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EXHIBIT 10.80
[INTERE RFC LETTERHEAD]
COVER NOTE NO.: SF961001 DATE: March 13, 1996
MEMORANDUM OF REINSURANCE EFFECTED ON BEHALF OF:
ALPINE INSURANCE COMPANY
TRANSCO SYNDICATE #1
SECOND CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
EFFECTIVE: JANUARY 1, 1996
PERIOD: Continuous Agreement effective from 12:01 a.m., Central Time,
January 1, 1996, (warranting no known or reported losses through
January 29, 1996) covering subject policies written or renewed
at or after that time. This Agreement is subject to
cancellation at any January 1, by any party by giving to the
others ninety (90) days prior written notice of cancellation by
certified or registered mail.
Any such cancellation will be on a "run off" basis or "cut
off" basis, at the REINSURED's option. On a "run off" basis
the REINSURER will remain liable for losses and allocated loss
adjustment expenses on all subject policies that have expired
at the time and date of cancellation, and all subject policies
that are unexpired at the time and date of cancellation
(including the unexpired portions of such subject policies)
until natural expiration, cancellation or first anniversary of
such policies, whichever occurs first, but not to exceed twelve
(12) months, plus odd time, to a maximum of eighteen (18)
months in all from the date of cancellation.
On a "cut off" basis the REINSURED will reassume the net ceded
unearned subject premium relating to unexpired subject
policies, and all liability for losses and allocated loss
adjustment expenses relating thereto (determined as pro rata
portions of the total liability for losses and allocated loss
adjustment expenses relating to such unexpired subject
policies, calculated on the basis of the number of days
remaining in the policy periods divided by the total number of
days in the policy periods), but the REINSURER will remain
liable for losses and allocated loss adjustment expenses on all
expired subject policies and the balance of the total liability
relating to unexpired subject policies.
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[INTERE RFC LETTERHEAD]
COVER NOTE NO.: SF961001
DATE: March 13, 1996
PERIOD: This Agreement is on a Underwriting Year of Account basis. The
(Cont'd.) first Underwriting Year of Account is the period beginning
January 1, 1996, through and including December 31, 1996. Each
Underwriting Year of Account consists of twelve (12)
consecutive months beginning January 1 and ending December 31.
SPECIAL
TERMINATION: Any party may terminate this Agreement at any time with
respect to the affected party or parties by giving it or them
fifteen (15) days prior written notice of termination by
certified or registered mail upon the happening of any of the
following events of special termination:
1. The state of domicile of the affected party, or the
Illinois Insurance Exchange in the case of Transco
Syndicate, has ordered the affected party to cease writing
new or renewal business;
2. The affected party has become insolvent or has been placed
into liquidation or receivership (whether voluntary or
involuntary), or there have been instituted against it
proceedings for the appointment of a receiver, liquidator,
rehabilitator, conservator, trustee in bankruptcy of other
agent known by whatever name, to take possession of its
assets or control of the affected party's operations;
3. The policyholders' surplus of the affected party has been
reduced by the greater of (i) 35% of the affected party's
policyholders' surplus as of December 31, 1995, or (ii)
35% of the affected party's policyholders' surplus as of
the most recent anniversary of this Agreement, provided
that the affected party receives such notice within
fifteen (15) days following the terminating party's
gaining knowledge of such happening;
4. The affected party has become merged with, acquired or
controlled by any entity or individual not controlling the
party's operations previously, provided that the affected
party receives such notice within fifteen (15) days
following the terminating party's gaining knowledge of
such happening;
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[INTERE RFC LETTERHEAD]
COVER NOTE NO.: SF961001
DATE: March 13, 1996
SPECIAL
TERMINATION: 5. If the affected party is Alpine Insurance Company, its
(Cont'd.) Best rating has dropped below B, if the affected party is
Transco Syndicate, its Best rating has dropped below B or
if the affected party is the REINSURER, its Best rating
has dropped below A, provided that the affected party
receives such notice within fifteen (15) days following
the terminating party's gaining knowledge of such
happening;
6. The affected party (i) has failed to make any payment when
due under this Agreement and (ii) also has failed to make
such payment within five (5) days of written demand
therefor by certified or registered mail after the
payment has become overdue.
Any such special termination will be on a run off or cut off
basis, upon mutual consent of both parties.
TYPE: SECOND CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
CLASS: All business underwritten or managed by TCO Insurance Services,
Inc. of Chicago, IL, and any successor and/or their subsidiary,
affiliated and associated entities, and classified by the
REINSURED as Primary General Liability, Primary Products
Liability/Completed Operations, Architects and Engineers
Professional Liability and Following Form Excess Liability.
"Subject policies" are defined as all policies, contracts and
binders (including endorsements and modifications thereto) on
such business attaching during the term of this Agreement with
limits in excess of $1,000,000.
EXCLUSIONS: Per attached list.
TERRITORIAL
SCOPE: Per subject policies.
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[INTERE RFC LETTERHEAD]
COVER NOTE NO.: SF961001
DATE: March 13, 1996
LIMIT: $1,000,000 each and every loss occurrence or claim made, each
and every subject policy, in excess of $1,000,000 each and
every loss occurrence or claim made each and every subject
policy. Allocated loss adjustment expenses pro rata in addition
to the limit, unless such expenses are inclusive in the subject
policy limit.
The REINSURER's aggregate limit of liability (including
liability for losses, allocated loss adjustment expenses and
ECO and XPL) for each Underwriting Year of Account is 300% of
the net ceded premium actually received by the REINSURER
with respect to that Underwriting Year of Account.
PREMIUM
& CEDING
COMMISSION: Ceded premium will be 26.39% of gross net written subject
premium (defined as total gross written premium, including
additions or subtractions of premium actually collected from
audits, extensions, extended reporting periods, cancellations,
reductions and endorsements, on all subject policies, less the
gross cost of reinsurance covering limits above $2,000,000 on
all subject policies), less a ceding commission of 30% in
allowance for the REINSURED's acquisition costs.
Reinsurance premium payable as follows: one-half of the net
ceded rate, 18.47% (26.39% gross less 30% cede), applied to
one-quarter of the then estimated subject premium for the year
($23,088 for the first calendar quarter of 1996) will be paid
to the REINSURER by the REINSURED by the last day of each
quarter (3/31, 6/30, 9/30 and 12/31); and the balance of the
net ceded rate applied to the actual subject premium for the
quarter will be paid within forty-five (45) days following the
end of each such quarter.
The ceded premium for each Underwriting Year of Account will be
adjusted within 60 days following each December 31 beginning
with December 31 which is the first anniversary of the last day
of such Underwriting Year of Account.
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[INTERE RFC LETTERHEAD]
COVER NOTE NO.: SF961001
DATE: March 13, 1996
PREMIUM
& CEDING
COMMISSION: The above ceded premium percentage is "blended", based upon
(Cont'd.) rate guidelines for each class code as a percentage of the
applicable $1,000,000 excess $1,000,000 policy limit on file
with the REINSURED.
REPORTS: 1. Premium reports will be provided by the REINSURED to the
REINSURER quarterly within forty-five (45) days following
the end of each calendar quarter. The format is to be
agreed.
2. Loss reports will be provided by the REINSURED to the
REINSURER quarterly within forty-five (45) days following
the end of each calendar quarter. The format is to be
agreed. Individual reported losses will be reported by the
REINSURED to the REINSURER promptly once total case loss
reserves (excluding IBNR) per policy, net of deductibles
and self-insured retentions, exceed $250,000 from the
ground up, and in all cases of serious injury which,
regardless of liability or coverage, are likely to involve
this reinsurance, including, but not limited to the
following:
a. Fatalities.
b. Paraplegia,
c. Quadriplegia,
d. Severe xxxxx resulting in disfigurement or scarring,
e. Serious brain injuries (seizure, coma or
physical/mental impairment),
f. Amputation of any extremity or multiple fractures,
g. Total or partial blindness in one or both eyes, or
h. Severe injury to a major organ (e.g., heart, lung).
3. Each party will provide the other parties annually any
information required and reasonably requested by the other
parties for annual statement purposes.
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[INTERE RFC LETTERHEAD]
COVER NOTE NO.: SF961001
DATE: March 13, 1996
ESTIMATED
SUBJECT
PREMIUM: The subject premium initially is estimated to be $1,000,000
per year. The REINSURED may revise the estimated subject
premium in good faith at the beginning of any calendar quarter,
subject to agreement by the REINSURER, which agreement shall
not be unreasonably withheld.
ORIGINAL
CONDITIONS: All reinsurance under this Agreement will be subject to the
same rates, terms, conditions, waivers and interpretations,
and to the same modifications, alterations and cancellations,
as the respective subject policies of the REINSURED. This
Agreement will not in any manner create any obligations or
establish any rights against the REINSURER or the REINSURED
in favor of any third parties or any persons not parties to
this Agreement.
OFFSET: The parties (and their subsidiaries, affiliated and associated
entities) will be entitled to offset any balances for amounts
due one party or another under this Agreement. In the event of
the insolvency of any party, offset is to be allowed only in
accordance with applicable law.
RISK TRANSFER: If the REINSURED's auditors in good faith determine and advise
the parties in writing by certified or registered mail that
this Agreement does not accomplish "risk transfer" pursuant to
FASB 113 and NAIC Accounting Practices and Procedures Manual
Chapter 22, the REINSURER will amend the terms of this
Agreement effective from inception, such amended terms to be
reasonably acceptable to the REINSURED, to accomplish such
"risk transfer".
GENERAL
CONDITIONS: Loss Adjustment Expenses Pro Rata in addition to Loss (unless
part of the subject policy).
Excess of Original Policy Limits Clause (80% basis).
Extra Contractual Obligations Clause (80% basis).
ECO/XPL - One Additional Limit Clause.
Ultimate Net Loss Clause.
Net Retained Lines Clause.
Definition of Loss Occurrence Clause.
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[INTERE RFC LETTERHEAD]
COVER NOTE NO.: SF961001
DATE: March 13, 1996
GENERAL
CONDITIONS: Notice of Loss Clause.
(Cont'd.) Loss Funding Clause.
Federal Excise Tax Clause.
Errors and Omissions Clause.
Insolvency Clause.
Service of Suit Clause.
Offset Clause.
Currency Clause.
Access to Records Clause.
Arbitration Clause.
Intere Intermediary Clause.
WORDING: To be agreed.
REINSURERS: THROUGH INTERE - SAN FRANCISCO
Underwriters Reinsurance Company 100.00%
TOTAL PLACEMENT: 100.00%
We will periodically provide a list of those companies with which Intere
Intermediaries is affiliated, which may be parties to this placement. This
list is available on request.
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[INTERE RFC LETTERHEAD]
COVER NOTE NO.: SF961001
DATE: March 13, 1996
For and on behalf of:
INTERE INTERMEDIARIES
[SIG]
---------------------------------
Chairman
AGREED TO:
ALPINE INSURANCE COMPANY
TRANSCO SYNDICATE #1
[SIG] May 31, 1996
--------------------------------- ---------------------------------
Authorized Signature Date
Please examine this document carefully and advise us immediately if any of the
Terms and Conditions or the security are not in accordance with your order or
requirements.
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[INTERE RFC LETTERHEAD]
ALPINE INSURANCE COMPANY
TRANSCO SYNDICATE #1
Second Casualty Excess of Loss Reinsurance Agreement
Effective: January 1, 1996
EXCLUSIONS: This Agreement does not cover:
1. Assumed treaty reinsurance;
2. Pollution Liability
3. Aircraft or airports as respects coverage for all
liability arising out of ownership, maintenance or use of
any aircraft or flight operations except for industrial
aid, pleasure or business craft when written as incidental
to the subject policy;
4. Products Liability as-respects:
a. Manufacture, sale or distribution of aircraft or
aircraft parts pertaining to essential
instrumentation, mechanical or structural components
relating thereto;
b. Manufacture or wholesale distribution of
pharmaceuticals pertaining to ethical drugs; and
c. Manufacture of automobiles and motorcycles with
projected receipts in excess of $5,000,000, but not
excluding manufacture of kit cars, whether assembled
or not, component parts or subassemblies.
5. Products Recall and Products Integrity business;
6. General Operations of railroads, but not excluding spurs
and side tracks;
7. Oil refinery's operations;
8. Asbestos liability;
9. Financial guarantee and insolvency;
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[INTERE RFC LETTERHEAD]
ALPINE INSURANCE COMPANY
TRANSCO SYNDICATE #1
Second Casualty Excess of Loss Reinsurance Agreement
Effective: January 1, 1996
EXCLUSIONS: 10. Loss or liability excluded by the provisions of the
(Cont'd.) "Nuclear Incident Exclusion Clause - Liability -
Reinsurance (USA)" and the Nuclear Incident Exclusion
Clause - Liability - (Canada)";
11. Disposal of hazardous chemicals or hazardous waste
including transporters, contractors or waste site
operators, but not excluding residential waste haulers;
12. Manufacturing, handling, storing or transporting of any
explosive substance intended for use as an explosive
(explosive substance being defined as any substance
manufactured for the express purpose of exploding as
differentiated from other commodities used industrially
and which are only fortuitously explosive such as
gasoline, fertilizers, fuel gases and dyestuffs);
13. Any risk engaged in the production, packaging,
distribution, promotion or sale (except retail sale) of
tobacco or tobacco products, insofar as injury arises out
of the alleged hazardous properties of tobacco;
14. Motor vehicle racing, when written as such;
15. Fidelity or crime coverage for financial institutions;
16. Medical Malpractice, unless the professional exposure is
considered to be incidental (it being understood that this
exclusion does not apply to druggists, pharmacists,
morticians, cemeteries, health studios and reducing
salons liability);
17. Professional Liability for accountants, insurance agents
and brokers, security guards and real estate agents;
18. Political risk or credit insurance;
19. Underground mining operations;
20. SEC liability;
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[INTERE RFC LETTERHEAD]
ALPINE INSURANCE COMPANY
TRANSCO SYNDICATE #1
Second Casualty Excess of Loss Reinsurance Agreement
Effective: January 1, 1996
EXCLUSIONS: 21. All liability of a REINSURED arising by contract,
(Cont'd.) operation of law, or otherwise from its participation or
memberships, whether voluntary or involuntary, in any
insolvency fund ("insolvency fund" being defined to
include any guaranty fund, insolvency fund, plan, pool,
association, fund, or other arrangement, however
denominated, established or governed, which provides for
any claim, debt, charge, fee or other obligation of an
insurer, or its successor or assigns which has been
declared by any competent authority to be insolvent or
which is otherwise deemed unable to meet any claim,
debt, charge, fee or other obligation in whole or in part);
22. Any loss or liability accruing to a REINSURED directly or
indirectly from any insurance written by or through any
pools and associations in which membership by the REINSURED
is required by law, but not excluding liability assumed by
a REINSURED directly as a syndicate member of the Illinois
Insurance Exchange as a participant on a line slip policy;
23. Workers' compensation (including occupational disease) and
employers' liability insurances, but not excluding
contingent Employers' Liability ("stop gap") coverage that
may be attached to Comprehensive General Liability policies
in the states of Washington, Wyoming, North Dakota or Ohio;
24. Circuses and power driven amusement devices;
25. Fire, police or salvage equipment, unless written as a
minor part of a fleet of other vehicles which are not
otherwise excluded (it being understood that the term
"salvage equipment" applies to equipment working in
conjunction with fire departments and assigned to answer
emergency alarms);
26. Long-haul trucking (generally being understood as regular
operations to locations more than 200 miles from the
insured's base or bases of operations), when the principal
operation of the insured;
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[INTERE RFC LETTERHEAD]
ALPINE INSURANCE COMPANY
TRANSCO SYNDICATE #1
Second Casualty Excess of Loss Reinsurance Agreement
Effective: January 1, 1996
EXCLUSIONS: 27. Ocean Marine business and all forms of legal liability
(Cont'd.) arising out of the operation or navigation of ships or
vessels;
28. Agricultural spraying;
29. Exterminators;
30. Retroactive liability and all back dates in excess of 30
days, but not excluding retroactive liability on claims
made policies;
31. Primary automobile liability to include non-owned and
hired;
32. Municipalities and governmental agencies;
33. Liquor liability, except when written in the states of
California and Nevada;
34. Construction of tunnels, dams, subways, and nuclear power
plants;
35. Ship builders and ship repair (a ship being defined as
over 100 feet in length);
36. Environmental impairment liability;
37. Boiler and Machinery liability;
38. Kidnap and xxxxxx;
39. Ocean Marine, Admiralty Xxxxx Act, and FELA, except
incidental Xxxxx Act as related to the use of watercraft
50 feet or less in length, and FELA as related to the
existence and use of railroad side tracks;
40. Electric utilities, but not excluding course of
construction risks;
41. Umbrella Liability;
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[INTERE RFC LETTERHEAD]
ALPINE INSURANCE COMPANY
TRANSCO SYNDICATE #1
Second Casualty Excess of Loss Reinsurance Agreement
Effective: January 1, 1996
EXCLUSIONS: 42. Any loss of damage occasioned by war, Hostilities, acts of
(Cont'd.) foreign enemies, civil war, rebellion, insurrection,
military or usurped power, martial law or confiscation of
any government or public authority;
43. Manufacture or storage of liquefied petroleum gas ("LPG"),
but not excluding storage of petroleum or LPG on a local
basis;
44. Punitive damages;
45. Subsidence and movement; or
46. Manufacturing or distribution of animal feed.
The exclusions enumerated above (other than the exclusions
enumerated in paragraphs 1, 2, 9, 10, 21 and 27) do not apply
when the items or activities enumerated are merely incidental
to the main operations of the insured or when the insured's
services are subcontracted for a limited-time basis to perform
services for an excluded entity, provided such main operations
are covered by the subject policies and are not themselves
excluded from the scope of the Agreement. The REINSURED will
be the sole judge of what is "incidental" for purposes of this
Agreement.
Should a REINSURED, by reason of an inadvertent act, error or
omission, be bound to afford coverage excluded hereunder, the
REINSURER will waive the exclusions with the exception of the
exclusions enumerated in paragraphs 1, 2, 9, 10, 21 and 27. The
duration of such waiver will not extend beyond the time that
notice of such coverage has been received by the responsible
underwriting authorities of the REINSURED (being defined as the
Senior Vice President of Underwriting or their equivalents)
plus the minimum time period required thereafter for
the REINSURED to terminate such coverage.
With respects to any exclusion included on a REINSURED's
subject policy, the liability for which is intended to be
excluded hereby, the REINSURER will follow the REINSURED's
fortunes.
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[INTERE RFC LETTERHEAD]
ALPINE INSURANCE COMPANY
TRANSCO SYNDICATE #1
Second Casualty Excess of Loss Reinsurance Agreement
Effective: January 1, 1996
EXCLUSIONS: The REINSURED may submit to the REINSURER, for special
(Cont'd,) acceptance hereunder, business not covered by the Agreement. If
such business is specially accepted by the REINSURER, it will
be subject to the terms of the Agreement, except as this
Agreement's terms are modified by the special acceptance.
Should any reinsurer become a party to this Agreement
subsequent to the acceptance of any business not normally
covered hereunder, such reinsurer automatically will accept
such business as being a part of this Agreement.
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