Exhibit 10.16
RETROCESSION
AGREEMENT
between
GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY
and
UNION FIDELITY LIFE INSURANCE COMPANY
Dated as of April 15, 2004
TABLE OF CONTENTS
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SCHEDULES |
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i
RETROCESSION AGREEMENT
This Retrocession Agreement, dated as of April 15, 2004 (this “Agreement”), is made and entered into by and between General Electric Capital Assurance Company, an insurance company organized under the laws of the State of Delaware (the “Company”), and Union Fidelity Life Insurance Company, an insurance company organized under the laws of the State of Illinois (the “Reinsurer”). Defined terms used herein are defined below.
The Company and the Reinsurer mutually agree to reinsure the risks described in this Agreement under the terms and conditions stated herein. This Agreement is an indemnity retrocession agreement solely between the Company and the Reinsurer, and the performance of the obligations of each party under this Agreement shall be rendered solely to the other party. In no instance shall anyone other than the Company or the Reinsurer have any rights under this Agreement. The Company shall be and shall remain the only party hereunder that is liable to Travelers under the Travelers Reinsurance Agreement or to any insured, contract holder, policyholder, claimant or beneficiary under any Novated Policy.
This Agreement is entered into in connection with an intercompany reorganization among the Company, the Reinsurer and certain of their Affiliates.
Nothing in this Agreement, express or implied, is intended to or shall assign, delegate, sublicense or transfer, in whole or in part, any rights, interests or obligations under the Travelers Agreements.
ARTICLE I
DEFINITIONS
“Accounting Period” means each calendar month, except that the last Accounting Period shall be the period commencing with the first day of the month in which the Termination Date falls and ending with the Termination Date.
“Affiliate” means any other Person that directly or indirectly controls, is controlled by, or is under common control with, the first Person. “Control” (including the terms, “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or credit arrangement, as trustee or executor, or otherwise.
“Agreement” shall have the meaning specified in the first paragraph of this Agreement.
“Allocated Loss Adjustment Expenses” means all costs, fees and expenses incurred by the Company or its Affiliates in the investigation, adjustment, settlement or defense of all claims or the monitoring, preservation or enforcement of rights, interests or benefits arising out of or relating to the Reinsured Policies (excluding office expenses and salaries of officials of the Company or its Affiliates or any other administrative or overhead expenses of the Company or of its Affiliates), and court costs, and interest on any judgment or award. Allocated Loss Adjustment Expenses shall also include expenses associated with an action by any entity for declaratory judgment filed in connection with the Reinsured Policies.
“Annual Report” shall have the meaning specified in Section 7.5.
“Applicable Law” means any federal, state, local or foreign law (including common law), statute, ordinance, rule, regulation, order, writ, injunction, judgment, permit governmental agreement or decree applicable to a Person or any of such Person’s subsidiaries, properties, assets, or to such Person’s officers, directors, managing directors, employees or agents in their capacity as such.
“Assets” shall have the meaning specified in Section 5.4(a).
“Assignment Letter Agreement” means the letter agreement dated the date hereof among General Electric Capital Corporation, a Delaware corporation, the Reinsurer, the Company and certain affiliates of the Company relating to the assignment by General Electric Capital Corporation of the Capital Maintenance Agreement.
“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in the States of Illinois or Virginia are required or authorized by law to be closed.
“Business Overhead Services” shall have the meaning specified in Schedule E-1 hereto.
“Capital Maintenance Agreement” means the Capital Maintenance Agreement between General Electric Capital Corporation, a Delaware corporation, and the Reinsurer.
“Ceding Commission” shall have the meaning specified in Section 5.3.
“Claims Settlement Account” shall have the meaning specified in Section 4.1(a).
“Closing Date” means April 15, 2004.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company Account” shall have the meaning specified in Section 12.1(e).
“CPR” shall have the meaning specified in Section 15.3.
“CPR Arbitration Rules” shall have the meaning specified in Section 15.4(a).
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“Dispute” shall have the meaning specified in Section 15.1(a).
“Eligible Securities” shall have the meaning specified in Section 12.1(c).
“Expense Allowance” shall have the meaning specified in Section 6.1.
“Experience Account” has the meaning set forth in Section 8.1(a)
“Experience Refund” has the meaning set forth in Section 8.1(c)
“Experience Refund Baseline” has the meaning set forth in Section 8.1(a)
“Extra Contractual Liabilities” means all liabilities for damages (including compensatory, consequential, exemplary, punitive, bad faith or similar or other damages) which (i) arise out of the conduct of the Company on or prior to the Inception Date in seeking premium rate increases pursuant to the terms of the Travelers Reinsurance Agreement or the Travelers Servicing Agreement or (ii) relate to the marketing, sale, underwriting, issuance, delivery, cancellation or administration of the Reinsured Policies, including liability arising out of or relating to any alleged or actual acts, errors or omissions by the Company or its agents, whether intentional or otherwise, with respect to any of the Reinsured Policies, including (A) any alleged or actual reckless conduct or bad faith in connection with the handling of any claim arising out of or under Reinsured Policies, or (B) the marketing, sale, underwriting, issuance, delivery, cancellation or administration of any of the Reinsured Policies.
“Force Majeure” shall have the meaning specified in Section 3.9(b)(iii).
“Funding Requirement” shall have the meaning specified in Section 12.1(e).
“GAAP” means U.S. generally accepted accounting principles consistently applied.
“Governmental Authority” means any foreign or national government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
“Inception Date” shall have the meaning specified in Section 2.1.
“Initial Notice” shall have the meaning specified in Section 15.2.
“Initial Reinsurance Premium” shall have the meaning specified in Section 5.1.
“Initial Report” shall have the meaning specified in Section 7.1.
“Insolvency Fund” means any guarantee fund, insolvency fund, plan, pool, association, fund or other arrangement, however denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee or other obligation of an insurer or reinsurer, or its successors or assigns,
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which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.
“Loss” or “Losses” means the amount of liability paid or payable by the Company with respect to claims, losses, liabilities, damages, deficiencies, costs or expenses, including without limitation, any settlements or compromises or disputed claims, arising under the Reinsured Policies.
“Loss Carry Forward Amount” shall have the meaning specified in the Travelers Reinsurance Agreement.
“Minimum Claims Settlement Amount” shall have the meaning specified in Section 4.1(b).
“Monthly Settlement” shall have the meaning specified in Section 5.4(a).
“Monthly Settlement Report” shall have the meaning specified in Section 7.2.
“Novated Policies” shall have the meaning specified in Section 2.6.
“Person” means any natural person, firm, limited liability company, general partnership, limited partnership, joint venture, association, corporation, trust, Governmental Authority or other entity.
“Quarterly Settlement” shall have the meaning specified in Section 5.4(a).
“Quarterly Settlement Report” shall have the meaning specified in Section 7.3.
“RBC Reporting Letter Agreement” means the letter agreement dated the date hereof among the Company, the Reinsurer and certain affiliates of the Company relating to the Reinsurer’s requirement to provide periodic certifications and reports regarding the Reinsurer’s risk based capital ratio.
“Reinsured Policies” means the long term care insurance policies issued by or on behalf of Travelers prior to January 1, 2004 and written on the policy forms described in Schedule A and reinsured by the Company pursuant to the Travelers Reinsurance Agreement.
“Reinsured Risks” shall have the meaning specified in Section 2.1.
“Response” shall have the meaning specified in Section 15.2.
“SAP” means statutory accounting practices prescribed or permitted by the Insurance Department of the State of Delaware.
“Stop-Loss Payments” means the payments required by the Company or Travelers, as the case may be, pursuant to Section 2.5 of the Travelers Reinsurance Agreement.
“Tax DAC” means specified policy acquisition expenses capitalized and amortized under section 848 of the Code.
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“Termination Date” means the effective date of any termination of this Agreement as provided in Article IX.
“Termination Letter Agreement” means the letter agreement dated the date hereof among the Company, the Reinsurer and certain affiliates of the Company relating to the rescission of this Agreement upon the failure of certain events to occur after the date hereof.
“Total Annual Contribution” has the meaning set forth in Section 8.1(b).
“Total SAP Ceded Reserves” means, as of any given date, the gross reserves of the Company calculated in accordance with SAP with respect to the Reinsured Risks, which shall consist of the sum of (A) (i) active life reserves, (ii) claim reserves (both case and incurred but not reported), (iii) unearned premium reserves, and (iv) advance premiums, less (B) due and unpaid premium receivable balances.
“Total GAAP Ceded Reserves” means, as of any given date, the gross reserves of the Company calculated in accordance with GAAP with respect to the Reinsured Risks, which shall consist of the sum of (A) (i) active life reserves (including related maintenance and loss expense reserves), (ii) claim reserves (both case and incurred but not reported), (iii) unearned premium reserves, and (iv) advance premiums, less (B) due and unpaid premium receivable balances.
“Travelers” means The Travelers Insurance Company, a Connecticut insurance company.
“Travelers Agreements” means, collectively, the Travelers Acquisition Agreement, the Travelers Reinsurance Agreement, the Travelers Servicing Agreement and the Travelers Side Letter.
“Travelers Acquisition Agreement” means the Acquisition Agreement dated as of April 14, 2000 between the Company and Travelers, including all amendments, modifications and supplements thereto made prior to January 1, 2004 or on or after January 1, 2004 with the consent of the Reinsurer.
“Travelers Reinsurance Agreement” means the Indemnity Reinsurance Agreement dated as of July 1, 2000 between the Company and Travelers, including all amendments, modifications and supplements thereto made prior to January 1, 2004, or on or after January 1, 2004 with the consent of the Reinsurer, and as contemplated in Section 2.7.
“Travelers Servicing Agreement” means the Administrative Services Agreement dated as of July 1, 2000 between Travelers and the Company, including all amendments, modifications and supplements thereto made prior to January 1, 2004 or on or after January 1, 2004 with the consent of the Reinsurer.
“Travelers Side Letter” means the letter agreement, dated April 14, 2000, between Travelers and the Company relating to or governing the novation of the Reinsured Policies reinsured by the Company pursuant to the Travelers Reinsurance Agreement, including all amendments, modifications and supplements thereto made prior to January 1, 2004 (including
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without limitation the amendment thereto dated July 31, 2000) or on or after January 1, 2004 with the consent of the Reinsurer.
“Trust Account” shall have the meaning set forth in Section 12.1(a).
“Trust Agreement” shall have the meaning set forth in Section 12.1(a).
“Trustee” shall have the meaning set forth in Section 12.1(a).
“Ultimate Net Loss” shall have the meaning specified in Section 2.3(a).
ARTICLE II
COVERAGE
ARTICLE III
ADMINISTRATION; GENERAL PROVISIONS
Except as required by Section 3.3(i) or by Applicable Law, the Company shall refrain from seeking any decrease in the premium rates under the Novated Policies from and after the Inception Date.
The Reinsurer shall bear, and shall indemnify the Company for, all costs and liabilities incurred in or arising out of seeking or effecting any premium rate changes at the direction of the Reinsurer, which, for the avoidance of doubt, are not included in the Expense Allowance.
ARTICLE IV
CLAIMS SETTLEMENT ACCOUNT; CLAIMS
ARTICLE V
REINSURANCE ASSET TRANSFER; CEDING COMMISSION
ARTICLE VI
EXPENSE ALLOWANCES
ARTICLE VII
ACCOUNTING AND SETTLEMENT
ARTICLE VIII
EXPERIENCE REFUND
[X] x [Y], where
X equals the excess of (i) over (ii) (the result of which may be a positive number or a negative number), where (i) is the actual statutory basis pre-tax income earned on the Reinsured Policies for the calendar year for which the calculation is being made, calculated consistent with projected statutory basis pre-tax income earned on the Reinsured Policies (the “Experience Refund Baseline”) as calculated on Schedule I hereto, but utilizing actual experience (e.g., actual premiums and expenses will be used in place of the projected amounts shown on Schedule I), except for investment income during the first three years (see below) and (ii) is the Experience Refund Baseline for the calendar year for which the calculation is being made as set forth on Schedule I hereto; and Y equals 90% for calculations made with respect to calendar years 2004 through 2006 and 50% for calculations made with respect to calendar years thereafter; provided,
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however, that if the cumulative amount of X during the calendar years 2004-2006 exceeds $65 million, then Y shall be reduced to 50% for any amounts of X over $65 million. The calculation of investment income and the IMR income components of the actual pre-tax income for 2004-2006 shall be based on an assumed net annual yield of 6.19%, 6.08% and 6.02% respectively. To derive investment income, the prior stated rates should be applied to a 2 point average of the sum of Total SAP Ceded Reserves and statutory IMR liability. The two points should be December 31st for the applicable settlement year and December 31st for the immediately prior year. Surplus assets and investment income thereon are excluded from the Experience Refund Baseline calculation, and therefore should also be excluded from the Total Annual Contribution calculation. Thereafter the investment income and IMR income shall be similarly calculated using the actual net yield (net of investment expenses and default costs) and allocated IMR from the Reinsurer’s LTC asset portfolio backing the Total SAP Ceded Reserves.
ARTICLE IX
DURATION AND TERMINATION
ARTICLE X
INSOLVENCY
ARTICLE XI
CREDIT FOR REINSURANCE
ARTICLE XII
REINSURANCE SECURITY
ARTICLE XIII
DEFERRED ACQUISITION COSTS
ARTICLE XIV
INDEMNIFICATION
ARTICLE XV
DISPUTE RESOLUTION
ARTICLE XVI
PRIVACY REQUIREMENTS
ARTICLE XVII
MISCELLANEOUS PROVISIONS
If to the Company:
General Electric Capital Assurance Company
6610 West Broad Street
Richmond, VA 23230
Facsimile: (804) 281-6165
Attention: Chief Executive Officer
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With a copy to:
General Electric Capital Assurance Company
6620 West Broad Street
Richmond, VA 23230
Facsimile: (804) 662-2414
Attention: General Counsel
If to the Reinsurer:
Union Fidelity Life Insurance Company
200 North Martingale Road
Schaumburg, IL 60173-2096
Facsimile: (847) 330-3404
Attention: Chief Financial Officer
With a copy to:
Union Fidelity Life Insurance
Company
200 North Martingale Road
Schaumburg, IL 60173-2096
Facsimile: (847) 605-3044
Attention: General Counsel
or to such other address or to such other Person as either party may have last designated by notice to the other party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives.
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GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY |
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By |
/s/ Victor C. Moses |
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Name: Victor C. Moses |
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Title: Senior Vice President and Chief Actuary |
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UNION FIDELITY LIFE INSURANCE COMPANY |
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By |
/s/ Glenn Joppa |
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Name: Glenn Joppa |
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Title: Senior Vice President and Secretary |
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POLICY FORMS
LTC1 (1990-92)
LTC2 Qualified (1990-99)
LTC2 Non-Qualified (1990-99)
LC2
LTC3 (1993-95)
LTC3+ Qualified Comprehensive (1993-2001)
LTC3+ Non-Qualified Comprehensive (1993-2001)
LTC3+ Qualified Facility (1993-1999)
LTC3+ Non-Qualified Facility (1993-1999)
LC3 Non-Qualified (1993-99)
LC3+ Qualified (1996-97)
LC3+ Non-Qualified (1996-97)
LTC4 Qualified Comprehensive (1997-2001)
LTC4 Non-Qualified Comprehensive (1998-2001)
LTC4 Qualified Facility (1997-1999)
LTC4 Non-Qualified Facility (1998-2001)
LC4
FORM OF ADMINISTRATIVE SERVICES AGREEMENT
LTC UFLIC/GECA
ADMINISTRATIVE SERVICES AGREEMENT
by and between
GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY
and
UNION FIDELITY LIFE INSURANCE COMPANY
Effective as of [ ]
ADMINISTRATIVE SERVICES AGREEMENT
This ADMINISTRATIVE SERVICES AGREEMENT (this “Agreement”), effective as of [ ] (the “Effective Date”), is entered into by and between GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY, an insurance company organized under the laws of the State of Delaware (the “Company”), and UNION FIDELITY LIFE INSURANCE COMPANY, an insurance company organized under the laws of the State of Illinois (the “Administrator”).
RECITALS:
WHEREAS, the Company and the Administrator have entered into a Retrocession Agreement dated as of April 15, 2004 (the “Retrocession Agreement”) which provides for the parties to enter into this Agreement;
WHEREAS, pursuant to the Retrocession Agreement, the Administrator has agreed to indemnify the Company for, among other things, 100% of Ultimate Net Loss incurred by the Company and unpaid as of the Inception Date with respect to the Novated Policies (capitalized terms used herein and not defined herein, unless otherwise indicated, have the respective meanings assigned to them in the Retrocession Agreement); and
WHEREAS, the Company wishes to appoint the Administrator to provide policyholder and claim servicing with respect to the Novated Policies, and the Administrator desires to provide such administrative services;
NOW, THEREFORE, in consideration of the covenants and agreements set forth herein, the parties hereto agree as follows:
AUTHORITY
The Company hereby appoints the Administrator, and the Administrator hereby accepts appointment, to provide as an independent contractor of the Company, from and after the Effective Date, all of the policyholder and claim servicing services necessary or appropriate with respect to the Novated Policies including those set forth in this Agreement (the “Administrative Services”), all on the terms as set forth in this Agreement. In providing the policyholder and claim servicing with respect to the Novated Policies, the Administrator shall handle all such matters, including but not limited to the billing and collection of premiums and the defense, adjustment, settlement and payment of all claims arising under the Novated Policies, as more fully described below. Notwithstanding any other provision of this Agreement to the contrary, the Company shall have the right to direct the Administrator to perform any action necessary for the Novated Policies or the policyholder and claim servicing thereof to comply with Applicable Law, or to cease performing any action that constitutes a violation of Applicable Law.
STANDARD FOR SERVICES; FACILITIES; SUBCONTRACTING
CLAIMS HANDLING
The Administrative Services with respect to claims for benefits including claims outstanding on the Effective Date, shall include the following:
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REGULATORY AND LEGAL PROCEEDINiGS
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NOTIFICATION TO POLICYHOLDERS
The Administrator agrees to send to policyholders of the Novated Policies a written notice prepared by the Administrator and reasonably acceptable to the Company to the effect that the Administrator, or such other Person designated by the Administrator in accordance with the terms of this Agreement, has been appointed by the Company to provide Administrative Services. The Administrator shall send such notice by first class U.S. mail at a time reasonably acceptable to the Company and the Administrator and in all events in accordance with Applicable Law. The parties intend to minimize the cost associated with any notification under this Article V, including by means of inclusion of the notice in a regularly scheduled mailing to policyholders in lieu of a separate mailing. The cost associated with such notification under this Article V (upon the initial assumption of the administration of the Novated Policies under Section 3.9 of the Retrocession Agreement) shall be a transition cost payable by the Administrator or the Company in accordance with Section 3.9(a) or 3.9(c) of the Retrocession Agreement, as applicable.
BILLINGS AND COLLECTIONS; RE-RATING OF NOVATED POLICIES
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QUARTERLY PREMIUM TAX AND INSOLVENCY FUND ACCOUNTINGS
CERTAIN ACTIONS BY COMPANY
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REGULATORY MATTERS AND AUDIT REPORTING
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MISCELLANEOUS ADMINISTRATIVE SERVICES
The Administrator shall assume the obligations set forth below:
BOOKS AND RECORDS
The Administrator shall keep accurate and complete records, files and accounts of all transactions and matters with respect to the Novated Policies and the administration thereof in accordance with Applicable Law and its record management practices in effect from time to time for the Administrator’s insurance business not covered by this Agreement, if any. The parties to this Agreement and their designated representatives may upon reasonable notice inspect, at the offices of the Administrator or the Company where such records are located, the papers and any and all other books or documents of the Administrator or the Company reasonably relating to this Agreement, including the Novated Policies, and shall have access to appropriate employees and representatives of the other party, in each case during normal business hours for such period as this Agreement is in effect or for as long thereafter as any rights or obligations of any party survives or the Administrator or the Company reasonably need access to such records for regulatory, tax or similar purposes. The information obtained shall be used only for purposes relating to the transactions contemplated under this Agreement.
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COOPERATION
Each party hereto shall cooperate fully with the other in all reasonable respects in order to accomplish the objectives of this Agreement including making available to each their respective officers and employees for interviews and meetings with Governmental Authorities and furnishing any additional assistance, information and documents as may be reasonably requested by a party from time to time.
PRIVACY REQUIREMENTS
In providing the Administrative Services provided for under this Agreement, and in connection with maintaining, administering, handling and transferring the data of the policyholders and other recipients of benefits under the Novated Policies, the Administrator shall, and shall cause its Affiliates and any permitted Subcontractors to, comply with all confidentiality and security obligations applicable to them in connection with the collection, use, disclosure, maintenance and transmission of personal, private, health or financial information about individual policyholders or benefit recipients, including the provisions of privacy policies under which such information was gathered, those laws currently in place and which may become effective during the term of this Agreement, including the Gramm-Leach-Bliley Act, the Health Insurance Portability and Accountability Act of 1996 and any other Applicable Laws. The Administrator shall entitle the Company and its agents and representatives, the Commissioner of Health and Human Services and such other Governmental Authorities, to the extent required by Applicable Law, to audit the Administrator’s compliance herewith. The Administrator shall also enable individual subjects of personally identifiable information, upon request from such individuals, to review and correct information maintained by the Administrator about them, and to restrict use of such information. The Administrator shall promptly report to the Company any violation of this provision of which the Administrator becomes aware. Unless required by Applicable Law, the Administrator shall not during the term of this Agreement, modify the privacy policies under which information utilized by the Administrator in administering the Novated Policies is gathered, without the Company’s prior written consent, which consent shall not be unreasonably withheld. The parties agree to comply with the terms of the Business Associate Addendum attached hereto or such other written agreement as may be required by Applicable Law on the date hereof.
CONSIDERATION FOR ADMINISTRATIVE SERVICES
Apart from the performance by the Company of its obligations under the Retrocession Agreement, there shall be no fee or other consideration due to the Administrator for performance of the Administrative Services under this Agreement.
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BANK ACCOUNT; USE OF COMPANY LETTERHEAD
When and on terms reasonably requested by the Administrator, the Company shall open, modify or close, and make available for use by the Administrator for the payment of amounts to be paid by the Administrator hereunder one or more bank accounts of the Company and check stock of the Company. The Administrator shall maintain such account(s) and pay all applicable bank fees and check stock costs. The Company shall adopt such resolutions and execute such documents as required to designate senior officers of the Administrator (by title) as signatories on such account(s) and authorize the Administrator to certify to such bank(s), from time to time, the names of such officers. The Company shall also make available to the Administrator, at the sole expense of the Administrator, such letterhead, printed forms and other documents of the Company as may be reasonably required by the Administrator in performing services hereunder. Upon termination of this Agreement, the Administrator shall promptly return to the Company all such unused check stock, letterhead, printed forms and other documents held by it in connection with this Agreement as provided under this Article XV.
INDEMNIFICATION
Any claim for or with respect to indemnification arising out of, or relating to, this Agreement or the Administrative Services hereunder shall be permitted under and governed by the provisions of Article V of the Master Agreement, dated as of [ ], 2004, among General Electric Company, General Electric Capital Corporation, GEI, Inc., GE Financial Assurance Holdings, Inc. and Genworth Financial, Inc (the “Master Agreement”), to the extent such provisions are applicable, as if this Agreement were a Transaction Document under the Master Agreement.
DURATION; TERMINATION
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DISPUTE RESOLUTION
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MISCELLANEOUS PROVISIONS
If to the Company:
General Electric Capital Assurance Company
6610 West Broad Street
Richmond, VA 23230
Facsimile: (804) 281-6165
Attention: Chief Executive Officer
With a copy to:
General Electric Capital Assurance Company
6620 West Broad Street
Richmond, VA 23230
Facsimile: (804)
662-2414
Attention: General Counsel
If to the Administrator:
Union Fidelity Life Insurance
Company
200 North Martingale Road
Schaumburg, IL 60173-2096
Facsimile: (847) 330-3404
Attention: Chief Financial Officer
With a copy to:
Union Fidelity Life Insurance
Company
200 North Martingale Road
Schaumburg, IL 60173-2096
Facsimile: (847) 605-3044
Attention: General Counsel
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or to such other address or to such other Person as either party may have last designated by notice to the other party.
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IN WITNESS WHEREOF, the Company and the Administrator have executed this Agreement as of the date first above written.
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GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY |
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UNION FIDELITY LIFE INSURANCE COMPANY |
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BUSINESS ASSOCIATE ADDENDUM
I. Purpose.
In order to disclose certain information to the party providing a service under this Agreement (“Provider”) under this Addendum, some of which may constitute Protected Health Information (defined below), the party to whom a service under this Agreement is being provided (“Recipient”) and Provider mutually agree to comply with the terms of this Addendum for the purpose of satisfying the requirements of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and its implementing privacy regulations at 45 C.F.R. Parts 160-164 (“HIPAA Privacy Rule”). These provisions shall apply to Provider to the extent that Provider is considered a “Business Associate” under the HIPAA Privacy Rule and all references in this section to Business Associates shall refer to Provider. Capitalized terms not otherwise defined herein shall have the meaning assigned in the Agreement. Notwithstanding anything else to the contrary in the Agreement, in the event of a conflict between this Addendum and the Agreement, the terms of this Addendum shall prevail.
II. Permitted Uses and Disclosures.
A. Business Associate agrees to use or disclose Protected Health Information (“PHI”) that it creates for or receives from Recipient or its Subsidiaries only as follows. The capitalized term “Protected Health Information or PHI” has the meaning set forth in 45 Code of Federal Regulations Section 164.501, as amended from time to time. Generally, this term means individually identifiable health information including, without limitation, all information, data and materials, including without limitation, demographic, medical and financial information, that relates to the past, present, or future physical or mental health or condition of an individual; the provision of health care to an individual; or the past present, or future payment for the provision of health care to an individual; and that identifies the individual or with respect to which there is a reasonable basis to believe the information can be used to identify the individual. This definition shall include any demographic information concerning members and participants in, and applicants for, Recipient’s or its Subsidiaries’ health benefit plans. All other terms used in this Addendum shall have the meanings set forth in the applicable definitions under the HIPAA Privacy Rule.
B. Functions and Activities on Company’s Behalf. Business Associate is permitted to use and disclose PHI it creates for or receives from Recipient or its Subsidiaries only for the purposes described in this Addendum or the Agreement that are not inconsistent with the provisions of this Addendum, or as required by law, or following receipt of prior written approval from whichever of the Recipient or its Subsidiary for which the relevant PHI was created or from which the relevant PHI was received. In addition to these specific requirements below, Business Associate may use or disclose PHI only in a manner that would not violate the HIPAA Privacy Rule if done by the Recipient or its Subsidiaries.
C. Business Associate’s Operations. Business Associate is permitted by this Agreement to use PHI it creates for or receives from Recipient or its Subsidiaries: (i) if such use is reasonably necessary for Business Associate’s proper management and administration; and (ii) as reasonably necessary to carry out Business Associate’s legal responsibilities. Business
Associate is permitted to disclose PHI it creates for or receives from Recipient or its Subsidiaries for the purposes identified in this Section only if the following conditions are met:
(1) The disclosure is required by law; or
(2) The disclosure is reasonably necessary to Business Associate’s proper management and administration, and Business Associate obtains reasonable assurances in writing from any person or organization to which Business Associate will disclose such PHI that the person or organization will:
a. Hold such PHI as confidential and use or further disclose it only for the purpose for which Business Associate disclosed it to the person or organization or as required by law; and
b. Notify Business Associate (who will in turn promptly notify whichever of the Recipient or its Subsidiary for which the relevant PHI was created or from which the relevant PHI was received) of any instance of which the person or organization becomes aware in which the confidentiality of such PHI was breached.
D. Minimum Necessary Standard. In performing the functions and activities on Recipient’s or its Subsidiaries’ behalf pursuant to the Agreement, Business Associate agrees to use, disclose or request only the minimum necessary PHI to accomplish the purpose of the use, disclosure or request. Business Associate must have in place policies and procedures that limit the PHI disclosed to meet this minimum necessary standard.
E. Prohibition on Unauthorized Use or Disclosure. Business Associate will neither use nor disclose PHI it creates or receives for or from Recipient, its Subsidiaries, or from another business associate of Recipient or its Subsidiaries, except as permitted or required by this Addendum or the Agreement that are not inconsistent with the provisions of this Addendum, or as required by law, or following receipt of prior written approval from whichever of the Recipient or its Subsidiary for which the relevant PHI was created or from which the relevant PHI was received.
F. De-identification of Information. Business Associate agrees neither to de-identify PHI it creates for or receives from Recipient or its Subsidiaries or from another business associate of Recipient or its Subsidiaries, nor use or disclose such de-identified PHI, unless such de-identification is expressly permitted under the terms and conditions of this Addendum or the Agreement and related to Recipient’s or its Subsidiaries’ activities for purposes of “treatment”, “payment” or “health care operations”, as those terms are defined under the HIPAA Privacy Rule. De-identification of PHI, other than as expressly permitted under the terms and conditions of the Addendum for Business Associate to perform services for Recipient or its Subsidiaries, is not a permitted use of PHI under this Addendum. Business Associate further agrees that it will not create a “Limited Data Set” as defined by the HIPAA Privacy Rule using PHI it creates or receives, or receives from another business associate of Recipient or its Subsidiaries, nor use or disclose such Limited Data Set unless: (i) such creation, use or disclosure is expressly permitted under the terms and conditions of this Addendum or the Agreement that are not inconsistent with
2
the provisions of this Addendum; and such creation, use or disclosure is for services provided by Business Associate that relate to Recipient’s or its Subsidiaries’ activities for purposes of “treatment”, “payment” or “health care operations”, as those terms are defined under the HIPAA Privacy Rule.
G. Information Safeguards. Business Associate will develop, document, implement, maintain and use appropriate administrative, technical and physical safeguards to preserve the integrity and confidentiality of and to prevent non-permitted use or disclosure of PHI created for or received from Recipient or its Subsidiaries. These safeguards must be appropriate to the size and complexity of Business Associate’s operations and the nature and scope of its activities. Business Associate agrees that these safeguards will meet any applicable requirements set forth by the U.S. Department of Health and Human Services, including (as of the effective date or as of the compliance date, whichever is applicable) any requirements set forth in the final HIPAA security regulations. Business Associate agrees to mitigate, to the extent practicable, any harmful effect that is known to Business Associate resulting from a use or disclosure of PHI by Business Associate in violation of the requirements of this Addendum.
III. Conducting Standard Transactions. In the course of performing services for Recipient or its Subsidiaries, to the extent that Business Associate will conduct Standard Transactions for or on behalf of Recipient or its Subsidiaries, Business Associate will comply, and will require any subcontractor or agent involved with the conduct of such Standard Transactions to comply, with each applicable requirement of 45 C.F.R. Part 162. “Standard Transaction(s)” shall mean a transaction that complies with the standards set forth at 45 C.F.R. parts 160 and 162. Further, Business Associate will not enter into, or permit its subcontractors or agents to enter into, any trading partner agreement in connection with the conduct of Standard Transactions for or on behalf of the Recipient or its Subsidiaries that:
a. Changes the definition, data condition, or use of a data element or segment in a Standard Transaction;
b. Adds any data element or segment to the maximum defined data set;
c. Uses any code or data element that is marked “not used” in the Standard Transaction’s implementation specification or is not in the Standard Transaction’s implementation specification; or
d. Changes the meaning or intent of the Standard Transaction’s implementation specification.
IV. Sub-Contractors, Agents or Other Representatives. Business Associate will require any of its subcontractors, agents or other representatives to which Business Associate is permitted by this Addendum or the Agreement (or is otherwise given Recipient’s or the relevant Subsidiary’s prior written approval) to disclose any of the PHI Business Associate creates or receives for or from Recipient or its Subsidiaries, to provide reasonable assurances in writing that subcontractor or agent will comply with the same restrictions and conditions that apply to the Business Associate under the terms and conditions of this Addendum with respect to such PHI.
3
V. Protected Health Information Access, Amendment and Disclosure Accounting.
A. Access. Business Associate will promptly upon Recipient’s or its Subsidiary’s request make available to Recipient, its Subsidiary, or, at Recipient’s or such Subsidiary’s direction, to the individual (or the individual’s personal representative) for inspection and obtaining copies any PHI about the individual which Business Associate created for or received from Recipient or its Subsidiary and that is in Business Associate’s custody or control, so that Recipient or its Subsidiary may meet its access obligations under 45 Code of Federal Regulations § 164.524.
B. Amendment. Upon Recipient’s or its Subsidiary’s request Business Associate will promptly amend or permit Recipient or its Subsidiary access to amend any portion of the PHI which Business Associate created for or received from Recipient or its Subsidiary, and incorporate any amendments to such PHI, so that Recipient or its Subsidiary may meet its amendment obligations under 45 Code of Federal Regulations § 164.526.
C. Disclosure Accounting. So that Recipient or its Subsidiaries may meet their disclosure accounting obligations under 45 Code of Federal Regulations § 164.528:
1. Disclosure Tracking. Business Associate will record for each disclosure, not excepted from disclosure accounting under Section V.C.2 below, that Business Associate makes to Recipient or its Subsidiaries of PHI that Business Associate creates for or receives from Recipient or its Subsidiaries, (i) the disclosure date, (ii) the name and member or other policy identification number of the person about whom the disclosure is made, (iii) the name and (if known) address of the person or entity to whom Business Associate made the disclosure, (iv) a brief description of the PHI disclosed, and (v) a brief statement of the purpose of the disclosure (items i-v, collectively, the “disclosure information”). For repetitive disclosures Business Associate makes to the same person or entity (including Recipient or its Subsidiaries) for a single purpose, Business Associate may provide a) the disclosure information for the first of these repetitive disclosures, (b) the frequency, periodicity or number of these repetitive disclosures and (c) the date of the last of these repetitive disclosures. Business Associate will make this disclosure information available to Recipient or its Subsidiaries promptly upon Recipient’s or its Subsidiaries’ request.
2. Exceptions from Disclosure Tracking. Business Associate need not record disclosure information or otherwise account for disclosures of PHI that this Addendum or Recipient or the relevant Subsidiary in writing permits or requires (i) for the purpose of Recipient’s or its Subsidiaries’ treatment activities, payment activities, or health care operations, (ii) to the individual who is the subject of the PHI disclosed or to that individual’s personal representative; (iii) to persons involved in that individual’s health care or payment for health care; (iv) for notification for disaster relief purposes, (v) for national security or intelligence purposes, (vi) to law enforcement officials or correctional institutions regarding inmates; or (vii) pursuant to an authorization; (viii) for disclosures of certain PHI made as part of a Limited Data Set; (ix) for certain incidental disclosures that may occur where reasonable safeguards have been implemented; and (x) for disclosures prior to April 14, 2003.
4
3. Disclosure Tracking Time Periods. Business Associate must have available for Recipient and its Subsidiaries the disclosure information required by this section for the 6 years preceding Recipient’s or its Subsidiaries’ request for the disclosure information (except Business Associate need have no disclosure information for disclosures occurring before April 14, 2003).
VI. Additional Business Associate Provisions
A. Reporting of Breach of Privacy Obligations. Business Associate will provide written notice to whichever of the Recipient or its Subsidiary for which the relevant PHI was created or from which the relevant PHI was received of any use or disclosure of PHI that is neither permitted by this Addendum nor given prior written approval by Recipient or the relevant Subsidiary promptly after Business Associate learns of such non-permitted use or disclosure. Business Associate’s report will at least:
B. Amendment. Upon the effective date of any final regulation or amendment to final regulations promulgated by the U.S. Department of Health and Human Services with respect to PHI, including, but not limited to the HIPAA privacy and security regulations, this Addendum and the Agreement will automatically be amended so that the obligations they impose on Business Associate remain in compliance with these regulations.
In addition, to the extent that new state or federal law requires changes to Business Associate’s obligations under this Addendum, this Addendum shall automatically be amended to include such additional obligations, upon notice by Recipient or its Subsidiaries to Business Associate of such obligations. Business Associate’s continued performance of services under the Agreement shall be deemed acceptance of these additional obligations.
C. Audit and Review of Policies and Procedures. Business Associate agrees to provide, upon Recipient request, access to and copies of any policies and procedures developed or utilized by Business Associate regarding the protection of PHI. Business Associate agrees to provide, upon Recipient’s request, access to Business Associate’s internal practices, books, and records, as they relate to Business Associate’s services, duties and obligations set forth in this Addendum and the Agreement(s) under which Business Associate provides services and / or
5
products to or on behalf of Recipient or its Subsidiaries, for purposes of Recipient’s or its Subsidiaries’ review of such internal practices, books, and records.
6
CEDING COMMISSION
The Ceding Commission shall be the sum of the following:
1. an amount equal to the excess of the Total SAP Ceded Reserves over Total GAAP Ceded Reserves measured as of the close of business on the day immediately preceding the Inception Date (which amount may be negative);
2. an amount equal to the unamortized PVFP intangible asset balance of the Company with respect to the Reinsured Policies as measured as of the close of business on the day immediately preceding the Inception Date, determined in accordance with GAAP;
3. an amount equal to the unamortized deferred acquisition costs of the Company with respect to the Reinsured Policies as measured as of the close of business on the day immediately preceding the Inception Date, determined in accordance with GAAP;
4. an amount equal to the balance of the Loss Carry Forward Amount as of the close of business on the day immediately preceding the Inception Date, determined in accordance with GAAP; and
5. an amount equal to the excess of the GAAP book value of the Assets (excluding any related mark to market adjustments for SFAS 115 requirement) over the SAP book value of the Assets measured as of the close of business on the day immediately preceding the Inception Date (which amount may be negative).
ASSETS
|
Transfer Document |
|
From |
|
To |
|
Nature of Transfer |
|
Cash Map Cross-Reference |
|
Schedule |
|
|
GECALTC Retrocession |
|
GECA |
|
UFLIC |
|
Treaty |
|
(91 |
) |
Schedule D |
|
|
Called Securities* |
|
Parent Name |
|
Issuer Name |
|
1Q04 Cusip |
|
1Q04 Tax lot |
|
12/31/03 Local Par |
|
12/31/03 GAAP BV (incl attached derivative) |
|
12/31/03 Accrued Interest |
|
12/31/03 GAAP BV + Accrued Interest |
|
12/31/03 STAT BV (incl attached derivative) |
|
12/31/03 Account Interest |
|
12/31/03 STAT BV + Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[Individual Asset Details Omitted] |
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Sub Total |
|
|
|
|
|
|
|
|
|
763,710,320.40 |
|
8,850,410.11 |
|
772,560,730.51 |
|
763,264,319.36 |
|
8,850,410.11 |
|
772,114,729.47 |
|
|
|
|
Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313,250.88 |
|
|
|
313,250.68 |
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
763,577,570.04 |
|
|
|
772,427,980.15 |
|
* These Securities will not be transferred. The “Call Amount” will be settled in cash.
EXPENSE ALLOWANCES
The “Annual Expense Reimbursement Factors” used to calculate the Expense Allowance are as follows:
|
Policy Maintenance Factor |
|
$7.12 per Policy |
|
|
Claims Factor |
|
$876.00 per Open and Pending Claim |
|
|
Travelers Agreement Maintenance Factor |
|
$45.24 per Policy |
|
Such Annual Expense Reimbursement Factors will be adjusted (i) for the year beginning January 1, 2005 and, thereafter, every three (3) years during the term of this Agreement based on a triennial cost/time study prepared in accordance with the methodology set forth below (the “Triennial Study”) and (ii) for the years between the Triennial Studies based on a report setting forth the Annual Expense Reimbursement Factors prepared in accordance with the methodology set forth below (the “Annual Expense Reimbursement Factor Report”).
(a) Triennial Study. As soon as practicable (and in any event within sixty (60) days) prior to January 1, 2005 and prior to the beginning of every third calendar year thereafter during the term of this Agreement, the Company shall cause to be prepared and delivered to the Reinsurer the Triennial Study which sets forth the Annual Expense Reimbursement Factors for the next calendar year, together with all supporting data used in preparing the Triennial Study and work papers, in reasonable detail, setting forth the determination of such Annual Expense Reimbursement Factors based on such Triennial Study (such documents, together with the Triennial Study, the “Triennial Study Documents”).
(b) Annual Expense Reimbursement Factor Report. As soon as practicable (and in any event within thirty (30) days) prior to January 1, 2006 and prior to the beginning of each calendar year thereafter in which no Triennial Study is prepared, the Company shall cause to be prepared and delivered to the Reinsurer the Annual Expense Reimbursement Factor Report, together with all supporting data used in preparing the Annual Expense Reimbursement Factor Report and work papers, in reasonable detail, setting forth the determination of such Annual Expense Reimbursement Factors for the next calendar year (such documents, together with the Annual Expense Reimbursement Factor Report, the “Annual Expense Reimbursement Factor Documents”).
(c) Methodology. At the time of the Triennial Study, historical costs (to include costs (excluding costs identified as “Allocated Loss Adjustment Expenses”) directly related to maintaining and administering policies, processing claims and reporting results, including, without limitation, for Business Overhead Services set forth on Schedule E-1 hereto) will be determined for the Policy Maintenance Factor, the Claims Factor and the Travelers Agreement Maintenance Factor identified above. For a given Annual Expense Reimbursement Factor the identified costs will be divided by the total historical number of units of measure for both the Reinsured Policies and the retained block of business to derive an historical cost per unit. The historical cost per unit will be used as a prospective cost per unit for the next calendar year.
For the two succeeding years in the period between the Triennial Studies the historical dollar amounts by Policy Maintenance Factor, Claims Factor and Travelers Agreement Maintenance Factor will be adjusted (rolled forward) for current year cost changes agreed to by the Reinsurer and the Company (in accordance with the procedures set forth below). This rolled forward historical cost will then be divided by the total historical number of units for the current period to determine a prospective cost per unit for the next calendar year.
An additional adjustment, positive or negative, to the prospective cost per unit determined by either the Triennial Study or the two succeeding years may be negotiated between the parties. The additional adjustment is for special projected costs or benefits of productivity, process improvements, inflation, loss of scale, and any other cost variation which was not included in the prior Triennial Study or the succeeding roll forward.
The combined prospective unit cost and additional adjustment is the Annual Expense Reimbursement Factor. The Expense Allowance will be determined quarterly and billed to the Reinsurer in three equal installments during the quarter at the end of the month. Each installment of the monthly amount billed will be determined by multiplying the actual number of units at the beginning of the quarter covered by this Agreement times the Annual Expense Reimbursement Factor (divided by twelve).
(d) Review of Documents. Following the delivery of the Annual Expense Reimbursement Factor Documents or the Triennial Study Documents, as applicable, the Company shall (i) provide to the Reinsurer or its designated representative copies of such additional work papers and other documents relating to its preparation of the Annual Expense Reimbursement Factor Report or Triennial Study, as applicable, as the Reinsurer or its designated representative may reasonably request, including, without limitation, claims files and practices and (ii) cooperate with, and make its personnel and facilities reasonably available to, the Reinsurer and the Reinsurer’s designated representative for the purpose of providing such other information as the Reinsurer or the Reinsurer’s designated representative may reasonably request concerning Annual Expense Reimbursement Factor Documents or the Triennial Study Documents, as applicable, and the calculation of the Annual Expense Reimbursement Factors.
(e) Notice of Disagreement. In the event that the Reinsurer has any disagreement with any of the Annual Expense Reimbursement Factor Documents or the Triennial Study Documents, as applicable, the Reinsurer shall give written notice of all such disagreements (a “Notice of Disagreement”) to the Company within thirty (30) days after the Annual Expense Reimbursement Factor Documents or the Triennial Study Documents, as applicable, are delivered to the Reinsurer. Any Notice of Disagreement shall set forth each item in disagreement and shall provide reasonable specificity as to the basis for each disagreement and shall specify the total adjustment to the Annual Expense Reimbursement Factors as proposed by the Company as a result of such items in disagreement.
(f) Dispute Resolution. If the Reinsurer does not deliver a Notice of Disagreement to the Company within such thirty (30) day period, the Annual Expense Reimbursement Factor Documents and the Triennial Study Documents, as applicable, shall be final and binding upon the parties hereto and shall constitute the final calculation of the Annual Expense Reimbursement Factor for the next calendar year. If the Reinsurer delivers a Notice of
Disagreement to the Company within such thirty (30) day period, the parties shall (and shall cause their respective designated representatives to) negotiate in good faith to resolve all disagreements as promptly as practicable. Any changes in the Annual Expense Reimbursement Factors, if any, that are agreed to by the Company and the Reinsurer within sixty (60) days of the aforementioned delivery of the Annual Expense Reimbursement Factor Documents or the Triennial Study Documents, as applicable, shall be incorporated into a final calculation of the Annual Expense Reimbursement Factors. If the parties and their respective designated representatives are unable to resolve all disagreements within sixty (60) days of delivery of the Annual Expense Reimbursement Factor Documents or the Triennial Study Documents, as applicable, then all unresolved disagreements will be submitted within ten (10) days after the end of such sixty (60) day period for resolution in accordance herewith to an independent certified public accounting firm of national standing and reputation (the “Accounting Firm”) mutually acceptable to the Company and the Reinsurer. The parties shall cooperate in good faith with the Accounting Firm and shall give the Accounting Firm access to all data and other information requested by the Accounting Firm for purposes of such resolution. The Accounting Firm shall, within thirty (30) days after its engagement, deliver to the Company and the Reinsurer a definitive calculation of the Annual Expense Reimbursement Factors, which shall be final and binding upon the parties hereto and shall be so reflected in the calculation of the Annual Expense Reimbursement Factors. The Company and the Reinsurer shall each pay one-half of the fees and expenses of the Accounting Firm.
(g) Expense Allowance Pending Resolution. In the event of a dispute with respect to any Annual Expense Reimbursement Factors for the next succeeding Calendar year, the Company and the Reinsurer agree that the Annual Expense Reimbursement Factors then in effect under this Agreement shall remain in effect pending resolution of such dispute and adjustment, if any, in accordance with the dispute resolution procedure set forth in paragraph (f) above.
BUSINESS OVERHEAD SERVICES
Business Overhead Services
The “Business Overhead Services” are broadly defined as activities performed by the “LTC” business unit of GNA Corporation (“GNA”) and its subsidiaries and Affiliates that benefit the business reinsured under this Agreement. GNA will provide, as a subcontractor, the Business Overhead Services, which will include, without limitation, the services described below.
Executive:
General support, counsel, strategy and leadership provided by LTC’s Chief Executive
Officer including managing existing business relationship with Travelers.
Human Resources:
General business level Human Resource related activities including but not
limited to leadership development, employee recruitment and staffing,
implementation of compensation policies and practices, payroll and benefit
administration, organizational communication, training, general security and
employee issue resolution and guidance.
Finance:
Cost of finance activities including but not limited to product financial
support and analysis, account reconciliations, state reporting, product
profitability analysis, investment income planning & analysis, expense
management, audit support, statutory & GAAP accounting, reporting &
analysis and ad hoc financial analysis.
Finance supports the existing reinsurance treaty and all related
filings.
Legal/Compliance:
Cost of support and coordination of litigation, government relations, human
resource, intellectual property, insurance regulatory, consumer privacy,
contract, compliance, and public relations matters. Additional relationships with the DOI and with Travelers are
managed within this group.
Risk:
Cost of Risk Management and reinsurance support---Monitor production vs.
authority limits, monitor and review key risk measures. General oversight of
inforce product performance analysis and reviews. Reinsurance oversight and treaty management including settlement
with reinsurers. Reserve analysis and
general risk management.
Sourcing / Facilities:
Campus expenses including building rent and maintenance, parking garage,
cafeteria, campus lawn care and utilities.
Procurement of necessary business software, supplies, EDP.
Information Technology:
General business technology infrastructure costs including but not limited to
general management, help desk assistance, data center management, disaster
recovery plans and digitization of processes.
Six Sigma Quality:
Costs including business project management and process improvement coaching,
execution and leadership.
Actuarial:
Sets Reserving Levels, Provides analysis on in-force blocks, evaluates product
risk analysis, forecasting and planning for future periods. Manages reinsurance analysis.
eQuTOps:
Project budget associated to large scale projects that impact the business via
digitization, streamlining of processes, system enhancements or regulatory
mandated projects (e.g., HIPAA).
Product Management:
Costs for product line managers to manage inforce policies and general product
line maintenance activities such as risk assessment, return on equity (“ROE”) variance analysis and related ROE
improvement projects.
Operations:
Costs including management, project leadership and administrative support for
service operations supporting customers, policyholders, claims delivery and
other stakeholders.
Other:
Costs including corporate insurance allocation to product lines (e.g.,
cost of building insurance and other property, plant and equipment).
Retention:
Costs including monitoring of inforce policy retention levels, design and
execute programs to retain inforce business.
Changes in Services
The Business Overhead Services shall include such other comparable and/or successor services implemented or maintained from time to time by GNA and its subsidiaries and Affiliates.
SCHEDULE F - PART I
INITIAL REPORT
|
1. Total SAP Ceded Reserves: |
|
|
|
|
|
|
A. Active Life Reserves |
|
$ |
|
|
|
|
B. Claim Reserves |
|
$ |
|
|
|
|
C. Unearned Premium Reserves |
|
$ |
|
|
|
|
D. Advanced Premium |
|
$ |
|
|
|
|
E. Less: Due and Unpaid Premium |
|
$ |
|
|
|
|
Total SAP Ceded Reserves (A+B+C+D-E) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
2. Ceding Commission: |
|
|
|
|
|
|
A. Excess SAP Ceded Reserves over GAAP Ceded Reserves: |
|
|
|
|
|
|
1) Total SAP Ceded Reserves |
|
$ |
|
|
|
|
2) Total GAAP Ceded Reserves: |
|
|
|
|
|
|
a. Active Life Reserves |
|
$ |
|
|
|
|
b. Maintenance Reserves |
|
$ |
|
|
|
|
c. Loss Expense Reserves |
|
$ |
|
|
|
|
d. Claim Reserves |
|
$ |
|
|
|
|
e. Unearned Premium Reserves |
|
$ |
|
|
|
|
f. Advanced Premium |
|
$ |
|
|
|
|
g. Less: Due and Unpaid Premium |
|
$ |
|
|
|
|
Total GAAP Ceded Reserves (a+b+c+d+e+f-g) |
|
$ |
|
|
|
|
Excess SAP Reserves over GAAP Reserves (A1-A2) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
B. Present Value of Future Profits (PVFP) |
|
|
|
$ |
|
|
C. Deferred Acquisition Costs (DAC) |
|
|
|
$ |
|
|
D. Loss Carry Forward Amount (Stop Loss Balance) |
|
|
|
$ |
|
|
E. Asset Book Value Difference |
|
|
|
|
|
|
1) Asset Book Value (GAAP basis) |
|
$ |
|
|
|
|
2) Asset Book Value (SAP basis) |
|
$ |
|
|
|
|
Excess Asset Book Value (E1-E2) |
|
|
|
$ |
|
|
Total Ceding Commission (A+B+C+D+E) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
3. Accrued Interest on Assets as of the day before Inception Date |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
4. Investment Cash Flows on the Assets from the Inception Date through the Closing Date |
|
|
|
$ |
|
|
Net Due Reinsurer (1-2-3+4) |
|
|
|
$ |
|
MONTHLY SETTLEMENT REPORT
|
1. Additional Premium Due: |
|
|
|
|
|
|
A. Premiums Received: |
|
$ |
|
|
|
|
1. Direct Premium Collected on Reinsured Policies |
|
|
|
|
|
|
2. Additional Reinsurance Premium Collected from Travelers |
|
$ |
|
|
|
|
3. Less: Premiums Paid to Travelers on retained business |
|
$ |
|
|
|
|
Total Premiums Received (A1+A2-A3) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
B. 12/31/03 Due and Unpaid Premium Receivable Collected |
|
|
|
$ |
|
|
C. Stop Loss Payments Received from Travelers |
|
|
|
$ |
|
|
Total Additional Premium Due (A+B+C) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
2. Ultimate Net Loss Paid: |
|
|
|
|
|
|
A. Losses (Claims Incurred) |
|
|
|
|
|
|
1. Direct Losses Incurred |
|
$ |
|
|
|
|
2. Less: Losses Reimbursed by Travelers on retained business |
|
$ |
|
|
|
|
Total Losses (Claims Incurred) (A1+A2) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
B. Stop Loss Payments to Travelers |
|
$ |
|
|
|
|
C. Allocated Loss Adjustment Expense |
|
$ |
|
|
|
|
D. Premium Taxes Due |
|
$ |
|
|
|
|
E. Insolvency Fund Assessments, net |
|
$ |
|
|
|
|
F. Returns or Refunds of Premiums |
|
$ |
|
|
|
|
G. Commissions Paid |
|
$ |
|
|
|
|
H. Unclaimed Property Liabilities |
|
$ |
|
|
|
|
Total Ultimate Net Loss Paid (A+B+C+D+E+F+G+H) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
3. Withdrawals from Claims Settlement Account |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
4. Expense Allowance: |
|
$ |
|
|
|
|
A. Policy Maintenance |
|
$ |
|
|
|
|
B. Claims |
|
$ |
|
|
|
|
C. Traveler’s Agreement Maintenance |
|
$ |
|
|
|
|
Total Expense Commission (A+B+C) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
5. Additional Expenses: |
|
|
|
|
|
|
A. Novation Costs Incurred (pursuant to Section 2.6) |
|
$ |
|
|
|
|
B. Re-rating costs incurred (pursuant to Section 3.3) |
|
$ |
|
|
|
|
Total Additional Expense (A+B) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
6. Additional Ceding Commission Paid to Travelers |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
Net Due Reinsurer (1-2+3-4-5-6) |
|
|
|
$ |
|
QUARTERLY SETTLEMENT REPORT
|
1. Additional Premium Due: |
|
|
|
|
|
|
A. Premiums Received: |
|
|
|
|
|
|
1. Direct Premium Collected on Reinsured Policies |
|
$ |
|
|
|
|
2. Additional Reinsurance Premium Collected from Travelers |
|
$ |
|
|
|
|
3. Less: Premiums Paid to Travelers on retained business |
|
$ |
|
|
|
|
Total Premiums Received (A1+A2-A3) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
B. 12/31/03 Due and Unpaid Premium Receivable Collected |
|
|
|
$ |
|
|
C. Stop Loss Payments Received from Travelers |
|
|
|
$ |
|
|
Total Additional Premium Due (A+B+C) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
2. Ultimate Net Loss Paid: |
|
|
|
|
|
|
A. Losses (Claims Incurred) |
|
|
|
|
|
|
1. Direct Losses Incurred |
|
$ |
|
|
|
|
2. Less: Losses Reimbursed by Travelers on retained business |
|
$ |
|
|
|
|
Total Losses (Claims Incurred) (A1+A2) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
B. Stop Loss Payments to Travelers |
|
$ |
|
|
|
|
C. Allocated Loss Adjustment Expense |
|
$ |
|
|
|
|
D. Premium Taxes Due |
|
$ |
|
|
|
|
E. Insolvency Fund Assessments, net |
|
$ |
|
|
|
|
F. Returns or Refunds of Premiums |
|
$ |
|
|
|
|
G. Commissions Paid |
|
$ |
|
|
|
|
H. Unclaimed Property Liabilities |
|
$ |
|
|
|
|
Total Ultimate Net Loss Paid (A+B+C+D+E+F+G+H) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
3. Withdrawals from Claims Settlement Account |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
4. Expense Allowance: |
|
|
|
|
|
|
A. Policy Maintenance |
|
$ |
|
|
|
|
B. Claims |
|
$ |
|
|
|
|
C. Traveler’s Agreement Maintenance |
|
$ |
|
|
|
|
Total Expense Commission (A+B+C) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
5. Additional Expenses: |
|
|
|
|
|
|
A. Novation Costs Incurred (pursuant to Section 2.6) |
|
$ |
|
|
|
|
B. Re-rating costs incurred (pursuant to Section 3.3) |
|
$ |
|
|
|
|
Total Additional Expense (A+B) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
6. Additional Ceding Commission Paid to Travelers |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
I. Quarterly Settlement Amount (1-2+3-4-5-6) |
|
|
|
$ |
|
|
II. Sum of Monthly Settlements for Quarter Ended |
|
|
|
$ |
|
|
Net Due to (from) Reinsurer (I-II) |
|
|
|
$ |
|
ANNUAL REPORT
|
1. Additional Premium Due: |
|
|
|
|
|
|
A. Premiums Received: |
|
|
|
|
|
|
1. Direct Premium Collected on Reinsured Policies |
|
$ |
|
|
|
|
2. Additional Reinsurance Premium Collected from Travelers |
|
$ |
|
|
|
|
3. Less: Premiums Paid to Travelers on retained business |
|
$ |
|
|
|
|
Total Premiums Received (A1+A2-A3) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
B. 12/31/03 Due and Unpaid Premium Receivable Collected |
|
|
|
$ |
|
|
C. Stop Loss Payments Received from Travelers |
|
|
|
$ |
|
|
Total Additional Premium Due (A+B+C) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
2. Ultimate Net Loss Paid: |
|
|
|
|
|
|
A. Losses (Claims Incurred) |
|
|
|
|
|
|
1. Direct Losses Incurred |
|
$ |
|
|
|
|
2. Less: Losses Reimbursed by Travelers on retained business |
|
$ |
|
|
|
|
Total Losses (Claims Incurred) (A1+A2) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
B. Stop Loss Payments to Travelers |
|
$ |
|
|
|
|
C. Allocated Loss Adjustment Expense |
|
$ |
|
|
|
|
D. Premium Taxes Due |
|
$ |
|
|
|
|
E. Insolvency Fund Assessments, net |
|
$ |
|
|
|
|
F. Returns or Refunds of Premiums |
|
$ |
|
|
|
|
G. Commissions Paid |
|
$ |
|
|
|
|
H. Unclaimed Property Liabilities |
|
$ |
|
|
|
|
Total Ultimate Net Loss Paid (A+B+C+D+E+F+G+H) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
3. Withdrawals from Claims Settlement Account |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
4. Expense Allowance: |
|
|
|
|
|
|
A. Policy Maintenance |
|
$ |
|
|
|
|
B. Claims |
|
$ |
|
|
|
|
C. Traveler’s Agreement Maintenance |
|
$ |
|
|
|
|
Total Expense Commission (A+B+C) |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
5. Additional Expenses: |
|
|
|
|
|
|
A. Novation Costs Incurred (pursuant to Section 2.6) |
|
$ |
|
|
|
|
B. Re-rating costs incurred (pursuant to Section 3.3) |
|
$ |
|
|
|
|
Total Additional Expense (A+B) |
|
|
|
$ |
|
|
6. Additional Ceding Commission Paid to Travelers |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
7. Experience Refund Amounts Due to the Company Under Article VIII |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
I. Annual Settlement Amount (1-2+3-4-5-6-7) |
|
|
|
$ |
|
|
II. Sum of Monthly Settlements for Calendar Year |
|
|
|
$ |
|
|
Net Due to (from) Reinsurer (I-II) |
|
|
|
$ |
|
FORM OF TRUST AGREEMENT
ELIGIBLE SECURITIES
Assets of the types for which an Illinois-domiciled life insurance company could obtain full statutory reserve credit under statutory accounting practices prescribed or permitted by the Director of Insurance of the State of Illinois.
EXPERIENCE REFUND1
|
Scenario 1—Base Case |
Net Yield |
|
6.19 |
% |
6.08 |
% |
6.02 |
% |
5.93 |
% |
5.90 |
% |
5.87 |
% |
5.85 |
% |
5.82 |
% |
5.81 |
% |
5.78 |
% |
5.74 |
% |
5.73 |
% |
5.71 |
% |
5.70 |
% |
5.70 |
% |
Calculated By taking Investment Income Including IMR amort and dividing by a 2 point avg of the sum of Total Ceded SAP Reserves plus IMR
|
LTC Reinsurance Segment Proje |
|
2004 |
|
2005 |
|
2006 |
|
2007 |
|
2008 |
|
2009 |
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
2015 |
|
2016 |
|
2017 |
|
2018 |
|
|
|
|
(in $1,000's) |
|
||||||||||||||||||||||||||||
|
Premium Income |
|
149,771 |
|
155,435 |
|
148,086 |
|
140,612 |
|
133,047 |
|
125,438 |
|
117,799 |
|
110,067 |
|
102,297 |
|
94,545 |
|
86,865 |
|
79,311 |
|
71,937 |
|
64,794 |
|
57,924 |
|
|
Investment Inc on LTC Rsvs (Net of Defaults & Inv Exp) |
|
78,304 |
|
87,570 |
|
96,510 |
|
104,068 |
|
111,669 |
|
118,543 |
|
124,737 |
|
130,152 |
|
135,233 |
|
139,341 |
|
142,454 |
|
145,636 |
|
147,692 |
|
149,124 |
|
150,135 |
|
|
IMR Amortization for LTC Segment |
|
467 |
|
469 |
|
475 |
|
481 |
|
481 |
|
494 |
|
475 |
|
453 |
|
438 |
|
415 |
|
407 |
|
397 |
|
378 |
|
356 |
|
327 |
|
|
TOTAL REVENUE: |
|
228,542 |
|
243,474 |
|
245,071 |
|
245,161 |
|
245,197 |
|
244,475 |
|
243,011 |
|
240,672 |
|
237,967 |
|
234,301 |
|
229,726 |
|
225,344 |
|
220,008 |
|
214,274 |
|
208,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid Benefits |
|
69,640 |
|
82,274 |
|
89,969 |
|
96,614 |
|
102,100 |
|
106,392 |
|
109,895 |
|
114,025 |
|
118,659 |
|
123,617 |
|
128,753 |
|
133,935 |
|
138,995 |
|
143,805 |
|
148,266 |
|
|
Increase in Active Life Reserves |
|
140,189 |
|
134,678 |
|
127,692 |
|
119,882 |
|
111,585 |
|
102,794 |
|
93,175 |
|
82,739 |
|
71,708 |
|
60,167 |
|
48,189 |
|
35,724 |
|
23,161 |
|
10,784 |
|
(1,502 |
|
|
Increase in Claim Reserves (incl IBNR) |
|
32,842 |
|
27,722 |
|
24,569 |
|
21,217 |
|
17,519 |
|
13,705 |
|
11,187 |
|
13,184 |
|
14,799 |
|
15,833 |
|
16,399 |
|
16,546 |
|
16,157 |
|
15,360 |
|
14,245 |
|
|
Loss Exp (Incl Rsv Change & LAE) |
|
1,624 |
|
1,594 |
|
1,575 |
|
1,540 |
|
1,484 |
|
1,413 |
|
1,372 |
|
1,470 |
|
1,561 |
|
1,639 |
|
1,704 |
|
1,758 |
|
1,795 |
|
1,817 |
|
1,827 |
|
|
Expense Allowances - Commissions |
|
18,754 |
|
19,382 |
|
18,556 |
|
17,706 |
|
16,834 |
|
15,947 |
|
15,051 |
|
14,149 |
|
13,248 |
|
12,354 |
|
11,471 |
|
10,604 |
|
9,760 |
|
8,942 |
|
8,155 |
|
|
Expense Allowances - Treaty (Claims Dept, PHS, Blue Sky) |
|
9,365 |
|
7,877 |
|
7,956 |
|
7,993 |
|
7,987 |
|
8,002 |
|
7,982 |
|
7,975 |
|
7,976 |
|
7,981 |
|
7,986 |
|
7,986 |
|
7,979 |
|
7,960 |
|
7,927 |
|
|
Expense Allowances - BSA Expenses (COH) |
|
3,390 |
|
3,230 |
|
3,118 |
|
3,003 |
|
2,884 |
|
2,762 |
|
2,638 |
|
2,512 |
|
2,384 |
|
2,255 |
|
2,126 |
|
1,998 |
|
1,870 |
|
1,743 |
|
1,619 |
|
|
Stop-loss & 10% Novation Costs |
|
4,438 |
|
2,817 |
|
1,894 |
|
838 |
|
25,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairments - 15bps |
|
2,064 |
|
2,368 |
|
2,647 |
|
2,905 |
|
3,140 |
|
3,349 |
|
3,530 |
|
3,684 |
|
3,829 |
|
3,939 |
|
4,036 |
|
4,111 |
|
4,158 |
|
4,186 |
|
4,192 |
|
|
TOTAL EXPENSES: |
|
282,307 |
|
281,942 |
|
277,976 |
|
271,697 |
|
288,555 |
|
254,364 |
|
244,830 |
|
239,738 |
|
234,165 |
|
227,786 |
|
220,665 |
|
212,662 |
|
203,874 |
|
194,597 |
|
184,729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-Tax Income 90% TLA |
|
(53,765 |
) |
(38,469 |
) |
(32,905 |
) |
(26,536 |
) |
(43,358 |
) |
(9,889 |
) |
(1,820 |
) |
934 |
|
3,802 |
|
6,516 |
|
9,061 |
|
12,682 |
|
16,135 |
|
19,677 |
|
23,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10% Novation Segment Pre-Tax Profits |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(1,099 |
) |
(202 |
) |
104 |
|
422 |
|
724 |
|
1,007 |
|
1,409 |
|
1,793 |
|
2,186 |
|
2,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-Tax Income = Experience Refund Baseline |
|
(53,765 |
) |
(38,469 |
) |
(32,905 |
) |
(26,536 |
) |
(43,358 |
) |
(10,988 |
) |
(2,022 |
) |
1,038 |
|
4,225 |
|
7,240 |
|
10,068 |
|
14,091 |
|
17,927 |
|
21,863 |
|
26,286 |
|
1 In recognition of the limited amount of time available to the Reinsurer to verify the accuracy of the calculation of the Experience Refund Baseline and the recent availability of 2003 experience on the Reinsured Policies, the parties to this Agreement agree to update the values set forth in the Experience Refund Baseline on this Schedule I, at any time on or before June 30, 2004, (a) to correct material errors or omissions in the models and workbooks used to derive the Experience Refund Baseline and (b) to reflect adjustments to projected rate increase filings resulting from further analysis of 2003 experience on the Reinsured Policies.
BUSINESS ASSOCIATE ADDENDUM
I. Purpose.
In order to disclose certain information to the party providing a service under this Agreement (“Provider”) under this Addendum, some of which may constitute Protected Health Information (defined below), the party to whom a service under this Agreement is being provided (“Recipient”) and Provider mutually agree to comply with the terms of this Addendum for the purpose of satisfying the requirements of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and its implementing privacy regulations at 45 C.F.R. Parts 160-164 (“HIPAA Privacy Rule”). These provisions shall apply to Provider to the extent that Provider is considered a “Business Associate” under the HIPAA Privacy Rule and all references in this section to Business Associates shall refer to Provider. Capitalized terms not otherwise defined herein shall have the meaning assigned in the Agreement. Notwithstanding anything else to the contrary in the Agreement, in the event of a conflict between this Addendum and the Agreement, the terms of this Addendum shall prevail.
II. Permitted Uses and Disclosures.
A. Business Associate agrees to use or disclose Protected Health Information (“PHI”) that it creates for or receives from Recipient or its Subsidiaries only as follows. The capitalized term “Protected Health Information or PHI” has the meaning set forth in 45 Code of Federal Regulations Section 164.501, as amended from time to time. Generally, this term means individually identifiable health information including, without limitation, all information, data and materials, including without limitation, demographic, medical and financial information, that relates to the past, present, or future physical or mental health or condition of an individual; the provision of health care to an individual; or the past present, or future payment for the provision of health care to an individual; and that identifies the individual or with respect to which there is a reasonable basis to believe the information can be used to identify the individual. This definition shall include any demographic information concerning members and participants in, and applicants for, Recipient’s or its Subsidiaries’ health benefit plans. All other terms used in this Addendum shall have the meanings set forth in the applicable definitions under the HIPAA Privacy Rule.
B. Functions and Activities on Company’s Behalf. Business Associate is permitted to use and disclose PHI it creates for or receives from Recipient or its Subsidiaries only for the purposes described in this Addendum or the Agreement that are not inconsistent with the provisions of this Addendum, or as required by law, or following receipt of prior written approval from whichever of the Recipient or its Subsidiary for which the relevant PHI was created or from which the relevant PHI was received. In addition to these specific requirements below, Business Associate may use or disclose PHI only in a manner that would not violate the HIPAA Privacy Rule if done by the Recipient or its Subsidiaries.
C. Business Associate’s Operations. Business Associate is permitted by this Agreement to use PHI it creates for or receives from Recipient or its Subsidiaries: (i) if such use is reasonably necessary for Business Associate’s proper management and administration; and (ii) as reasonably necessary to carry out Business Associate’s legal responsibilities. Business
1
Associate is permitted to disclose PHI it creates for or receives from Recipient or its Subsidiaries for the purposes identified in this Section only if the following conditions are met:
(1) The disclosure is required by law; or
(2) The disclosure is reasonably necessary to Business Associate’s proper management and administration, and Business Associate obtains reasonable assurances in writing from any person or organization to which Business Associate will disclose such PHI that the person or organization will:
a. Hold such PHI as confidential and use or further disclose it only for the purpose for which Business Associate disclosed it to the person or organization or as required by law; and
b. Notify Business Associate (who will in turn promptly notify whichever of the Recipient or its Subsidiary for which the relevant PHI was created or from which the relevant PHI was received) of any instance of which the person or organization becomes aware in which the confidentiality of such PHI was breached.
D. Minimum Necessary Standard. In performing the functions and activities on Recipient’s or its Subsidiaries’ behalf pursuant to the Agreement, Business Associate agrees to use, disclose or request only the minimum necessary PHI to accomplish the purpose of the use, disclosure or request. Business Associate must have in place policies and procedures that limit the PHI disclosed to meet this minimum necessary standard.
E. Prohibition on Unauthorized Use or Disclosure. Business Associate will neither use nor disclose PHI it creates or receives for or from Recipient, its Subsidiaries, or from another business associate of Recipient or its Subsidiaries, except as permitted or required by this Addendum or the Agreement that are not inconsistent with the provisions of this Addendum, or as required by law, or following receipt of prior written approval from whichever of the Recipient or its Subsidiary for which the relevant PHI was created or from which the relevant PHI was received.
F. De-identification of Information. Business Associate agrees neither to de-identify PHI it creates for or receives from Recipient or its Subsidiaries or from another business associate of Recipient or its Subsidiaries, nor use or disclose such de-identified PHI, unless such de-identification is expressly permitted under the terms and conditions of this Addendum or the Agreement and related to Recipient’s or its Subsidiaries’ activities for purposes of “treatment”, “payment” or “health care operations”, as those terms are defined under the HIPAA Privacy Rule. De-identification of PHI, other than as expressly permitted under the terms and conditions of the Addendum for Business Associate to perform services for Recipient or its Subsidiaries, is not a permitted use of PHI under this Addendum. Business Associate further agrees that it will not create a “Limited Data Set” as defined by the HIPAA Privacy Rule using PHI it creates or receives, or receives from another business associate of Recipient or its Subsidiaries, nor use or disclose such Limited Data Set unless: (i) such creation, use or disclosure is expressly permitted under the terms and conditions of this Addendum or the Agreement that are not inconsistent with the provisions of this Addendum; and such creation, use or disclosure is for services provided by
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Business Associate that relate to Recipient’s or its Subsidiaries’ activities for purposes of “treatment”, “payment” or “health care operations”, as those terms are defined under the HIPAA Privacy Rule.
G. Information Safeguards. Business Associate will develop, document, implement, maintain and use appropriate administrative, technical and physical safeguards to preserve the integrity and confidentiality of and to prevent non-permitted use or disclosure of PHI created for or received from Recipient or its Subsidiaries. These safeguards must be appropriate to the size and complexity of Business Associate’s operations and the nature and scope of its activities. Business Associate agrees that these safeguards will meet any applicable requirements set forth by the U.S. Department of Health and Human Services, including (as of the effective date or as of the compliance date, whichever is applicable) any requirements set forth in the final HIPAA security regulations. Business Associate agrees to mitigate, to the extent practicable, any harmful effect that is known to Business Associate resulting from a use or disclosure of PHI by Business Associate in violation of the requirements of this Addendum.
III. Conducting Standard Transactions. In the course of performing services for Recipient or its Subsidiaries, to the extent that Business Associate will conduct Standard Transactions for or on behalf of Recipient or its Subsidiaries, Business Associate will comply, and will require any subcontractor or agent involved with the conduct of such Standard Transactions to comply, with each applicable requirement of 45 C.F.R. Part 162. “Standard Transaction(s)” shall mean a transaction that complies with the standards set forth at 45 C.F.R. parts 160 and 162. Further, Business Associate will not enter into, or permit its subcontractors or agents to enter into, any trading partner agreement in connection with the conduct of Standard Transactions for or on behalf of the Recipient or its Subsidiaries that:
a. Changes the definition, data condition, or use of a data element or segment in a Standard Transaction;
b. Adds any data element or segment to the maximum defined data set;
c. Uses any code or data element that is marked “not used” in the Standard Transaction’s implementation specification or is not in the Standard Transaction’s implementation specification; or
d. Changes the meaning or intent of the Standard Transaction’s implementation specification.
IV. Sub-Contractors, Agents or Other Representatives. Business Associate will require any of its subcontractors, agents or other representatives to which Business Associate is permitted by this Addendum or the Agreement (or is otherwise given Recipient’s or the relevant Subsidiary’s prior written approval) to disclose any of the PHI Business Associate creates or receives for or from Recipient or its Subsidiaries, to provide reasonable assurances in writing that subcontractor or agent will comply with the same restrictions and conditions that apply to the Business Associate under the terms and conditions of this Addendum with respect to such PHI.
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V. Protected Health Information Access, Amendment and Disclosure Accounting.
A. Access. Business Associate will promptly upon Recipient’s or its Subsidiary’s request make available to Recipient, its Subsidiary, or, at Recipient’s or such Subsidiary’s direction, to the individual (or the individual’s personal representative) for inspection and obtaining copies any PHI about the individual which Business Associate created for or received from Recipient or its Subsidiary and that is in Business Associate’s custody or control, so that Recipient or its Subsidiary may meet its access obligations under 45 Code of Federal Regulations § 164.524.
B. Amendment. Upon Recipient’s or its Subsidiary’s request Business Associate will promptly amend or permit Recipient or its Subsidiary access to amend any portion of the PHI which Business Associate created for or received from Recipient or its Subsidiary, and incorporate any amendments to such PHI, so that Recipient or its Subsidiary may meet its amendment obligations under 45 Code of Federal Regulations § 164.526.
C. Disclosure Accounting. So that Recipient or its Subsidiaries may meet their disclosure accounting obligations under 45 Code of Federal Regulations § 164.528:
1. Disclosure Tracking. Business Associate will record for each disclosure, not excepted from disclosure accounting under Section V.C.2 below, that Business Associate makes to Recipient or its Subsidiaries of PHI that Business Associate creates for or receives from Recipient or its Subsidiaries, (i) the disclosure date, (ii) the name and member or other policy identification number of the person about whom the disclosure is made, (iii) the name and (if known) address of the person or entity to whom Business Associate made the disclosure, (iv) a brief description of the PHI disclosed, and (v) a brief statement of the purpose of the disclosure (items i-v, collectively, the “disclosure information”). For repetitive disclosures Business Associate makes to the same person or entity (including Recipient or its Subsidiaries) for a single purpose, Business Associate may provide a) the disclosure information for the first of these repetitive disclosures, (b) the frequency, periodicity or number of these repetitive disclosures and (c) the date of the last of these repetitive disclosures. Business Associate will make this disclosure information available to Recipient or its Subsidiaries promptly upon Recipient’s or its Subsidiaries’ request.
2. Exceptions from Disclosure Tracking. Business Associate need not record disclosure information or otherwise account for disclosures of PHI that this Addendum or Recipient or the relevant Subsidiary in writing permits or requires (i) for the purpose of Recipient’s or its Subsidiaries’ treatment activities, payment activities, or health care operations, (ii) to the individual who is the subject of the PHI disclosed or to that individual’s personal representative; (iii) to persons involved in that individual’s health care or payment for health care; (iv) for notification for disaster relief purposes, (v) for national security or intelligence purposes, (vi) to law enforcement officials or correctional institutions regarding inmates; or (vii) pursuant to an authorization; (viii) for disclosures of certain PHI made as part of a Limited Data Set; (ix) for certain incidental disclosures that may occur where reasonable safeguards have been implemented; and (x) for disclosures prior to April 14, 2003.
3. Disclosure Tracking Time Periods. Business Associate must have available for Recipient and its Subsidiaries the disclosure information required by this section for the 6 years preceding Recipient’s or its Subsidiaries’ request for the disclosure information (except Business Associate need have no disclosure information for disclosures occurring before April 14, 2003).
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VI. Additional Business Associate Provisions
A. Reporting of Breach of Privacy Obligations. Business Associate will provide written notice to whichever of the Recipient or its Subsidiary for which the relevant PHI was created or from which the relevant PHI was received of any use or disclosure of PHI that is neither permitted by this Addendum nor given prior written approval by Recipient or the relevant Subsidiary promptly after Business Associate learns of such non-permitted use or disclosure. Business Associate’s report will at least:
B. Amendment. Upon the effective date of any final regulation or amendment to final regulations promulgated by the U.S. Department of Health and Human Services with respect to PHI, including, but not limited to the HIPAA privacy and security regulations, this Addendum and the Agreement will automatically be amended so that the obligations they impose on Business Associate remain in compliance with these regulations.
In addition, to the extent that new state or federal law requires changes to Business Associate’s obligations under this Addendum, this Addendum shall automatically be amended to include such additional obligations, upon notice by Recipient or its Subsidiaries to Business Associate of such obligations. Business Associate’s continued performance of services under the Agreement shall be deemed acceptance of these additional obligations.
C. Audit and Review of Policies and Procedures. Business Associate agrees to provide, upon Recipient request, access to and copies of any policies and procedures developed or utilized by Business Associate regarding the protection of PHI. Business Associate agrees to provide, upon Recipient’s request, access to Business Associate’s internal practices, books, and records, as they relate to Business Associate’s services, duties and obligations set forth in this Addendum and the Agreement(s) under which Business Associate provides services and / or products to or on behalf of Recipient or its Subsidiaries, for purposes of Recipient’s or its Subsidiaries’ review of such internal practices, books, and records.
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