<PAGE>

                                                                    Exhibit 10.1


                          Administrative Reinsurance
                                  Agreement #

                   (hereinafter referred to as "Agreement")


                                    between



                     Provident Life and Accident Insurance
                                    Company
                           (Chattanooga, Tennessee)

                (hereinafter referred to as the "the Company")


                                      and


                    Reassure America Life Insurance Company
                           (Jacksonville, Illinois)

                     (hereinafter referred to as "REALIC")


                            Effective: July 1, 2000
<PAGE>

                                   Preamble
                                   --------


     WHEREAS, Provident Life and Accident Insurance Company, a Tennessee
insurance corporation (the "Company"), desires to reinsure a block of its in
force individual life and corporate owned life insurance ("COLI") policies; and

     WHEREAS, Reassure America Life Insurance Company, an Illinois insurance
corporation ("REALIC"), desires to reinsure these individual life and COLI
policies from the Company; and

     WHEREAS, the Company and REALIC intend that the basis of the reinsurance
shall be 100% coinsurance by REALIC; and

     WHEREAS, REALIC further wishes to provide certain administrative services
for these policies.

     NOW, THEREFORE, the Company and REALIC have entered into this Reinsurance
Agreement ("Agreement") and mutually agree to reinsure, and to provide
administrative services for the Company's insurance policies on the terms and
conditions set forth in this Agreement.

     This Agreement is solely between the Company and REALIC and performance of
the obligations of the party under this Agreement will be rendered solely to the
other party.  In no instance will anyone other than the Company or REALIC have
any rights under this Agreement.


                                   ARTICLE I

                                  Coinsurance
                                  -----------

1.   Insurance
     ---------

     The Company will cede and REALIC will accept on a coinsurance basis 100% of
the Company's rights, obligations, liabilities and risks written and retained by
the Company on the policies and plans of insurance set forth in Schedule A.
                                                                ----------
Schedule A contains a seriatim list of the policies reinsured hereunder. The
----------
policies or plans set forth in Schedule A that are reinsured under this
                               ----------
Agreement are hereinafter referred to collectively as "Reinsured Policies" and
individually as a "Reinsured Policy."

     The premium to be paid to REALIC by the Company for the Reinsured Policies
will be 100% of the premium paid to the Company for coverage under the Reinsured
Policies on and

                                      -1-
<PAGE>

after July 1, 2000 (the "Effective Date"), inclusive of policy fees
("Premiums"). This Agreement will not be valid and binding until receipt of all
required regulatory approvals.

2.   Transfer of Reserves and Ceding Allowance
     -----------------------------------------

     In consideration for the reinsurance provided by REALIC, the Company will
transfer to REALIC the assets listed in Schedule F with a designated value of
$534,051,578.95, plus cash in an amount necessary to have the sum of the
designated value of the assets and the cash be equal to (i) the reserves
(excluding reserves for claims in the course of settlement and claims that have
been incurred but not reported) (but including for the AMA policies the
experience rating refund balances) for the Reinsured Policies calculated in
accordance with statutory accounting practices permitted for life insurance
companies by the State of Tennessee and consistent with the Company's current
practices and methodologies, less (ii) due and deferred Premiums on the
                             ----
Reinsured Policies, less (iii) any policy loans outstanding on the Reinsured
                    ----
Policies, net of any unearned policy loan interest on those policy loans (each
of items (i),(ii) and (iii) measured as of the Effective Date). REALIC will
transfer to the Company a cash ceding allowance of $486,600,000 for the
Reinsured Policies. REALIC will be entitled to the investment earnings on the
assets transferred from the Effective Date until the date of transfer. REALIC
will pay the Company interest on the ceding allowance at an annual rate equal to
5% from the Effective Date until the date of transfer. Such date of transfer
will be as soon as practicable following receipt of all required regulatory
approvals.

     REALIC agrees with respect to the Reinsured Policies, to establish and
maintain as liability on its statutory statements not less than the statutory
reserves as required by the applicable State of Tennessee regulatory
authorities.

3.   Agent Compensation
     ------------------

     At intervals reasonably requested by the Company, REALIC will provide the
Company with premium payment information in a format reasonably acceptable to
the Company that permits the Company to calculate and pay agent commissions.
REALIC will reimburse the Company for all agent commissions earned on or after
the Effective Date related to the Reinsured Policies, in accordance with
procedures agreed to by the parties. REALIC will not be responsible for
reimbursing the Company for any payments made under the ICG Supplemental Bonus
Program, but will administer the program for the Company.

4.   Payment of Premium Taxes and Guaranty Fund Assessment
     -----------------------------------------------------

     The Company will pay all actual premium taxes incurred on or after the
Effective Date related to the Reinsured Policies, in accordance with procedures
agreed to by the parties. On or about April 1 of each year, the Company will
provide to REALIC a schedule of taxes paid by state, and REALIC will promptly
reimburse the Company for such taxes. The Company

                                      -2-
<PAGE>

shall be entitled to recover from REALIC all premium taxes paid by the Company
incurred on or after the Effective Date related to the Reinsured Policies and to
recover from REALIC the amounts paid by the Company on guaranty fund
assessments, based on insolvencies which occurred after the Effective Date, with
respect to the Reinsured Policies, which are not offset from the premium taxes.
The Company shall prepare a premium tax statement with appropriate documentation
and submit the statement to REALIC and REALIC shall remit to the Company its
payment within thirty (30) days. The Company shall submit a guaranty fund
statement to REALIC with attached documentation within thirty (30) days after
the end of the month in which the Company pays any guaranty fund assessment.
REALIC shall remit, if required, to the Company within thirty (30) days of
receipt of such statement.

5.   Excess Reinsurance
     -------------------

     REALIC will reimburse the Company for all premiums and other charges, if
any, for the existing excess of retention reinsurance for the Reinsured Policies
due for all periods on or after the Effective Date. REALIC will receive from the
Company all recoveries for claims incurred on or after the Effective Date from
the existing excess of retention reinsurance for the Reinsured Policies. REALIC,
on behalf of the Company, will assume all responsibility for administration of
the reinsurance arrangements on the Reinsured Policies at the same time as
REALIC assumes responsibility for the administration of such Reinsured Policies
pursuant to Article IV of this Agreement. In addition, REALIC will assume
responsibility for any credit or payment risk from other reinsurers related to
the Reinsured Policies.

     With the consent of REALIC, the Company may exercise any right it may have
to recapture risk subject to excess reinsurance and REALIC will reinsure such
recaptured risk under this Agreement. Upon request by REALIC, the Company agrees
to take reasonable action to exercise it rights to recapture risk subject to
excess reinsurance and REALIC will reinsure such recaptured risk under this
Agreement.


                                  ARTICLE II

                             Reinsurance Liability
                             ---------------------

     The liability of REALIC on any Reinsured Policy begins on the Effective
Date. The liability of REALIC on any Reinsured Policy ends at the same time as
that of the Company; however, REALIC will have no liability for claims incurred
before the Effective Date.

                                      -3-
<PAGE>

                                  ARTICLE III

                         Plan and Amount of Insurance
                         ----------------------------

1.   Plan
     ----

     Reinsurance under this Agreement is on a coinsurance basis and is subject
to the terms and conditions of the original policy forms for the Reinsured
Policies, and any amendments thereto in effect as of the Effective Date.

2.   Reductions and Terminations
     ---------------------------

     Reinsurance amounts are calculated in terms of coverages on a "per policy"
basis. If the coverage of any Reinsured Policy on an insured is reduced or
terminated, reinsurance under this Agreement on such Reinsured Policy will be
similarly reduced or terminated.

3.   Reinstatements
     --------------

     A Reinsured Policy ceded under this Agreement that is reduced, terminated
or lapsed, and later reinstated pursuant to policy provisions will be reinsured
by REALIC. REALIC will retain any Premiums and interest that the Company has
received for reinstatement.

     A terminated policy that would have been a Reinsured Policy had it been in
force on the date of this Agreement, that later reinstates pursuant to policy
provisions, will be reinsured by REALIC and become a Reinsured Policy. REALIC
will be entitled to retain any Premiums and interest for coverage on or after
the Effective Date that is received for reinstatement, and the Company will
transfer to REALIC the amount of the statutory reserves calculated as of the
Effective Date. The date of reinsurance for such reinstated policies shall be
the Effective Date.


                                  ARTICLE IV

                                Administration
                                --------------

1.   Transfer of Administrative Services.
     -----------------------------------

     On and after the dates set forth in Schedule B, REALIC will be responsible
                                         ----------
for providing administrative services for the Reinsured Policies as set forth in
Schedule B. The effective date on which REALIC assumes responsibility for
----------
administrative services on a Reinsured Policy is referred to as the
"Administrative Transfer Date." Prior to the respective Administrative Transfer
Dates, the Company shall continue to provide administrative services for the
Reinsured Policies in a manner consistent with its current practices. In
consideration for the Company

                                      -4-
<PAGE>

performing these administrative services, REALIC shall pay the Company, on a
monthly basis, the fees computed as set forth in Schedule C.
                                                 ----------

2.   Administrative Services.
     -----------------------

     (a)  The administrative services to be provided by REALIC shall include,
but not be limited to, the following: (i) preparing and mailing all necessary or
appropriate policyholder statements, reports and communications, including
premium notices; (ii) collecting premiums and amounts due under the Reinsured
Policies; (iii) receiving, processing, investigating, evaluating and paying
claims filed by or on behalf of policyholders; (iv) defending any action brought
upon a Reinsured Policy or in connection with the policy liabilities; (v)
providing usual and customary services for policyholders, including, without
limitation, processing loans, non-forfeitures, lapses, reinstatements,
cancellations, conversions or other changes provided for under the Reinsured
Policies and calculations relating thereto, and call center operations; (vi)
providing the Company with information on commissions and the producers entitled
thereto, if any, for the Reinsured Policies; (viii) preparing all accounting and
actuarial information related to the Reinsured Policies that are necessary to
timely meet statutory or tax accounting requirements; (ix) maintaining
appropriate books and records of all transactions related to the Reinsured
Policies; (x) administering other reinsurance ceded related to the Reinsured
Policies; and (xi) providing such additional services as may be necessary or
appropriate to properly administer the Reinsured Policies. REALIC shall perform
such administrative services in accordance with the provisions of the Reinsured
Policies. REALIC's performance of services hereunder shall be in accordance with
any applicable federal and state laws, rules and regulations.

     (b)  Each year in connection with the preparation of the Company's annual
financial statements, REALIC's appointed actuary shall provide to the Company's
appointed actuary a certificate of reliance stating that in his opinion, the
reserves and related actuarial values concerning the Reinsured Policies:

          (i)   are computed in accordance with presently accepted actuarial
          standards consistently applied and are fairly stated, in accordance
          with sound actuarial principles;
          (ii)  are based on actuarial assumptions which produce reserves at
          least as great as those called for in any contract provision as to
          reserve basis and method, and are in accordance with all other policy
          or contract provisions;
          (iii) meet the requirements of the insurance laws and regulations of
          the State of Tennessee;
          (iv)  have been subjected to asset adequacy testing and the reserves
          are adequate;
          (v)   are computed on the basis of assumptions consistent with those
          used in computing the corresponding items in the prior year; and

                                      -5-
<PAGE>

          (vi)  include provision for all actuarial reserves and related
          statement items which ought to be established.

     (c)  REALIC shall make available to the Company a duly qualified actuary,
for appointment by the Company, to serve as the "illustration actuary" with
respect to the Reinsured Policies. Such illustration actuary will use the fully
allocated expense methodology with respect to the Reinsured Policies.

3.   Administrative Software.
     -----------------------

     To the extent permitted by law and subject to applicable licensing or
contractual restrictions, the Company shall provide REALIC with access to all
software and data processing systems currently used to perform the
administrative services. For software systems not owned or developed by the
Company or its affiliates, REALIC shall be responsible for any costs or related
license fees associated with providing access to the software.

4.   Service Transition Matters.
     --------------------------

     The Company and REALIC shall cooperate with each other and use their
commercially reasonable efforts to effect an orderly transition of all
administrative services for the Reinsured Policies as of the respective
Administrative Transfer Dates from the Company to REALIC. The assistance and
services REALIC expects will be needed from the Company in order to effect the
transition of administrative services are set forth in Schedule D. After
                                                       ----------
successful transition of all administrative services no additional charges shall
be incurred pursuant to Article IV, Section 1.

5.   Reports - Transition Period.
     ---------------------------

     Within a time period mutually agreeable to the Company and REALIC, but in
no event more than ten (10) days for cash items and twenty (20) days for reserve
items, following the end of each calendar month prior to the Administrative
Transfer Dates, the Company will provide REALIC with the information needed by
REALIC for reporting the Reinsured Policies in its statutory financial
statements. The form of the report and the information to be provided is set
forth in Schedule E Part 1.
         -----------------

6.   Quarterly Reports - Post Transition Period.
     ------------------------------------------

     Within a time period mutually agreeable to the Company and REALIC, but in
no event more than ten (10) days for cash items and twenty (20) days for reserve
items, following the end of each calendar quarter after the Administrative
Transfer Dates, REALIC will provide the Company with the information needed by
the Company for reporting the Reinsured Policies in its statutory, GAAP, and tax
financial statements. The form of the report and the information to be provided
is set forth in Schedule E Part 2.
                -----------------

                                      -6-
<PAGE>

7.   DAC Tax
     -------

     Each party is subject to United States taxation as defined in Section
1.848-2(h)(2)(ii) of the Income Tax Regulations under Section 848 of the
Internal Revenue Code of 1986, as amended (the "Code"). REALIC and the Company
will comply with the following concerning the capitalization of certain policy
expenses, pursuant to Section 848 of the Code and Income Tax Regulations
Sections 1.848-1 and 1.848-2.

     (a)  The term "party" will refer to either REALIC or the Company as
          appropriate.
     (b)  The terms used in this Article are defined by reference to Regulations
          Section 1.848-1 and 1.848-2 as in effect on the closing date. The term
          "net consideration" will refer to net consideration as defined in
          Regulation Section 1.848-2(f).
     (c)  Each party shall attach a schedule to its federal income tax return
          which identifies the relevant Reinsurance Agreements for which the
          joint election under the Regulation has been made. The first taxable
          year for which the joint election will be effective is the tax year
          ending December 31, 2000.
     (d)  Pursuant to the joint election set forth in Section 1.848-2(g)(8) of
          the Income Tax Regulations, the party with net positive consideration,
          for such Agreement for each taxable year, shall capitalize specified
          policy acquisition expenses with respect to such Agreement without
          regard to the general deductions limitation of Section 848(c)(1).
     (e)  Each party agrees to exchange information pertaining to the amount of
          net consideration under such Agreement each year to ensure
          consistency. REALIC shall provide the Company with the amount of net
          consideration for each taxable year no later than June 15 following
          the end of such year. The Company shall advise REALIC if it disagrees
          with the amounts provided, and the parties agree to act in good faith
          to amicably resolve any differences.


                                  ARTICLE V

                         Complaints and Investigations
                         -----------------------------

1.   Claims Administration
     ---------------------

     As of the respective Administrative Transfer Dates, REALIC will provide
full administrative services for claims involving any Reinsured Policy. REALIC
will fully investigate the claim, including reviewing the documentation for the
claim and determining the validity of the claim. REALIC shall process claims in
accordance with any applicable federal or state laws, rules and regulation. In
the event of an appeal from an adverse claim determination, REALIC will review
all pertinent information relating to the claim, and communicate the
determination on appeal to the claimant. With regard to claims arising under a
Reinsured Policy, REALIC shall be responsible for determining whether the claim
should be paid. REALIC shall

                                      -7-
<PAGE>

promptly pay all claims arising under Reinsured Policies that are determined to
be valid in accordance with this paragraph.

2.   Contested Claims
     ----------------

     Whenever REALIC has formed a preliminary opinion that a claim should be
denied or contested, and before any final action by REALIC indicating to the
claimant that the claim is being denied or contested, REALIC will give the
Company the opportunity to review the complete claim file. REALIC and the
Company will have good faith discussions regarding the claim and agree as to its
appropriate disposition.

3.   Procedure for Handling Litigation
     ---------------------------------

     In any legal action or administrative proceeding arising out of or relating
to the administrative services provided by REALIC or this Agreement ("Legal
Actions"), REALIC shall be responsible, at its cost, for the defense thereof,
including the defense of the Company should the Company be named as defendant.
Notwithstanding the foregoing, the Company shall have the right to elect to
assume the defense of any such Legal Actions. Should the Company so elect,
REALIC shall reimburse the Company for reasonable attorneys' fees, costs and
other expenses of defense incurred by the Company.

     The Company and REALIC shall promptly advise each other of commenced Legal
Actions which come to the respective attention of the parties. the Company and
REALIC agree to cooperate fully in the defense of any Legal Actions, including
furnishing any related documentation or information in their possession to the
party defending such legal Actions.

4.   Complaint Handling Procedure
     ----------------------------

     The parties will cooperate with each other in providing information
necessary to respond to any complaints concerning the Reinsured Policies. After
the respective Administrative Transfer Date, REALIC shall answer all complaints
received by it concerning the Reinsured Policies. All complaints concerning the
Reinsured Policies received by the Company after the Administrative Transfer
Date shall be immediately forwarded by facsimile or overnight mail to a contact
person designated by REALIC for reply. Upon answering such complaints, REALIC
will furnish the Company with a copy of the complaint file. The Company shall be
responsible for maintaining any complaint files, complaint registers or other
reports of any kind, which are required to be maintained under the applicable
laws and regulations. REALIC shall also maintain complaint files and registers
and shall provide the Company with copies of complaint registers, and other
necessary files, concerning the Reinsured Policies on a quarterly basis or upon
request by the Company.

5.   Complaints and Regulatory Proceedings
     -------------------------------------

                                      -8-
<PAGE>

     REALIC agrees to forward to the Company for investigation any insurance
department inquiries, or inquiries of any other regulatory body in connection
with the duties under this Agreement. REALIC and the Company agree to cooperate
fully with each other in any regulatory examination or judicial proceedings, and
in connection with any complaint filed by an insured with an insurance
department or other regulatory authority or the Better Business Bureau.


                                  ARTICLE VI

                                  Insolvency
                                  ----------

     All reinsurance under this Agreement will be paid on demand by REALIC
directly to the Company, its liquidator, receiver, or statutory successor, on
the basis of the liability of the Company under the policy or policies reinsured
without diminution because of the insolvency of the Company. In the event of the
insolvency of the Company, the liquidator, receiver, or statutory successor of
the Company will give written notice to REALIC of a pending claim against REALIC
or the Company on any policy reinsured, such notice will be given within a
reasonable time after the claim is filed in the conservation, liquidation, or
insolvency proceedings. While the claim is pending, REALIC may investigate and
interpose, at its own expense, in the proceedings where the claim is to be
adjudicated, any defenses which it may deem available to the Company or its
liquidator, receiver, or statutory successor. The expense incurred by REALIC
will be charged, subject to court approval, against the Company as an expense of
the conservation, liquidation, or insolvency to the extent of a proportionate
share of the benefit that accrues to the Company as a result of the defenses by
REALIC. Where two or more reinsurers are involved and a majority in interest
elect to defend a claim, the expense will be apportioned in accordance with the
terms of this Agreement as if the expense had been incurred by the Company.

     Nothing hereinabove set forth in this insolvency clause shall in any way
change the relationship or status of the parties hereto, to wit, that of ceding
insurer and reinsurer, nor enlarge the obligations of either party to each
other, except as specifically hereinabove provided, to wit, to pay the statutory
successor on the basis of the amount of liability of the Company under the
Reinsured Policies, rather than on the basis of the actual amount of loss
(dividends) paid by the liquidator, receiver or statutory successor to allowed
claimants, nor shall anything in the insolvency clause in any manner create any
obligation or establish any rights against REALIC in favor of any third parties
or any person not parties to this Agreement.

                                  ARTICLE VII

                            Duration of Coinsurance
                            -----------------------

                                      -9-
<PAGE>

     This Agreement will be effective as of July 1, 2000. This Agreement is
unlimited in duration but may be amended by mutual consent of the Company and
REALIC. The reinsurance provided hereunder will remain in force until
termination of the policy or policies on which the reinsurance is based in
accordance with the terms of this Agreement.

                                 ARTICLE VIII

                                  Arbitration
                                  -----------

     REALIC and the Company intend that any dispute between them under or with
respect to this Agreement be resolved without resort to any litigation.
Accordingly, REALIC and the Company agree that they will negotiate diligently
and in good faith to agree on a mutually satisfactory resolution of any such
dispute; provided, however, that if any such dispute cannot be so resolved by
         --------  -------
them within sixty calendar days (or such longer period as the parties may agree)
after commencing such negotiations, REALIC and the Company agree that they will
submit such dispute to arbitration in the manner specified in, and such
arbitration proceeding will be conducted in accordance with, the Commercial
Arbitration Rules of the American Arbitration Association.

     The arbitration hearing will be before a panel of three disinterested
arbitrators, each of whom must be a present or former officer of a life
insurance or life reinsurance company familiar with the reinsurance business.
REALIC and the Company will each appoint one arbitrator by written notification
to the other party within thirty calendar days after the date of the mailing of
the notification initiating the arbitration. These two arbitrators will then
select the third arbitrator within sixty calendar days after the date of the
mailing of the notification initiating arbitration.

     If either REALIC or the Company fails to appoint an arbitrator, or should
the two arbitrators be unable to agree upon the choice of a third arbitrator,
the president of the American Arbitration Association or of its successor
organization or (if necessary) the president of any similar organization
designated by lot of REALIC and the Company within thirty calendar days after
the request will appoint the necessary arbitrators.

     The arbitrators shall construe this Agreement in light of the prevailing
custom and practices for reinsurance in the insurance industry. The vote or
approval of a majority of the arbitrators will decide any question considered by
the arbitrators. The place of arbitration will be determined by the arbitrator.
Each decision (including without limitation each award) of the arbitrators will
be final and binding on all parties and will be nonappealable, and (at the
request of either REALIC or the Company) any award of the arbitrators may be
confirmed by a judgment entered by any court of competent jurisdiction. No such
award or judgment will bear interest. Each party will be responsible for paying
(a) all fees and expenses charged by its respective counsel, accountants,
actuaries, and other representatives in conjunction with such arbitration and
(b) one-half of the fees and expenses charged by each arbitrator.

                                     -10-
<PAGE>

                                   ARTICLE IX

        Indemnification and Costs for Administrative Processing Issues
        --------------------------------------------------------------

1.   Indemnification of REALIC by the Company
     ----------------------------------------

     The Company will indemnify and hold harmless REALIC from and against
monetary damages which may include but are not limited to punitive, exemplary,
compensatory or consequential damages or plaintiff's litigation-related costs
and fees, together with REALIC's reasonable attorneys' fees, costs and expenses,
resulting from or relating to (i) actions by the Company's employees or agents
in the sale, issuance, or administration of the Reinsured Policies, (ii) the
failure of any Reinsured Policy to have complied with applicable laws and
regulations at the time of its issuance, (iii) any breach or nonfulfillment by
the Company of, or any failure by the Company to perform, any of the terms or
conditions of, or any duties or obligations under, this Agreement, (iv) any
liability not transferred to REALIC, or (v) any enforcement of this indemnity.
Without limiting the foregoing, the Company will indemnify REALIC for any
economic loss stemming from lapsation of the Reinsured Policies set forth in
Part 2 of Schedule A, if (A) such lapsation is the result of such Reinsured
--------- ----------
Policy for U.S. federal income tax purposes being subject to the disallowance of
the statutory interest deduction or the imposition of the $50,000 interest
deduction limit and (B) such disallowance or imposition results from actions by
the Company's employees or agents in the sale, issuance, or administration of
the Reinsured Policy. The Company will not be required to indemnify and hold
harmless REALIC from economic loss stemming from lapsation of Reinsured Policies
resulting from changes in United States tax laws occurring after the Effective
Date.

2.   Indemnification of the Company by REALIC
     ----------------------------------------

     REALIC will indemnify and hold harmless the Company from and against
monetary damages which may include but are not limited to punitive, exemplary,
compensatory or consequential damages or plaintiff's litigation-related costs
and fees, together with the Company's reasonable attorneys' fees, costs and
expenses, resulting from or relating to (i) actions by REALIC's employees or
agents in the administration of the Reinsured Policies after the Administrative
Transfer Date, (ii) REALIC's decision, action, delay or failure to act in
accordance with the terms of this Agreement, (iii) contractual liabilities under
the Reinsured Policies arising after the Effective Date, or (iv) any enforcement
of this indemnity.

3.   Claims Notice
     -------------

     In the event that either the Company or REALIC wishes to assert a claim for
indemnification hereunder, the party seeking indemnification (the "Indemnified
Party") shall deliver written notice (a "Claims Notice") to the other party (the
"Indemnifying Party") no later than ten (10) Business Days after such claim
becomes known to the Indemnified Party,

                                     -11-
<PAGE>

specifying the facts constituting the basis for, and the amount (if known) of
the claim asserted. Failure to deliver a Claims Notice with respect to a claim
(other than a claim based on an Asserted Liability, as defined below) in a
timely manner as specified in the preceding sentence shall not be deemed a
waiver of the Indemnified Party's right to indemnification hereunder for Losses
in connection with such claim, but the amount of reimbursement to which the
Indemnified Party is entitled shall be reduced by the amount, if any, by which
the Indemnified Party's losses would have been less had such Claims Notice been
timely delivered.

4.   Right to Contest Claims of Third Parties
     ----------------------------------------

     (a)  If an Indemnified Party asserts, or may in the future seek to assert,
a claim for indemnification hereunder because of a claim or demand made, or an
action, proceeding or investigation instituted, by any Person not a party to
this Agreement (a "Third Party Claimant") that may result in a liability with
respect to which the Indemnified Party would be entitled to indemnification
pursuant to this Article IX (an "Asserted Liability"), the Indemnified Party,
shall deliver to the Indemnifying Party a Claims Notice with respect thereto,
which Claims Notice shall, in accordance with the provisions of Section 3
hereof, be delivered as promptly as practicable and in any event no later than
ten (10) Business Days after such Asserted Liability is actually known to the
Indemnified Party. Failure to deliver a Claims Notice with respect to a claim in
a timely manner as specified in the preceding sentence shall not be deemed a
waiver of the Indemnified Party's right to indemnification hereunder for a
liability in connection with such claim, but the amount of reimbursement to
which the Indemnified Party is entitled shall be reduced by the amount, if any,
by which the Indemnified Party's resultant liabilities would have been less had
such Claims Notice been timely delivered.

     (b)  The Indemnifying Party shall have the right, upon written notice to
the Indemnified Party, to investigate, contest, defend or settle any Asserted
Liability that may result in a liability with respect to which the Indemnified
Party is entitled to indemnification pursuant to this Article IX, provided that
the Indemnified Party may, at its option and at its own expense, participate in
the investigation, contesting, defense or settlement of any such Asserted
Liability through representatives and counsel of its own choosing; and, provided
further, that the Indemnifying Party shall not settle any Asserted Liability
unless (i) such settlement is on exclusively monetary terms or (ii) the
Indemnified Party shall have consented to the terms of such settlement, which
consent shall not unreasonably be withheld. If requested by the Indemnifying
Party, the Indemnified Party will, at the sole cost and expense of the
Indemnifying Party, cooperate with the Indemnifying Party and its counsel in
contesting any Asserted Liability or, if appropriate and related to the Asserted
Liability in question, in making any counterclaim against the third party
claimant, or any cross-compliant against any Person (other than the Indemnified
Party or its affiliates). Unless and until the Indemnifying Party elects to
defend the Asserted Liability, the Indemnified Party shall have the right, at
its option and at the Indemnifying Party's expense to do so in such manner as it
deems appropriate, provided, however, that the Indemnified Party shall not
settle or compromise any Asserted Liability for

                                     -12-
<PAGE>

which it seeks indemnification hereunder without the prior written consent of
the Indemnifying Party (which shall not be unreasonably withheld).

     (c)  The Indemnifying Party shall be entitled to participate in (but not to
control) the defense of any Asserted Liability which it has not elected to
defend with its own counsel and at its own expense.

     (d)  The Company and REALIC shall make mutually available to each other all
relevant information in their possession relating to any Asserted Liability
(except to the extent that such actin would result in a loss of attorney-client
privilege) and shall cooperate with each other in the defense thereof.

5.   Administrative Processing Issues
     --------------------------------

     The Company and REALIC will in good faith assist each other to resolve
various administrative processing issues related to the Reinsured Policies. If
the resolution of such issues results in (i) fees or additional costs payable to
policyholders or other third parties or (ii) enhanced benefits or policy
modifications, the Company will reimburse REALIC for such costs and compensate
it for such additional benefits or policy modifications.

6.   Cooperation for Policyholder Audits
     -----------------------------------

     If the Company or REALIC receives notice that an owner of a Reinsured
Policy is the subject of an audit being conducted by the United States Internal
Revenue Service, the Company or REALIC will provide good faith cooperation to
the other and to such owner of a Reinsured Policy, to provide information and
support related to the audit.

                                     -13-
<PAGE>

                                   ARTICLE X

                                Confidentiality
                                ---------------

     The Company and REALIC may come into possession or knowledge of
confidential information of the other in connection with the obligations to be
performed by each under this Agreement. The Company and REALIC 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, agents or
administrators to third parties of any kind, except as is authorized in advance.
"Confidential Information" means any information which (i) is not generally
available to the public, or (ii) has not been lawfully obtained by the parties
prior to the date of disclosure to it by the other, and includes:

          (a)  Information or knowledge about each party's products, processes,
               services, finances, claims management practices, and reserving
               methodology; and
          (b)  Any medical or other private, individually identifiable
               information about other people or business entities with whom the
               parties do business, including customers, individuals covered by
               insurance policies or plans, and each party's producers and
               employees.

                                  ARTICLE XI

                              General Provisions
                              ------------------

1.   Policy Forms and Rates
     ----------------------

     Upon request, the Company will use its best efforts to furnish REALIC with
a copy of its application forms, policy and rider forms, premium and non-
forfeiture value manuals, reserve tables, actuarial memoranda, and any other
forms or tables needed for proper handling of reinsurance under this Agreement.
REALIC must agree in writing before incurring additional liability resulting
from any changes to policies, policy riders or amendments reinsured under this
Agreement.

2.   Non-Guaranteed Elements.
     -----------------------

     (a)  The Company shall set all non-guaranteed elements of the Reinsured
Policies, taking into account the recommendations of REALIC. With respect to the
Reinsured Policies, the Company shall, in its absolute discretion, either (i)
follow such recommendations, or (ii) reject such recommendations. If the Company
rejects any such recommendation, the

                                     -14-
<PAGE>

Company shall indemnify REALIC for any Direct Economic Loss to the extent such
Direct Economic Loss results from the Company's rejection of such
recommendation. The Company's obligation to indemnify REALIC shall not apply if
implementing such recommendation would violate any applicable law or regulation.
For purposes of this Article XI, Section 1, "Direct Economic Loss" means (x)
with respect to credited interest rates, the amount by which the aggregate
amount due to policyholders in respect of the period to which REALIC's
recommendation relates exceeds the aggregate amount that would have been due to
such policyholders in respect of such period to the extent that the Company had
followed such recommendation, and (y) with respect to charges under the
Reinsured Policies included in the non-guaranteed elements, the amount by which
the aggregate amount due from policyholders in respect of the period to which
REALIC's recommendation relates is less than the aggregate amount that would
have been due from such policyholders in respect of such period if the Company
had followed such recommendation.

     (b)  If the Company accepts REALIC's recommendation with respect to any
aspect of the non-guaranteed elements and the propriety of REALIC's
recommendation is challenged by any Person, REALIC shall indemnify the Company,
its affiliates and their respective directors, officers, shareholders, employees
and representatives, and the respective successors and assigns of any of the
foregoing (collectively, the "Indemnified Parties"), for 100% of any and all
liabilities, claims, damages, losses, fines, penalties, assessments, costs or
other obligations (collectively, the "Obligations") incurred by, asserted
against or imposed upon any of the Indemnified Parties to the extent such
Obligations result from the Company following any recommendation of REALIC with
respect to any aspect of the non-guaranteed elements.

3.   Reinsurance Conditions
     ----------------------

     The reinsurance is subject to the same limitations and conditions as the
insurance under the policy or policies written by the Company on which the
reinsurance is based.

4.   Errors and Omissions
     --------------------

     If either the Company or REALIC unintentionally fails to perform an
obligation that affects this Agreement and such failure results in an error on
the part of the Company or REALIC, the error will be corrected by restoring both
the Company and REALIC to the positions they would have occupied had no such
error occurred. Any amounts due under this Section will bear interest at a rate
mutually agreeable to REALIC and the Company.

5.   Offset
     ------

     Any amount which either the Company or REALIC is contractually obligated to
pay to the other party may be paid out of any amount which is due and unpaid
under this Agreement.

                                     -15-
<PAGE>

The application of this offset provision will not be deemed to constitute
diminution in the event of insolvency.

6.   Inspection
     ----------

     Upon reasonable notice, REALIC may inspect any and all books, records,
documents or similar information relating to or affecting reinsurance under this
Agreement at the appropriate office of the Company during normal business hours.
Upon reasonable notice, the Company may inspect any and all books, records,
documents or similar information relating to or affecting reinsurance or
administration under this Agreement at the appropriate office of REALIC during
normal business hours.

7.   Subcontracting
     --------------

     REALIC may arrange for a duly authorized third party administrator to
perform any portion of the services that REALIC has agreed to provide under this
Agreement. REALIC shall remain liable to the Company in accordance with the
terms of this Agreement for any such work performed by a subcontractor. REALIC
shall absorb any additional costs incurred as a result of its subcontracting the
services to be provided under this Agreement.

8.   Authority
     ---------

     Neither the Company nor REALIC shall have any power or authority to act for
or on behalf of the other except as herein expressly granted, and no other or
greater power or authority shall be implied by the grant or denial of power or
authority specifically mentioned herein.

9.   Entire Agreement
     ----------------

     This Agreement and the Schedules attached hereto supersede all prior
discussions and written and oral agreements between the parties with respect to
the subject matter of this Agreement. This Agreement and the Schedules attached
hereto contain the sole and entire agreement between the parties hereto with
respect to the subject matter hereof.

10.  Amendment
     ---------

     This Agreement may be modified or amended only by a writing duly executed
by or on behalf of the Company and REALIC.

                                     -16-
<PAGE>

11.  Counterparts
     ------------

     This Agreement may be executed simultaneously in any number of
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument.

12.  No Assignment
     -------------

     Except as otherwise provided herein, neither party hereto may assign this
Agreement or any right hereunder or part hereof without the prior written
consent of the other party hereto.

13.  Binding Effect
     --------------

     This Agreement is binding upon and will inure to the benefit of the parties
and their respective successors and permitted assignees.

14.  Notices
     -------

     Any notice, request, instruction, or other document to be given hereunder
by any party hereto to the other party hereto will be in writing and (a)
delivered personally, (b) sent by facsimile, (c) delivered by overnight express,
or (d) sent by registered or certified mail, postage prepaid, as follows:

     If to the Company, to:

               Provident Life and Accident Insurance Company
               1 Fountain Square
               Chattanooga, Tennessee 37402
               Attention:  Robert C. Greving
               Facsimile: 423/642-4259

     with a copy to:

               Office of the General Counsel
               Provident Life and Accident Insurance Company
               1 Fountain Square
               Chattanooga, Tennessee 37402
               Facsimile: 423/755-2590

                                     -17-
<PAGE>

     If to REALIC, to:

               Reassure America Life Insurance Company
               969 High Ridge Road
               Stamford, Connecticut 06905
               Attention: President
               Facsimile: 203/968-0920

or at such other address for a party as will be specified by like notice.  Each
notice or other communication required or permitted under this Agreement that is
addressed as provided in this section will be deemed given upon delivery.

15.  Invalid Provisions
     ------------------

     If any provision of this Agreement is held to be illegal, invalid, or
unenforceable under any present or future law, and if the rights or obligations
of the Company or REALIC under this Agreement will not be materially and
adversely affected thereby, (i) such provision will be fully severable, (ii)
this Agreement will be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part hereof, (iii) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid, or unenforceable provision or by its
severance herefrom, and (iv) in lieu of such illegal, invalid, or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid, and enforceable provision as similar in terms to such illegal,
invalid, or unenforceable provision as may be possible.

                                     -18-
<PAGE>

                                  ARTICLE XII

                                   Execution
                                   ---------

     IN WITNESS WHEREOF, REALIC and the Company have executed this Agreement on
the dates and at the places set forth below.


                                        PROVIDENT LIFE AND ACCIDENT
                                        INSURANCE COMPANY


Date:  August 25, 2000                  By:  /s/ Robert C. Greving
     ---------------------------            -------------------------------

Place:  Chattanooga, TN                 Name:  Robert C. Greving
       -------------------------

Witness:  /s/ Kathy Burke               Title:  Senior Vice President, Finance
         -----------------------


                                        REASSURE AMERICA LIFE
                                        INSURANCE COMPANY



Date:     August 25, 2000               By:  /s/ W. Weldon Wilson
     ---------------------------            -----------------------------

Place:  Stanford, CT                    Name:  W. Weldon Wilson
       -------------------------

Witness:  Patricia Rup                  Title:  Vice President
         -----------------------
                                     -19-
<PAGE>

                                  Schedule A
                                  ----------

PART 1


[SEE ATTACHED]

                                      -1-
<PAGE>

                                  Schedule A
                                  ----------

PART 2


[SEE ATTACHED]

                                      -2-
<PAGE>

                                  Schedule B
                                  ----------


                         Administrative Transfer Dates
                         -----------------------------



     Administrative System              Conversion Date
     ---------------------              ---------------

     The ALIS System                    February 28, 2001

     The CAPSIL System                  April 30, 2001

     The Non-COLI Business
     on the PARIS System                April 30, 2001

     The COLI  Business
     on the PARIS System                May 31, 2001

     The Life70 System                  June 30, 2001

                                      -3-
<PAGE>

                                  Schedule C
                                  ----------

                          Administrative Service Fees
                          ---------------------------


Until the Administrative Transfer Dates, REALIC will pay the fees outlined in
this schedule to the Company. Within ten days after the end of each month, the
Company will provide REALIC with the average number of policies in force in the
preceding month for which the Company was providing administrative services.
Within ten days of receipt of such information, REALIC shall pay the appropriate
fees to the Company.

     Type of Policy                     Fee to be Paid
     --------------                     --------------


     Traditional Permanent Policies     $2.00 per policy per month
     Traditional Term Policies          $1.75 per policy per month
     Universal Life Policies            $3.00 per policy per month
     Interest Sensitive Life            $3.00 per policy per month
     COLI                               $2.00 per policy per month



If an Administrative Transfer Date set forth in Schedule B is not met, the fees
                                                ----------
provided above will double for the Reinsured Policies on such administrative
system.

                                      -4-
<PAGE>

                                  Schedule D
                                  ----------


                 Services Needed for Administrative Transition
                 ---------------------------------------------


The Company will assist REALIC as follows in the transition of the
administrative systems. Such assistance will be provided to REALIC or, as
requested by REALIC, its designated third party administrator that will be
administering the Reinsured Policies.

(1)  The Company will permit REALIC to assign one or more representatives on-
     site at the Company's offices in Chattanooga for a period of time as
     necessary. The representatives will work with the Company's PARIS IT staff
     to learn the PARIS system in order to facilitate the ultimate migration of
     the PARIS System to REALIC or its designated third party administrator.

(2)  The Company will be prepared to accept premium payment information for
     commission calculation and payment for each administrative system as of the
     respective Administrative Transfer Date.

(3)  The Company will complete that portion of the KPMG guideline project
     calculations which involves calculating the CAPSIL ISWL guideline premiums
     and "7 pay" factors for the Successor/Protector policies. The Company will
     then update the CAPSIL records with, or have available for REALIC, the
     correct values by December 31, 2000.

(4)  The Company will make available sufficient experienced support staff to aid
     in the conversion and administrative transfer of products residing on the
     PARIS, ALIS, CAPSIL, and Life70 Systems.

(5)  The Company will ensure that all billing, collection and policyholder
     notifications are current as of the various Administrative Transfer Dates
     according to existing Company servicing levels.

                                      -5-
<PAGE>

                                  Schedule E
                                  ----------


                          Format of Quarterly Reports
                          ---------------------------


[SEE ATTACHED]

                                      -6-
<PAGE>

                                  Schedule F
                                  ----------


                           Assets to be Transferred
                           ------------------------


[SEE ATTACHED]

                                      -7-