Exhibit 10(c)
REINSURANCE POOLING AGREEMENT
This REINSURANCE POOLING AGREEMENT (the "Pooling Agreement" or "Agreement"),
effective as of 12:00 a.m. Eastern Time on January 1, 2003 (the "Effective
Date"), is by and between Merchants Insurance Company of New Hampshire, Inc.
("MNH"), a New Hampshire domiciled insurance company having its principal place
of business at 000 Xxxx Xxxxxx, Xxxxxxx, Xxx Xxxx 00000 and Merchants Mutual
Insurance Company ("MMIC"), a New York domiciled insurance company having its
principal place of business at 000 Xxxx Xxxxxx, Xxxxxxx, Xxx Xxxx 00000 (herein
collectively referred to as the "Pooled Companies" and individually as a "Pooled
Company").
RECITALS
WHEREAS, the Pooled Companies have determined that their business operations as
respects the Traditional Insurance Business (as defined below) should be managed
and administered by MMIC on behalf of each of the Pooled Companies; and
WHEREAS, MMIC provides underwriting, claims, administrative and investment
services for MNH with respect to MNH's Traditional Insurance Business in
accordance with the Administrative, Underwriting, Claims and Investment and Cash
Management Services Annexes which are part of the Services Agreement between
MMIC, on the one hand, and MNH and its parent company, Merchants Group, Inc.
("MGI"), on the other hand, dated the date of this Pooling Agreement (the
various Annexes and the Services Agreement being collectively referred to herein
as the "Services Agreement") attached hereto as Exhibit A and incorporated
herein by reference; and
WHEREAS, the Pooled Companies have determined that the combined underwriting
results of the Traditional Insurance Business should be shared between them by
means of mutual reinsurance on percentage bases as herein provided (the "Pool"
or "Pooled Traditional Insurance Business") so that each Pooled Company will
have the same loss and allocated and unallocated loss adjustment expense ("LAE")
ratio on its share of the Pooled Traditional Insurance Business; for purposes of
this Agreement, LAE shall include allocated and unallocated loss adjustment
expense; and
WHEREAS, the Pooled Companies have agreed to various profit-sharing and
retrospective commission adjustment percentages based upon the loss and LAE
ratio that is achieved by MMIC's management and administration of the Pooled
Traditional Insurance Business; and
WHEREAS, the parties desire to enter into this Pooling Agreement to provide for
the mutual reinsurance of the Traditional Insurance Business and in order to
better align the economic interests of the Pooled Companies as to the
Traditional Insurance Business.
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NOW, THEREFORE, in consideration of the terms, conditions and other agreements
set forth herein, the parties hereto hereby agree as follows:
I. Definitions:
As used in this Agreement:
A. "Applicable Ceding Commission" shall mean the Ceding Commission,
as defined below, determined based upon underwriting expenses for
each year of this Pooling Agreement.
B. "Ceding Commission" shall mean the sum of the following amounts
relating to Traditional Insurance Business expressed as a
percentage of net written premiums:
i. Actual commissions including commissions paid to agents
or brokers and commissions on third party reinsurance
assumed or ceded, plus
ii. Actual premium taxes, plus
iii. Actual fees and assessments for boards, bureaus,
associations and industry and residual market facilities
related to policy or accident years as applicable, after
the Effective Date of this Pooling Agreement, plus
iv. Agreed underwriting expenses as set forth in Schedule 1
attached hereto and incorporated herein.
Item iv. shall be agreed for the initial cessions at the Effective
Date of this Pooling Agreement and for each year thereafter.
C. "Claims Related Extra Contractual Obligation" shall mean, except
to the extent contrary to New York law, the amount for which a
Pooled Company is liable as a result of a judgment or settlement
or arbitration, or otherwise, to its insured or a third-party
claimant, where such liability has arisen because of:
i. the failure of the Pooled Company to agree to pay a
claim within the policy limits or to provide a defense
against such claims as required by law, or
ii. bad faith or negligence in investigating or handling a
claim or in rejecting an offer of settlement, or
iii. negligence or breach of duty in the preparation of the
defense or the conduct of a trial or the preparation or
prosecution of any appeal and/or subrogation and/or any
subsequent action resulting therefrom.
Any loss arising under this Pooling Agreement in respect of
"Claims Related Extra Contractual Obligations" shall be deemed to
have been incurred on the same date as the event giving rise to
the claim to which the Claims Related Extra Contractual
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Obligation is related, provided that the policy which gives rise
to the Claims Related Extra Contractual Obligation falls within
the scope of this Pooling Agreement.
D. "Initial Ceding Commission" shall mean the Ceding Commission
determined based upon underwriting expenses incurred relative to
the net unearned premiums as of the Effective Date.
E. "Maximum MNH annual written premium assumption" shall be that
amount for each applicable year as set forth in Schedule 2
attached hereto and incorporated herein.
F. "Net Retained Liability" shall mean that portion of the gross
liability for losses and LAE, including losses in excess of policy
limits and "Claims Related Extra Contractual Obligations" less
salvage and subrogation, on the Traditional Insurance Business
which shall remain after deducting the amount, if any, of
liability ceded pursuant to third party reinsurance inuring to the
benefit of the Pool.
G. "Net unearned premium reserves" shall mean as to either Pooled
Company, a reserve equal to the direct unearned premiums on all
Traditional Insurance Business in force as of the Effective Date
or at any time during the term of this Pooling Agreement plus
unearned premiums on related reinsurance assumed minus unearned
premiums on related reinsurance ceded.
H. "Net written premiums" shall mean all direct written premiums plus
reinsurance assumed minus reinsurance ceded.
I. "Pooling Percentage" shall be those percentages as set forth in
Schedule 2 attached hereto and incorporated herein.
J. "Traditional Insurance Business" shall mean those commercial and
personal lines of property, liability and workers' compensation
insurance in any jurisdiction in which either of MNH or MMIC is or
was licensed to do an insurance business, which insurance was
produced through the Pooled Companies' independent insurance
agents pursuant to the Management Agreement dated as of September
29, 1986 among MMIC, MNH and MGI (the "Previous Management
Agreement"), including residual market assumptions and
assessments, industry underwriting facilities charges, and all
similar assessments and charges attributable to such business, and
such other business as the Pooled Companies may mutually agree.
II. MNH Cessions:
As of and from the Effective Date, MNH cedes and MMIC assumes a 100%
quota share participation in the Net Retained Liability of MNH in
respect of losses incurred and all other rights and obligations under
MNH's Traditional Insurance Business:
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A. in force as of the Effective Date; and
B. issued or assumed after the Effective Date until the termination
of this Agreement.
III. Assets Transfer and Premiums Paid by MNH:
In exchange for the assumption by MMIC of MNH's Net Retained Liability
under Traditional Insurance Business issued by MNH, MNH hereby agrees
to pay to MMIC:
A. as of the Effective Date, in premiums receivable, as agreed among
the Pooled Companies, plus cash or other assets, an amount equal
to the net unearned premium reserve of MNH as of the Effective
Date assumed by MMIC under Section II hereof, less the Initial
Ceding Commission associated with the net unearned premium
reserves which are transferred as provided herein; and
B. for each year thereafter, in premiums receivable and cash or other
assets, an amount equal to the MNH net written premiums on the
Traditional Insurance Business, less the Applicable Ceding
Commission for each such year.
IV. MMIC Cessions:
As of and from the Effective Date, MMIC cedes and MNH assumes the MNH
Pooling Percentage of the Net Retained Liability of the Pooled
Companies in respect of losses incurred and all other rights and
obligations under Traditional Insurance Business issued by MMIC or
assumed by MMIC from MNH as provided in Section II, as follows:
A. the initial Pooling Percentage for MNH as set forth in Schedule 2
of the Traditional Insurance Business in force as of the Effective
Date; and
B. the Pooling Percentage for MNH as set forth in Schedule 2 (but not
more than the annual percentage that the Maximum MNH annual net
written premium assumption as set forth in Schedule 2 bears to the
total net written premiums of the Traditional Insurance Business
of the Pooled Companies) of the Traditional Insurance Business
issued or assumed after the Effective Date until the termination
of this Agreement. However, the parties may mutually agree that
MNH may assume a greater percentage or dollar amount of net
premiums written.
V. Assets Transfer and Premiums Paid by MMIC:
In exchange for the assumption by MNH of MNH's Pooling Percentage of
MMIC's obligations under Traditional Insurance Business issued or
reinsured by MMIC, including the Traditional Insurance Business written
by MNH and ceded to MMIC under Section II of this Pooling Agreement,
MMIC hereby agrees to pay to MNH:
A. as of the Effective Date, in premiums receivable, as agreed among
the Pooled Companies, plus cash or other assets, an amount equal
to the Initial Pooling
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Percentage for MNH of the net unearned premium reserve of MMIC
including the net unearned premium reserve assumed by MMIC from
MNH as provided in Section II hereof, less the Initial Ceding
Commission associated with the net unearned premium reserves which
are transferred as provided herein; and
B. for each year thereafter, in premiums receivable and cash or other
assets, an amount equal to the Pooling Percentage for MNH of net
written premiums of the Pooled Companies on the Traditional
Insurance Business, less the Applicable Ceding Commission for each
such year.
C. MMIC will reduce its payments to MNH under this section V. by an
amount equal to the Pooling Percentage for MNH times any premiums
on Traditional Insurance Business deemed uncollectible by MMIC.
VI. Unallocated Loss Adjustment Expenses:
In addition to its other obligations under this Agreement, MNH shall
also be liable to pay its Pooling Percentage of the MMIC unallocated
loss adjustment expenses, as defined in the Claims Services Annex of
the Services Agreement, allocated to the Traditional Insurance Business
subject to this Agreement.
VII. Third Party Reinsurance:
The Pooled Companies annually will agree on the structure of the third
party reinsurance for the next year in accordance with the provisions
of the Underwriting Services Annex to the Services Agreement. Each
Pooled Company will pay reinsurance premiums based upon its direct
premiums applied to the reinsurance rates in effect for the year. Each
Pooled Company will make recoveries from such third party reinsurance
for losses involving only its direct policies or its pro-rata share of
recoveries from loss occurrences involving policies from more than one
Pooled Company. Any of the Pooled Companies may, at its option and its
expense, further reinsure any portion of its retention; provided that
such reinsurance does not affect the cost, availability or security of
the Pool's reinsurance with third parties.
VIII. Adjustments to the Pooling Percentages:
Adjustments to the Pooling Percentages shall occur at the times set
forth in Schedule 2 or as may, from time to time, otherwise be agreed
upon between the Pooled Companies. At the time adjustments are made,
the Pooled Company whose Pooling Percentage is being decreased will
transfer to the Pooled Company whose Pooling Percentage is being
increased: (i) the appropriate proportionate amount of the adjustment
in the net unearned premium reserve, less the Applicable Ceding
Commission and (ii) the associated assets determined in accordance with
Section V of this Agreement. The parties will thereafter adjust the
allocation of net written premiums according to the new percentages as
provided in Section IV and will adjust the asset transfers as provided
in Section V.
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IX. MMIC Administration, Premium Collections and Loss Payments of
MNH Business:
As of and from the Effective Date, MMIC shall administer MNH's
Traditional Insurance Business reinsured under this Pooling Agreement
in accordance with the terms of the Services Agreement as amended from
time to time.
X. Policy and Installment Fees:
MMIC shall collect on behalf of the Pooled Companies all policy and
installment fees related to the Traditional Insurance Business and
shall pay to MNH its Pooling Percentage of the policy and installment
fees processed and collected by the Pool after the Effective Date
relating to policies in force as of, and/or to policy coverage provided
prior to, the Effective Date, plus the MNH Pooling Percentage of the
policy and installment fees for all policies becoming effective on and
after the Effective Date of this Agreement.
XI. Cash Settlements:
Commencing with the Effective Date, and as relates to the Traditional
Insurance Business subject to this Pooling Agreement:
A. MMIC hereby agrees to pay to MNH the MNH Pooling Percentage of the
net written premiums collected by the parties hereto, less the
Applicable Ceding Commission.
B. MNH hereby agrees to pay to MMIC the MNH Pooling Percentage of all
net losses, after deducting salvage and subrogation, allocated
LAE, unallocated LAE as set forth in Section VI, and policyholder
dividends paid by the parties hereto.
Accounts reflecting the net balance from A and B in this Section XI
shall be rendered monthly and shall be settled within thirty (30) days
after the end of the month.
XII. Offset:
It is understood and agreed that, insofar as is practicable and
consistent with the purposes and intentions of this Pooling Agreement,
the obligations of each of the Pooled Companies under this Agreement to
transfer assets to the other Pooled Company may, in whole or in part,
be offset against the obligations of each Pooled Company to the other
Pooled Company under this Agreement so that each Pooled Company shall
deliver hereunder only the net amount of assets required under such
offset due under this Agreement.
XIII. Accounting and Reporting:
MMIC, as the Pool manager and pursuant to the terms of the Services
Agreement, will maintain all of the accounting records and provide to
the Pooled Companies monthly,
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quarterly and annual accounting reports of each Pooled Company's
respective share of the business transacted during the period and the
balances of the related assets and liabilities as of each reporting
date.
XIV. Profit Sharing - Retrospective Commission Adjustment:
A. MNH shall pay profit sharing to MMIC equal to the amount that the
actual cumulative net loss and LAE ratio on the Pooled Traditional
Insurance Business from the Effective Date is less than 74.0%
times MNH's cumulative earned premium assumed under this Pooling
Agreement, multiplied by the Profit Sharing percentages in the
table below. The profit sharing is based on the following
percentages for the following bands:
Cumulative Net Loss Profit Sharing
and LAE Ratios for L/R Band
------------------------- ---------------
From To
------ -----
Band 1 >72.5% 74.0% 10%
Band 2 >70.5% 72.5% 25%
Band 3 68.5% 70.5% 33%
Less than 68.5% 50%
B. MMIC will pay to, or return ceding commissions paid by, MNH equal
to the amount that the actual cumulative net loss and LAE ratio on
the Pooled Traditional Insurance Business from the Effective Date
is greater than 74.0% times MNH's cumulative earned premium
assumed under this Pooling Agreement, multiplied by the
Retrospective Commission percentages in the table below. The
retrospective amounts are based on the following percentages for
the following bands:
Retrospective
Cumulative Net Loss Commission
and LAE Ratios for L/R Band
------------------------- ---------------
From To
------ -----
Band 1 >74.0% 75.5% 10%
Band 2 >75.5% 77.5% 25%
Band 3 >77.5% 79.5% 33%
Greater than 79.5% 50%
C. The calculations and payments shall be based on the following:
i. The profit sharing or retrospective amount is the sum of
the amounts calculated for each band separately.
ii. The profit sharing or retrospective amount is calculated
annually, 6 months after the end of each calendar year,
based upon the cumulative net earned premiums and
cumulative net incurred loss and LAE ratio, including
incurred but not reported (IBNR) losses and LAE, from
the Effective Date through the end of the calendar year
and adjusted to include experience through the date of
the calculation.
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iii. The payment of profit sharing or retrospective
commission is settled annually as of the date of the
calculation. MNH shall pay the profit sharing or MMIC
shall pay the retrospective amount based upon the
cumulative amount of profit sharing or retrospective
amount as of each calculation date and the cumulative
amount of payments previously made.
iv. Calculations and settlements of profit sharing or
retrospective amounts shall continue until all losses
are settled, or unless finally settled by mutual
agreement of the parties prior to that time.
v. The development, implementation and operation of
Traditional Insurance Business without taking into
account the claims, losses and LAE that are the result
of any acts of terrorism similar to those acts of
September 11, 2001.
vi. Claims Related Extra Contractual Obligations arising
from claims for which MNH has assumed direct
responsibility will be excluded from the calculation of
actual accumulated net losses.
XV. Management Controls and Reports:
A. MMIC will develop an underwriting plan for the Traditional
Insurance Business, and confer with the management of MNH in the
course of developing or modifying that plan. MMIC will take any
comments or suggestions of MNH under consideration in the
development or modification of that plan; however, MMIC shall have
ultimate authority and responsibility for the development and
modification of that plan.
B. MMIC will present periodic reports, as more fully defined in the
Services Agreement and as shall be agreed between MMIC and MNH, on
the operating results of the Pool to MNH management including, but
not limited to, the following:
i. monthly Regional Management Reports which include
monthly and year-to-date premiums written and other
production data
ii. periodic large loss reports
iii. quarterly underwriting profit and loss statements by
line of business and management responsibility, e.g.
states or regional offices
iv. all internal and home office underwriting and claim
audit reports
v. other reports as are mutually agreed to by the parties.
XVI. General Statement of Intent:
It is the purpose and intent of this Pooling Agreement that:
A. The parties hereto intend to perpetuate a mutually beneficial
relationship among the Pooled Companies following the termination
of the Previous Management Agreement. In that regard, the parties
hereto intend to align their interests by pooling risks and
assuming common underwriting results on their Traditional
Insurance Business, prior to any annual profit or loss sharing
calculation pursuant to Section XIV.
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B. MMIC shall be liable as a reinsurer to MNH on the Traditional
Insurance Business of MNH, issued and in force as of the Effective
Date, and thereafter issued by MNH during the term of this
Agreement.
C. MNH shall be liable as a reinsurer to MMIC on the Traditional
Insurance Business of MMIC and MNH issued and in force as of the
Effective Date, and thereafter issued by the Pooled Companies
during the term of this Agreement to the extent of MNH's Pooling
Percentage.
D. The parties hereto shall, on and after the Effective Date,
participate in all of the underwriting operations related to the
Traditional Insurance Business of each of the Pooled Companies
hereto on the basis of their Pooling Percentages as set forth in
Schedule 2 attached hereto.
E. The parties hereto reserve the right to mutually agree to modify
any of the terms of this Pooling Agreement and any Schedule hereto
in order to accommodate transition issues following the
termination of the Previous Management Agreement and to handle
immaterial adjustments resulting from or necessitated by timing or
proration issues, or similar events.
F. The Pooled Companies acknowledge that MMIC intends to form a new,
wholly owned subsidiary and to license that subsidiary to write
property and casualty insurance. To the extent the new subsidiary
writes Traditional Insurance Business, the Pooled Companies agree
that the new subsidiary shall become a party to this Pooling
Agreement and shall participate in MMIC's Pooling Percentage of
the Traditional Insurance Business subject to this Pooling
Agreement.
XVII. "Follow the Fortunes":
The reinsurance provided by the terms of this Pooling Agreement shall
be subject to the same risks, terms and conditions under which the
original policies and contracts for Traditional Insurance Business were
written, or which may be or may have been agreed to during the term of
the original insurance policy or contract, the intent of this Agreement
being that the Pooled Companies shall, in every case to which this
Agreement applies and in the proportions specified herein, follow the
underwriting fortunes of one another in respect of the risk that has
been written.
XVIII. Methods and Procedures:
The methods and procedures, including accounting transactions, by which
the terms of this Pooling Agreement shall be performed by and on behalf
of the parties hereto shall be determined in conjunction with the
performance of the parties under the Services Agreement.
XIX. Amendments:
This Agreement may be modified from time to time, so as to adapt its
provisions to the varying conditions of the business of the Pooled
Companies, by a mutual agreement in writing of the parties hereto,
subject to ratification by the Board of Directors of each party and, if
required, with the approval of the insurance regulatory officials from
the
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State of New York and/or the State of New Hampshire.
XX. Term and Termination:
A. This Pooling Agreement shall become effective on the Effective
Date and shall continue in effect thereafter unless terminated on
written notice as follows:
i. MNH may tender notice to terminate this Agreement prior
to July 1, 2005 or July 1, 2006 for termination of this
Agreement effective for the calendar year commencing six
(6) months after such date, but only if the cumulative
loss and LAE ratio for the business pooled hereunder is
greater than 76%;
ii. Either MMIC or MNH may tender notice to terminate this
Agreement for any reason on July 1, 2007 or any July 1
thereafter for termination of this Agreement effective
for the calendar year commencing six (6) months after
such date;
iii. Either party may, at any time, terminate this Agreement
for "cause" by written notice specifying (i) the
effective date of termination, which date shall be not
less than sixty (60) days after the date of such notice,
and (ii) the reasons for termination. "Cause", for
purposes of terminating this Agreement, shall mean
either (i) any material breach of this Agreement or (ii)
continuous or repeated failure of a party to comply with
a material term of this Agreement. Any termination for
cause shall not affect the rights and obligations of the
parties as to transactions or acts by either party prior
to the effective date of termination or relieve either
party's obligation during the pendency of any dispute
over the cause of termination. Before a party may
terminate this Agreement for cause, the terminating
party must permit the other to rectify such breach,
non-performance, or violation within thirty (30)
business days after receipt of written notice of
termination. If the party in breach of this Agreement
fails to cure within thirty (30) days of receiving
notice of termination of this Agreement for cause, this
Agreement shall terminate on the effective day of the
termination as provided in the notice, unless agreed
otherwise by the terminating party;
iv. Either party may terminate this Agreement immediately by
giving written notice of termination to the other party
if:
a. the other party is placed under supervision or in
rehabilitation or liquidation by a state
authority;
b. the other party is adjudged bankrupt;
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c. the other party has a receiver of its assets or
property appointed by a court of competent
jurisdiction;
d. the other party makes a general assignment for the
benefit of creditors;
e. the other party institutes (or suffers to be
instituted and not dismissed within sixty (60)
days) any proceeding for the reorganization or
arrangement of its affairs;
f. this Agreement fails to qualify for credit as
authorized reinsurance, or any party fails to
qualify as an authorized reinsurer under either
the New York Insurance Laws or regulations or the
New Hampshire Insurance Laws or regulations;
provided however, if either party elects to engage
in an insurance business that would not qualify
either that business or that party as authorized
reinsurance or authorized reinsurer, respectively,
but the parties have mutually agreed to include
that business as Traditional Insurance Business,
then neither party may use that failure to qualify
as a basis to terminate this Agreement; or
g. the Services Agreement or the Underwriting or
Claims Services Annexes thereto are terminated for
any reason including a "change in control" as that
term is defined in the Services Agreement.
B. Upon termination of this Agreement for any reason, the pooling
will cease on a cutoff basis and MNH and MMIC will, respectively,
return the net unearned premiums to the other, less the
Applicable Ceding Commissions. The returned net unearned premiums
shall be settled in premiums receivable, cash and other assets as
agreed among the parties. Each of the Pooled Companies will
remain obligated for their Pooling Percentages of all losses and
LAE and other obligations incurred prior to the date of
termination, whether or not such losses or associated LAE have
been reported.
XXI. Interpretation; Governing Law:
A. Wherever required to give the correct meaning throughout this
Agreement, the singular shall be interpreted in the plural.
Clerical errors or errors of involuntary or inadvertent omission
or commission shall not be interpreted as a discharge of liability
on behalf of any of the parties to this Agreement. Such errors
shall be rectified at the time of discovery or as soon as
practicable thereafter. Caption headings are for convenience only
and are not intended to affect the construction of
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the terms hereof.
B. This Agreement shall be interpreted and construed in accordance
with the internal laws of the State of New York without regard to
conflicts of law.
C. The Pooled Companies will use their good faith efforts to
interpret and apply the terms of this Pooling Agreement in a
manner that is consistent with the Services Agreement and each
Annex thereto if they are in effect at that time.
XXII. Insolvency:
The reinsurance made under this Agreement shall be payable by the
assuming reinsurer on the basis of the liability of the ceding insurer
under the contract or contracts reinsured without diminution because of
the insolvency of the ceding insurer. The reinsurance made effective
under this Agreement shall be payable by the assuming reinsurer to the
ceding insurer or to the liquidator, receiver or statutory successor of
the ceding insurer.
In the event of insolvency of the ceding insurer, the liquidator or
receiver or statutory successor of such insurer shall give written
notice to the assuming reinsurer: (a) of the pendency of a claim
against the insolvent ceding insurer on the policy or bond reinsured
within a reasonable time after such claim is filed in the insolvency
proceeding; (b) that during the pendency of such claim the assuming
reinsurer may investigate such claim and interpose, at its own expense,
in the proceeding where such claim is to be adjudicated any defense or
defenses which it may deem available to the ceding insurer or its
liquidator or receiver or statutory successors; and (c) that the
expense thus incurred by the assuming reinsurer shall be chargeable,
subject to court approval, against the insolvent ceding insurer as part
of the expense of liquidation to the extent of a proportionate share of
the benefit which may accrue to the ceding insurer solely as a result
of the defense undertaken by the assuming reinsurer.
XXIII. Arbitration:
The Pooled Companies shall use their best efforts to resolve any
dispute under or arising out of this Agreement, the interpretation of
this Agreement or any party's performance, nonperformance, rights or
obligations under this Agreement. In the event any dispute cannot be
mutually resolved between the parties, MMIC and MNH hereby agree that
such dispute shall, upon the request of the one of the parties, be
submitted to arbitration in the following manner: The dispute shall be
submitted for determination to a panel of three (3) arbitrators, not
related to or affiliated with any of the parties to this Agreement,
with experience in the property and casualty insurance or reinsurance
industry, one to be chosen by MMIC, one to be chosen by MNH and the
third to be selected by the mutual agreement of the other two (2)
arbitrators. The arbitration shall take place in Buffalo, New York, and
shall be conducted in accordance with the then current Commercial
Arbitration Rules of the American Arbitration Association. The
arbitrators are not empowered to award punitive damages.
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XXIV. Records and Accounts; Reviews:
MMIC shall keep accurate records and accounts of all transactions
undertaken under this Pooling Agreement. Those records and accounts
shall be maintained in accordance with the same prudent standards of
record keeping as MMIC follows with respect to its own business and in
accordance with all applicable state laws and regulations concerning
records retention. All files shall be open and available for on-site
review and/or inspection and reproduction, at MNH's expense, by duly
authorized representatives of MNH. MNH may conduct such reviews during
normal business hours upon reasonable prior written notice to MMIC.
MMIC shall cooperate fully with MNH, its representatives, and designees
in such reviews. MNH shall prepare written findings in connection with
any review and shall provide MMIC with a copy of such findings within
thirty (30) days after completion of the review.
XXV. Entire Agreement:
This Pooling Agreement, including the Schedules and the Exhibit
attached hereto, constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof, and supersedes all previous
agreements whether written or oral between them with respect to the
subject matter hereof.
XXVI. Counterparts:
This Pooling Agreement may be executed in two or more counterparts,
each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date and the year first above written.
Attest Merchants Mutual Insurance Company
/s/ By /s/
-------------------------------- ----------------------------
Secretary Xxxxxx X. Xxx, President
Attest Merchants Insurance Company of
New Hampshire, Inc.
/s/ By /s/
-------------------------------- ----------------------------
Secretary Xxxxxxx X. June,
Executive Vice President
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"Schedule 1"
Underwriting Expenses
As Included in Calculation of Ceding Commission
INITIAL MNH TRANSFER TO MMIC
The underwriting expense component in the "Initial Ceding Commission"
calculation with respect to MNH's initial asset transfer to MMIC under Section
III of the Pooling Agreement the underwriting expenses as reported in the 2002
Underwriting and Investment Exhibit, Part 4 - Expenses of the MNH Annual
Statement included in Column 2 on lines 3 through 18 plus line 24, excluding the
following specific items:
1. Expenses unrelated to the Traditional Insurance Business;
2. Expenses deemed to be direct expenses of either MNH or MMIC;
3. Administrative expenses of MMIC that will be included in the
determination of the fees payable under the Administrative Services
Annex of the Services Agreement;
4. Provisions for payment of Senior Management bonuses by MMIC; and
5. Other expenses as may, from time to time, be agreed by the parties.
INITIAL MMIC TRANSFER TO MNH OF MNH POOLING PERCENTAGE
The underwriting expense component included in the "Initial Ceding Commission"
calculation with respect to MMIC's initial asset transfer to MNH under Section V
of the Pooling Agreement is the combined amount of underwriting expenses of MMIC
and MNH as reported in the 2002 Underwriting and Investment Exhibit, Part 4 -
Expenses of the MMIC and MNH Annual Statements included in Column 2 on lines 3
through 18 plus line 24, excluding the following specific items:
1. Expenses unrelated to the Traditional Insurance Business;
2. Expenses deemed to be direct expenses of either MNH or MMIC;
3. Administrative expenses of MMIC that will be included in the
determination of the fees payable under the Administrative Services
Annex of the Services Agreement;
4. Provisions for payment of Senior Management bonuses by MMIC; and
5. Other expenses as may, from time to time, be agreed by the parties.
SUBSEQUENT ASSET TRANSFERS BETWEEN THE PARTIES
The underwriting expense component included in the "Applicable Ceding
Commission" calculation with respect to each party's asset transfer to the other
party for each year after the initial asset transfer will be determined as
provided above, except that the expenses will be as reported in the most recent
Underwriting and Investment Exhibit, Part 4 - Expenses of Annual Statements
included in Column 2 on lines 3 through 18 plus line 24, but excluding the same
items excluded from the initial asset transfers. The parties agree that if the
applicable Exhibit changes over time, they will derive the underwriting expenses
by using comparable figures from the revised statutory reporting form.
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"Schedule 2"
The Pooling Percentages are as follows:
MMIC MNH
---- ---
Initial Percentage of policies in force as of
inception of the Agreement 60% 40%
Accident Year 2003 60% 40%
Accident Year 2004 65% 35%
Accident Year 2005 70% 30%
Accident Year 2006 75% 25%
Accident Year 2007 75% 25%
The maximum MNH annual written premium assumption shall be:
Maximum Written
Premium
Year In $ millions
---- ---------------
2003 $68.0
2004 $59.5
2005 $50.0
2006 $42.5
2007 $37.5
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