insurer.



Results of audits by the Insurer shall be communicated to the Reinsurer in a verbal summary
followed by written documentation of the findings, including any irregularities or problems
identified.




VIII. Information Relating to Fraudulent Claims 



CSI will provide to the Insurer, upon the Insurer’s request, a list of measures that CSI uses
to detect fraudulent claims.




IX. Responsibility of Reinsurer for Act of CSI



Reinsurer shall be responsible for all acts of CSI as if the Reinsurer had itself performed
said acts.



The signatures below constitute acceptance of the Claims Management Agreement by all parties.
Nothing contained in the Claims Management Agreement shall vary, alter or affect any of the terms
or conditions of the Group Short term Disability Reinsurance Agreement. The Claims Management
Agreement may be revised only by changes agreed to by both parties and documented in writing.




15









 







IN WITNESS WHEREOF, the parties have signed this Claims Management Agreement on the dates shown.




	 	 	 	 
	DUNCANSON & HOLT SERVICES,	SAFECO LIFE INSURANCE
	INC. (Managing Agent of Reinsurer)	COMPANY (Insurer)
	 
	 	 
	By /s/ Paul K. Fields

	 	By 
	 
	 	 

	 
	 	 
	Title
V P Finance

	 	Title Sr. V.P.
	 
	 	 
	Date
8/30/99

	 	Date 11/4/99
	 
	 	 
	 
	 	 

	Witness

	 	Witness 






16









 





AMENDMENT NO. 1

TO THE

GROUP SHORT TERM DISABILITY REINSURANCE AGREEMENT



This
Amendment No. 1 (the “Amendment”) is effective as of
July 1, 2006 and is hereby made a part
of and incorporated into the Group Short, Term Disability Reinsurance
Agreement effective January 1, 1999 (the “Agreement”) by
and between Symetra
Life Insurance Company (formerly Safeco Life
Insurance Company) (hereinafter the “Insurer”) of Bellevue, Washington and Reliance Standard Life
Insurance Company doing business as Custom Disability Solutions (successor to Integrated Disability
Resources, Inc., formerly Duncanson & Holt Services, Inc.), as Managing Agent (hereinafter the
“Managing Agent”) for each of the participating reinsurers collectively referred to in the
Reinsurance Agreement as the American Disability Reinsurance Underwriters Syndicate (“ADRUS”).
Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the
Agreement.



Intending
to be legally bound, Insurer and Managing Agent agree to amend the Agreement as follows:





	1.	 	ARTICLE I. GENERAL PROVISIONS, Paragraph C is amended to
read as follows:






	 	C)	 	All new business proposals which are quoted using rates
provided by the Reinsurer
shall be reinsured under this Agreement, except for new business proposals produced:






	 	i)	 	by Meridian Benefits in the states of North Carolina, South Carolina and
Tennessee, or
	 
	 	ii)	 	from distribution channels and opportunities brought to insurer by other reinsurance outlets, where discussions concerning such opportunities are not
initiated by the Insurer.






Otherwise, this Agreement represents, an exclusive reinsurance arrangement between the
parties with respect to new business proposals.




This Agreement will continue to represent an exclusive reinsurance arrangement between
the parties with respect to renewals for Policies which are in force and reinsured with
Reinsurer as of July 1, 2006. In the event the Reinsurer declines to accept a renewal of
any such policy, the Insurer may reinsure such policy with another reinsurer.




	2.	 	ARTICLE III. FINANCIAL RESPONSIBILITIES AND  TRANSACTIONS, Section A), first two paragraphs
are amended to read as follows:
	 
	 	 	The Insurer shall remit premium for reinsured group short term disability policies to the
Reinsurer within ninety (90) days from the date on which premium is
due to the Insurer.





1









 







The
Insurer will follow all prudent procedures for premium collection and will notify the
Reinsurer of all reinsured policies for which premium is overdue by ninety (90) days of the due
date.




The third and fourth paragraphs under Section A) remain unchanged by this Amendment.




	3.	 	ARTICLE V. DURATION, RECAPTURE AND TERMINATION is amended to read as follows:





ARTICLE V. DURATION, TERMINATION AND RECAPTURE





	 	A)	 	Duration. This Agreement shall govern the relationship of the parties until the
liability of the Reinsurer with respect to all policies reinsured under this Agreement
ceases.
	 
	 	 	 	Insurer agrees to continue an ongoing active relationship
with the Reinsurer for an initial
period ending December 31, 2007.
	 
	 	B)	 	Termination.






	 	(i)	 	Without Cause, Subject to Section A in this Article VI, either party may
terminate this Agreement with respect to all prospective acceptances,
at any time by
providing ninety (90) days prior written notice to the other party.
	 
	 	(ii)	 	Insurer Insolvency. If Insurer becomes insolvent as determined by one or
more state regulatory agencies, this Agreement will terminate automatically as of the
date of insolvency as to all prospective acceptances. Liabilities already incurred by
the Reinsurer will be administered in accordance with the Insolvency Article of this
Agreement.
	 
	 	(iii)	 	Immediate Termination Rights Notwithstanding the above, Insurer may terminate
this Agreement upon the occurrence of any of the following at any time by the giving
of fifteen (15) days prior written notice to the Managing Agent:






	 	a)	 	Either ADRUS or the Managing Agent ceases active underwriting operations;
	 
	 	b)	 	A State Insurance Department or other regulatory authority
orders ADRUS, or any then-participating member of ADRUS, to cease writing business;
	 
	 	c)	 	ADRUS, any then-participating member of ADRUS, or the Managing
Agent: 1) becomes insolvent, 2) is placed into liquidation or receivership,
or 3) has instituted against it proceedings for the appointment of a supervisor,
receiver, liquidator, rehabilitator, conservator or trustee in
bankruptcy, or other agent known by whatever name, to take possession of its assets or control
of its operations;





2









 








	 	d)	 	ADRUS or the Managing Agent enters into a definitive written agreement to
directly or indirectly assign its interests in this Agreement and liability for
obligations under this Agreement to another party without the insurer prior
written consent;
	 
	 	e)	 	The Managing Agent has entered into a definitive agreement to
sell, substantially all of its assets without the Insurer’s prior written
consent; or
	 
	 	f)	 	ADRUS or the Managing Agent, has engaged in any of the following: 1)
a pattern or practice of failure by ADRUS or the Managing Agent to pay claims on a
timely basis, 2) a pattern or practice of failure by ADRUS or the Managing Agent
to abide by applicable federal or state laws, 3) a pattern or practice of acts of
bad faith conduct by ADRUS or the Managing Agent, or 4) a pattern or practice of
committing acts of negligent behavior by ADRUS or the Managing Agent, in
discharging the Reinsurer’s duties under this Agreement.






	 	C)	 	Recapture.
	 
	 	 	 	If the insurer terminates the Agreement effective on January 1, 2008 or some other date in
2008, the recapture period shall be three (3) years from the effective date of such
termination.
	 
	 	 	 	If the Insurer terminates the Agreement effective on or after January 1, 2009, the
recapture period shall be two (2) years from the effective date of such termination.
	 
	 	 	 	Recapture through any means will include 100% of the risk for the policies unless other
terms are agreed to by the Insurer and Reinsurer.
	 
	 	D)	 	The Reinsured Percentage governing any claim under a reinsured policy will be
that Reinsured Percentage in effect as of the date of disability.
	 
	 	E)	 	As of the date termination of the Agreement becomes effective, Reinsurer will provide
Insurer only with those necessary claim and financial services
required to manage any
reinsured business Upon termination, Reinsurer will utilize renewal methods, tools and
procedures which are consistent with those in use for renewals generally within Reinsurer’s
overall block of business at the time Insurer’s policies are
being renewed.






	4.	 	The Agreement is amended by the addition of the following
Article, which is applicable to ADRUS members for all ADRUS
agreement years effective on or after July 1, 2006.





ARTICLE XV. COLLATERAL REQUIREMENTS





If
the amount of capital and surplus of any ADRUS member has been
reduced by  50% or more of the amount of capital and surplus as stated in such ADRUS member’s most recent
prior annual statutory statement filed with its state of domicile, such ADRUS member shall
deposite in trust with a trustee (which shall not be an affiliate of such ADRUS member), and
thereafter at all times maintain in such trust, assets at least equal in value to such ADRUS
member’s proportionate amount of the reserves required to be maintained from time to time



3









 






by ADRUS under sound actuarial principles and accepted statutory accounting
practices, with respect to reserves required for liabilities incurred by ADRUS
members under this Agreement on or after July 1, 2006.




Such ADRUS member may alternatively post a letter of credit to satisfy such obligations.
The trust or letter of credit arrangements, and all documentation relating thereto, must be
satisfactory in form and substance to Insurer in its good faith discretion. The trust shall
be terminated and the assets returned to the ADRUS member, or the letter of credit returned
for cancellation, if the ADRUS member’s amount of capital and surplus increases by 10% of
the amount of capital and surplus as stated in such ADRUS member’s most recent prior
annual statutory statement filed with its state of domicile.




The parties acknowledge that the collateral obligations under this provision predicated
upon a reduction in surplus shall not be applicable if the ADRUS member has already
provided collateral or taken other lawful actions that allow Insurer
to receive full reserve credit with respect to the reinsurance ceded under this Agreement.


All provisions of the Agreement not in conflict with the provisions of this Amendment
will continue unchanged.



IN WITNESS
WHEREOF  the parties hereto have caused this Amendment to be executed in duplicate
by the signatures of their duly authorized representatives as indicated below.




	 	 	 
	CUSTOM DISABILITY SOLUTIONS.

	 	SYMETRA LIFE INSURANCE COMPANY
	Managing Agent of Reinsurer
	 	 
	 
	 	 
	By:     /s/ Paul K. Fields

	 	By:     /s/ Michael Fry
	 
	 	 
	Name:    Paul K. Fields

	 	Name:      Michael Fry
	 
	 	 
	Title:      CFO

	 	Titles:      VP
	 
	 	 
	Date:      8/16/2006

	 	Date:     8/17/2006







4










 






AMENDMENT NO. 2

TO THE

GROUP SHORT TERM DISABILITY REINSURANCE AGREEMENT



This
Amendment no. 2 (“Amendment”) is hereby made a part of and incorporated into the
Group Short Term Disability Reinsurance Agreement which was effective
January 1, 1999
(“Agreement”) by and between Symetra Life Insurance Company (formerly Safeco Life
Insurance Company) (“Insurer”) of Bellevue, Washington and Reliance Standard Life Insurance
Company doing business as Custom Disability Solutions (successor to Integrated Disability
Resources, Inc., formerly Duncanson & Holt Services, Inc.), as
Managing Agent (“Managing
Agent”) for each of the participating reinsurers collectively
referred to in the Agreement as
the American Disability Reinsurance Underwriters Syndicate (“ADRUS”). Capitalized terms not
otherwise defined herein shall have the meaning ascribed to them in the Agreement.



Intending
to be legally bound, Insurer and Managing Agent agree to amend the Agreement as follows:



Effective
January 1, 1999, Appendix A-20 appearing in the Agreement is amended to read as follows:




APPENDIX A




AGREEMENT YEAR 1999




January 1,1999 to December 31,1999



Member Reinsurers who have contracted with Duncanson & Holt Services, Inc. as
Managing Agent of ADRUS and their levels of participation are as follows:




	 	 	 	 	 	 	 	 	 
	 	 	DOLLAR	 	PERCENTAGE
	MEMBER REINSURER[S]	 	PARTICIPATION	PARTICIPATION
	UNUM Life Insurance Company of
America
	 	$	30,000	 	 	 	100	%
	 
	 	 	 	 	 	 	 	 
	TOTAL AUTHORIZED PARTICIPATION
	 	$	30,000	 	 	 	100	%






1









 




IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed in
duplicate by the signatures of their duly authorized representatives as indicated below.




	 	 	 	 	 	 	 
	CUSTOM DISABILITY SOLUTIONS,	 	 	 	 
	Managing Agent of Reinsurer	 	SYMETRA LIFE INSURANCE COMPANY
	 
	 	 	 	 	 	 
	By:

	 	/s/ Paul K. Fields
	 	By:
	 	/s/ David C. Fry
	 
	 	 	 	 	 	 
	Name:

	 	Paul K. Field
	 	Name:
	 	David C. Fry
	 
	 	 	 	 	 	 
	 

	 	CFO
	 	Title:
	 	Senior Actuary & AVP
	 
	 	 	 	 	 	 
	 

	 	12/7/2006
	 	Date:
	 	12/8/2006






2









 





APPENDIX A-l




AGREEMENT YEAR 2000




January 1, 2000 to December 31, 2000



Member Reinsurers who have contracted with Duncanson & Holt Services, Inc. as Managing Agent
of ADRUS and their levels of participation are as follows:




	 	 	 	 	 	 	 	 	 
	 	 	DOLLAR	 	PERCENTAGE
	MEMBER
REINSURER	 	PARTICIPATION	 	PARTICIPATION
	UNUM Life
Insurance Company
of America
	 	$	30,000	 	 	 	100.0	%
	 
	 	 	 	 	 	 	 	 
	TOTAL
AUTHORIZED
PARTICIPATION
	 	$	30,000	 	 	 	100.0	%






1









 





APPENDIX A-2




AGREEMENT YEAR 2001




January 1, 2001 to December 31, 2001



Member Reinsurers who have contracted with Duncanson & Holt Services, Inc. as Managing Agent
of ADRUS and their levels of participation are as follows:




	 	 	 	 	 	 	 	 	 
	 	 	DOLLAR	 	PERCENTAGE
	MEMBER REINSURER	 	PARTICIPATION	 	PARTICIPATION
	UNUM Life Insurance
Company of America
	 	$	30,000	 	 	 	100.0	%
	 
	 	 	 	 	 	 	 	 
	TOTAL AUTHORIZED
PARTICIPATION
	 	$	30,000	 	 	 	100.0	%






2









 





APPENDIX A-3




AGREEMENT YEAR 2002




January 1, 2002 to December 31, 2002



Member
Reinsurers who have contracted with Integrated Disability Resources, Inc. as Managing
Agent of ADRUS and their levels of participation are as follows:




	 	 	 	 	 	 	 	 	 
	 	 	DOLLAR	 	PERCENTAGE
	MEMBER
REINSURER	 	PARTICIPATION	 	PARTICIPATION
	UNUM Life Insurance
Company of America
	 	$	30,000	 	 	 	100.0	%
	 
	 	 	 	 	 	 	 	 
	TOTAL AUTHORIZED
PARTICIPATION
	 	$	30,000	 	 	 	100.0	%






3









 





APPENDIX A-4




AGREEMENT YEAR 2003




January 1, 2003 to December 31, 2003



Member Reinsurers who have contracted with Integrated Disability Resources, Inc. as Managing Agent
of ADRUS and their levels of participation are as follows:




	 	 	 	 	 	 	 	 	 
	 	 	DOLLAR	 	PERCENTAGE
	MEMBER REINSURER	 	PARTICIPATION	 	PARTICIPATION
	UNUM Life
Insurance Company of
America
	 	$	30,000	 	 	 	100.0	%
	 
	 	 	 	 	 	 	 	 
	TOTAL AUTHORIZED
PARTICIPATION
	 	$	30,000	 	 	 	100.0	%






4









 





APPENDIX A-5




AGREEMENT YEAR 2004




January 1, 2004 to December 31, 2004



Member Reinsurers who have contracted with Integrated Disability Resources, Inc. as Managing
Agent of ADRUS and their levels of participation are as follows:




	 	 	 	 	 	 	 	 	 
	 	 	DOLLAR	 	PERCENTAGE
	MEMBER REINSURER	 	PARTICIPATION	 	PARTICIPATION
	UNUM Life
Insurance Company of
America
	 	$	30,000	 	 	 	100.0	%
	 
	 	 	 	 	 	 	 	 
	TOTAL AUTHORIZED
PARTICIPATION
	 	$	30,000	 	 	 	100.0	%






5









 





APPENDIX A-6




AGREEMENT YEAR 2005




January 1, 2005 to December 31, 2005




Member Reinsurers who have contracted with Integrated Disability Resources, Inc. as Managing
Agent of ADRUS and their levels of participation are as follows:



	 	 	 	 	 	 	 	 	 
	 	 	DOLLAR	 	PERCENTAGE
	MEMBER REINSURER	 	PARTICIPATION	 	PARTICIPATION
	UNUM Life Insurance
Company of America
	 	$	30,000	 	 	 	100.0	%
	 
	 	 	 	 	 	 	 	 
	TOTAL AUTHORIZED
PARTICIPATION
	 	$	30,000	 	 	 	100.0	%






6









 





APPENDIX A-7




AGREEMENT YEAR 2006




January 1, 2006 to December 31, 2006



Member Reinsurers who have contracted with Custom Disability Solutions as Managing Agent of
ADRUS and their levels of participation are as follows:




	 	 	 	 	 	 	 	 	 
	 	 	DOLLAR	 	PERCENTAGE
	MEMBER REINSURER	 	PARTICIPATION	 	PARTICIPATION
	Reliance Standard Life
Insurance Company
	 	$	30,000	 	 	 	100.0	%
	 
	 	 	 	 	 	 	 	 
	TOTAL AUTHORIZED
PARTICIPATION
	 	$	30,000	 	 	 	100.0	%







7