Common use of LIABILITY OF THE REINSURER Clause in Contracts

LIABILITY OF THE REINSURER. A. Commencing as of the Effective Time, the Company hereby agrees to cede to the Reinsurer, and the Reinsurer agrees to accept and reinsure, the Ultimate Net Loss of the Company equal to forty percent (40%) of the Affiliate Ultimate Net Loss with respect to Covered Business ceded to the Company by each Affiliate, subject to all other terms and conditions set forth in this Agreement; provided, however, that the Reinsurer's maximum liability hereunder in respect of a single loss under a Policy reinsured hereunder (without taking into account any Loss Adjustment Expenses, Extra Contractual Obligations or Loss in Excess of Policy Limits attributable thereto) shall not exceed $2,000,000. For purposes of this Agreement, "Affiliate Ultimate Net Loss" means the sum actually paid or to be paid by such Affiliate in settlement of losses for which it is liable in respect of the Covered Business, after making deductions for all inuring reinsurance (other than reinsurance with any direct or indirect subsidiary of AmTrust), whether collectible or not, and all Recoveries. Without limiting the generality of the foregoing, the Reinsurer shall be liable for its proportionate share of any experience-related premium rebates or credits to policyholders under Policies of workers compensation insurance, and shall benefit proportionately to the extent any such policyholder pays any additional premiums as a result of the experience under such Policies. B. If an Affiliate Change in Control or Affiliate Run-Off Event occurs with respect to any Affiliate, the Reinsurer shall be entitled to elect not to reinsure Covered Business related to Policies issued or renewed by such Affiliate (“Applicable Covered Business”) effective as of such Affiliate Change in Control or Affiliate Run-Off Event (the “Election Effective Date”). Such election shall be in writing (an “Affiliate Run-Off Notice”), and shall be given not later than thirty (30) days following the date on which the Reinsurer has actual knowledge that the Affiliate Change in Control or the Affiliate Run-Off event (as applicable) shall have occurred. Subject to the immediately following sentence, if the Reinsurer makes such an election, all reinsurance hereunder of Applicable Covered Business that is in force as of the Election Effective Date shall remain in full force and effect until the applicable expiration date, anniversary date, or prior termination date of the Policies attributable to the Applicable Covered Business (the “Run-Off Policies”). The Company shall be entitled to notify the Reinsurer, within thirty (30) days following delivery to it of the Affiliate Run-Off Notice, that the Reinsurer shall not be liable for any Ultimate Net Loss arising out of the Run-Off Policies to the extent such Ultimate Net Loss occurs, accrues or arises on or after the Election Effective Date and, if the Company makes such election, the Reinsurer shall, within thirty (30) days following the date of such election, return to the Company the unearned premium attributable to the Run-Off Policies in force as of the Election Effective Date, less the unearned portion of the ceding commission paid thereon. C. For purposes of this Agreement: 1. an “Affiliate Change of Control” will be deemed to occur with respect to an Affiliate when either (a) an individual person, corporation or other entity, or a group of commonly controlled persons, corporations or entities, acquires, including through merger, directly or indirectly, more than fifty percent (50%) of the voting securities of such Affiliate or obtains the power to vote (directly or through proxies) more than fifty percent (50%) of the voting securities of such Affiliate, except if such individual person, corporation or other entity is under common control with the Affiliate, or (b) AmTrust no longer directly or indirectly controls the power to vote more than fifty percent (50%) of the voting securities of such Affiliate; provided that in no event shall the acquisition, including through merger, of more than fifty percent (50%) of the voting securities of AmTrust or of the power to vote (directly or through proxies) more than fifty percent (50%) of the voting securities of AmTrust, or the merger, combination or amalgamation of AmTrust into any person, or similar transaction pursuant to which AmTrust shall not be the surviving entity, be deemed a "Affiliate Change of Control". 2. An “Affiliate Run-off Event” shall be deemed to have occurred as to an Affiliate if: (a) such Affiliate ceases writing new or renewal business and elects to run off its existing business or an insurance or other regulatory authority orders such party to cease writing new or renewal business; or (b) such Affiliate becomes insolvent, or has been placed into liquidation or receivership (whether voluntary or involuntary), or there have been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, or trustee in bankruptcy or other agent known by whatever name, to take possession of its assets or control of its operations; or D. No more frequently than quarterly the Company shall, and shall cause each ceding Affiliate under an Underlying Reinsurance Agreement to, provide to the Reinsurer and its representatives reasonable access, on reasonable advance notice and during business hours, to its claims files with respect to Covered Business. The Reinsurer shall have the right, but not the obligation, to consult with the Company and such Affiliate regarding the handling of any disputed or contested claim.

LIABILITY OF THE REINSURER. A. Commencing as The Reinsurer shall pay to the Company, with respect to each Occurrence, the Reinsurer's Quota Share Percentage of the Effective TimeNet Loss sustained by the Company, but not exceeding the Limit of Liability of the Reinsurer as set forth in the Schedule of Reinsurance, subject to the provisions of the following paragraphs. SCHEDULE OF REINSURANCE Company's Quota Reinsurer's Quota Limit of Liability Share Percentage Share Percentage of the Reinsurer ---------------- ---------------- ---------------- 67.5% 32.5% 32.5% of $50,000 The sum of 32.5% of $900 shall be deducted from the Reinsurer's share of Net Loss sustained hereunder arising out of each Occurrence. However, if the Reinsurer's Quota Share Percentage of the Company's Subject Written Premium for the Agreement Year commencing on October 1, 2003 results in a reinsurance premium, gross of commission, greater than a cap of $120,000,000, such Quota Share Percentage of the Company's Subject Written Premium from the beginning of the calendar quarter during which such cap was exceeded though the close of the Agreement Year shall be reduced to a percentage which will result in a reinsurance premium, gross of commission, of $120,000,000 for such Agreement Year. The Reinsurer's Quota Share Percentage of Net Loss for Occurrences taking place from the beginning of the calendar quarter during which such cap was exceeded though the close of the Agreement Year shall be reduced GENERAL REINSURANCE CORPORATION A Berkshire Hathaway Company accordingly and the Company's Quota Share Percentage will be increased accordingly. The amount of such cap for subsequent Agreement Years shall be mutually agreed upon. However, if the Reinsurer's Quota Share Percentage of the Company's Subject Written Premium in all states other than Ohio, Pennsylvania, South Carolina, Georgia, Indiana, Kentucky, Mississippi, Louisiana, or Tennessee for any Agreement Year hereunder results in a reinsurance premium equal to more than 5% of the total reinsurance premium for any Agreement Year, such Quota Share Percentage of the Company's Subject Written Premium for all such states for such Agreement Year shall be reduced to a percentage which will result in a reinsurance premium of no more than 5% of the total reinsurance premium for such Agreement Year. The Reinsurer's Quota Share Percentage of Net Loss involving such states for Occurrences taking place during such Agreement Year shall be reduced accordingly and the Company's Quota Share Percentage will be increased accordingly. Further, the Company hereby agrees sum of the Reinsurer's payment of Net Loss for Occurrences taking place during any Agreement Year and fixed commission allocable to cede such Agreement Year shall not exceed an Aggregate Limit of Liability equal to 112% of the reinsurance premiums, gross of fixed commission, paid under this Agreement for such Agreement Year, subject to the Reinsurer, and the Reinsurer agrees to accept and reinsure, the Ultimate Net Loss provisions of the Company equal to forty percent sub-paragraph (40%d) of the Affiliate Ultimate Net Loss with respect to Covered Business ceded to the Company by each Affiliatearticle entitled CONTINGENT COMMISSION. Further, subject to all other terms and conditions set forth in this Agreement; provided, however, that the Reinsurer's maximum liability hereunder in respect payment of a single loss under a Policy reinsured hereunder (without Net Loss for Occurrences taking into account place during any Loss Adjustment Expenses, Extra Contractual Obligations or Loss in Excess of Policy Limits attributable thereto) Agreement Year shall not exceed $2,000,000. For purposes the Reinsurer's portion of this Agreement, "Affiliate Ultimate Estimated Net Loss" means Loss as evaluated and reported by the sum actually paid or Company to be paid by such Affiliate in settlement of losses for which it is liable in respect the Reinsurer 18 months after the end of the Covered Business, after making deductions for all inuring reinsurance (other than reinsurance with any direct or indirect subsidiary of AmTrust), whether collectible or not, and all Recoveries. Without limiting the generality of the foregoing, the Reinsurer shall be liable for its proportionate share of any experience-related premium rebates or credits to policyholders under Policies of workers compensation insurance, and shall benefit proportionately to the extent any such policyholder pays any additional premiums as a result of the experience under such Policies. B. If an Affiliate Change in Control or Affiliate Run-Off Event occurs with respect to any Affiliate, the Reinsurer shall be entitled to elect not to reinsure Covered Business related to Policies issued or renewed by such Affiliate (“Applicable Covered Business”) effective as of such Affiliate Change in Control or Affiliate Run-Off Event (the “Election Effective Date”). Such election shall be in writing (an “Affiliate Run-Off Notice”), and shall be given not later than thirty (30) days following the date on which the Reinsurer has actual knowledge that the Affiliate Change in Control or the Affiliate Run-Off event (as applicable) shall have occurred. Subject to the immediately following sentence, if the Reinsurer makes such an election, all reinsurance hereunder of Applicable Covered Business that is in force as of the Election Effective Date shall remain in full force and effect until the applicable expiration date, anniversary dateAgreement Year, or prior termination date of the Policies attributable to the Applicable Covered Business (the “Run-Off Policies”). The Company shall be entitled to notify the Reinsurerquarterly thereafter, within thirty (30) days following delivery to it of the Affiliate Run-Off Notice, that the Reinsurer shall not be liable for any Ultimate Net Loss arising out of the Run-Off Policies to the extent such Ultimate Net Loss occurs, accrues or arises on or after the Election Effective Date and, if the Company makes such election, the Reinsurer shall, within thirty (30) days following the date of such election, return to the Company the unearned premium attributable to the Run-Off Policies in force as of the Election Effective Date, less the unearned portion of the ceding commission paid thereonwhichever is less. C. For purposes of this Agreement: 1. an “Affiliate Change of Control” will be deemed to occur with respect to an Affiliate when either (a) an individual person, corporation or other entity, or a group of commonly controlled persons, corporations or entities, acquires, including through merger, directly or indirectly, more than fifty percent (50%) of the voting securities of such Affiliate or obtains the power to vote (directly or through proxies) more than fifty percent (50%) of the voting securities of such Affiliate, except if such individual person, corporation or other entity is under common control with the Affiliate, or " II - Paragraph (b) AmTrust no longer directly or indirectly controls the power of ARTICLE VII-DEFINITIONS are amended to vote more than fifty percent (50%) of the voting securities of such Affiliate; provided that in no event shall the acquisition, including through merger, of more than fifty percent (50%) of the voting securities of AmTrust or of the power to vote (directly or through proxies) more than fifty percent (50%) of the voting securities of AmTrust, or the merger, combination or amalgamation of AmTrust into any person, or similar transaction pursuant to which AmTrust shall not be the surviving entity, be deemed a "Affiliate Change of Control". 2. An “Affiliate Run-off Event” shall be deemed to have occurred as to an Affiliate ifread: (a) such Affiliate ceases writing new or renewal business and elects to run off its existing business or an insurance or other regulatory authority orders such party to cease writing new or renewal business; or (b) such Affiliate becomes insolvent, or has been placed into liquidation or receivership (whether voluntary or involuntary), or there have been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, or trustee in bankruptcy or other agent known by whatever name, to take possession of its assets or control of its operations; or D. No more frequently than quarterly the Company shall, and shall cause each ceding Affiliate under an Underlying Reinsurance Agreement to, provide to the Reinsurer and its representatives reasonable access, on reasonable advance notice and during business hours, to its claims files with respect to Covered Business. The Reinsurer shall have the right, but not the obligation, to consult with the Company and such Affiliate regarding the handling of any disputed or contested claim.

LIABILITY OF THE REINSURER. A. Commencing as of the Effective Time, except as otherwise provided on Schedule A, as now stated and as amended from time to time with respect to Additional Business and Excess Retention Business, the Company hereby agrees to cede to the Reinsurer, and the Reinsurer agrees to accept and reinsure, the Ultimate Net Loss of the Company equal to forty percent (40%) of the Affiliate Ultimate Net Loss with respect to Covered Business ceded to the Company by each Affiliate, subject to all other terms and conditions set forth in this Agreement; provided, however, that the Reinsurer's maximum liability hereunder in respect of a single loss under a Policy reinsured hereunder (without taking into account any Loss Adjustment Expenses, Extra Contractual Obligations or Loss in Excess of Policy Limits attributable thereto) shall not exceed $2,000,000. For purposes of this Agreement, "Affiliate Ultimate Net Loss" means the sum actually paid or to be paid by such Affiliate in settlement of losses for which it is liable in respect of the Covered Business, after making deductions for all inuring reinsurance (other than reinsurance with any direct or indirect subsidiary of AmTrust), whether collectible or not, and all Recoveries. Without limiting the generality of the foregoing, the Reinsurer shall be liable for its proportionate share of any experience-related premium rebates or credits to policyholders under Policies of workers compensation insurance, and shall benefit proportionately to the extent any such policyholder pays any additional premiums as a result of the experience under such Policies. B. If an Affiliate Change in Control or Affiliate Run-Off Event occurs with respect to any Affiliate, the Reinsurer shall be entitled to elect not to reinsure Covered Business related to Policies issued or renewed by such Affiliate (“Applicable Covered Business”) effective as of such Affiliate Change in Control or Affiliate Run-Off Event (the “Election Effective Date”). Such election shall be in writing (an “Affiliate Run-Off Notice”), and shall be given not later than thirty (30) days following the date on which the Reinsurer has actual knowledge that the Affiliate Change in Control or the Affiliate Run-Off event (as applicable) shall have occurred. Subject to the immediately following sentence, if the Reinsurer makes such an election, all reinsurance hereunder of Applicable Covered Business that is in force as of the Election Effective Date shall remain in full force and effect until the applicable expiration date, anniversary date, or prior termination date of the Policies attributable to the Applicable Covered Business (the “Run-Off Policies”). The Company shall be entitled to notify the Reinsurer, within thirty (30) days following delivery to it of the Affiliate Run-Off Notice, that the Reinsurer shall not be liable for any Ultimate Net Loss arising out of the Run-Off Policies to the extent such Ultimate Net Loss occurs, accrues or arises on or after the Election Effective Date and, if the Company makes such election, the Reinsurer shall, within thirty (30) days following the date of such election, return to the Company the unearned premium attributable to the Run-Off Policies in force as of the Election Effective Date, less the unearned portion of the ceding commission paid thereon. C. For purposes of this Agreement: 1. an “Affiliate Change of Control” will be deemed to occur with respect to an Affiliate when either (a) an individual person, corporation or other entity, or a group of commonly controlled persons, corporations or entities, acquires, including through merger, directly or indirectly, more than fifty percent (50%) of the voting securities of such Affiliate or obtains the power to vote (directly or through proxies) more than fifty percent (50%) of the voting securities of such Affiliate, except if such individual person, corporation or other entity is under common control with the Affiliate, or (b) AmTrust no longer directly or indirectly controls the power to vote more than fifty percent (50%) of the voting securities of such Affiliate; provided that in no event shall the acquisition, including through merger, of more than fifty percent (50%) of the voting securities of AmTrust or of the power to vote (directly or through proxies) more than fifty percent (50%) of the voting securities of AmTrust, or the merger, combination or amalgamation of AmTrust into any person, or similar transaction pursuant to which AmTrust shall not be the surviving entity, be deemed a "Affiliate Change of Control". 2. An “Affiliate Run-off Event” shall be deemed to have occurred as to an Affiliate if: (a) such Affiliate ceases writing new or renewal business and elects to run off its existing business or an insurance or other regulatory authority orders such party to cease writing new or renewal business; or (b) such Affiliate becomes insolvent, or has been placed into liquidation or receivership (whether voluntary or involuntary), or there have been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, or trustee in bankruptcy or other agent known by whatever name, to take possession of its assets or control of its operations; or D. No more frequently than quarterly the Company shall, and shall cause each ceding Affiliate under an Underlying Reinsurance Agreement to, provide to the Reinsurer and its representatives reasonable access, on reasonable advance notice and during business hours, to its claims files with respect to Covered Business. The Reinsurer shall have the right, but not the obligation, to consult with the Company and such Affiliate regarding the handling of any disputed or contested claim.