THIS TRANSFER AND ASSUMPTION AGREEMENT (this "Agreement"), made and
effective the ____ day of __________, 2000 (the "Effective Date"), by and
between RISK CAPITAL REINSURANCE COMPANY, a corporation organized and existing
under the laws of State of Nebraska (the "Company"), and FOLKSAMERICA
REINSURANCE COMPANY, a corporation organized and existing under the laws of the
State of New York (the "Reinsurer").
WITNESSETH THAT:
WHEREAS, pursuant to a certain Asset Purchase Agreement, dated as of
January 10, 2000, by and between Risk Capital Holdings, Inc. ("RCHI"), the
Company, Folksamerica Holding Company, Inc. (together with its affiliates other
than the Reinsurer, "FHC") and the Reinsurer (the "Asset Purchase Agreement"),
the parties thereto have agreed, subject to the terms and conditions herein, to
transfer the reinsurance operations of the Company to the Reinsurer; and
WHEREAS, it is the intent of the parties hereto that the Reinsurer shall
completely replace and be substituted for the Company in all respects under the
Treaties (as defined) and the Retrocession Agreements (as defined).
WHEREAS, this Agreement has been approved by the Director of Insurance of
the State of Nebraska, the Superintendent of Insurance of the State of New York
and certain other regulatory authorities.
THEREFORE, in consideration of the mutual covenants hereinafter set forth
and subject to the terms and conditions stated herein, the parties hereto agree
as follows:
ARTICLE I
BUSINESS ASSUMPTIVELY REINSURED
1. The Company hereby cedes to the Reinsurer, and the Reinsurer hereby
assumes as reinsurance from the Company as direct obligations of the Reinsurer,
100% of the Treaty Liabilities (as defined below) arising under the Treaties;
provided, however, that the Reinsurer shall assume no liability for the
Xxxxxxxxx/Xxxxxxx (collectively "Xxxxxxxxx") Treaties identified by the Company
as Treaty Numbers AV 1009 and AV 1010 reinsuring Lloyds Syndicate Nos. 588, 861
and 1209. The terms "Treaty" or "Treaties" shall mean all binders, riders,
facultative certificates, treaties, contracts of reinsurance and insurance
policies (including line slips, management agreements, pools or other similar
facilities) set forth on Section 3.17(b)(i) of the Disclosure Schedule to the
Asset Purchase Agreement, as such
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Schedule is amended and restated the date hereof, (the "Schedule of Assumed
Treaties"). The Reinsurer shall have no liability with respect to any binders,
riders, facultative certificates, treaties, contracts of reinsurance or
insurance policies which are not set forth on the Schedule of Assumed Treaties;
provided, however, that to the extent that the Reinsurer receives premiums and
related case reserves hereunder which are attributable to a reinsurance
agreement not set forth on the Schedule of Assumed Treaties, then, promptly,
upon discovery thereof, the Reinsurer shall re-pay such premiums and related
case reserves to the Company.
2. All reinsurance for which the Reinsurer shall be liable by virtue of
this Agreement shall be subject in all respects to the same terms, rates and
conditions, interpretations and waivers and to the same modifications,
alterations and cancellations as the Treaties. The Reinsurer accepts and assumes
the Treaty Liabilities (as defined in Article V) subject to any and all
defenses, offsets (it being understood such offsets only include mutual
liabilities arising under the Assumed Business) and counterclaims to which the
Company would be entitled with respect to such Treaty Liabilities, it being
expressly understood and agreed by the parties hereto that no such defenses,
offsets or counterclaims are waived by the execution of this Agreement or
consummation of the transactions contemplated hereunder and that as of the
Effective Date, the Reinsurer shall be fully subrogated to all such defenses,
offsets and counterclaims.
3. As of the Effective Date, the Reinsurer is the successor to the Company
under the Treaties as if such Treaties were obligations of the Reinsurer. The
Reinsurer substitutes itself as of the Effective Date in the place and stead of
the Company as if named in the place of the Company, and each ceding company
under any Treaty may thereafter disregard the Company as a party thereto and
treat the Reinsurer as if it had been originally obligated thereunder. From and
after the Effective Date, this Agreement shall provide direct insurance or
reinsurance by the Reinsurer to each of the ceding companies under the Treaties.
Payments made to ceding companies in discharge of obligations to provide direct
reinsurance to ceding companies will diminish any obligation in respect thereof
which the Reinsurer may have to the estate of the Company if it shall be in
receivership, liquidation or rehabilitation proceedings; provided, however, that
if any of such payments are returned by the ceding companies to the Reinsurer,
any such obligation shall be reinstated upon receipt of such payment by the
Reinsurer. After the Effective Date, the ceding companies shall have the right
to file claims arising under the Treaties with the Reinsurer. The ceding
companies shall have a direct right of action against the Reinsurer, and the
Reinsurer hereby consents to be subject to direct action taken by any ceding
company; provided, however, that the rights of any ceding company under any
Treaty shall be limited to and consist of those rights set forth in such Treaty
(including any endorsement or amendment thereto) , and no ceding company shall
have the right to receive any greater amount under any Treaty than such ceding
company would have had in the absence of this Agreement (except that in
assessing such right no effect shall be
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given to any bankruptcy, liquidation, insolvency, reorganization or moratorium
of the Company, or the effect of laws or legal procedures affecting enforcement
of creditors' rights against the Company generally). As of the Effective Date,
the Reinsurer shall have all rights to subrogation and salvage proceeds from the
business reinsured.
4. Promptly following the Closing, the Reinsurer shall mail by first class
mail to each cedent's broker of record (or to the cedent if there is no broker
of record) under in-force Treaties, a certificate of assumption in the form
attached hereto as Exhibit A. At the Closing, the Company shall deliver to the
Reinsurer a list setting forth each in-force Treaty and the address of the
cedents thereunder or such cedents' brokers of record.
5. To the extent permitted to be transferred to the Reinsurer, the Company
hereby assigns to the Reinsurer all of the Company's rights with respect to any
commitment or agreement whereby a cedent has agreed to cede reinsurance after
the Effective Date to the Company as part of an Integrated Solutions program (as
defined in the Asset Purchase Agreement). By this assignment, the Reinsurer is
not assuming any liabilities or obligations relating to such Integrated
Solutions (including any obligation to provide reinsurance to any Integrated
Solution cedent) other than such liabilities or obligations as may expressly
arise from a Treaty set forth on the Schedule of Assumed Treaties and the
Company is not assigning any rights other than those related to commitments or
agreements to cede reinsurance business to the Company.
ARTICLE II
ASSIGNMENT OF RETROCESSION AGREEMENTS
Regardless of whether retrocessional reinsurance novation agreements are
entered into, the Reinsurer is hereby substituted for and succeeds to all of the
rights and liabilities of the Company under any reinsurance and retrocession
agreements in effect on the Effective Date between the Company and any
reinsurers or retrocessionnaires relating to the Treaties (the "Retrocession
Agreements") and is hereby recognized for all purposes as the "Company"
thereunder in substitution for the Company. As of the Effective Date, the
Company hereby sells, assigns, transfers and conveys, and the Reinsurer hereby
purchases, binds and assumes, any and all rights and obligations of the Company
under any Retrocession Agreement including amounts held by or which may become
due from reinsurers and retrocessionnaires for losses or loss adjustment
expenses on the Treaties for which the Reinsurer has assumed liability or for
losses paid by the Company prior to the Effective Date.
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ARTICLE III
CREDIT FOR REINSURANCE FACILITIES
1. The Reinsurer has full power and authority in accordance with the
designation of the Reinsurer as attorney-in-fact for the Company pursuant to
Article VII hereof for purposes of administering the Treaties, to act for and on
behalf of the Company with respect to any and all Credit for Reinsurance
Facilities outstanding with respect to the Treaties or any Retrocession
Agreements. The Company and the Reinsurer shall each use their commercially
reasonable efforts (as defined in the Asset Purchase Agreement) to:
(a) cause replacement letters of credit (or other acceptable form of
credit for reinsurance facility) to be issued for the account of the
Reinsurer to any cedent under a Treaty where such cedent is not able to
take full statutory credit for the reinsurance assumed by the Reinsurer
under such Treaty due to the Reinsurer's licensing status;
(b) cause the reinsurers and retrocessionnaires of the Company under
the Retrocession Agreements to cause replacement letters of credit to be
issued in favor, and for the benefit, of the Reinsurer; and
(c) amend any reinsurance trust agreements related to the Retrocession
Agreements to substitute the Reinsurer for the Company as the beneficiary
thereunder; provided, that all fees and other amounts payable to issuing
banks and other similar third parties relating to all Credit for
Reinsurance Facilities for periods after the Effective Date shall be for
the account of the Reinsurer.
2. For purposes of this Article III, the term "Credit for Reinsurance
Facilities" means any and all reinsurance trusts, letters of credit, statutory
deposits, funds withheld deposits and other similar agreements or mechanisms
which have been established by, on behalf of, or for the benefit of, the Company
in connection with any Treaty or Retrocession Agreement which permit the cedent
thereunder or the Company to take statutory credit for reinsurance ceded
pursuant to such Treaty or Retrocession Agreement.
ARTICLE IV
TERRITORY
This Agreement shall apply to Treaties covering risks wherever situated.
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ARTICLE V
TREATY LIABILITIES
The term "Treaty Liabilities" shall mean the liabilities and obligations of
the Company arising out of the Treaties (including, without limitation, the
reserves for claims and claims expenses, net unearned premium reserves,
reinsurance balances payable, contingent commissions, funds withheld and paid
losses payable reflected on the Closing Date Balance Sheet (as defined in the
Asset Purchase Agreement)), before deduction for all other applicable
reinsurance and retrocessions, if any, under the Company's reinsurance programs,
and shall include losses arising as a result of the Company's participation in
guaranty funds, assigned risk plans, or governmental mandated insurance or
reinsurance programs or associations of any kind which are predicated on the
business reinsured hereunder or the premium volume generated by the Treaties or
are otherwise related to the Company's status as a reinsurer or an insurer prior
to the Effective Date.
ARTICLE VI
TREATY ADMINISTRATION
1. The Reinsurer will administer and service all of the Treaties reinsured
under this Agreement. The Company grants to the Reinsurer authority (exclusive
of the Company) in all matters relating to contract administration (to the
extent such authority may be granted pursuant to applicable law), including but
not limited to contract changes, reinstatement standards, rate changes, contract
renewals, commission, audits and administrative methods and procedures, and the
Reinsurer shall bear all expenses related to such administration. With respect
to the rights, duties, privileges and obligations of the Company, in order to
assist and to more fully evidence the substitution of the Reinsurer in the place
and stead of the Company, the Company hereby nominates, constitutes and appoints
the Reinsurer as the attorney-in-fact of the Company with respect to the rights,
duties, privileges and obligations of the Company in and to the Treaties and the
Retrocession Agreements, with full power and authority to act in the name, place
and stead of the Company with respect to the Treaties and the Retrocession
Agreements, including without limitation, the power, without reservation, to
service all contracts, to adjust, to defend, to compromise, to settle and to pay
all claims, to recover salvage and subrogation for any losses incurred under any
of the Treaties and to take such other and further actions as may be necessary
or desirable to effect the transactions contemplated by this Agreement and
administer any trust arrangements.
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2. The Reinsurer shall have authority and discretion with respect to all
matters relating to claim settlement, salvage, arbitration, and litigation
concerning the Treaties, including, but not limited to, the selection of
counsel. The Reinsurer shall bear all expenses incurred in connection with
settling such claims, with recovering any salvage amounts, with exercising
rights of subrogation or with such litigation, including but not limited to the
cost of investigations, legal fees and interest charges and shall pay directly
on behalf of the Company all amounts due under the Treaties. The Reinsurer shall
have the obligation to assume authority for all matters relating to those claims
which are the subject of a complaint to any regulatory authority having
jurisdiction thereof.
ARTICLE VII
INDEMNIFICATION
The Reinsurer shall indemnify and hold harmless the Company from any and
all losses, claims, liabilities and expenses arising directly or indirectly from
acts or omissions required or permitted to be taken by the Reinsurer under this
Agreement (including, without limitation, under Article VI); provided, however,
that the Company must notify the Reinsurer within sixty (60) days of the date
any such loss, suit, claim or other proceeding is served on the Company directly
or otherwise brought to the attention of the Company, or within such shorter
period as may be necessary to enable the Reinsurer to respond timely thereto.
ARTICLE VIII
PREMIUMS: CONSIDERATION
1. The Reinsurer shall be entitled to 100% of all premiums and other
considerations received on or after the Effective Date by the Company or the
Reinsurer with respect to the Treaties. The Company shall promptly remit and
hereby assigns to the Reinsurer any premiums and other considerations received
by it or its Affiliates on or after the Effective Date in respect of any of the
Treaties, except for premiums attributable to Xxxxxxxxx. Furthermore, with
respect to any such remittance, the Company shall also promptly furnish
Reinsurer with appropriate information pertaining thereto to the extent the
Company has such information (e.g. the nature of the payment, source of funds,
Treaty identification and period or periods to which it relates and any special
rates or instructions accompanying same). Upon execution hereof, the Reinsurer
shall assume the responsibility for billing and collecting premiums.
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2. As consideration for the assumption of the Treaty Liabilities by the
Reinsurer, as of the Effective Date, the Company (i) does hereby transfer and
assign to the Reinsurer all of its right, title and interest in all Purchased
Assets (as defined in the Asset Purchase Agreement) transferred pursuant to the
Asset Purchase Agreement, and (ii) does hereby assign to the Reinsurer, pursuant
to Article II hereof, its rights under all Retrocession Agreements.
ARTICLE IX
RECORDS AND ACCOUNTING
1. Promptly following the Effective Date, the Company shall forward to the
Reinsurer all reports, records, underwriting files, claim files and other
information the Reinsurer reasonably believes is required to administer the
Treaties and shall cooperate with the Reinsurer in the transfer of the
administration of the Treaties to the Reinsurer; it being the intent of the
parties to this Agreement that the rights and obligations of the Company under
the Treaties become the rights and obligations of the Reinsurer. All right,
title and interest in the Treaties and the said reports, records, underwriting
files, claim files and other information shall vest in the Reinsurer for
utilization and disposition in any manner by the Reinsurer.
2. All premiums written and earned, and all losses and loss adjustment
expenses incurred after the Effective Date on Treaties will be accounted for as
business written by the Reinsurer. The Company will have no further obligations
for accounting for such business under this Agreement after the Effective Date.
3. From time to time as the Company and the Reinsurer may reasonably agree
(but not less frequently than once per year) upon reasonable notice during
normal business hours, representatives of the Company (including its independent
public accountants and actuary) shall be permitted to inspect the Reinsurer's
books and records involving the Treaties, including those relating to the
settlement and payment of claims and work papers of the Reinsurer's independent
public accountants and actuary, and, at the Company's expense, to make copies of
them and to discuss them with the Reinsurer's representatives (including its
independent public accountants and actuaries).
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ARTICLE X
INSOLVENCY
1. The Treaty Liabilities shall be payable by the Reinsurer in accordance
with the terms of this Agreement and without diminution because of the
insolvency of the Company.
2. In the event of Company's insolvency, any amounts payable by the
Reinsurer to the Company pursuant to this Agreement shall be payable, without
diminution because of such insolvency, on the basis of claims allowed against
the estate of the Company by any court of competent jurisdiction or by the
liquidator, receiver or statutory successor of the Company and immediately upon
demand of such liquidator, receiver or statutory successor of the Company save
only for such reasonable period as may be necessary for verification.
ARTICLE XI
GENERAL PROVISIONS
1. All notices and other communications shall be in writing and shall be
delivered personally or mailed postage prepaid, certified or registered mail,
return receipt requested, or telexed, to the party at the address set forth
after its name below or at such different address as such party shall have
advised the other party in writing:
If to the Reinsurer: Folksamerica Reinsurance Company
Xxx Xxxxxxx Xxxxx
Xxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: General Counsel
If to the Company: Risk Capital Reinsurance Company
00 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Delivery of notices and other communications by FAX shall be effective so long
as a confirming copy is mailed to the appropriate address and in the manner set
forth above within one (1) business day after the FAX transmission.
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2. If any provision or portion hereof shall be invalid or unenforceable for
any reason, there shall be deemed to be made such minor changes in such
provision or portion as are necessary to make it valid or enforceable. The
invalidity or unenforceability of any provision or portion hereof shall not
affect the validity or enforceability of the other provisions or portions
hereof.
3. Any inadvertent delay, omission or error shall not be held to relieve
either party hereto from any liability which would attach to it hereunder if
such delay, omission or error is rectified immediately upon discovery and will
not prejudice the other party.
4. This Agreement:
(a) is not intended to confer any rights upon any person other than
the parties hereto and their respective successors and assigns;
(b) shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; and
(c) shall be governed by and construed in accordance with the laws of
the State of New York, other than any conflict of law rules which might
result in the application of the laws of any other jurisdiction.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duty authorized officers at New York, New York on the day and year
first above mentioned.
Attest: RISK CAPITAL REINSURANCE COMPANY
--------------------------- -----------------------------------
Name: Name:
Title:
Attest: FOLKSAMERICA REINSURANCE COMPANY
--------------------------- -----------------------------------
Name: Name:
Title:
EXHIBIT A
NOTICE AND CERTIFICATION OF ASSUMPTION
BY
FOLKSAMERICA REINSURANCE COMPANY
Pursuant to the terms of a Transfer and Assumption Agreement, all liability
and obligations of RISK CAPITAL REINSURANCE COMPANY ("RISK CAPITAL", a Nebraska
Stock Insurance Corporation) under all contracts of assumed treaty and
facultative reinsurance and any amendment or modifications thereto (the
"Contract or Contracts") will be reinsured by FOLKSAMERICA REINSURANCE COMPANY
("FOLKSAMERICA", a New York Stock Insurance Corporation).
This change is effective as of _______, 2000.
All terms and conditions of your Contract remain unchanged, except that
FOLKSAMERICA shall be substituted as the Reinsurer. All payments, notices,
claims and suits or actions on any of the Contracts shall hereafter be made to
FOLKSAMERICA as though it were the original Reinsurer.
Unless you object in writing within thirty days of receipt of this notice,
you will be presumed to have consented to a change in the named Reinsurer on
your Contract by the substitution of FOLKSAMERICA for RISK CAPITAL under any of
the Contracts in which you have an interest. Objections must be mailed to:
Xxxxxx X. Xxxxxx, Xx.
Senior Vice President,
General Counsel & Secretary
Folksamerica Reinsurance Company
Xxx Xxxxxxx Xxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
IN WITNESS WHEREOF, FOLKSAMERICA has caused its corporate seal to be
affixed hereto and this Notice of Certification of Assumption to be executed by
its duly authorized officers.
(SEAL) By:__________________________________
Name: Xxxxxx X. Xxxx
Title: President and CEO
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(SEAL) By:__________________________________
Name: Xxxxxx X. Xxxxxx, Xx.
Title: Senior Vice President,
General Counsel and Secretary
