<PAGE>
 
                                                                   EXHIBIT 10(D)

                         FORM OF REINSURANCE AGREEMENT
                 BETWEEN WESTERN UNITED LIFE ASSURANCE COMPANY
                    AND OLD STANDARD LIFE INSURANCE COMPANY
<PAGE>
 
________________________________________________________________________________
 


                                  REINSURANCE

                                   AGREEMENT


________________________________________________________________________________





                                    Between


                     WESTERN UNITED LIFE ASSURANCE COMPANY


                                      and


                      OLD STANDARD LIFE INSURANCE COMPANY



<PAGE>
 
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                   Page
                                                                   ----
<S>                                                                <C> 
A.    REINSURANCE COVERAGE                                          1  
B.    EFFECTIVE DATE OF AGREEMENT AND OF REINSURANCE                2
C.    AMOUNT DUE FROM REINSURED                                     2
D.    AMOUNT DUE FROM REINSURER                                     2
E.    MONTHLY REPORTS AND PAYMENT SCHEDULE                          2
F.    ANNUAL REPORTS                                                3
G.    TAX TREATMENT                                                 3
H.    UNUSUAL EXPENSES AND ADJUSTMENTS                              3
I.    POLICY ADMINISTRATION                                         4
J.    POLICY CHANGES                                                4
K.    ASSIGNMENT OF REINSURANCE                                     5
L.    ERRORS                                                        5
M.    REDUCTIONS AND CANCELLATIONS                                  5
N.    AUDIT OF RECORDS AND PROCEDURES                               5
O.    ARBITRATION                                                   6
P.    CHOICE OF LAW AND FORUM                                       6
Q.    INSOLVENCY                                                    6
R.    PARTIES TO AGREEMENT                                          7
S.    SUSPENSION AND REACTIVATION                                   7
T.    DURATION AND TERMINATION                                      8
U.    MISCELLANEOUS                                                 8
V.    EXECUTION                                                     9 
               SCHEDULES
               ---------
               SCHEDULE I                                          10
               SCHEDULE II                                         11
               SCHEDULE III                                        13
               SCHEDULE IV                                         14
               SCHEDULE V                                          15
               SCHEDULE VI                                         17
</TABLE>
<PAGE>
 
                   R E I N S U R A N C E    A G R E E M E N T

                                    between

                     WESTERN UNITED LIFE ASSURANCE COMPANY

                                       of

                             Spokane, Washington.,

                hereinafter referred to as the "REINSURED," and

                      OLD STANDARD LIFE INSURANCE COMPANY

                                       of

                                 Boise, Idaho,

                  hereinafter referred to as the "REINSURER."


                            A. REINSURANCE COVERAGE
                               --------------------

1. The annuity policies issued by the REINSURED listed on Schedule I ( the
   "Policies") shall be reinsured with the REINSURER in accordance with the
   terms of this Agreement.

2. The reinsurance shall cover all benefits provided by the Policies in the
   amount of the Reinsurance Share set forth in Schedule I.

3. The liability of the REINSURER shall begin:

   a. for Policies written by REINSURED from and including April 1, 1998 up to
   but not including the Effective Date of this Agreement (Closed Block
   Policies) as of the date each such Policy was issued; and

   b. for Policies issued on or after the Effective Date of this Agreement
   (Open Block Policies), concurrently with that of the REINSURED.

4. Reinsurance with respect to any Policy shall not be in force and binding
   unless the Policy issued directly by the REINSURED is in force and unless the
   issuance and delivery of such Policy constituted the doing of business in a
   state of the United States of America, the District of Columbia, or a country
   in which the REINSURED was properly licensed.

5. The reinsurance under this Agreement with respect to any Policy shall be
   maintained in force without reduction so long as the liability of the
   REINSURED under such reinsured Policy remains in force, without reduction,
   unless reinsurance is terminated or reduced as provided herein pursuant to
   Sections T and M respectively.
<PAGE>
 
               B. EFFECTIVE DATE OF AGREEMENT AND OF REINSURANCE
                  ----------------------------------------------

1. The Effective Date of this Agreement shall be __________

2. Closed Block Policies shall be reinsured in bulk on the Effective Date of
   this Agreement,

3. Open Block Policies shall be reinsured automatically upon the issuance of any
   such Policy by the REINSURED.


                         C. AMOUNTS DUE FROM REINSURED
                            --------------------------

The REINSURED shall pay the REINSURER the Reinsurance Share, as set forth in
Schedule I, of the Premiums received by the REINSURED, plus interest, calculated
as set forth in Schedule IV.


                         D. AMOUNTS DUE FROM REINSURER
                            --------------------------

1. Benefits
   --------

   The REINSURER shall pay the REINSURED:

   a. the Reinsurance Share of the gross amount of all death or annuity benefits
   paid by the REINSURED (i.e., without deduction for reserves) with respect to
   the Policies reinsured hereunder; and

   b. the Reinsurance Share of the cash surrender value net of surrender charges
   paid by the REINSURED  with respect to the Policies reinsured hereunder, and

2. Commissions
   -----------

   The REINSURER shall pay the REINSURED the Reinsurance Share of Commissions
   paid by the REINSURED  with respect to Policies reinsured hereunder.

3. Administrative Allowances
   -------------------------

   The REINSURER shall pay the REINSURED the Administrative Allowances as
   defined in Schedule I as follows:

   a. The Policy Issuance Allowances shall be a one time charge payable in full
   concurrent with payment of the reinsurance Premiums by the REINSURED.

   b. The Policy Servicing Allowances shall be payable monthly by REINSURER.


                    E. MONTHLY REPORTS AND PAYMENT SCHEDULE
                       ------------------------------------

1. Except as otherwise specifically provided herein, all amounts due to be paid
   by either the REINSURER or the REINSURED shall be determined and paid on a
   net basis calculated as of the last day of the calendar month to which such
   amount is attributable, plus interest calculated and accrued pursuant to
   Schedule IV.

2. The REINSURED shall submit a monthly report substantially in accordance with
   Schedule II (the "Monthly Report") not later than the fifteenth day of each
   calendar month, regarding reinsurance occurring during the preceding calendar
   month.

3. Any amounts indicated in the Monthly Report as due from the REINSURED to the
   REINSURER shall accompany such report.  Any amounts indicated in the Monthly
   Report as due from the REINSURER to the REINSURED shall be paid by the
   REINSURER within fifteen (15) days after REINSURER'S receipt of the Monthly
   Report plus interest accrued up to the date of such payment.

4.  Interest shall be calculated and accrue as specified in Schedule IV.
<PAGE>
 
                               F. ANNUAL REPORTS
                                  --------------

1. Not later than thirty (30) days after the end of each calendar year, the
   REINSURED shall submit to the REINSURER an Annual Report substantially in
   accordance with Schedule III.

2. Each year the REINSURED shall provide the REINSURER with a copy of its annual
   financial reports prepared in accordance with GAAP, if applicable, and its
   annual statutory statement, as soon as they are available.


                                G. TAX TREATMENT
                                   -------------

The parties elect to have this Agreement treated in accordance with Section
1.848-2(g)(8) of the Income Tax Regulations issued under Section 848 of the
Internal Revenue Code of 1986. Specific details of this election are set forth
in Schedule VI.


                      H. UNUSUAL EXPENSES AND ADJUSTMENTS
                         --------------------------------

1. Any unusual expenses, as hereinafter defined, incurred by the REINSURED in
   defending or investigating a claim for liability on a Policy or rescinding a
   Policy reinsured hereunder shall be participated in by the REINSURER in the
   same proportion as its Reinsurance Share.

2. Unusual expenses shall include, but not be limited to, penalties, attorneys
   fees, and interest imposed automatically by statute against the REINSURED and
   arising solely out of a judgment rendered against the REINSURED in a suit for
   Policy benefits reinsured hereunder.

3. The following categories of expenses or liabilities shall not be "unusual
   expenses":

   a. routine investigative or administrative expenses;

   b. expenses incurred in connection with a dispute or contest arising out of
   conflicting claims of entitlement to Policy proceeds or benefits which the
   REINSURED admits are payable;

   c. expenses, fees, settlements, or judgments arising out of or in connection
   with claims against the REINSURED for punitive or exemplary damages; and

   d. expenses, fees, settlements, or judgments arising out of or in connection
   with claims made against the REINSURED and based on alleged or actual bad
   faith, failure to exercise good faith, or tortious conduct.


                            I. POLICY ADMINISTRATION
                               ---------------------

1. The Policies reinsured pursuant to the terms of this Agreement shall be
   administered by the REINSURED in accordance with the terms of each Policy and
   in compliance with applicable statutes, regulations and rules.

2. Administrative expenses incurred in connection with administration of the
   Policies reinsured hereunder shall be paid by REINSURED and reimbursable by
   REINSURER pursuant to Section H hereinabove and Schedule I.


                               J. POLICY CHANGES
                                  --------------

1. All Policies shall be underwritten in accordance with the REINSURED'S
   underwriting rules applicable to such Policies as of the Effective Date of
   this Agreement.

2. If the REINSURED intends to make a change in the terms or conditions or
   underwriting rules of a Policy reinsured hereunder including, but not limited
   to a change in the method used to calculate the statutory reserve on the
   Policy 
<PAGE>
 
   and such change is likely to affect the risk reinsured hereunder in respect
   of such Policy, the REINSURED shall notify the REINSURER of such proposed
   change.

3. For purposes of this Agreement, any change made to a Policy reinsured
   hereunder which has not been approved by the REINSURER shall be deemed to be
   the issuance of a new policy form by the REINSURED. The REINSURER shall
   inform the REINSURED whether the REINSURER will include such new policy form
   under this Agreement or will terminate or modify the reinsurance hereunder in
   respect of such policy.

4. Unless otherwise agreed by the REINSURER and the REINSURED, the interest
   rates credited on the Policies reinsured hereunder shall be determined
   according to interest rates credited by the REINSURED.


                          K. ASSIGNMENT OF REINSURANCE
                             -------------------------

If the REINSURED proposes to sell, assumption reinsure or otherwise transfer the
Policies or risks that are reinsured under this Agreement to any third party, it
shall require that the third party agree in writing to an assignment of all
rights and obligations of the REINSURED under this Agreement. The REINSURER may
object to any assignment that would result in a material adverse economic impact
to the REINSURER. If the REINSURER objects to an assignment on this basis, the
REINSURED and the REINSURER shall mutually agree on a termination charge which
shall be paid by the REINSURED to the REINSURER.


                                   L. ERRORS
                                      ------

If either party identifies an error in the Monthly Reports or any other
inadvertent clerical error, then such error shall be corrected by restoring both
the REINSURED and the REINSURER to the positions they would have occupied had no
such error occurred.  If the error relates to a Monthly report or other report,
the REINSURED shall promptly provide a revised report to REINSURER.


                        M. REDUCTIONS AND CANCELLATIONS
                           ----------------------------

1. If a portion of a Policy is terminated, the REINSURER shall return to the
   REINSURED any reinsurance Premiums on that Policy in the amount that the
   Reinsurance Share bears to the amount of the reduction.

2. If a Policy is cancelled in accordance with a thirty day cancellation
   provision, the REINSURED shall refund the entire Policy Issuance Allowance to
   the REINSURER, and the REINSURER shall refund the entire Reinsurance Share of
   the Premiums to REINSURED each as they relate to the cancelled Policy

3. Payments made pursuant to a reduction or cancellation shall include interest
   be paid pursuant to Section E.


                       N. AUDIT OF RECORDS AND PROCEDURES
                          -------------------------------

1. The REINSURER and the REINSURED each shall have the right to audit, at the
   office of the other, all records and procedures relating to reinsurance under
   this Agreement.

2. Upon reasonable notice to the REINSURED, the REINSURER may require additional
   monthly or annual reports from the REINSURED in order to obtain the data
   REINSURER reasonably needs to properly administer this Agreement or to
   prepare its financial statements.
<PAGE>
 
                                O. ARBITRATION
                                   -----------

If the REINSURED and the REINSURER cannot mutually resolve a dispute regarding
the interpretation or operation of this Agreement, the dispute shall be decided
through arbitration as set forth in the Schedule V. The arbitrators shall base
their decision on the terms and conditions of this Agreement. However, if the
terms and conditions of this Agreement do not explicitly dispose of an issue in
dispute between the parties, the arbitrators may base their decision on the
customs and practices of the insurance and reinsurance industry rather than
solely on an interpretation of applicable law. The arbitrators' decision shall
take into account the right to offset mutual debts and credits as provided in
this Agreement. There shall be no appeal from the arbitrators' decision. Any
court having jurisdiction over the subject matter and over the parties may
reduce the arbitrators' decision to judgment.

The parties intend this section to be enforceable in accordance with the Federal
Arbitration Act (9 U.S.C., Section 1) including any amendments to that Act which
are subsequently adopted. In the event that either party refuses to submit to
arbitration as required by paragraph 1, the other party may request a United
States Federal District Court to compel arbitration in accordance with the
Federal Arbitration Act. Both parties consent to the jurisdiction of such court
to enforce this section and to confirm and enforce the performance of any award
of the arbitrators.


                          P. CHOICE OF LAW AND FORUM
                             -----------------------

Idaho law shall govern the terms and conditions of the Agreement. In the case of
an arbitration, the arbitration hearing shall take place in Boise, Idaho,


                                 Q. INSOLVENCY
                                    ----------

1. In the event of the insolvency of the REINSURED, all reinsurance shall be
   payable directly to the liquidator, receiver, or statutory successor of said
   REINSURED, without diminution because of the insolvency of the REINSURED.

2. In the event of the insolvency of the REINSURED, the liquidator, receivor, or
   statutory successor shall give the REINSURER written notice of the pendency
   of a claim on a Policy reinsured within a reasonable time after such claim is
   filed in the insolvency proceeding. During the pendency of any such claim,
   the REINSURER may investigate such claim and interpose, in the name of the
   REINSURED (its liquidator, receiver, or statutory successor), but at its own
   expense, in the proceeding where such claim is to be adjudicated, any defense
   or defenses which the REINSURER may deem available to the REINSURED or its
   liquidator, receiver, or statutory successor.

3. The expense thus incurred by the REINSURER shall be chargeable, subject to
   court approval, against the REINSURED as part of the expense of liquidation
   to the extent of a proportionate share of the benefit which may accrue to the
   REINSURED solely as a result of the defense undertaken by the REINSURER.
   Where two or more reinsurers are participating in the same claim and a
   majority in interest elect to interpose a defense or defenses to any such
   claim, the expense shall be apportioned in accordance with the terms of the
   reinsurance agreement as though such expense had been incurred by the
   REINSURED.
<PAGE>
 
4. Any debts or credits, matured or unmatured, liquidated or unliquidated,
   regardless of when they arose or were incurred, in favor of or against either
   the REINSURED or the REINSURER with respect to this Agreement or with respect
   to any other claim of one party against the other are deemed mutual debts or
   credits, as the case may be, and shall be set off, and only the balance shall
   be allowed or paid.


                            R. PARTIES TO AGREEMENT
                               --------------------

This is an agreement for indemnity reinsurance solely between the REINSURED and
the REINSURER. The acceptance of reinsurance hereunder shall not create any
right or legal relation whatever between the REINSURER and the insured or the
beneficiary under any Policy reinsured hereunder, and the REINSURED shall be and
remain solely liable to such insured or beneficiary under any such Policy.


                        S. SUSPENSION AND REACTIVATION
                           ---------------------------

1. This Agreement may be suspended at any time and from time to time with
   respect to all or any of the Policy forms upon five (5) days written notice
   from either party with respect to reinsurance not yet placed in force.  The
   REINSURER shall continue to accept reinsurance during the five (5) day notice
   period, and shall remain liable on all Policies placed in effect under this
   Agreement until the effective date of the suspension of this Agreement.

2. This Agreement may be by reactivated at any time, and from time to time,
   with respect to all or any of the Policy forms upon five (5) day written
   notice from either party.  The REINSURER shall accept reinsurance at the end
   of the five (5) day notice period and be liable on all Policies placed in
   effect under this Agreement until the Agreement is further suspended or
   terminated.


                          T. DURATION AND TERMINATION
                             -------------------------

1. Except as otherwise provided herein, this Agreement shall be unlimited in
   duration.

2. This Agreement may be terminated at any time by either the REINSURER or the
   REINSURED upon thirty (30) days' written notice with respect to reinsurance
   not yet placed in force. The REINSURER shall continue to accept reinsurance
   during the thirty (30) day notice period, and shall remain liable on all
   reinsurance placed in effect under this Agreement until the termination or
   expiration of the Policy reinsured.

3. Upon ninety (90) days' written notice to the the other party, REINSURER and
   REINSURED shall have the right to terminate reinsurance under this Agreement
   with respect to those Policies which have attained the tenth or any
   subsequent anniversary of having been reinsured hereunder. Any such
   termination shall apply to all Policies which attain the same or any
   subsequent anniversary within the twelve (12) month period following the
   effective date of such notice of termination. Termination with respect to
   each affected Policy shall be effective as of the anniversary of such Policy
   having been reinsured hereunder. The REINSURER shall pay to the REINSURED a
   surrender benefit equal to the surrender value of each Policy for which
   reinsurance is terminated.

4. The termination of this Agreement or of the reinsurance in effect under this
   Agreement shall not extend to or affect any of the rights or obligations of
   the REINSURED and the REINSURER applicable to any period prior to the
   effective date of such termination. In the event that, subsequent to the
   termination of this Agreement, an adjustment 
<PAGE>
 
   is made necessary with respect to any accounting hereunder, a supplementary
   accounting shall take place. Any amount owed to either party by reason of
   such supplementary accounting shall be paid promptly upon the completion
   thereof.


                               U. MISCELLANEOUS
                                  -------------

1. This Agreement represents the entire agreement between the REINSURED and
   REINSURER and supersedes, with respect to its subject matter, any prior oral
   or written agreements between the parties.

2. No modification of any provision of this Agreement shall be effective unless
   set forth in a written amendment to this Agreement which is executed by both
   parties.

3. A waiver shall constitute a waiver only with respect to the particular
   circumstance for which it is given and not a waiver of any future
   circumstance.


                                 V. EXECUTION
                                    ---------

                              IN WITNESS WHEREOF

                     WESTERN UNITED LIFE ASSURANCE COMPANY

                                      of

                             Spokane, Washington.,

                                      and

                      OLD STANDARD LIFE INSURANCE COMPANY

                                       of

                                 Boise, Idaho,

have by their respective officers executed this Agreement in duplicate on the
dates shown below.

WESTERN UNITED LIFE ASSURANCE COMPANY


By ___________________________       By ____________________________
   Title:                               Title:


Date _________________________       Date __________________________


OLD STANDARD LIFE INSURANCE COMPANY


By ___________________________       By ____________________________
   Title:                               Title:


Date _________________________       Date __________________________
<PAGE>
 
                                  SCHEDULE I


      POLICIES SUBJECT TO REINSURANCE, AMOUNT OF REINSURANCE & ALLOWANCES
      -------------------------------------------------------------------


<TABLE>
<CAPTION>
                  -------------------------------------------------------------------------------------------------------------
                                           REINSURANCE SHARE                                  ADMINISTRATIVE ALLOWANCES
                  -------------------------------------------------------------------------------------------------------------
 
TRADE NAME                PREMIUMS          POLICY RESERVES         COMMISSIONS         POLICY ISSUANCE       POLICY SERVICING
                                           CLAIMS & BENEFITS

<S>               <C>                      <C>                      <C>                 <C>                   <C>
Opti-Max I                  75%                   75%                   75%                 1.50%                 0.0333%
TD-Max I                    75%                   75%                   75%                 1.50%                 0.0333%
TD-Max III                  75%                   75%                   75%                 1.50%                 0.0333%
TD Max V                    75%                   75%                   75%                 1.50%                 0.0333%
Navigator II                75%                   75%                   75%                 1.50%                 0.0333%
Unimax III                  75%                   75%                   75%                 1.50%                 0.0333%
Spectrum                    75%                   75%                   75%                 1.50%                 0.0333%
Prism                       75%                   75%                   75%                 1.50%                 0.0333%
Value-Max VII               75%                   75%                   75%                 1.50%                 0.0333%
Value-Max X                 75%                   75%                   75%                 1.50%                 0.0333%
Opti-Max III                75%                   75%                   75%                 1.50%                 0.0333%
Opti-Max V                  75%                   75%                   75%                 1.50%                 0.0333%
Opti-Max VII                75%                   75%                   75%                 1.50%                 0.0333%
Opti-Max X                  75%                   75%                   75%                 1.50%                 0.0333%
TD Max V-V                  75%                   75%                   75%                 1.50%                 0.0333%
 
Basis for charge      Gross Premiums       Policy Reserves,         Commissions        Reinsurance Quota    Reinsurance  Quota
                                            Policy Claims &          Incurred           Share of Gross           Share of
                                               Benefits                                    Premiums            Account Value
</TABLE>
<PAGE>
 
                                  SCHEDULE II

                     Annuity Reinsurance Monthly Report to

                      OLD STANDARD LIFE INSURANCE COMPANY


<TABLE> 
<S>                                                                              <C> 
Amounts Due OLD STANDARD LIFE INSURANCE COMPANY
-----------------------------------------------

Premiums received during the month by REINSURED multiplied by the                $_______________ 
Reinsurance Share applicable to each Policy                                      
                                                                                 
Sum of amounts due to OLD STANDARD LIFE INSURANCE COMPANY                        $_______________ 
                                                                                 
Amounts Due WESTERN UNITED LIFE ASSURANCE COMPANY                                
-------------------------------------------------                                
                                                                                 
Commission Allowance (Attach detailed worksheet of calculations)                 $_______________ 
                                                                                 
Policy Issue Allowances (Attach detailed worksheet of calculations)              $_______________ 

Monthly Administrative Servicing  Allowances (Attach detailed worksheet of
calculations)                                                                    $_______________ 

Surrender values paid during the month multiplied by the Reinsurance
Share percentage                                                                 $_______________ 

Policy Reductions paid during the month multiplied by the Reinsurance
Share                                                                            $_______________ 
     
Death benefits paid during the month multiplied by the Reinsurance
Share percentage                                                                 $_______________ 

Policy Cancellations (Attach detailed worksheet of calculations)/1/              $_______________ 

Sum of amounts due to WESTERN UNITED LIFE ASSURANCE COMPANY                      $_______________ 

Net of amount due (sum of amounts due OLD STANDARD LIFE INSURANCE
Company minus sum of amounts due to WESTERN UNITED LIFE
ASSURANCE)                                                                       $_______________ 

Interest on the above amount calculated pursuant to Schedule IV                  $_______________ 

NET AMOUNT DUE PLUS INTEREST                                                     $_______________ 

</TABLE> 

Note:  If the net amount due is negative, then that amount is due from OLD
STANDARD LIFE INSURANCE COMPANY to WESTERN UNITED LIFE ASSURANCE COMPANY.

Additional Items:
-----------------

A monthly listing of statutory and GAAP reserves, account values, and interest
credited.

_______________________________
/1/ Policies cancelled pursuant to the thirty day cancellation provision. 
<PAGE>
 
                                 SCHEDULE III


                                 ANNUAL REPORT
                                 -------------


The annual report shall provide the following information:

     (a) Exhibit 8 from the NAIC-prescribed annual statement

     (b) a breakdown of the reserves by withdrawal characteristic of the annuity
         contract

     (c) "Analysis of Increase in Reserves" from the NAIC-prescribed annual
         statement

     (d) "Exhibit of Annuities" from the NAIC-prescribed annual statement

     (e) an actuarial certification of the reported statutory reserves

     (f) tax reserves and required interest.
<PAGE>
 
                                  SCHEDULE IV

INTEREST RATE
-------------

The rate of interest shall be equal to the effective annual yield of the 90 day
Treasury bill determined at the close of business on the last business day of
the month for the amount owed is being determined.

INTEREST ACCRUAL CALCULATION
----------------------------

Interest shall be calculated on the monthly ending amount due and accrued from
the preceding 15/th/ day of such month.
<PAGE>
 
                                  SCHEDULE V

                             ARBITRATION SCHEDULE
                             --------------------

To initiate arbitration, either the REINSURED or the REINSURER shall notify the
other party in writing of its desire to arbitrate, relating the nature of its
dispute and the remedy sought. The party to which the notice is sent shall
respond to the notification in writing within ten (10) days of its receipt.

The arbitration hearing shall be before a panel of three arbitrators, each of
whom must be a present or former officer of a life insurance company. An
arbitrator may not be a present or former officer, attorney, or consultant of
the REINSURED or the REINSURER or either's affiliates.

The REINSURED and the REINSURER shall each name five (5) candidates to serve as
an arbitrator. The REINSURED and the REINSURER shall each choose one candidate
from the other party's list, and these two candidates shall serve as the first
two arbitrators. If one or more candidates so chosen shall decline to serve as
an arbitrator, the party which named such candidate shall add an additional
candidate to its list, and the other party shall again choose one candidate from
the list. This process shall continue until two arbitrators have been chosen and
have accepted. The REINSURED and the REINSURER shall each present their initial
lists of five (5) candidates by written notification to the other party within
twenty-five (25) days of the date of the mailing of the notification initiating
the arbitration. Any subsequent additions to the list which are required shall
be presented within ten (10) days of the date the naming party receives notice
that a candidate that has been chosen declines to serve.

The two arbitrators shall then select the third arbitrator from the eight (8)
candidates remaining on the lists of the REINSURED and the REINSURER within
fourteen (14) days of the acceptance of their positions as arbitrators. If the
two arbitrators cannot agree on the choice of a third, then this choice shall be
referred back to the REINSURED and the REINSURER. The REINSURED and the
REINSURER shall take turns striking the name of one of the remaining candidates
from the initial eight (8) candidates until only one candidate remains. If the
candidate so chosen shall decline to serve as the third arbitrator, the
candidate whose name was stricken last shall be nominated as the third
arbitrator. This process shall continue until a candidate has been chosen and
has accepted. This candidate shall serve as the third arbitrator. The first turn
at striking the name of a candidate shall belong to the party that is responding
to the other party's initiation of the arbitration. Once chosen, the arbitrators
are empowered to decide all substantive and procedural issues by a majority of
votes.

It is agreed that each of the three arbitrators should be impartial regarding
the dispute and should resolve the dispute on the basis described in the
Agreement and this ARBITRATION Schedule. Therefore, at no time will either the
REINSURED or the REINSURER contact or otherwise communicate with any person who
is to be or has been designated as a candidate to serve as an arbitrator
concerning the dispute, except upon the basis of jointly drafted communications
provided by both the REINSURED and the REINSURER to inform those candidates
actually chosen as arbitrators of the nature and facts of the dispute. Likewise,
any written or oral arguments provided to the arbitrators concerning the dispute
shall be coordinated with the other party and shall be provided simultaneously
to the other party or shall take place in the presence of the other party.
Further, at no time shall any arbitrator be informed that the arbitrator has
been named or chosen by one party or the other.

The arbitration hearing shall be held on the date fixed by the arbitrators. In
no event shall this date be later than six (6) months after the appointment of
the third arbitrator. As soon as possible, the arbitrators shall establish
prearbitration procedures as warranted by the facts and issues of the particular
case. At least ten (10) days prior to the arbitration hearing, each party shall
provide the other party and the arbitrators with a detailed statement of the
facts and arguments it will present at the arbitration hearing. The arbitrators
may consider any relevant evidence; they shall give the evidence such weight as
they deem it entitled to after consideration of any objections raised concerning
it. The party initiating the arbitration shall have the burden of proving its
case by a preponderance of the evidence. Each party may examine any witnesses
who testify at the arbitration hearing. Within twenty (20) days after the end of
the arbitration hearing, the arbitrators shall issue a written decision that
sets forth their findings and any award to be paid as a result of the
arbitration, except that the arbitrators may not award punitive or exemplary
damages. In their decision, the arbitrators shall also apportion the costs of
arbitration, which shall include, but not be limited to, their own fees and
expenses.
<PAGE>
 
                                  SCHEDULE VI
                                  -----------

                        SECTION 1.848-2(g)(8) ELECTION

The REINSURED and the REINSURER agree to the following pursuant to Section
1.848-2(g)(8) of the Income Tax Regulations issued under Section 848 of the
Internal Revenue Code of 1986 (hereinafter "Section 1.848-2(g)(8).")

     1.   As used below, the term "party" will refer to the REINSURED or the
          REINSURER as appropriate.

     2.   As used below, the phrases "net positive consideration", "capitalize
          specified Policy acquisition expenses", "general deductions
          limitation", and "net consideration" shall have the meaning used in
          Section 1.848-2(g)(8).

     3.   The party with net positive consideration for this Agreement for any
          taxable year beginning with the taxable year prescribed in paragraph 5
          below will capitalize specified Policy acquisition expenses with
          respect to this Agreement without regard to the general deductions
          limitation.

     4.   The parties agree to exchange information pertaining to the amount of
          net consideration under this Agreement to ensure consistency. This
          will be accomplished as follows:

          (a)  The REINSURED shall submit to the REINSURER by the fifteenth day
               of March in each year its calculation of the net consideration
               for the preceding calendar year. Such calculation will be
               accompanied by a statement signed by an officer of the REINSURED
               stating that the REINSURED will report such net consideration in
               its tax return for the preceding calendar year.

          (b)  The REINSURER may contest such calculation by providing an
               alternative calculation to the REINSURED in writing within thirty
               (30) days of the REINSURER'S receipt of the REINSURED'S
               calculation. If the REINSURER does not so notify the REINSURED,
               the REINSURER will report the net consideration as determined by
               the REINSURED in the REINSURER'S tax return for the previous
               calendar year.

          (c)  If the REINSURER contests the REINSURED'S calculation of the net
               consideration, the parties will act in good faith to reach an
               agreement as to the current amount within thirty (30) days of the
               date the REINSURER submits its alternative calculation. If the
               REINSURED and the REINSURER reach agreement on an amount of net
               consideration, each party shall report such amount in their
               respective tax returns for the preceding calendar year.

     5.   This election shall be effective for 1998 and all subsequent taxable
          years for which the Reinsurance Agreement remains in effect.