Exhibit 10.20
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100% QUOTA SHARE RETROCESSION AGREEMENT
(Non-TRADITIONAL - B-1)
BY AND BETWEEN
ST. XXXX FIRE AND MARINE INSURANCE COMPANY
(RETROCEDANT)
and
PLATINUM UNDERWRITERS REINSURANCE, INC.
(RETROCESSIONAIRE)
DATED AS OF________, 2002
This QUOTA SHARE RETROCESSION Agreement (this "AGREEMENT"),
effective as of 12:01 a.m. New York time on the day following the Closing
(such term and all other capitalized terms used but not defined herein shall
have the meanings ascribed to such terms in the Formation and Separation
Agreement, as defined below; such time the "EFFECTIVE TIME", and such date
the "EFFECTIVE DATE"), is made by and between St. Xxxx Fire and Marine
Insurance Company, a Minnesota domiciled insurance company ("RETROCEDANT"),
and Platinum Underwriters Reinsurance, Inc. (formerly known as USF&G Family
Insurance Company), a Maryland domiciled stock insurance company
("RETROCESSIONAIRE").
WHEREAS, pursuant to a Formation and Separation Agreement dated as
of [ ], 2002 (the "FORMATION AND SEPARATION AGREEMENT") between Platinum
Underwriters Holdings, Ltd. ("PLATINUM HOLDINGS"), the ultimate parent of
Retrocessionaire and The St. Xxxx Companies, Inc. ("THE ST. XXXX"), the
ultimate parent of Retrocedant, Platinum
Holdings acquired one hundred percent (100%) of the issued and outstanding
Shares; and
WHEREAS, pursuant to the Formation and Separation Agreement, The St.
Xxxx agreed to cause its insurance subsidiaries to cede specified liabilities
under certain reinsurance contracts of The St. Paul's insurance subsidiaries;
and Platinum Holdings agreed to cause its insurance subsidiaries to reinsure
such liabilities; and
WHEREAS, Retrocedant has agreed to retrocede to Retrocessionaire,
and Retrocessionaire has agreed to assume by indemnity reinsurance, as of the
Effective Time, a one hundred percent (100%) quota share of the liabilities
arising pursuant to the Reinsurance Contracts (as defined hereunder), subject
to the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
promises and upon the terms and conditions set forth herein, the parties
hereto agree as follows:
ARTICLE I
BUSINESS COVERED; EXCLUSIONS
Retrocedant hereby obligates itself to retrocede to Retrocessionaire
and Retrocessionaire hereby obligates itself to accept, pursuant to the terms
of this Agreement, a one hundred percent (100%) quota share of any and all
liabilities incurred by Retrocedant on or after January 1, 2002 but not yet
paid as of the Effective Time, net of Inuring Retrocessions (as defined in
Section 7.01 herein), under all reinsurance and retrocession contracts (each,
a "REINSURANCE CONTRACT") that
(i) are underwritten by St. Xxxx Re on behalf of Retrocedant, incept
on or after January 1, 2002 and belong to the classes specified in Exhibit
A-1 hereto (solely for the convenience of the parties, Exhibit A-2 sets forth
Loss Reserves (as defined in Exhibit B hereto), over all such Reinsurance
Contracts, by Class of Business (as defined below), each as of June 30,
2002), or
(ii) are new or renewal contracts entered into by Retrocedant
pursuant to Article III, paragraph (a) of the Underwriting Management
Agreement between Retrocedant and Retrocessionaire of even date herewith.
Notwithstanding the foregoing, Retrocedant shall retain all
liabilities for ceding commission and brokerage fees up to the carrying value
of the related reserves on the books of the Retrocedant as of September 30,
2002 (the "Initial Ceding Commission Reserves"), and as finally determined
pursuant to the provisions of Article IV herein, which reserves shall also be
retained by Retrocedant. All liabilities for ceding commissions are brokerage
fees in excess of such carrying value shall be assumed by Retrocessionaire,
as provided for above.
Notwithstanding the foregoing, Retrocedant will retain all
liabilities arising under any Reinsurance Contract relating to or emanating
from the losses caused by the European floods in August 2002 (the "FLOOD
LIABILITIES").
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With respect to any named storm(s) (which are any tropical cyclones
assigned a name by the National Hurricane Center) in existence as of the
Effective Time which cause insured damage within 10 days of the Effective
Date, except as provided for herein, Retrocedant shall retrocede one hundred
percent (100%) quota share of losses arising from all such storms, net of the
inuring benefit of Inuring Retrocessions as allocated pursuant to Exhibits D
and F (but excluding the inuring benefit of the Holborn aggregate cover
referenced as Item 13 in Exhibit D) to Retrocessionaire and Retrocessionaire
shall accept one hundred percent (100%) quota share of such losses. However,
Retrocedant shall retain $25,000,000 of losses, in the aggregate, net of the
inuring benefit of Inuring Retrocessions as allocated pursuant to Exhibits D
and F, in excess of the first $25,000,000, net of the inuring benefit of
Inuring Retrocessions as allocated pursuant to Exhibits D and F, that
Retrocessionaire assumes. Retrocedant shall use commercially reasonable
efforts to arrange, on behalf of Retrocessionaire, third party retrocessional
coverage for losses arising from such named storms in excess of $50,000,000
in the aggregate, net of the inuring benefit of Inuring Retrocessions as
allocated pursuant to Exhibits D and F. The cost of such coverage shall not
exceed $5 million with such cost shared equally by Retrocedant and
Retrocessionaire. The amount of such coverage shall be $100,000,000 or such
lesser amount as may be available on the specified terms. It is understood
that the calculation of any losses or retentions by the Retrocedant or the
Retrocessionaire, as the case may be, pursuant to this subparagraph shall
include all losses or retentions, respectively, with respect to all
subsidiaries of The St. Xxxx or Platinum Holdings, as the case may be, under
any Quota Share Retrocession Agreement, as defined in the Formation and
Separation Agreement, between any subsidiary of The St. Xxxx, as cedant, and
a subsidiary of Platinum Holdings as retrocessionaire.
The Flood Liabilities and the liabilities in respect of the named
storms, as described above retained by Retrocedant as specified above
(collectively, the "EXCLUDED LOSSES") shall not be subject to this Agreement.
No retrocession shall attach with respect to any contracts of
reinsurance of any kind or type whatsoever issued and/or assumed by
Retrocedant, other than the Reinsurance Contracts.
ARTICLE II
TERM
This Agreement shall be continuous as to the Reinsurance Contracts.
Except as mutually agreed in writing by the Retrocedant and the
Retrocessionaire, this Agreement shall remain continuously in force until all
Reinsurance Contracts are terminated, expired, cancelled or commuted.
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ARTICLE III
COVERAGE
SECTION 3.01 SECTION A (RETROSPECTIVE) COVERAGE PERIOD. The Section
A (Retrospective) Coverage Period will be the period from and including
January 1, 2002 to but not including the Effective Time.
SECTION 3.02 SECTION B (PROSPECTIVE) COVERAGE PERIOD. The Section B
(Prospective) Coverage Period will be the period from and including the
Effective Time through the commutation, expiration, or final settlement of
all liabilities under any of the Reinsurance Contracts.
SECTION 3.03 COVERAGE LIMITS. Coverage under this Agreement for a
specific Reinsurance Contract shall be subject to the aggregate limit
specified in the Reinsurance Contract reduced by all payments made by either
Retrocedant or Retrocessionaire pursuant to such Reinsurance Contract. The
application of any such aggregate limits shall be made in chronological order
in accordance with the dates of the respective losses. It is understood,
however, that such application shall not result in Retrocedant's becoming
liable for any adverse development under this Agreement except as otherwise
explicitly set forth herein.
ARTICLE IV
PREMIUMS AND ADDITIONAL CONSIDERATION
SECTION 4.01 SECTION A (RETROSPECTIVE) COVERAGE PERIOD PREMIUM.
(a) On the Effective Date, in respect of the Section A
(Retrospective) Coverage Period, Retrocedant shall pay to the account of
Retrocessionaire an aggregate amount representing the sum of all amounts
related and specifically allocated to each individual Class of Business (the
"INITIAL SECTION A PREMIUM") equal to one hundred percent (100%) of the
carrying value on the books of the Retrocedant as of September 30, 2002, of
the aggregate of all Loss Reserves relating to the Reinsurance Contracts,
determined in accordance with statutory accounting principles on a basis
consistent in all material respects with the methods, principles, practices
and policies employed in the preparation and presentation of Retrocedant's
annual statutory financial statement as of December 31, 2001 as filed with
the Minnesota Department of Commerce (consistent with the methods,
principles, practices and policies applied at June 30, 2002) and as submitted
to The St. Xxxx, provided, that in no event shall such amount be less than
Retrocedant's good faith estimate, based upon due investigation by the
Retrocedant, as of the date at which such calculation is being made, of all
Loss Reserves relating to the Reinsurance Contracts by applicable Class of
Business that would be required (i) in order for such reserves to be in full
compliance with customary practices and procedures of Retrocedant for filings
and financial statements as of September 30, 2002, and (ii) to cause such
reserves to bear a reasonable relationship to the events, conditions,
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contingencies and risks which are the bases for such reserves, to the extent
known by Retrocedant at the time of such calculation.
(b) On the 90th day following the Effective Date (or if such 90th
day is not a Business Day, the first Business Day following such 90th day),
Retrocedant shall prepare and deliver to Retrocessionaire an accounting (the
"PROPOSED LOSS RESERVE ACCOUNTING") of all Loss Reserves relating to the
Reinsurance Contracts, as of the Effective Date, determined in accordance
with this Section 4.01 and the Methodology for Calculation of the Final
Section A Premium, as set forth on Exhibit B hereto (the "FINAL SECTION A
PREMIUM") and the reserves for ceding commissions and brokerage fees relating
to the Reinsurance Contracts on the books of the Retrocedant as of the
Effective Date (the "Final Ceding Reserves"), and taking into consideration
all relevant data becoming available to Retrocedant subsequent to the
Effective Date. In the event the Final Section A Premium for any individual
Class of Business is greater than the Initial Section A Premium for such
individual Class of Business or the Final Ceding Commission Reserves are less
than the Initial Ceding Commission Reserves, Retrocedant shall promptly pay
to the account of Retrocessionaire the difference plus interest on such
amount at the Applicable Rate from and including the Effective Date to and
including the date of such payment. In the event the Final Section A Premium
for any individual Class of Business is less than the Initial Section A
Premium for such individual Class of Business or the Final Ceding Commission
Reserves are greater than the Initial Ceding Commission Reserves,
Retrocessionaire shall promptly pay to the account of Retrocedant the
difference plus interest on such amount at the Applicable Rate (as defined
below) from and including the Effective Date to and including the date of
such payment. "Class of Business" shall be defined as each individual class
or line of business as delineated by the Retrocedant as of the date hereof as
set forth on Exhibit A-1.
(c) In the event that a reinsurance contract is not included in one
of the classes set forth in Exhibit A-1, but is deemed to be a Reinsurance
Contract by the mutual agreement of the parties, the parties shall determine
whether the Final Section A Premium reflected one hundred percent of the
associated reserves with respect to such Reinsurance Contract as of the
Effective Date. If the Final Section A Premium did not so reflect such
associated reserves with respect to such Reinsurance Contract as of the
Effective Date, Retrocedant shall promptly pay to the account of
Retrocessionaire an amount equal to the amount that should have been included
in the Final Section A Premium, as determined pursuant to paragraph (b) of
this Section 4.01, less any amounts paid by Retrocedant on or after the
Effective Date pursuant to such Reinsurance Contract relating to such
reserves, plus interest on such amount at the Applicable Rate calculated from
and including the Effective Date to and including the date of such payment to
Retrocessionaire.
(d) Notwithstanding the foregoing, the parties agree that all gross
estimated premiums written prior to the Effective Date and earned but not yet
billed, net of applicable ceding commission and retrocession premium (net of
retrocession commissions) ("EBUB", and also referred to as "estimated
premiums receivable" or "EBNR" or "earned but unbilled") as of the Effective
Time and relating to the Reinsurance Contracts, as determined on or before
________, 2002, as set forth in
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Exhibit B, in a manner consistent with Retrocedant's customary practices and
procedures and as submitted to The St. Xxxx, shall be allocated to
Retrocedant. All payments received after the Effective Time by Retrocedant or
Retrocessionaire in respect of EBUB as of the Effective Time shall be
retained by Retrocedant or held on trust for and paid by Retrocessionaire to
or to the order of Retrocedant, and all rights to collect such amounts shall
be retained by or transferred to Retrocedant. Any changes made on or after
the Effective Time as to the estimated amount of EBUB as of the Effective
Time shall be for the account of Retrocessionaire and shall not affect the
amount retained by Retrocedant. The parties agree that as of the first
anniversary of the date hereof, Retrocessionaire shall pay to Retrocedant the
difference, if any, between the amount of EBUB as of the Effective Time and
the aggregate amount subsequently billed and paid to and/or retained by
Retrocedant prior to that date with respect to EBUB as of the Effective Time,
it being understood that Retrocedant shall bear all risk of non-payment and
non-collectibility with respect to premiums written and unearned as of the
Effective Date and subsequently billed. All amounts, if any, in respect of
EBUB which are in excess of EBUB as of the Effective Time, calculated
pursuant to the first sentence of this Section 4.01(d), shall be for the
account of Retrocessionaire and no such amounts shall be retained by or
payable to Retrocedant
SECTION 4.02 SECTION B (PROSPECTIVE) COVERAGE PERIOD PREMIUMS.
(a) On the Effective Date, in respect of the Section B (Prospective)
Coverage Period, Retrocedant shall transfer to Retrocessionaire an aggregate
amount representing the sum of all amounts related and specifically allocated
to each individual Class of Business (the "INITIAL SECTION B PREMIUM") equal
to the carrying value on the books of Retrocedant as of September 30, 2002,
of one hundred percent (100%) of the unearned premium reserves, net of
unearned ceding commission [and brokerage fees] and net of Inuring
Retrocession premiums as provided for in Section 7.04 and as allocated
pursuant to Exhibit E, in each case, relating to the Reinsurance Contracts,
determined in accordance with statutory accounting principles on a basis
consistent in all material respects with the methods, principles, practices
and policies employed in the preparation and presentation of Retrocedant's
annual statutory financial statement as of December 31, 2001 as filed with
the Minnesota Department of Commerce (consistent with the methods,
principles, practices and policies applied at June 30, 2002) and as submitted
to The St. Xxxx.
(b) On the 90th day following the Effective Date (or if such 90th
day is not a Business Day, the first Business Day following such 90th day),
Retrocedant shall prepare and deliver to Retrocessionaire an accounting (the
"PROPOSED PREMIUM RESERVE ACCOUNTING", together with the Proposed Loss
Reserve Accounting, the "PROPOSED ACCOUNTING") of all unearned premium
reserves relating to the Reinsurance Contracts, as of the Effective Date,
determined in accordance with statutory accounting principles on a basis
consistent in all material respects with the methods, principles, practices
and policies employed in the preparation and presentation of Retrocedant's
annual statutory financial statement as of December 31, 2001 as filed with
the Minnesota Department of Commerce (consistent with the methods,
principles, practices and policies applied at June 30,2002) and as submitted
to The St. Xxxx, relating to the Reinsurance Contracts, net of
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the unearned ceding commission and net of Inuring Retrocession premiums as
provided for in Section 7.04 and as allocated pursuant to Exhibit E (the
"FINAL SECTION B PREMIUM"). In the event the Final Section B Premium for any
individual Class of Business is greater than the Initial Section B Premium
for such individual Class of Business, Retrocedant shall promptly pay to the
account of Retrocessionaire the difference plus interest on such amount at
the Applicable Rate from and including the Effective Date to and including
the date of such payment. In the event the Initial Section B Premium for any
individual Class of Business is greater than the Final Section B Premium for
such individual Class of Business, Retrocessionaire shall promptly pay to the
account of Retrocedant the difference plus interest on such amount at the
Applicable Rate from and including the Effective Date to and including the
date of such payment.
(c) Retrocedant shall transfer to Retrocessionaire with respect to
all Reinsurance Contracts, one hundred percent (100%) of all gross premiums
written on or after the Effective Time, net of premium returns, allowances
and cancellations and less any applicable Retrocedant Ceding Commission and
Inuring Retrocession premiums as provided for in Section 7.04 and as
allocated pursuant to Exhibit E.
(d) Retrocedant shall retain all gross premiums attributable to
losses arising from the Excluded Losses, including but not limited to
adjusted premiums, portions of reinstatement premiums and other adjustments
attributable to such losses.
SECTION 4.03 DISPUTE RESOLUTION.
(a) After receipt of the Proposed Accounting, together with the work
papers used in preparation thereof, Retrocessionaire shall have 30 days (the
"REVIEW PERIOD") to review such Proposed Accounting. Unless Retrocessionaire
delivers written notice to Retrocedant on or prior to the 30th day of the
Review Period stating that it has material objections to the Proposed
Accounting for one or more Classes of Business or the Final Ceding Commission
Reserves, Retrocessionaire shall be deemed to have accepted and agreed to the
Proposed Accounting and the Final Ceding Commission Reserves. If
Retrocessionaire so notifies Retrocedant of any material objection(s) to the
Proposed Accounting or the Final Ceding Commission Reserves, the parties
shall in good faith attempt to resolve, within 30 days (or such longer period
as the parties may agree) following such notice (the "RESOLUTION PERIOD"),
their differences with respect to such material objections related to any
Class of Business so identified. Retrocedant and Retrocessionaire agree that
only those Classes of Business (or the Final Ceding Commission Reserves, if
applicable) to which such notification relates shall be subject to
adjustment, and any resolution by them as to any disputed amounts, as
evidenced by a writing signed by both parties, shall be final, binding and
conclusive.
In the event that Retrocessionaire believes that Loss Reserves for a
Class of Business need to be increased beyond the amount implied by the
algorithm set forth in Exhibit B, or the Final Ceding Commission Reserves need
to be reduced, Retrocessionaire and Retrocedant will endeavor to agree on an
appropriate adjustment. If the two parties cannot agree on an adjustment,
Retrocedant may elect to (i) retain the
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liabilities and the associated Loss Reserves for the subject Class of
Business and all unearned premium and Retrocessionaire shall transfer to
Retrocedant all Initial Section A Premium and Initial Section B Premium paid
by Retrocedant for the subject Class of Business, plus interest on the
average daily amount at the Applicable Rate from the Effective Date to the
date of such transfer, or (ii) extend the time period for adjusting the
reserve to as much as 36 months or (iii) choose to arbitrate according to
Section 4.03(b), it being understood that arbitration according to Section
4.03(b) shall be the sole remedy for disputes regarding the Final Ceding
Commission Reserves. In the event that Retrocedant chooses to extend the time
period for adjusting the reserves for a Class of Business, Retrocedant
retains the exposure to adverse loss development and Retrocessionaire will
suffer no exposure to paid losses in excess of the Initial Section A Premium
and Initial Section B Premium paid by Retrocedant. At the end of the extended
period, any continued disagreement between Retrocedant and Retrocessionaire
would be submitted to arbitration as set forth in Section 4.03(b) hereto.
(b) Any amount remaining in dispute at the conclusion of the
Resolution Period for which Retrocedant has not elected the remedies set
forth in Section 4.03(a)(i) and (ii) above or as to which any extension
period has elapsed without agreement between the parties ("UNRESOLVED
CHANGES") shall be submitted to arbitration. One arbiter (each arbiter, an
"ARBITER") shall be chosen by Retrocedant, the other by Retrocessionaire, and
an umpire (the "UMPIRE") shall be chosen by the two Arbiters before they
enter upon arbitration. In the event that either party should fail to choose
an Arbiter within 30 days following a written request by the other party to
do so, the requesting party may choose two Arbiters, but only after providing
10 days' written notice of its intention to do so and only if such other
party has failed to appoint an Arbiter within such 10 day period. The two
Arbiters shall in turn choose an Umpire who shall act as the Umpire and
preside over the hearing. If the two Arbiters fail to agree upon the
selection of an Umpire within 30 days after notification of the appointment
of the second Arbiter, the selection of the Umpire shall be made by the
American Arbitration Association. All Arbiters and Umpires shall be active or
retired disinterested property/casualty actuaries of insurance or reinsurance
companies or Lloyd's of London Underwriters.
(c) Each party shall present its case to the Arbiters within 30 days
following the date of appointment of the Umpire, unless the parties mutually
agree to an extension of time. Subject to the provisions of paragraph (f) of
this Section 4.03, the decision of the Arbiters shall be final and binding on
both parties; but failing to agree, they shall call in the Umpire and the
decision of the majority shall be final and binding upon both parties.
Judgment upon the final decision of the Arbiters may be entered in any court
of competent jurisdiction.
(d) Each party shall bear the expense of its own Arbiter, and shall
jointly and equally bear with the other the expense of the Umpire and of the
arbitration unless otherwise directed by the Arbiters.
(e) Any arbitration proceedings shall take place in New York, New
York unless the parties agree otherwise.
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(f) Once the Proposed Accounting has been finalized in accordance
with the above process, the Final Section A Premium and the Final Section B
Premium amounts shall be as set forth in the Proposed Accounting, as
determined by the Arbiters, if applicable (the "ARBITRATED FINAL SECTION A
PREMIUM" and/or "ARBITRATED FINAL SECTION B PREMIUM", as the case may be). In
the event the sum of the Arbitrated Final Section A Premium and the
Arbitrated Final Section B Premium amounts (determined in accordance with the
first sentence of this Section 4.03(f)) is greater than the amount paid by
Retrocedant to Retrocessionaire on the Effective Date, Retrocedant shall
promptly pay to the account of Retrocessionaire the difference plus interest
on such amount at the Applicable Rate from and including the Effective Date
to and including the date of such payment. In the event the sum of such
amounts (determined in accordance with the first sentence of this Section
4.03(f)) is lower than the amount paid by Retrocedant to Retrocessionaire on
the Effective Date, Retrocessionaire shall promptly pay to the account of
Retrocedant the difference plus interest on such amount at the Applicable
Rate from the Effective Date to the date of such payment.
(g) It is understood that the dispute resolution provisions set
forth in this Section 4.03 represent the exclusive remedy for disputes
arising between the parties with respect to the Proposed Accounting and that
the dispute mechanisms set forth in Article XV shall be the exclusive remedy
for all disputes not relating to the Proposed Accounting.
ARTICLE V
RETROCEDANT CEDING COMMISSION
With respect to the Reinsurance Contracts, Retrocessionaire shall
pay to Retrocedant a ceding commission (the "RETROCEDANT CEDING COMMISSION")
with respect to the Section B (Prospective) Coverage Period, and such
Retrocedant Ceding Commission shall equal 100 percent (100%) of the actual
expenses incurred in writing each Reinsurance Contract, including actual
ceding commissions and brokerage fees, as determined in accordance with
Retrocedant's customary practices and procedures and as submitted to The St.
Xxxx, all as allocable pro rata to periods from and after the Effective Time.
Retrocedant Ceding Commissions shall also include all underwriting fees and
other costs and expenses paid by Retrocedant pursuant to the Underwriting
Management Agreement between Retrocedant and Retrocessionaire, dated as of
the date hereof, and all underwriting and other expenses incurred by
Retrocedant on or after the Effective Date with respect to the liabilities
transferred hereunder, as determined in accordance with Retrocedant's
customary practices and procedures.
ARTICLE VI
ORIGINAL CONDITIONS
All retrocessions assumed under this Agreement shall be subject to the
same rates, terms, conditions, waivers and interpretations, and to the same
modifications and alterations, as the respective Reinsurance Contracts.
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ARTICLE VII
INURING RETROCESSIONS
SECTION 7.01 ALLOCATION TO RETROCESSIONAIRE. Retrocedant agrees that
the retrocession contracts purchased by the reinsurance division of The St.
Xxxx ("St. Xxxx Re") from third party retrocessionaires ("THIRD PARTY
Retrocessionaires") on behalf of Retrocedant prior to the Effective Time that
are listed on Exhibit C hereto shall inure to the benefit of Retrocessionaire
to the extent of liabilities covered under this Agreement ("INURING
RETROCESSIONS"), subject to the allocations in Exhibits D, E and F. It is
further understood and agreed that facultative reinsurance not listed on
Exhibit C but relating to the Reinsurance Contracts shall also inure to the
benefit of Retrocessionaire to the extent of liabilities covered under this
Agreement and shall be considered Inuring Retrocessions under this Agreement.
SECTION 7.02 TRANSFER. Retrocedant and Retrocessionaire shall use
their respective commercially reasonable efforts to obtain the consent of
Third Party Retrocessionaires under the Inuring Retrocessions to include
Retrocessionaire as an additional reinsured with respect to the Reinsurance
Contracts or, in the alternative, to make all payments directly to the
Retrocessionaire, to the extent allocable to the Reinsurance Contracts, in
the manner set forth in Exhibit D hereto, and to seek all payments, to the
extent allocable to the Reinsurance Contracts, in the manner set forth herein
Exhibit E hereto, directly from Retrocessionaire, it being understood that
Retrocessionaire shall bear all risk of non-payment or non-collectibility
under the Inuring Retrocessions.
SECTION 7.03 INURING RETROCESSIONS CLAIMS.
(a) Each of the parties agrees to transfer to the other party all
recoveries or any portion thereof that such party receives on or after the
Effective Time pursuant to the Inuring Retrocessions which are allocated to
the other party, in the manner set forth in Exhibit D hereto. Retrocedant
shall use its commercially reasonable efforts to collect any recoveries due
to Retrocessionaire under the Inuring Retrocessions that indemnify the
Retrocedant for losses or expenses payable or return of premium allocable to
the Retrocessionaire and shall hold them on trust for, and pay them to or to
the order of Retrocessionaire. The parties agree that Retrocessionaire's
obligations to make payments pursuant to the Inuring Retrocessions or to
reimburse Retrocedant pursuant to this Agreement shall not be waived by
non-receipt of any such amounts. Retrocessionaire shall reimburse Retrocedant
for one hundred percent (100%) of any expenses reasonably incurred by
Retrocedant in attempting to make such collection, including all allocated
expenses, as determined in accordance with St. Xxxx Re's customary practices
and procedures. Retrocessionaire shall have the right to associate with
Retrocedant, at Retrocessionaire's own expense, in any actions brought by
Retrocedant to make such collections.
(b) In the event claims of Retrocedant and Retrocessionaire
aggregate in excess of the applicable limit under an Inuring Retrocession,
all limits applicable to either
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Retrocedant or Retrocessionaire shall be allocated between Retrocedant and
Retrocessionaire in the manner set forth in Exhibit F hereto.
SECTION 7.04 INITIAL CONSIDERATION. To the extent not already
reflected in the calculation of Final Section B Premium, as part of the
Section B (Prospective) Coverage Period premiums described in Section 4.02,
Retrocessionaire shall reimburse Retrocedant for one hundred percent (100%)
of any and all unearned premiums paid by Retrocedant under such Inuring
Retrocessions net of any applicable unearned ceding commissions paid to
Retrocedant thereunder.
SECTION 7.05 ADDITIONAL CONSIDERATION. Retrocessionaire agrees to
pay under the Inuring Retrocessions all future premiums Retrocedant is
obligated to pay pursuant to the terms of the Inuring Retrocessions to the
extent that such premiums are allocable to Retrocessionaire in the manner set
forth in Exhibit E hereto, and not otherwise paid by Retrocessionaire and to
indemnify Retrocedant for all such premiums paid directly by Retrocedant, net
of any ceding commissions and similar amounts paid by Third Party
Retrocessionaires to Retrocedant.
SECTION 7.06 TERMINATION OR COMMUTATION OF INURING RETROCESSIONS.
(a) With respect to any Inuring Retrocessions providing coverage
solely with respect to the Reinsurance Contracts, Retrocedant agrees, on
behalf of itself and its affiliates, that Retrocedant shall not take any
action or fail to take any action that would reasonably result in the
termination or commutation of, or any material change in the coverage
provided by, any Inuring Retrocession, without the prior written consent of
the Retrocessionaire, such consent not to be unreasonably withheld.
(b) With respect to any Inuring Retrocessions providing coverage for
both Reinsurance Contracts and business not being transferred, neither party
shall take any action or fail to take any action that would reasonably result
in the termination or commutation of, or any material change in the coverage
provided by, any Inuring Retrocession, without the prior written consent of
the Retrocessionaire, such consent not to be unreasonably withheld.
ARTICLE VIII
LOSS AND LOSS EXPENSE; SALVAGE AND SUBROGATION;
FOLLOW THE FORTUNES
(a) Retrocessionaire shall be liable for one hundred percent (100%)
of all future loss, loss adjustment expenses, incurred but not reported
losses and other payment obligations that arise (including ceding
commissions, as and to the extent determined in Article IV) under the
Reinsurance Contracts on and after January 1, 2002 and are payable as of or
after the Effective Time, and shall reimburse Retrocedant for any losses,
loss adjustment expenses and other payment obligations paid by Retrocedant
following the Effective Time in respect of the Reinsurance Contracts, net of
any recoveries received by Retrocedant with respect thereto, including
recoveries under Inuring Retrocessions.
11
Retrocessionaire shall have the right to all salvage and subrogation on the
account of claims and settlements with respect to the Reinsurance Contracts.
(b) In the event of a claim under a Reinsurance Contract, the
Retrocedant will assess the validity of the claim and make a determination as
to payment, consistent with the claims handling guidelines previously
provided to Retrocedant in writing by Retrocessionaire and Retrocessionaire
may exercise its rights under Section 10.01 in respect thereof. Retrocedant
shall provide prompt notice of any claim in excess of $500,000 to
Retrocessionaire. All payments made by Retrocedant, whether under strict
contract terms or by way of compromise, shall be binding on Retrocessionaire.
In addition, if Retrocedant refuses to pay a claim in full and a legal
proceeding results, Retrocessionaire will be unconditionally bound by any
settlement agreed to by Retrocedant or the adverse judgment of any court or
arbitrator (which could include any judgment for bad faith, punitive damages,
excess policy limit losses or extra contractual obligations) and Retrocedant
may recover with respect to such settlements and judgments under this
Agreement. Though Retrocedant will settle such claims and litigation in good
faith, Retrocessionaire is bound to accept the settlements paid by
Retrocedant and such settlements may be for amounts that could be greater
than the amounts that would be agreed to by Retrocessionaire if
Retrocessionaire were to settle such claims or litigation directly. It is the
intent of this Agreement that Retrocessionaire shall in every case in which
this Agreement applies and in the proportions specified herein, "follow the
fortunes" of Retrocedant in respect of risks Retrocessionaire has accepted
under this Agreement.
ARTICLE IX
EXTRA CONTRACTUAL OBLIGATIONS
In the event Retrocedant or Retrocessionaire is held liable to
pay any punitive, exemplary, compensatory or consequential damages because of
alleged or actual bad faith or negligence related to the handling of any
claim under any Reinsurance Contract or otherwise in respect of such
Reinsurance Contract, the parties shall be liable for such damages in
proportion to their responsibility for the conduct giving rise to the
damages. Such determination shall be made by Retrocedant and
Retrocessionaire, acting jointly and in good faith, and in the event the
parties are unable to reach agreement as to such determination, recourse
shall be had to Article XV hereof.
ARTICLE X
ADMINISTRATION OF REINSURANCE CONTRACTS
SECTION 10.01 ADMINISTRATION.
(a) The parties agree that, as of the Effective Time, Retrocedant shall
have the sole authority to administer the Reinsurance Contract in all respects,
which authority shall include, but not be limited to, authority to xxxx for and
collect premiums, adjust all
12
claims and handle all disputes thereunder and to effect any and all
amendments, commutations and cancellations of the Reinsurance Contract,
subject, however, in the case of administration of claims, to all claims
handling guidelines provided in advance in writing by Retrocessionaire to
Retrocedant. Retrocedant shall not, on its own, settle any claim, waive any
right, defense, setoff or counterclaim relating to the Reinsurance Contracts
with respect to amounts in excess of $500,000 or make any ex gratia payments,
and shall not amend, commute or terminate any of the Reinsurance Contracts,
in each case without the prior written consent of Retrocessionaire.
(b) Notwithstanding the foregoing, to the extent permitted by law,
Retrocessionaire may, at its discretion and at its own expense, assume the
administration, defense and settlement of any claim upon prior written notice
to Retrocedant. Upon receipt of such notice, Retrocedant shall not
compromise, discharge or settle such claim except with the prior written
consent of Retrocessionaire. Retrocessionaire shall not take any action in
the administration of such claim that would reasonably be expected to
adversely affect Retrocedant, its business or its reputation, without the
prior written consent of Retrocedant. Subject to the terms of Article IX
hereof, Retrocessionaire shall indemnify Retrocedant for all Losses,
including punitive, exemplary, compensatory or consequential damages arising
from such assumption of the conduct of such settlement pursuant to Article
XIV herein.
SECTION 10.02 REPORTING AND REGULATORY MATTERS. Each party shall
provide the notices and filings required to be made by it to state regulatory
authorities as a result of this Agreement. Notwithstanding the foregoing,
each party shall provide to the other party any information in its possession
regarding the Reinsurance Contracts as reasonably required by the other party
to make such filings and in a form as agreed to by the parties.
SECTION 10.03 DUTY TO COOPERATE. Upon the terms and subject to the
conditions and other agreements set forth herein, each party agrees to use
its commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other party in doing, all things necessary or advisable to perform the
transactions contemplated by this Agreement.
SECTION 10.04 COMMUNICATIONS RELATING TO THE REINSURANCE CONTRACTS.
Following the Effective Time, Retrocedant and Retrocessionaire shall each
promptly forward to the other copies of all material notices and other
written communications it receives relating to the Reinsurance Contracts
(including, without limitation, all inquiries and complaints from state
insurance regulators, brokers and other service providers and reinsureds and
all notices of claims, suits and actions for which it receives service of
process.)
ARTICLE XI
REPORTS AND REMITTANCES
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SECTION 11.01 REPORT FROM RETROCEDANT. Within thirty days following
the end of each month, Retrocedant shall provide Retrocessionaire with a
summary statement of account for the previous month showing all activity
relating to each of the Reinsurance Contracts, including related
administration costs and expenses incurred by Retrocedant, consisting of the
categories of information set forth in Exhibit G hereto. The monthly
statement of account shall also provide a breakdown of any amounts due to the
Retrocedant or Retrocessionaire, as the case may be, as reimbursement for
paid claims, collected premiums or other amounts due pursuant to the terms of
this Agreement, including amounts relating to Inuring Retrocessions.
SECTION 11.02 REMITTANCES. Within two Business Days after delivery
of each monthly report pursuant to Section 11.01, Retrocedant and
Retrocessionaire shall settle all amounts then due under this Agreement for
that month. It is agreed that Retrocedant shall retain all premiums received
arising from all business written for which the first day of the original
cedant's account period occurs prior to the Effective Date until such time as
such aggregate amount of such premiums received equals the net amount to be
retained by Retrocedant pursuant to Section 4.01(d) and 4.02(b) herein, after
which time, such premiums shall be remitted by Retrocedant to
Retrocessionaire.
SECTION 11.03 LATE PAYMENTS. Should any payment due any party to
this Agreement be received by such party after the due date for such payment
under this Agreement, interest shall accrue from the date on which such
payment was due until payment is received by the party entitled thereto, at
an annual rate equal to the London Interbank Offered Rate quoted for six
month periods as reported in The Wall Street Journal on the first Business
Day of the month in which such payment first becomes due plus one hundred
basis points (the "APPLICABLE RATE").
SECTION 11.04 COST REIMBURSEMENT. Retrocessionaire shall reimburse
for its allocated share of all costs and expenses incurred by Retrocedant in
administering the Reinsurance Contracts as set forth in Exhibit H hereto.
SECTION 11.05 CURRENCY. For purposes of this Agreement, where
Retrocedant receives premiums or pays losses in currencies other than United
States dollars, such premiums or losses shall be converted into United States
dollars at the actual rates of exchange at which these premiums or losses are
entered in the Retrocedant's books.
ARTICLE XII
MAINTENANCE OF LICENSES
Each of Retrocedant and Retrocessionaire hereby covenants to maintain
at all times all licenses and authorizations required to undertake the actions
contemplated hereby.
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ARTICLE XIII
ACCESS TO RECORDS
From and after the Closing Date, Retrocedant shall afford
to Retrocessionaire and its respective authorized accountants, counsel and
other designated representatives (collectively, "REPRESENTATIVES") reasonable
access (including using commercially reasonable best efforts to give access
to Persons possessing information) during normal business hours to all data
and information that is specifically described in writing (collectively,
"INFORMATION") within the possession of Retrocedant relating to the
liabilities transferred hereunder, insofar as such information is reasonably
required by Retrocessionaire. Similarly, from and after the Closing Date,
Retrocessionaire shall afford to Retrocedant, any Post-closing Subsidiary of
Retrocedant and their respective Representatives reasonable access (including
using commercially reasonable best efforts to give access to Persons
possessing information) during normal business hours to Information within
Retrocessionaire's possession relating to Retrocedant, insofar as such
information is reasonably required by Retrocedant. Information may be
requested under this Article XIII for, without limitation, audit, accounting,
claims, litigation (other than any claims or litigation between the parties
hereto) and tax purposes, as well as for purposes of fulfilling disclosure
and reporting obligations and for performing this Agreement and the
transactions contemplated hereby.
From and after the Closing Date, Retrocessionaire and Retrocedant or
their designated representatives may inspect, at the place where such records
are located, any and all data and information that is specifically described
in writing within the possession of the other party hereto reasonably
relating to this Agreement, on reasonable prior notice and during normal
business hours. The rights of the parties under this Article XIII shall
survive termination of this Agreement and shall continue for as long as there
may be liabilities under the Reinsurance Contracts or reporting or retention
requirements under applicable law. In addition, each party shall have the
right to take copies (including electronic copies) of any information held by
the other party that reasonably relates to this Agreement or the Reinsurance
Contracts. Each party shall, and shall cause its designated representative
to, treat and hold as confidential information any information it receives or
obtains pursuant to this Article XIII.
ARTICLE XIV
INDEMNIFICATION
SECTION 14.01 INDEMNIFICATION BY RETROCEDANT. Retrocedant agrees to
indemnify, defend and hold harmless Retrocessionaire, and its officers,
directors and employees with respect to any and all Losses arising from any
breach by Retrocedant of any representation, warranty or covenant herein.
Retrocedant further agrees to indemnify, defend and hold harmless
Retrocessionaire and its officers, directors and employees against any and
all Losses arising out of Retrocedant's administration of the Reinsurance
Contracts, including but not limited to extracontractual obligations,
payments in excess of policy limits and settlements made in respect of any
such claims to
15
the extent arising from the gross negligence or willful misconduct of
Retrocedant except to the extent such actions are taken with the prior
consent or direction of Retrocessionaire. Such indemnification obligations
shall be limited to the aggregate of all fees paid to Retrocedant pursuant to
Section 11.04 hereof.
SECTION 14.02 INDEMNIFICATION BY RETROCESSIONAIRE. Retrocessionaire
agrees to indemnify, defend and hold harmless Retrocedant, and its officers,
directors and employees with respect to any and all Losses arising from any
breach by Retrocessionaire of any representation, warranty or covenant
herein. Retrocessionaire further agrees to indemnify, defend and hold
harmless Retrocedant and its officers, directors and employees against any
and all Losses arising out of Retrocessionaire's administration of the
Reinsurance Contracts, including but not limited to extracontractual
obligations, payments in excess of policy limits and settlements made in
respect of any such claims.
SECTION 14.03 INDEMNIFICATION PROCEDURES. (a) If a party seeking
indemnification pursuant to this Article XIV (each, an "INDEMNITEE") receives
notice or otherwise learns of the assertion by a Person (including, without
limitation, any governmental entity) who is not a party to this Agreement or
an Affiliate thereof, of any claim or of the commencement by any such Person
of any Action (a "THIRD PARTY CLAIM") with respect to which the party from
whom indemnification is sought (each, an "INDEMNIFYING PARTY") may be
obligated to provide indemnification pursuant to this Section 14.01 or 14.02,
such Indemnitee shall give such Indemnifying Party written notice thereof
promptly after becoming aware of such Third Party Claim; PROVIDED that the
failure of any Indemnitee to give notice as provided in this Section 14.03
shall not relieve the Indemnifying Party of its obligations under this
Article XIV, except to the extent that such Indemnifying Party is prejudiced
by such failure to give notice. Such notice shall describe the Third Party
Claim in as much detail as is reasonably possible and, if ascertainable,
shall indicate the amount (estimated if necessary) of the Loss that has been
or may be sustained by such Indemnitee.
(b) An Indemnifying Party may elect to defend or to seek to settle
or compromise, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within [30] days of
the receipt of notice from an Indemnitee in accordance with Section 14.03(a)
(or sooner, if the nature of such Third Party Claim so requires), the
Indemnifying Party shall notify the Indemnitee of its election whether the
Indemnifying Party will assume responsibility for defending such Third Party
Claim, which election shall specify any reservations or exceptions. After
notice from an Indemnifying Party to an Indemnitee of its election to assume
the defense of a Third Party Claim, such Indemnifying Party shall not be
liable to such Indemnitee under this Article XIV for any legal or other
expenses (except expenses approved in writing in advance by the Indemnifying
Party) subsequently incurred by such Indemnitee in connection with the
defense thereof; PROVIDED that, if the defendants in any such claim include
both the Indemnifying Party and one or more Indemnitees and in any
Indemnitee's reasonable judgment a conflict of interest between one or more
of such Indemnitees and such Indemnifying Party exists in respect of such
claim or if the Indemnifying Party shall have assumed responsibility for such
claim with reservations or
16
exceptions that would materially prejudice such Indemnitees, such Indemnitees
shall have the right to employ separate counsel to represent such Indemnitees
and in that event the reasonable fees and expenses of such separate counsel
(but not more than one separate counsel for all such Indemnitees reasonably
satisfactory to the Indemnifying Party) shall be paid by such Indemnifying
Party. If an Indemnifying Party elects not to assume responsibility for
defending a Third Party Claim, or fails to notify an Indemnitee of its
election as provided in this Article XIV, such Indemnitee may defend or
(subject to the remainder of this Article XIV) seek to compromise or settle
such Third Party Claim at the expense of the Indemnifying Party.
(c) Neither an Indemnifying Party nor an Indemnitee shall consent to
entry of any judgment or enter into any settlement of any Third Party Claim
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnitee, in the case of a consent or
settlement by an Indemnifying Party, or the Indemnifying Party, in the case
of a consent or settlement by the Indemnitee, of a written release from all
liability in respect to such Third Party Claim.
(d) If an Indemnifying Party chooses to defend or to seek to
compromise or settle any Third Party Claim, the Indemnitee shall make
available at reasonable times to such Indemnifying Party any personnel or any
books, records or other documents within its control or which it otherwise
has the ability to make available that are necessary or appropriate for such
defense, settlement or compromise, and shall otherwise cooperate in a
reasonable manner in the defense, settlement or compromise of such Third
Party Claim.
(e) Notwithstanding anything in this Article XIV to the contrary,
neither an Indemnifying Party nor an Indemnitee may settle or compromise any
claim over the objection of the other; PROVIDED that consent to settlement or
compromise shall not be unreasonably withheld or delayed. If an Indemnifying
Party notifies the Indemnitee in writing of such Indemnifying Party's desire
to settle or compromise a Third Party Claim on the basis set forth in such
notice (provided that such settlement or compromise includes as an
unconditional term thereof the giving by the claimant or plaintiff of a
written release of the Indemnitee from all liability in respect thereof) and
the Indemnitee shall notify the Indemnifying Party in writing that such
Indemnitee declines to accept any such settlement or compromise, such
Indemnitee may continue to contest such Third Party Claim, free of any
participation by such Indemnifying Party, at such Indemnitee's sole expense.
In such event, the obligation of such Indemnifying Party to such Indemnitee
with respect to such Third Party Claim shall be equal to (i) the costs and
expenses of such Indemnitee prior to the date such Indemnifying Party
notifies such Indemnitee of the offer to settle or compromise (to the extent
such costs and expenses are otherwise indemnifiable hereunder) PLUS (ii) the
lesser of (A) the amount of any offer of settlement or compromise which such
Indemnitee declined to accept and (B) the actual out-of-pocket amount such
Indemnitee is obligated to pay subsequent to such date as a result of such
Indemnitee's continuing to pursue such Third Party Claim.
(f) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to
any events or circumstances in
17
respect of which such Indemnitee may have any right or claim relating to such
Third Party Claim against any claimant or plaintiff asserting such Third
Party Claim or against any other Person. Such Indemnitee shall cooperate with
such Indemnifying Party in a reasonable manner, and at the cost and expense
of such Indemnifying Party, in prosecuting any subrogated right or claim.
(g) Except with respect to claims relating to actual fraud, the
indemnification provisions set forth in this section are the sole and
exclusive remedy of the parties hereto for any and all claims for
indemnification under this Agreement.
SECTION 14.04 SURVIVAL. This Article XIV shall survive
termination of this Agreement.
ARTICLE XV
ARBITRATION
(a) As a condition precedent to any right of Action under this
Agreement, any dispute or difference between the parties hereto relating to
the formation, interpretation, or performance of this Agreement, or any
transaction under this Agreement, whether arising before or after
termination, shall be submitted for decision to a panel of three arbitrators
(the "PANEL") at the offices of Judicial Arbitration and Mediation Services,
Inc. in accordance with the Streamlined Arbitration Rules and Procedures of
Judicial Arbitration and Mediation Services, Inc.
(b) The party demanding arbitration shall do so by written notice
complying with the terms of Section 20.06. The arbitration demand shall state
the issues to be resolved and shall name the arbitrator appointed by the
demanding party.
(c) Within 30 days of receipt of the demand for arbitration, the
responding party shall notify the demanding party of any additional issues to
be resolved in the arbitration and the name of the responding party's
appointed arbitrator. If the responding party refuses or neglects to appoint
an arbitrator within 30 days following receipt of the written arbitration
demand, then the demanding party may appoint the second arbitrator, but only
after providing 10 days' written notice of its intention to do so, and only
if such other party has failed to appoint the second arbitrator within such
10 day period.
(d) The two arbitrators shall, before instituting the hearing,
select an impartial arbitrator who shall act as the umpire and preside over
the hearing. If the two arbitrators fail to agree on the selection of a third
arbitrator within 30 days after notification of the appointment of the second
arbitrator, the selection of the umpire shall be made by the American
Arbitration Association. Upon resignation or death of any member of the
Panel, a replacement will be appointed in the same fashion as the resigning
or deceased member was appointed. All arbitrators shall be active or former
officers of property/casualty insurance or reinsurance companies, or Lloyd's
underwriters, and shall be disinterested in the outcome of the arbitration.
18
(e) Within 30 days after notice of appointment of all arbitrators,
the Panel shall meet and determine timely periods for briefs, discovery
procedures and schedules for hearings. The Panel shall have the power to
determine all procedural rules for the holding of the arbitration, including
but not limited to the inspection of documents, examination of witnesses and
any other matter relating to the conduct of the arbitration. The Panel shall
interpret this Agreement as an honorable engagement and not as merely a legal
obligation and shall make its decision considering the custom and practice of
the applicable insurance and reinsurance business. The Panel shall be
relieved of all judicial formalities and may abstain from following the
strict rules of law. The decision of any two arbitrators shall be binding and
final. The arbitrators shall render their decision in writing within 60 days
following the termination of the hearing. Judgment upon the award may be
entered in any court of competent jurisdiction.
(f) Except as otherwise provided herein, all proceedings pursuant
hereto shall be governed by the laws of the State of Minnesota without giving
effect to any choice or conflict of laws provision or rule (whether of the
State of Minnesota or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Minnesota.
(g) The parties agree that any disputes subject to arbitration
pursuant to this Article XV that may also be subject to arbitration
proceedings between respective Affiliates of the parties shall be
consolidated with and subject to arbitration pursuant to this Article XV. The
parties further agree that all issues that are limited to a specific foreign
jurisdiction under an agreement between the respective affiliates of the
parties shall be determined by this Panel pursuant to the consolidation, in
reference to the governing law of the applicable agreement.
(h) Each party shall bear the expense of its own arbitrator and
shall share equally with the other party the expense of the umpire and of the
arbitration.
(i) Arbitration hereunder shall take place in New York, New York
unless the parties agree otherwise.
(j) This Article XV shall survive termination of this Agreement.
ARTICLE XVI
INSOLVENCY
(a) In the event of the insolvency of Retrocedant, this reinsurance
shall be payable directly to Retrocedant, or to its liquidator, receiver,
conservator or statutory successor on the basis of the liability of
Retrocedant without diminution because of the insolvency of Retrocedant or
because the liquidator, receiver, conservator or statutory successor of
Retrocedant has failed to pay all or a portion of any claim.
(b) It is agreed, however, that the liquidator, receiver,
conservator or statutory successor of Retrocedant shall give written notice
to the Retrocessionaire of the pendency of a claim against Retrocedant
indicating the Reinsurance Contract, which claim would
19
involve a possible liability on the part of Retrocessionaire within a
reasonable time after such claim is filed in the conservation or liquidation
proceeding or in the receivership, and that during the pendency of such
claim, Retrocessionaire may investigate such claim and interpose, at its own
expense, in the proceeding where such claim is to be adjudicated any defense
or defenses that it may deem available to Retrocedant or its liquidator,
receiver, conservator or statutory successor. The expense thus incurred by
Retrocessionaire shall be chargeable, subject to the approval of the court,
against Retrocedant as part of the expense of conservation or liquidation to
the extent of a pro rata share of the benefit which may accrue to Retrocedant
solely as a result of the defense undertaken by Retrocessionaire.
(c) As to all reinsurance made, ceded, renewed or otherwise becoming
effective under this Agreement, the reinsurance shall be payable as set forth
above by Retrocessionaire to Retrocedant or to its liquidator, receiver,
conservator or statutory successor, except (1) where the Reinsurance
Contracts specifically provide another payee in the event of the insolvency
of Retrocedant, and (2) where Retrocessionaire, with the consent of the
reinsured or reinsureds under the Reinsurance Contracts, has assumed such
Reinsurance Contract obligations of Retrocedant as direct obligations of
Retrocessionaire to the payees under such Reinsurance Contracts and in
substitution for the obligations of the Retrocedant to such payees.
ARTICLE XVII
OFFSET
Retrocedant and Retrocessionaire shall have the right to offset any
balance or amounts due from one party to the other under the terms of this
Agreement. The party asserting the right of offset may exercise such right at
any time whether the balances due are on account of premiums, losses or
otherwise.
ARTICLE XVIII
ERRORS AND OMISSIONS
Any inadvertent delay, omission, error or failure shall not relieve
either party hereto from any liability which would attach hereunder if such
delay, omission, error or failure had not been made provided such delay,
omission, error or failure is rectified as soon as reasonably practicable
upon discovery.
ARTICLE XIX
CREDIT FOR REINSURANCE; SECURITY
SECTION 19.01 CREDIT FOR REINSURANCE. Retrocessionaire shall take
all actions reasonably necessary, if any, to permit Retrocedant to obtain
full financial statement credit in all applicable U.S. jurisdictions for all
liabilities assumed by the Retrocessionaire pursuant to this Agreement,
including but not limited to loss and loss
20
adjustment expense reserves, unearned premium reserves, reserves for incurred
but not reported losses, allocated loss adjustment expenses and ceding
commissions, and to provide the security required for such purpose, in a form
reasonably acceptable to Retrocedant. Any reserves required by the foregoing
in no event shall be less than the amounts required under the law of the
jurisdiction having regulatory authority with respect to the establishment of
reserves relating to the relevant Reinsurance Contracts. For purposes of this
Article XIX, such "actions reasonably necessary" may include, without
limitation, the furnishing of a letter of credit or the establishment of a
custodial or trust account, as permitted under applicable law, to secure the
payment of the amounts due the Retrocedant under this Agreement.
SECTION 19.02 EXPENSES. All expenses of establishing and maintaining
any letter of credit or other security arrangement shall be paid by
Retrocessionaire.
SECTION 19.03 SECURITY. Retrocessionaire shall establish and
maintain a trust fund for the benefit of Retrocedant as security for the
obligations of Retrocessionaire under this Agreement. The trust fund shall be
in a form reasonably satisfactory to Retrocedant and shall comply in all
material respects with the requirements under Maryland Insurance Law
applicable to trust funds established for credit for reinsurance purposes
except as explicitly set forth therein.
ARTICLE XX
MISCELLANEOUS PROVISIONS
SECTION 20.01 SEVERABILITY. If any term or provision of this
Agreement shall be held void, illegal, or unenforceable, the validity of the
remaining portions or provisions shall not be affected thereby.
SECTION 20.02 SUCCESSORS AND ASSIGNS. This Agreement may not be
assigned by either party without the prior written consent of the other. The
provisions of this Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto and their respective successors
and assigns as permitted herein.
SECTION 20.03 NO THIRD PARTY BENEFICIARIES. Except as otherwise
specifically provided for in Article XIV of this Agreement, nothing in this
Agreement is intended or shall be construed to give any Person, other than
the parties hereto, their successors and permitted assigns, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein, and Retrocessionaire shall not be directly liable
hereunder to any reinsured under any Reinsurance Contract.
SECTION 20.04 EQUITABLE RELIEF. Each party hereto acknowledges that
if it or its employees or agents violate the terms of this Agreement, the
other party will not have an adequate remedy at law. In the event of such a
violation, the other party shall have the right, in addition to any other
rights that may be available to it, to obtain in any court of competent
jurisdiction injunctive relief to restrain any such violation and to compel
specific performance of the provisions of this Agreement. The seeking or
21
obtaining of such injunctive relief shall not foreclose or limit in any way
relief against either party hereto for any monetary damage arising out of
such violation.
SECTION 20.05 EXECUTION IN COUNTERPARTS. This Agreement may be
executed by the parties hereto in any number of counterparts and by each of
the parties hereto in separate counterparts, each of which counterparts, when
so executed and delivered, shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
SECTION 20.06 NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to
have been duly given if delivered by hand (with receipt confirmed), or by
facsimile (with transmission confirmed), or by certified mail, postage
prepaid and return receipt requested, addressed as follows (or to such other
address as a party may designate by written notice to the others) and shall
be deemed given on the date on which such notice is received:
If to Retrocedant:
St. Xxxx Fire and Marine Insurance Company
000 Xxxxxxxxxx Xxxxxx
Xx. Xxxx, XX 00000
Facsimile: [ NO. ]
Attention: [TITLE]
If to Retrocessionaire:
Platinum Underwriters Reinsurance, Inc.
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
SECTION 20.07 WIRE TRANSFER. WIRE TRANSFER. All settlements in
accordance with this Agreement shall be made by wire transfer of immediately
available funds on the due date, or if such day is not a Business Day, on the
next day which is a Business Day, pursuant to the following wire transfer
instructions:
For credit to Platinum Underwriters Reinsurance, Inc.
Citibank
Newcastle, Delaware
Account Number 00000000
Bank ABA Number 000000000.
For credit to St. Xxxx Fire and Marine Insurance Company
[ ]
22
Payment may be made by check payable in immediately available funds in the
event the party entitled to receive payment has failed to provide wire
transfer instructions.
SECTION 20.08 HEADINGS. Headings used herein are not a part of
this Agreement and shall not affect the terms hereof.
SECTION 20.09 FURTHER ASSURANCES. Each of the parties shall from
time to time, on being reasonably requested to do so by the other party to
this Agreement, do such acts and/or execute such documents in a form
reasonably satisfactory to the party concerned as may be necessary to give
full effect to this Agreement and securing to that party the full benefit of
the rights, powers and remedies conferred upon it by this Agreement.
SECTION 20.10 AMENDMENTS; ENTIRE AGREEMENT. This Agreement may be
amended only by written agreement of the parties. This Agreement, together
with the Formation and Separation Agreement, supersedes all prior discussions
and written and oral agreements and constitutes the sole and entire agreement
between the parties with respect to the subject matter hereof.
SECTION 20.11 GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Minnesota, without giving effect to principles of
conflicts of laws thereof.
23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
St. Xxxx Fire and Marine Insurance Company
By
--------------------------------------------
Name:
Title:
Platinum Underwriters Reinsurance, Inc.
By
--------------------------------------------
Name:
Title:
24
EXHIBIT A-1
REINSURANCE CONTRACTS
------------------------------------------------------------------------------------------------------------------------------------
RESERVE RESERVE EFFECTIVE EXPIRATION
CONTRACT UY USER TITLE CLASS CLASS NAME CEDANT NAME DATE DATE
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
00003631900 2001 Marine Non Marine Clash Xs 0340 B-1 Liberty 30-Mar-01 29-Mar-02
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
00003444100 2002 Marine Account Excess 0340 B-1 M.I.C. Xxxxxxxx 01-Jan-02 31-Dec-02
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
M0000531700 2002 EXCESS OF LOSS PROTEC.2000 0340 B-1 Scor (Uk) 01-Jan-02 31-Dec-02
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
00002528700 2002 Finite Non-Marine Excess of Lo 0340 B-1 Aioi Insurance Co 01-Apr-02 31-Mar-03
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
M0000000000 2002 CATASTROPHE XOL 0340 B-1 CNAlInt'l Re, London 01-Jan-02 31-Dec-02
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
00004043200 2002 Property Cat Excess 0340 B-1 CNAlReinsurance Comp 01-Mar-02 28-Feb-03
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
00003008100 2002 Retro Cat Excess 0340 B-1 Xxxxxx 2121 01-Jan-02 31-Dec-02
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
M0000548800 2002 STOP LOSS REINSURANCE 0340 B-1 Irish European Re 01-Jan-02 31-Dec-02
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
00000156300 2002 Non-Marine Funded Excess 0340 B-1 Limit 01-Jan-02 31-Dec-02
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
00001505500 2002 Non-Marine Funded Excess 0340 B-1 Limit 01-Jan-02 31-Dec-02
------------------------------------------------------------------------------------------------------------------------------------
A-1-1
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
00002408100 2002 Non-Marine Catastrophe Excess 0340 B-1 Limit 01-Jan-02 31-Dec-02
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
00003709500 2002 Non-Marine Funded 3rd Event 0340 B-1 Limit 01-Jan-02 31-Dec-02
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
M0000541600 2002 Marine Account Catastrophe 0340 B-1 Upton 01-Jan-02 31-Dec-02
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
00002528900 2002 Catastrophe Excess Program 1.L 0340 B-1 X.xX. Mid Ocean Re 01-May-02 30-Apr-03
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
00002530400 2002 Catastrophe Excess Program 2.L 0340 B-1 X.xX. Mid Ocean Re 01-May-02 30-Apr-03
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
00003095000 2002 Ren Re Cat Layer 2 0340 B-1 Underwriters Re, Bar 01-Jan-02 31-Dec-02
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
00003301700 2002 QS 0340 B-1 Underwriters Re, Bar 01-Jan-02 31-Dec-02
------------------------------------------------------------------------------------------------------------------------------------
Non-
traditional
00002993400 2002 XXXXXXXXX XXXX XXXX 0000 X-0 X.xX. Xxxxxxx Group 01-Jan-02 31-Dec-02
------------------------------------------------------------------------------------------------------------------------------------
Non-
St Xxxx Re traditional
3102 2001 Co, Ltd B-1 TRClRisk Excess Layer 2 01-Apr-02 31-Mar-03
------------------------------------------------------------------------------------------------------------------------------------
Non-
St Xxxx Re traditional
3103 2001 Co, Ltd B-1 TRClRisk Excess Layer 2 01-Apr-02 01-Apr-03
------------------------------------------------------------------------------------------------------------------------------------
X-0-0
XXXXXXX X-0
LOSS RESERVES BY CLASS OF BUSINESS
As of June 30, 2002
Deposit Profit
IBNR Liabilities Commissions
--------- ------------- -------------
New York & Vermont Non-Traditional B1 1,872,000 232,000
A-2
EXHIBIT B
LOSS RESERVES
Loss Reserves shall consist of loss and loss adjustment expense reserves,
including incurred but not reported loss and loss adjustment expense reserves
as of the Effective Time with respect to premium earned on the Reinsurance
Contracts net of retrocessional recoverables under the Inuring Retrocessions.
Loss Reserves shall not include any loss and loss adjustment expense reserves
or ceding commission reserves relating to Excluded Losses. Aggregate Loss
Reserves as of June 30, 2002 are set forth on A-2.
METHODOLOGY FOR CALCULATION OF FINAL SECTION A PREMIUM
It is understood that the Loss Reserve analysis will be performed by
Retrocessionaire's employees under the direction of Retrocedant and reviewed
by Retrocedant's employees.
Excluding catastrophes, the IBNR component of Loss Reserves will be
booked, by Class of Business, to the planned IBNR. Planned IBNR is determined
using the Xxxxxxxxxxx-Xxxxxxxx methodology, using the planned loss ratio
(adjusted for the difference between actual and planned commission and
brokerage) as the initial expected loss ratio and the development pattern
used for the class in the September 30, 2002 analysis. In the case of a Class
of Business where the expected reported losses are less than 75% of the
expected ultimate losses, as per the loss development patterns in use as of
September 30, 2002, the IBNR will not be less than that amount needed to
produce an ultimate loss ratio equal to the ultimate plan loss ratio
(adjusted for the difference between actual and planned commission and
brokerage).
In addition to the above, known large events and catastrophe
variances from plan as of the Effective Date will be added to the ultimate
losses. Subsequent adjustments to the reserves for known large events and
catastrophe variances from plan in the 90 days following the Effective Date
could be upward or downward.
CALCULATION METHODOLOGY FOR EARNED BUT NOT YET BILLED PREMIUM
Earned But Not Yet Billed Premium shall equal estimated premiums receivable
with respect to the Reinsurance Contracts net of estimated ceding commissions
and Inuring Retrocession premiums. Earned But Not Yet Billed Premium as of
June 30, 2002 is equal to $[ ]
B-1-1
EXHIBIT C
INURING RETROCESSIONS
C-1
FER 17/10/02
Platinum Re _Inuring Reinsurance 17_10_02.xls
PLATINUM RE UK / US / BERMUDA - SCHEDULE OF INURING REINSURANCE : PROPORTIONAL
AS AT 17/10/02
Reference Inception Expiration
No. Name of Contract Date Date Cover Limit
------------------------------------------------------------------------------------------------------------------------
1) Worldwide Property 1/1/02 12/31/02 International Property Risk USD 40,000,000 Aggregate
Excluding Japan Excess of Loss & Catastrophe Cession Limit
Excess of Loss Business
(protects Europe)
2) UK/Eire Cat. XL Q.S. / 1/1/02 12/31/02 U.K. / Eire Cat. Excess GBP 100,000,000 Aggregate
1st & / 2nd Surplus of Loss Treaty Business Cession Limit
(protects Europe)
3) UK/Europe Cat. XL Quota 1/1/02 12/31/02 International Property GBP 75,000,000 Aggregate
Share Treaty Catastrophe Excess of Loss Cession Limit
Business (protects Europe)
4) Japan Cat. XL Surplus 1/1/02 12/31/02 Japan / Japanese Islands USD 30,000,000 Aggregate
Treaty Property Cat. Excess of Loss Cession Limit : quake USD
Business (protects New York 20,000,000 Aggregate
& Europe) Cession Limit : windstorm
Projected Prem. Participants % Placed
----------------------------------------------------
USD 9m - USD 12m [100% Nisshin - 50% 55%
treaty estimate] Nichido - 5%
GBP 5m [100% treaty Nisshin - 14% 29%
estimate] PX Re - 10%
TOA Re - 5%
GBP 3m - GBP 3.5m Montpelier Re - 100%
100%
USD 1.2m PX Re - 100% 100%
C-2
5) Casualty Clash Quota 1/1/96 12/31/02 Casualty Clash, Casualty 20% Quota Share of
Share Contingency, Casualty Cat. USD 7,500,000 any
and Workers Comp. Cat. (NY) one occurrence etc.
6) Nisshin NM Open Cover 7/1/01 6/30/02 Business in the Pacific Rim SGD 2,000,000
Region from our NY,
Xxxxxxxxx & XX xxxxxxx
0) Xxxxx Xxxxxxx Property 4/1/02 12/1/02 North America Property 50% Quota Share
Cat. Quota Share Catastrophe business written
by NY & Chicago
$4,200,000 Auto-Owners 100%
Ins. Co.
$500,000 Nisshin F & M 100%
estimated $12,500,000 Montpelier Re 100%
C-3
FER 17/10/02
Platinum Re _Inuring Reinsurance 17_10_02.xls
PLATINUM RE UK / US / BERMUDA - SCHEDULE OF INURING REINSURANCE : NON-PROPORTIONAL
AS AT 17/10/02
Reference Inception Expiration Reinstatement
No. Name of Contract Date Date Cover Limit Retention
------------------------------------------------------------------------------------------------------------------
1a) Marine XL (a) 5/1/01 4/30/02 Protects Europe $1,500,000 $1,000,000 1 @ 100%
XL account (pound)750,000 (pound)500,000
1b) Marine XL (b) 1/1/02 12/31/02 Protects Europe $5,000,000 $5,000,000 2 @ 100%
XL account (pound)2,500,000(pound)2,500,000
1c) Marine XL (c) 1/1/02 12/31/02 Protects Europe $5,000,000 $10,000,000 2 @ 100%
XL account (pound)2,500,000(pound)5,000,000
2a) International 7/11/01 7/10/02 Protects Europe $7,500,000 $7,500,000 1 @ 100%
Property Cat. XL Risk/Prorata/Cat.(pound)5,000,000(pound)5,000,000
XL business
Projected
Premium ROL % Placed Participants
-------------------------------------------------------------------
$360,000 26.67% 100% PX Re - 44.20%
(pound)20,000 Lloyd's Synd. 2121 (HYL) - 10%
Cornhill Ins. - 33.33%
XL Re - 12.47%
$1,125,000 25.00% 100% Lloyd's Synd. 1861 (BRM) - 20%
(pound)62,500 QBE Intnl. London - 30%
Cornhill - 25%
Odyssey London Branch - 25%
$675,000 15.00% 100% QBE Intnl. London - 50%
(pound)37,500 Cornhill - 25%
Odyssey London Branch - 25%
$843,750 22.50% 100% PX Re - 40%
(pound)562,500 GE Frankona Re (Germany) - 20%
Xxxxxxx Global (UK) - 1.91%
Safety National Casualty Corp. -
7.61%
Lloyd's Synd. 566 (STN) - 15.24%
Lloyd's Synd. 780 (BFC) - 3.81%
Lloyd's Synd. 2121 (HYL) - 3.81%
Lloyd's Synd. 2027 (COX) - 3.81%
Lloyd's Synd. 2010 (MMX) - 3.81%
C-4
2b) International 7/11/01 7/10/02 Protects Europe $7,500,000 $15,000,000 1 @ 100%
Property Cat. XL Risk/Prorata/Cat.(pound)5,000,000(pound)10,000,000
XL business
2c) International 7/11/01 7/10/02 Protects Europe $7,500,000 $22,500,000 1 @ 100%
Property Cat. XL Risk/Prorata/Cat.(pound)5,000,000(pound)15,000,000
XL business
3a) Joint Risk XOL 2/13/02 2/12/03 1st layer XS 5M $2,500,000 $2,500,000 1 @ 100%
Cover - First aggregate
Layer
3b) Joint Risk XOL 2/13/02 2/12/03 Property Risk & $5,000,000 $5,000,000 1 @ 100%
Cover - Second Prorata
Layer business
(all offices)
$1,162,500 31.00% 100% PX Re - 15.66%
(pound)775,000 [18.91% w.e.f. 1/11/02]
GE Frankona Re (Germany) - 25%
XL Re (UK) - 15%
Xxxxxxx Global (UK) - 1.54%
Taisei F&M - 3.25% (replaced
@1/11/02)
Protective Ins. Co. - 3.25%
Safety National Corp. - 6.5%
Lloyd's Synd. 000 (XXX) - 19.23%
Lloyd's Synd. 566 (STN) - 7.69%
Lloyd's Synd. 958 (GSC) - 1.92%
Lloyd's Synd. 529 (SHE) - 0.96%
$900,000 24.00% 100% PX Re - 12% [14.93% w.e.f. 1/11/02]
(pound)600,000 GE Frankona Re (Germany) - 20%
XL Re (UK) - 15%
Xxxxxxx Global (UK) - 1.17%
Taisei F&M - 2.93% (replaced @
1/11/02)
Royal Bank of Canada Ins. Co. -
5.87%
Protective Ins. Co. - 2.93%
Safety National Corp. - 5.86%
Lloyd's Synd. 000 (XXX) - 17.5%
Lloyd's Synd. 566 (STN) - 6.75%
Lloyd's Synd. 2027 (COX) - 4.42%
Lloyd's Synd. 958 (GSC) - 1.76%
Lloyd's Synd. 529 (SHE) - 0.88%
Lloyd's Synd. 727 (XXX) - 2.93%
$875,000 35.00% 100% Lloyd's Synd. 566 (STN) - 25%
Lloyd's Synd. 780 (BFC) - 15%
Xxxxxxx Global (UK) - 2.373%
XL Re - 8.898%
Transatlantic Re - 15%
Lloyd's Synd. 000 (XXX) - 5.933%
Lloyd's Synd. 2010 (MMX) - 4.449%
Lloyd's Synd. 282 (LSM) - 4.449%
GE Frankona - 8.898%
PX Re - 10%
$2,000,000 40.00% 100% Lloyd's Synd. 566 (STN) - 10%
Lloyd's Synd. 780 (BFC) - 15%
Xxxxxxx Global (UK) - 4%
XL Re - 15%
Transatlantic Re - 20%
Lloyd's Synd. 2010 (MMX) - 3.50%
Lloyd's Synd. 282 (LSM) - 7.50%
GE Frankona - 15%
PX Re - 10%
C-5
4a) International 3/9/02 2/8/03 International $20,000,000 $50,000,000 1 @ 100%
Cat. XOL - First Risk/Prorata/Cat.
Layer XL (all offices)
4b) International 3/9/02 2/8/03 International $30,000,000 $70,000,000 1 @ 100%
Cat. XOL - Second Risk/Prorata/Cat.
Layer XL (all offices)
5) Satellite XL 6/12/02 6/11/03 Protects all $10,000,000 $10,000 0
[Geosynchronous / offices. 3
Geostationary satellite
In-Orbit warranty.
Reinsurance] Covers
naturally
occurring
phenomena in
space.
6) Latin America & 7/1/00 6/3/06 All loss $25,000,000 $15,000,000 margin -
Caribbean ILW XOL recoveries on Term Aggregate $400,000
Latin America Limit - USD 75M
and Caribbean
business
subject to USD
1 Billion ILW
7) Caribbean ILW XOL 11/1/01 10/31/02 Caribbean $15,000,000 $100,000 Nil
Property
business
subject to an
Industry Loss
of USD1.5
Billion
$4,800,000 24.00% 100% Lloyd's Synd. 566 (STN) - 12.5%
Lloyd's Synd. 780 (BFC) - 10%
Lloyd's Synd. 282 (LSM) - 8%
PX Re - 8%
Renaissance Re - 25%
Di Vinci Re - 12.5%
Transatlantic Re - 10%
GE Frankona Re - 10%
Royal Bank of Canada - 4%
$4,500,000 15.00% 100% Lloyd's Synd. 566 (STN) - 5%
Lloyd's Synd. 780 (BFC) - 12.5%
Lloyd's Synd. 000 (XXX) - 4.004%
Lloyd's Synd. 2010 (MMX) - 1.202%
Lloyd's Synd. 282 (LSM) - 10.01%
Lloyd's Synd. 1096 (RAS) - 1.602%
Xxxxxxx Global (UK) - 0.801%
PX Re - 8.007%
Folksamerica - 16.014%
Renaissance Re - 8.007%
Di Vinci Re - 4.004%
Transatlantic Re - 7.5%
Auto-Owners - 16.015%
Royal Bank of Canada - 2.667%
Protective - 2.667%
$575,000 5.75% 100% Renaissance Re - 100%
N/A 56.50% Fuji F & M - 5%
Nisshin F & M - 13.5%
Sumitomo - 10%
Taisei F & M - 8%
Toa Re - 20%
$3,450,000 23.00% 100% Continental Casualty - 100%
C-6
8) N.A. $10 Billion 7/1/01 6/30/02 North American $2,500,000 $10,000 1 @ 100%
ILW Property
business
subject to
Industry Loss
of USD 10B
9) N.A. $10 Billion 8/1/01 7/31/02 North American $2,500,000 $1,000,000 1 @ 100%
ILW Property
business
subject to
Industry Loss
of USD 10B
10) N.A. Property / 1/1/02 12/31/02 North American $10,000,000 $100,000 1 @ 100%
WCA Cat $ 30B ILW Property and
Workers
Compensation
business
subject to ILW
of USD 30
Billion
11) N.A. Property Cat 1/5/02 1/5/03 North American $5,000,000 $50,000 1 @ 100%
$15B ILW Property
business
subject to ILW
of USD 15
Billion
12a) Marine XOL - 1st 1/1/02 12/31/02 Marine business $5,000,000 $5,000,000 1 @ 100%
layer [NY] for New York
Office
12b) Marine XOL - 2nd 1/1/02 12/31/02 Marine business $5,000,000 $10,000,000 1 @ 100%
layer [NY] for New York
Office
13) Single Period 1/1/02 12/31/02 Covers $200,000,000 79.4% Traditional
Accident Year aggregate net bus. 93.5%
Aggregate XOL losses incurred Non-traditional
(Holborn) on an ultimate business
accident year
basis IRO all
business
written by All
offices
including
Discovery Re.
$500,000 20.00% 100% Transatlantic Re - 100%
$475,000 19.00% 100% IPC Re Limited - 100%
$420,000 4.20% 100% Tokio Millenium Re - 100%
$950,000 19.00% 100% Odyssey Re - 100%
$1,125,052 22.50% 100% Lloyd's Synd. 457 (WTK) - 7.5%
Cornhill - 21.5%
Folksamerica Re - 30%
Lloyd's Synd. 2 (WHS) - 20%
Nisshin F & M - 1%
XL Mid Ocean Re - 20%
$624,982 12.50% 100% Lloyd's Synd. 457 (WTK) - 7.5%
Cornhill - 21.5%
Folksamerica Re - 30%
Lloyd's Synd. 2 (WHS) - 20%
Nisshin F & M - 1%
XL Mid Ocean Re - 20%
$4,750,000 100% Underwriters Reinsurance - 53.75%
London Life & General - 25%
PMA Reins. - 10%
Hannover Re - 9%
E & S Reins. - 2.25%
C-7
14) Workers' 1/1/02 12/31/02 Covers Workers' $50,000,000 $75,000,000
Compensation Cat. 1/1/03 12/31/05 Compensation $50,000,000 $75,000,000 Annual Agg. Of 50M
XOL (Holborn) treaty business
15) Puerto Rico ILW 7/26/02 7/25/03 Property $10,000,000 $10,000 Nil
XOL business
subject to an
Industry Loss
of USD1.5
Billion
$10,000,000 100% Swiss Re - 81.25%
Hannover - 15%
E & S Reins. - 3.75%
$1,250,000 12.50% 100% ACE Tempest Re - 50%
Renaissance Re - 50%
C-8
EXHIBIT D
ALLOCATION OF RECOVERIES
1. Recoveries allocable to this contract available under an Inuring
Retrocession shall be allocated between the parties in proportion to the
losses otherwise recoverable.
2. Any and all loss recoveries and premium adjustments allocable to this
contract resulting from triggering the 2002 Holborn cover will be allocated
between The St. Xxxx Companies and Retrocessionaire and its affiliates
("Platinum Re") based on variance from plan and in accordance with the
existing methodology shown below.
Variance from plan at an underwriting year level will be the basis for the
allocation. The 2000, 2001 and 2002 underwriting year plan loss ratios
associated with the 2002 calendar year plan loss ratio will be compared to
indicated ultimate loss ratios for the same underwriting years. These
indicated ultimate loss ratios are the same ones used to determine if the
Holborn cover has been triggered. The 2002 underwriting year must be
segmented into three pieces. Namely, that business written on Fire and Marine
paper and subject to transfer, that written on Fire and Marine paper and not
subject to transfer and that written on Platinum Re paper. The distinction is
warranted as the cession to Platinum Re will be net of the Holborn cover. The
variance in loss ratio by underwriting year will be multiplied by the
respective underwriting year's EP component in the 2002 calendar year. This
is the same EP by underwriting year that was used to calculate the total 2002
Holborn Year's EP. This dollar variance will be the basis for determining the
distribution to be applied to the total loss recovery and AP. It is in this
manner that the total loss recovery and AP attributable to the 2002 Holborn
Year will be allocated to underwriting year. To the extent that the
recoveries and AP's have been allocated to the 2000 and 2001 underwriting
years they will be afforded to The St. Xxxx Companies. Similarly, the
allocation to that part of the 2002 underwriting year pertaining to
non-transferred business will also be realized by The St. Xxxx Companies. The
allocation pertaining to business written on The St. Xxxx xxxxx and
transferred will be used in determining the net transferred business that
will be ceded to Platinum Re. The remaining allocation associated with 2002
underwriting year business written on Platinum Re paper will inure to the
benefit of Platinum Re directly. The margin for the 2002 Holborn cover will
be distributed based on earned premium and allocated between The St. Xxxx
Companies and Platinum Re by underwriting year.
D-1
EXHIBIT E
ALLOCATION OF RETROCESSIONAL PREMIUMS
1. Ceded premium allocable to this contract will be allocated between the
parties and to the underwriting year in proportion to the earned subject
premium. Ceding commission will be allocated in the same manner.
2. Reinstatement premium allocable to this contract due in respect of
non-proportional Inuring Retrocessions will be allocated between the parties
in proportion to the related allocated recoverable losses.
3. Any and all loss recoveries and premium adjustments allocable to this
contract resulting from triggering the 2002 Holborn cover will be allocated
between The St. Xxxx Companies and Platinum Re based on variance from plan
and in accordance with the existing methodology shown below.
Variance from plan at an underwriting year level will be the basis for the
allocation. The 2000, 2001 and 2002 underwriting year plan loss ratios
associated with the 2002 calendar year plan loss ratio will be compared to
indicated ultimate loss ratios for the same underwriting years. These
indicated ultimate loss ratios are the same ones used to determine if the
Holborn cover has been triggered. The 2002 underwriting year must be
segmented into three pieces. Namely, that business written on Fire and Marine
paper and subject to transfer, that written on Fire and Marine paper and not
subject to transfer and that written on Platinum Re paper. The distinction is
warranted as the cession to Platinum Re will be net of the Holborn cover. The
variance in loss ratio by underwriting year will be multiplied by the
respective underwriting year's EP component in the 2002 calendar year. This
is the same EP by underwriting year that was used to calculate the total 2002
Holborn Year's EP. This dollar variance will be the basis for determining the
distribution to be applied to the total loss recovery and AP. It is in this
manner that the total loss recovery and AP attributable to the 2002 Holborn
Year will be allocated to underwriting year. To the extent that the
recoveries and AP's have been allocated to the 2000 and 2001 underwriting
years they will be afforded to The St. Xxxx Companies. Similarly, the
allocation to that part of the 2002 underwriting year pertaining to
non-transferred business will also be realized by The St. Xxxx Companies. The
allocation pertaining to business written on The St. Xxxx xxxxx and
transferred will be used in determining the net transferred business that
will be ceded to Platinum Re. The remaining allocation associated with 2002
underwriting year business written on Platinum Re paper will inure to the
benefit of Platinum Re directly. The margin for the 2002 Holborn cover will
be distributed based on earned premium and allocated between The St. Xxxx
Companies and Platinum Re by underwriting year.
4. The $10 million of premium payable for 2002 under the Workers Compensation
Catastrophe Excess of Loss $50 million excess of $75 million Retrocession
Contract will be split $1 million for Platinum Re and $9 million for The St.
Xxxx Companies. Such contract has a feature that states that for certain
unfavorable experience on the Whole Account Stop Loss Cover the premium on this
cover could reduce by as much as $9
E-1
million. In this event the reduction in ceded premium would benefit The St.
Xxxx Companies exclusively. The Platinum Re share would remain at $1 million.
The contract has a feature that allows the Retrocessionaire to renew
the cover if it is in a loss position. In this event the subsequent years'
premium will be split in proportion to the losses incurred to the cover.
E-2
EXHIBIT F
ALLOCATION OF LIMITS
Available limits under an Inuring Retrocession shall be allocated
between the parties in proportion to the losses otherwise recoverable.
F-1
EXHIBIT G
FORM OF RETROCEDANT'S REPORT
Retrocedant will provide the following information separately for each
coverage period on a monthly basis:
a) Transaction listing at assumed policy level showing all revenue items
including booked premiums, booked acquisition costs and paid losses entered
in Retrocedant's books during the relevant accounting period.
b) Claims listing at assumed policy level showing loss description, date of
loss, paid amount and outstanding case reserve.
c) Listing of Inuring Retrocession amounts allocated to Retrocessionaire
during the relevant accounting period including details of non-proportional
Inuring Retrocession premiums and recoverables.
Note 1 relating to (a) and (b): Revenue and reserve amounts will be shown in
the accounting currency used by Retrocedant for the purposes of its own books.
Note 2 relating to (a) and (b): Transaction and claims listings will include
gross amounts and proportional Inuring Retrocession amounts.
Note 3 relating to (c): Retrocession amounts will be paid to Retrocessionaire
only following receipt by Retrocedant. These amounts together with any unpaid
amounts that are due to Retrocessionaire but not yet received by Retrocedant
will be included in the listing of Inuring Retrocession amounts.
G-1
EXHIBIT H
ALLOCATION OF ADMINISTRATIVE EXPENSES
Retrocessionaire shall pay to Retrocedant the "actual cost" to Retrocedant
(which shall consist of Retrocedant's direct and reasonable indirect costs),
as certified in good faith by Retrocedant. For greater certainty, the parties
agree that "actual cost" will include any incremental and out-of-pocket costs
incurred by Retrocedant in connection with the administrative services
provided hereunder, including the conversion, acquisition and disposition
cost of software and equipment acquired for the purposes of providing the
services and the cost of establishing requisite systems and data feeds and
hiring necessary personnel.
No later than 30 days following the last day of each calendar quarter,
Retrocedant shall provide Retrocessionaire with a report setting forth an
itemized list of the services provided to Retrocessionaire during such last
calendar quarter, in a form agreed to by the parties. Retrocessionaire shall
promptly (and in no event later than 30 days after receipt of such report,
unless Retrocessionaire is contesting the amount set forth in the report in
good faith) pay to Retrocedant by wire transfer of immediately available
funds all amounts payable as set forth in such report. Each party will pay
all taxes for which it is the primary obligor as a result of the provision of
any service under this Agreement; provided, that Retrocessionaire shall be
solely responsible for, and shall reimburse Retrocedant in respect of, any
sales, gross receipts or transfer tax payable with respect to the provision
of any service under this Agreement, and any such reimbursement obligation
shall be in addition to Retrocessionaire's obligation to pay for such service.
H-1
