Exhibit 99.2
QUOTA SHARE RETROCESSION AGREEMENT
BY AND BETWEEN
LASALLE RE LIMITED
(as Retrocedent)
and
ENDURANCE SPECIALTY INSURANCE LTD.
(as Retrocessionaire)
dated May 16, 2002
QUOTA SHARE RETROCESSION AGREEMENT
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS
Section 1.1 Defined Terms....................................................2
Section 1.2 Interpretation...................................................6
ARTICLE II BASIS OF REINSURANCE
Section 2.1 Cession..........................................................7
Section 2.2 Basis of Cession.................................................7
Section 2.3 Effect of Reinsured Contracts....................................7
Section 2.4 Renewal and Novation of Reinsured Contracts......................8
Section 2.5 Novation of Third Party Retrocession Contracts...................8
ARTICLE III PREMIUMS AND ALLOWANCES
Section 3.1 Transfer.........................................................9
Section 3.2 Retrocedent's Payment Obligations...............................10
ARTICLE IV COMMISSIONS
Section 4.1 Ceding Commission...............................................11
Section 4.2 Renewal Commission..............................................12
Section 4.3 Profit-Sharing Commission.......................................14
Section 4.4 Credits and Adjustments of Commissions..........................14
ARTICLE V ACCOUNTING AND REINSURANCE SETTLEMENT
Section 5.1 Delivery of Accounting and Settlement Reports...................15
Section 5.2 Report of Allowances............................................15
Section 5.3 Payment of Amounts Indicated in Accounting and Settlement
Reports.........................................................16
Section 5.4 Offset..........................................................16
ARTICLE VI RENEWAL RIGHTS
Section 6.1 Renewal Rights..................................................17
ARTICLE VII REINSURED CONTRACT ADMINISTRATION
Section 7.1 Administrative Services.........................................18
ARTICLE VIII OVERSIGHTS, ERRORS AND OMISSIONS
Section 8.1 Continuing Liability............................................18
i
ARTICLE IX INSOLVENCY
Section 9.1 Insolvency......................................................18
Section 9.2 Notice of Pendency of Claim.....................................19
Section 9.3 Notice of Insolvency............................................19
ARTICLE X DURATION AND TERMINATION
Section 10.1 Effective Date..................................................19
Section 10.2 Termination.....................................................20
ARTICLE XI DUTY OF COOPERATION
Section 11.1 Full Cooperation................................................20
Section 11.2 Furnishing of Relevant Information..............................20
ARTICLE XII INDEMNIFICATION
Section 12.1 Indemnification by Retrocessionaire.............................21
Section 12.2 Indemnification by Retrocedent..................................21
ARTICLE XIII REINSURANCE CREDIT AND SECURITY FOR REINSURED LIABILITIES
Section 13.1 Reinsurance Credit..............................................21
Section 13.2 Security for Reinsured Liabilities..............................22
ARTICLE XIV ARBITRATION
Section 14.1 Arbitration.....................................................22
ARTICLE XV MISCELLANEOUS PROVISIONS
Section 15.1 Amendment, Modification and Waiver..............................23
Section 15.2 Entire Agreement................................................24
Section 15.3 Governing Law...................................................24
Section 15.4 Severability....................................................24
Section 15.5 Counterparts....................................................25
Section 15.6 Third Party Beneficiaries.......................................25
Section 15.7 Binding; Assignment.............................................25
Section 15.8 Descriptive Headings............................................26
Section 15.9 Reasonableness..................................................26
Section 15.10 Expenses........................................................26
Section 15.11 Survival........................................................26
Section 15.12 Notices.........................................................26
Section 15.13 Construction....................................................28
LIST OF EXHIBITS
ii
Exhibit A Administrative Services Agreement
Exhibit B Assignment of Reinsurance Recoverables and Other Receivables
iii
LIST OF SCHEDULES
Schedule 1.1(a) Third Party Retrocession Contracts
iv
THIS QUOTA SHARE RETROCESSION AGREEMENT (together with all Exhibits
and Schedules hereto, the "Retrocession Agreement") is made as of May 16, 2002,
by and between LaSalle Re Limited, a Bermuda insurance company ("Retrocedent"),
and Endurance Specialty Insurance Ltd., a Bermuda insurance company
("Retrocessionaire").
WHEREAS, Trenwick Group Ltd., a Bermuda company and the parent
company of Retrocedent, Retrocedent and Retrocessionaire have entered into a
Transfer and Purchase Agreement, dated as of May 16, 2002 (the "Transfer and
Purchase Agreement") pursuant to which Retrocessionaire will acquire certain of
Retrocedent's right, title and interest in the property catastrophe reinsurance
business on the terms and conditions set forth herein;
WHEREAS, as part of such Transfer and Purchase Agreement,
Retrocedent and Retrocessionaire have agreed to enter into this Retrocession
Agreement pursuant to which Retrocedent will cede, and Retrocessionaire will
assume, on a 100% quota share basis, certain of the liabilities and obligations
arising out of Reinsured Contracts (as defined herein) issued by the
Retrocedent;
WHEREAS, the Retrocessionaire will administer certain aspects of the
Reinsured Contracts and the Reinsured Liabilities (as defined herein) under the
Administrative Services Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
promises and the mutual agreements hereinafter set forth and set forth in the
Administrative Services Agreement, the parties hereto, intending to be legally
bound, covenant and agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. Capitalized and uncapitalized terms used
but not defined herein and which are defined in the Transfer and Purchase
Agreement and/or the Administrative Services Agreement shall have the meanings
ascribed to them in the Transfer and Purchase Agreement and/or the
Administrative Services Agreement, as the context requires. As used in this
Retrocession Agreement, the following terms shall have the meanings set forth
herein:
"Administrative Services Agreement" means the Administrative
Services Agreement effective as of the date hereof between Retrocessionaire and
Retrocedent attached as Exhibit A hereto.
"Advance Payment" shall have the meaning set forth in the Section
4.2 herein.
"Applicable Law" means any applicable order, law, regulation, rule,
ordinance, order, writ, injunction, directive, judgment, decree, principle of
common law, constitution or treaty enacted, promulgated, issued, enforced or
entered by any Governmental Entity applicable to the parties hereto, or any of
their respective businesses, properties or assets.
"Ceding Commission" shall have the meaning set forth in the Section
4.1 herein.
"Closing" means the closing of the transactions contemplated by this
Retrocession Agreement.
2
"Damages" means all costs, expenses, fines, penalties, losses,
judgments, damages and other amounts (including attorneys', actuaries',
accountants' and experts' fees and settlement amounts) arising out of any suit,
claim or proceeding.
"Effective Date" means 12:01 a.m. (based upon the stated local time
of the respective Reinsured Contract), April 1, 2002.
"Excluded Liabilities" means any liability or obligation of
Retrocedent that arises under or as a result of the issuance of a Reinsured
Contract for:
(1) Extra Contractual Liabilities and any related attorneys' fees
and other expenses incurred by Retrocedent (i) to the extent caused by acts,
errors or omissions by Retrocedent or any of its officers, employees, agents or
representatives that occurred prior to the date hereof and (ii) to the extent
covered by the Reinsured Contracts for periods prior to the Effective Date;
(2) claims incurred with respect to any Reinsured Contract after
such contract was terminated, rescinded or voided (provided that such
termination, rescission or voiding occurred prior to the Effective Date);
(3) any liability or obligation arising out of or relating to
Retrocedent's failure to follow in all material respects any recommendation
relating to the Reinsured Liabilities made by the Administrator (as defined in
the Administrative Services Agreement) pursuant to the Administrative Services
Agreement;
(4) any liability of or expense allowance allocated to Retrocedent
relating to policies or contracts of insurance of the Retrocedent or assumed
reinsurance by Retrocedent to the extent they are not Reinsured Contracts;
3
(5) any losses incurred under the Reinsured Contracts prior to the
Effective Date, including any and all loss development relating thereto;
(6) any obligations arising out of or relating to the Property
Catastrophe Excess of Loss Retrocession Agreement, by and between Retrocedent
and London Life and General Reinsurance Company dated January 21, 2002.
"Extra Contractual Liabilities" means all liabilities or
obligations, other than those arising under the express terms of and within the
express limits of the Reinsured Contracts, whether to policyholders,
Governmental Entities or any other Person, which liabilities and obligations
shall include, without limitation, any liability for punitive, exemplary,
special or any other form of extracontractual damages relating to the Reinsured
Contracts which arises from any act, error or omission, whether or not
intentional, in bad faith or otherwise, including, without limitation, any act,
error or omission relating to (i) the marketing, underwriting, production,
issuance, cancellation or administration of the Reinsured Contracts, (ii) the
investigation, defense, trial, settlement or handling of claims, benefits, or
payments arising out of or relating to the Reinsured Contracts or (iii) the
failure to pay or the delay in payment of benefits, claims or any other amounts
due or alleged to be due under or in connection with the Reinsured Contracts.
"Governmental Entity" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court or government, self-regulatory organization,
commission, tribunal or organization or any political or other subdivision,
department, branch or representative of any of the foregoing.
4
"90-Day Treasury Rate" means the annual yield rate, as of any given
date, of actively traded U.S. Treasury securities having a remaining duration to
maturity of three months, as such rate is published under "Treasury Constant
Maturities" in Federal Reserve Statistical Release H.15(519).
"Novation" shall have the meaning set forth in the Section 2.4
herein.
"Person" shall mean any individual, corporation, limited liability
company, partnership, joint venture, trust or other organization or government
or any agency or political subdivision thereof.
"Profit-Sharing Commission" shall have the meaning set forth in the
Section 4.3 herein.
"Reinsurance Recoverables" shall mean all amounts due to Retrocedent
or its designee under Third Party Retrocession Contracts relating to the
Reinsured Liabilities including all receivables, recoverables, returns, amounts
in respect of profit sharing and all other sums to which Retrocedent may be
entitled under the Third Party Retrocession Contracts, but shall not include any
such recoverables relating to the Excluded Liabilities.
"Reinsured Liabilities" means all liabilities and obligations,
including any losses, loss or allocated loss adjustment expense or unearned
premium obligation arising from the Reinsured Contracts, but only to the extent
incurred on or after the Effective Date, including Extra Contractual Liabilities
and any related attorney fees and other expenses incurred by the
Retrocessionaire to the extent caused by acts, errors or omissions of the
Retrocessionaire or any of its officers, employees, agents or representatives
occurring on or after the date hereof, and to the extent covered under the
5
Reinsured Contracts for period after the Effective Date, but excluding Excluded
Liabilities.
"Renewal Commission" shall have the meaning set forth in the Section
4.2 herein.
"Renewal Rights" means (i) rights to renew the Reinsured Contracts
upon the expiration or cancellation thereof, subject to applicable contractual
relationships with non-affiliated companies, and (ii) the exclusive right to use
the Books and Records relating to the Reinsured Contracts.
"Renewed Contracts" shall have the meaning set forth in the Section
4.2 herein.
"Third Party Retrocession Contracts" means those reinsurance
agreements attached hereto as Schedule 1.1(a).
Section 1.2 Interpretation (a) When a reference is made in this
Retrocession Agreement to a Section or Article, such reference shall be to a
section or article of this Retrocession Agreement unless otherwise clearly
indicated to the contrary. Whenever the words "include", "includes" or
"including" are used in this Retrocession Agreement, they shall be deemed to be
followed by the words "without limitation." The words "hereof," "herein" and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Retrocession Agreement as a whole and not to any
particular provision of this Retrocession Agreement. The meaning assigned to
each term used in this Retrocession Agreement shall be equally applicable to
both the singular and the plural forms of such term, and words denoting any
gender shall include
6
all genders. Where a word or phrase is defined herein, each of its other
grammatical forms shall have a corresponding meaning.
(b) The parties have participated jointly in the negotiation and
drafting of this Retrocession Agreement; consequently, in the event an ambiguity
or question of intent or interpretation arises, this Retrocession Agreement
shall be construed as if drafted jointly by the parties thereto, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Retrocession Agreement.
ARTICLE II
BASIS OF REINSURANCE
Section 2.1 Cession. As of the Effective Date, Retrocedent hereby
cedes on an indemnity basis to Retrocessionaire, and Retrocessionaire hereby
accepts and agrees to reinsure and indemnify Retrocedent for, one hundred
percent (100%) of all Reinsured Liabilities. The parties hereto agree that the
Retrocessionaire shall not be required to indemnify the Retrocedent for any
liability related to the Reinsured Contracts other than the Reinsured
Liabilities.
Section 2.2 Basis of Cession. The reinsurance provided by this
Retrocession Agreement applies net of collectible Reinsurance Recoverables.
Section 2.3 Effect of Reinsured Contracts. Except for Excluded
Liabilities or as otherwise set forth in this Retrocession Agreement, the
reinsurance provided under this Retrocession Agreement shall be subject to the
same clauses, terms, limits, conditions, endorsements, modifications, and
waivers of or affecting the Reinsured Contracts, it being the intent of the
parties that Retrocessionaire shall follow the settlements made by or on behalf
of the Retrocedent.
7
Section 2.4 Renewal and Novation of Reinsured Contracts (a) If
requested by the Retrocessionaire, Retrocedent shall consent to and use its
reasonable best efforts to assist the Retrocessionaire in (i) renewing the
Reinsured Contracts directly with the Retrocessionaire; (ii) canceling and
rewriting the Reinsured Contracts on the Retrocessionaire's paper; and (iii)
novating the Reinsured Contracts as if the Reinsured Contracts were direct
obligations originally reinsured by the Retrocessionaire ("Novation"). Pursuant
to the terms of any such Novation, the Retrocessionaire shall be substituted in
the place and instead of the Retrocedent under the Reinsured Contracts as the
assuming reinsurer, and each cedent under a Reinsured Contract shall disregard
the Retrocedent as a party thereto and treat the Retrocessionaire as if it had
originally been obligated thereunder except as otherwise provided in paragraph
(b), below.
(b) Notwithstanding the foregoing, until the Novation is
effectuated, in the event that a Reinsured Contract is determined by appropriate
Governmental Entities, by judicial decision or otherwise to be not novated from
the Retrocedent to Retrocessionaire (including but not limited to jurisdictions
requiring the original cedent's affirmative consent for novation where the
original cedent either did not or refused to provide such consent), such
Reinsured Contract shall continue for all purposes of this Retrocession
Agreement to be a Reinsured Contract hereunder.
Section 2.5 Novation of Third Party Retrocession Contracts.
Retrocedent shall use its reasonable best efforts to assist the Retrocessionaire
in novating the Third Party Retrocession Contracts as if the Retrocessionaire
were the original party thereto. Pursuant to the terms of such novation, the
Retrocessionaire shall be substituted in the place and instead of the
Retrocedent under the Third Party Retrocession Contracts
8
as the reinsured, and each reinsurer under the Third Party Retrocession Contract
shall disregard the Retrocedent as a party thereto and treat Retrocessionaire as
if it had originally been obligated thereunder.
ARTICLE III
PREMIUMS AND ALLOWANCES
Section 3.1 Transfer (a) As of the date hereof, the Retrocedent
shall transfer to the Retrocessionaire a registrable security interest in all of
the Retrocedent's right, title and interest in, to and under all receivables
under the Reinsured Contracts for the Reinsured Liabilities ("Receivables") as
set forth on the Closing Statement of Business attached as Schedule 2.8 to the
Transfer and Purchase Agreement (which right, title and interest shall include,
without limitation, the right to collect the Receivables).
(b) As of May 30, 2002, the Retrocedent shall transfer to
Retrocessionaire, in cash and securities acceptable to the Retrocessionaire, the
sum of all unearned premium collected in cash under the Reinsured Contracts for
the Reinsured Liabilities by May 17, 2002, plus all of the Reinsurance
Recoverables received by the Retrocedent by May 18, 2002 net of the sum of the
amounts of the losses paid, and the retrocessional premiums paid and less the
advance for prepaid insurance as of May 18, 2002, all as set forth on the
Closing Statement of Business delivered to the Purchaser on May 30, 2002
pursuant to the Transfer and Purchase Agreement.
(c) As of the date hereof, the Retrocedent shall transfer and assign
to Retrocessionaire a registrable security interest in all of the Retrocedent's
right, title and interest in, to and under all Reinsurance Recoverables (which
shall include, without limitation, the right to collect the Reinsurance
Recoverables) under the Third Party Retrocession Contracts.
9
(d) To secure Retrocedent's obligations to the Retrocessionaire
under Section 3.1(a) and (c) with respect to the Receivables and the Reinsurance
Recoverables, each of Retrocedent and Retrocessionaire shall execute the
Assignment of Reinsurance Recoverables and Other Receivables in the form
attached as Exhibit B hereto. All costs and expenses incurred in connection with
obtaining a registrable security interest in accordance with this Section 3.1
shall be borne by the Retrocessionaire.
Section 3.2 Retrocedent's Payment Obligations. Retrocedent agrees to
pay Retrocessionaire one hundred percent (100%) of the following amounts
received by Retrocedent on or after the Effective Date:
(i) all premiums including reinstatement premiums relating to
the Reinsured Contracts for periods on or after the Effective Date;
(ii) all return premiums relating to Novation and canceling
and rewriting the Reinsured Contracts on the Retrocessionaire's paper;
(iii) litigation recoveries from third parties to the extent
they relate to Reinsured Liabilities;
(iv) refunds of Ceding Commissions and Renewal Commissions
provided for pursuant to Section 4.4 herewith;
(v) any and all Reinsurance Recoverables and other recoveries
from third parties to the extent they relate to the Reinsured Liabilities;
and
10
(vi) any and all amounts paid by Retrocessionaire relating to
the Excluded Liabilities.
ARTICLE IV
COMMISSIONS
Section 4.1 Ceding Commission. (a) On May 30, 2002, the
Retrocessionaire shall pay to the Retrocedent a ceding commission ("Ceding
Commission") of twenty-five percent (25%) of the difference between (i) the
amount of all unearned premiums collected (excluding reinstatement premiums) and
(ii) any advance for prepaid insurance relating to the Reinsured Contracts for
periods after the Effective Date received in cash by May 17, 2002 by the
Retrocedent and paid to the Retrocessionaire on May 30, 2002 and as set forth in
the Statement of Business delivered on such date. Starting with Wednesday May
29, 2002, every week on Wednesday (or if Wednesday of a particular week falls on
a non-Business Day, the following Business Day) until termination of this
Retrocession Agreement in accordance with Article X, the Retrocessionaire shall
pay to the Retrocedent the Ceding Commission for all remaining unearned premiums
relating to the Reinsured Liabilities under Reinsured Contracts collected in
cash by the Retrocessionaire during the week preceding such Wednesday.
(b) The premium used for determining Ceding Commissions paid to the
Retrocedent under this Section 4.1 shall be net of all premiums paid by the
Retrocessionaire to the reinsurers under the Third Party Retrocession Contracts.
Furthermore, in no event shall the Retrocessionaire pay a Ceding Commission on
any reinsurance premium which is already included in the calculation of Renewal
Commissions pursuant to Section 4.2 hereof.
11
Section 4.2 Renewal Commission. (a) The Retrocessionaire shall
pay to the Retrocedent a renewal commission ("Renewal Commission") of twelve and
a half percent (12.5%) on all net reinsurance premiums (excluding any
reinstatement premiums relating to any losses incurred on or after the Effective
Date) collected in cash by the Retrocessionaire or any Affiliate thereof
relating to any Reinsured Contracts which are renewed, at its sole discretion,
by the Retrocessionaire or any Affiliate thereof ("Renewed Contracts") over the
twelve (12) month period following the date hereof. At the Closing, the
Retrocessionaire will remit to the Retrocedent an advance payment of eight
million dollars ($8,000,000) ("Advance Payment") to be applied against payment
of such Renewal Commissions. The Advance Payment shall be a minimum Renewal
Commission and shall not be subject to repayment by the Retrocedent. The parties
agree that in the event the aggregate amount of Renewal Commissions to be paid
by the Retrocessionaire to the Retrocedent exceeds the amount of the Advance
Payment, the Retrocessionaire shall pay such additional Renewal Commissions to
the Retrocedent as reinsurance premiums are received in cash from the Renewed
Contracts. The parties further agree that the decision to write any Renewed
Contracts is at the sole discretion of the Retrocessionaire, and that this
Section 4.2 does not create an obligation in any way on the part of the
Retrocessionaire to renew any Reinsured Contract.
(b) For the avoidance of doubt, any reinsurance premiums relating to
(i) the cancellation and rewriting of Reinsured Contracts on the
Retrocessionaire's paper or (ii) Novation of Reinsured Contracts effected
pursuant to Section 2.4 hereof shall be subject to the Ceding Commissions
calculation under Section 4.1 hereof, but not the Renewal Commission calculation
under this Section 4.2 hereof; provided, however,
12
subject to Section 4.4, any renewal of a Reinsured Contract which has been
novated pursuant to Section 2.4 hereof will be subject to Renewal Commissions.
New Section 4.2(c).
(c) The premium used for determining the Renewal Commissions paid to
the Retrocedent under this Section 4.2 shall be net of all premiums paid by the
Retrocessionaire to third party reinsurers under reinsurance agreements obtained
by the Retrocessionaire to reinsure the Renewed Contracts. The premium for such
reinsurance shall be calculated by reasonably allocating the premium for all
reinsurance obtained by the Purchaser for the coverage period of the Renewal
Contracts between the premium received by the Purchaser for the portion of the
Renewal Contracts on which the Seller Parties are to receive Renewal Commissions
and the premium received by the Purchaser on any and all other business
underwritten by the Purchaser protected by such third party reinsurance. In the
event the Retrocessionaire materially changes the reinsurance coverage purchased
by the Retrocessionaire in connection with the Reinsured Contracts, the
Retrocessionaire and the Retrocedent agree to determine jointly in good faith an
appropriate amount of Renewal Commissions payable to the Retrocedent as if the
Retrocessionaire has purchased reinsurance at a level comparable to the current
program of reinsurance provided under the Third Party Retrocession Contracts to
LaSalle Re.
(d) In the event the Retrocessionaire renews a Reinsured Contract at
higher reinsurance premiums than the reinsurance premiums previously paid under
such Reinsured Contract, the Retrocedent is entitled to Renewal Commissions
based upon net reinsurance premiums not greater than one hundred and thirty-five
percent (135%) of the expiring net reinsurance premium relating to such
Reinsured Contract. Furthermore, in
13
the event the Retrocessionaire renews a Reinsured Contract and in the process
increases the amount of coverage under such Reinsured Contract, the Retrocedent
shall not be entitled to any Renewal Commission based upon such additional
coverage, but shall be entitled to Renewal Commissions based upon its pro rata
share of the coverage under such Reinsured Contract prior to its renewal.
Section 4.3 Profit-Sharing Commission. If the loss ratio of the
Reinsured Contracts subject to this Retrocession Agreement for the 2002 accident
year, net of any Reinsurance Recoverables under the Third Party Retrocession
Contracts, is less than forty-five percent (45%) for the relevant period in the
2002 accident year measured after the Effective Date, the Retrocessionaire shall
make a one-time payment to the Retrocedent on or before April 1, 2003, of an
amount equal to fifty percent (50%) of the underwriting profits generated by the
difference between the ultimate net loss ratio and a net loss ratio of
forty-five percent (45%) multiplied by the net premiums earned by the
Retrocessionaire on such Reinsured Contracts for the 2002 accident year
("Profit-Sharing Commission").
Section 4.4 Credits and Adjustments of Commissions. Notwithstanding
any other provision of this Retrocession Agreement to the contrary, Ceding
Commissions, Renewal Commissions and Profit-Sharing Commissions shall be paid by
Retrocessionaire to Retrocedent only with respect to the premiums relating to
the Reinsured Contracts for periods after the Effective Date that have been
collected in cash by Retrocessionaire. If reinsurance premiums are returned by
Retrocessionaire due to termination or cancellation of any Reinsured Contracts
or Renewed Contracts, any payments made by Retrocessionaire to Retrocedent
pursuant to this Article IV shall be
14
taken into consideration in the calculation or recalculation of Ceding
Commissions, Renewal Commissions or Profit-Sharing Commissions payable to the
Retrocedent.
ARTICLE V
ACCOUNTING AND REINSURANCE SETTLEMENT
Section 5.1 Delivery of Accounting and Settlement Reports. Within
forty-five (45) days following the end of each calendar month, Retrocessionaire
shall provide Retrocedent with accounting and settlement reports (including
underlying journal entries contemplated by the Administrative Services
Agreement) in a format to be mutually agreed upon by the parties. Retrocedent
shall have the right to change the format of the reports upon forty-five (45)
days' prior written notice to Retrocessionaire, provided, however, that the
change shall involve no additional cost to Retrocessionaire, except if and to
the extent the changes are reasonably required by the Retrocedent to prepare,
make or file necessary or required financial or regulatory reports.
Section 5.2 Report of Allowances. Within forty-five (45) days
following receipt of the report required to be provided to Retrocedent by
Section 5.1 hereof, Retrocedent shall provide Retrocessionaire with a report of
the allowances set forth in Section 3.2 in a format to be mutually agreed upon
by the parties.
Section 5.3 Payment of Amounts Indicated in Accounting and
Settlement Reports. Simultaneously with Retrocessionaire's delivery of the
accounting and settlement reports required to be provided to Retrocedent by
Retrocessionaire under Section 5.1 hereof, Retrocessionaire shall pay any
amounts due to Retrocedent indicated by such accounting and settlement reports
not otherwise collected directly by the Retrocessionaire in its capacity as
Administrator under the Administrative Services Agreement. Retrocedent shall pay
any allowances due to the Retrocessionaire shown on
15
the report required to be provided to Retrocessionaire by Retrocedent under
Section 5.2 hereof on or before the thirtieth (30th) Business Day following its
receipt of such report. Retrocedent shall pay any amount due to Retrocessionaire
on or before the thirtieth (30th) Business Day following its receipt of the
accounting and settlement reports required to be provided to Retrocedent by
Retrocessionaire under Section 5.1 hereof. Any late payment of an amount
required by this Retrocession Agreement to be paid or remitted by Retrocedent to
Retrocessionaire or by Retrocessionaire to Retrocedent shall bear simple
interest from and including the date such payment is due under this provision
until, but excluding, the date of payment, at a rate per annum equal to the
90-Day Treasury Rate.
Section 5.4 Offset. Any debts or credits incurred on and after the
Effective Date in favor of or against either Retrocedent and its Affiliates, on
one hand, or Retrocessionaire and its Affiliates, on the other hand, with
respect to this Retrocession Agreement, the Administrative Services Agreement ,
the Assignment Agreement or the Transfer and Purchase Agreement, are deemed
mutual debts or credits, as the case may be, and shall be set off, and only the
balance shall be allowed or paid.
ARTICLE VI
RENEWAL RIGHTS
Section 6.1 Renewal Rights. (a) Retrocedent acknowledges that the
intent of this Retrocession Agreement, the Transfer and Purchase Agreement and
the Related Documents is to convey to Retrocessionaire, on an exclusive basis,
all of the Retrocedent's right, title and interest in the Renewal Rights.
Retrocedent shall not retain any Renewal Rights nor shall Retrocedent assign,
transfer or facilitate in any manner the transfer of the Business to any Person
other than the Retrocessionaire, regardless of whether Retrocessionaire chooses
to reinsure any Reinsured Contracts upon expiration or
16
cancellation of such Reinsured Contract. For the avoidance of doubt, the parties
agree and acknowledge that, as of and after the date hereof, under no
circumstances may Retrocedent conduct, or permit any Person other than
Retrocessionaire and its Affiliates to conduct, any marketing or solicitation
activities of any kind whatsoever with respect to the Business, except to the
extent provided for under Section 5.1 in the Transfer and Purchase Agreement.
(b) Retrocedent shall take such actions as are deemed reasonably
necessary and appropriate by Retrocessionaire to facilitate the
Retrocessionaire's exercise of the Renewal Rights with respect to the Reinsured
Contracts.
ARTICLE VII
REINSURED CONTRACT ADMINISTRATION
Section 7.1 Administrative Services. The Reinsured Contracts and the
Reinsured Liabilities shall be administered by the Retrocessionaire pursuant to
the terms and conditions of the Administrative Services Agreement.
ARTICLE VIII
OVERSIGHTS, ERRORS AND OMISSIONS
Section 8.1 Continuing Liability. Inadvertent delays, errors or
omissions made in connection with this Retrocession Agreement shall not relieve
either party from any liability which would have attached had such delay, error
or omission not occurred, provided always that such error or omission is sought
to be rectified as soon as possible after discovery, and provided that the party
making such error or omission or responsible for such delay shall be responsible
for any additional liability which attaches as a result.
17
ARTICLE IX
INSOLVENCY
Section 9.1 Insolvency. In the event of the insolvency of
Retrocedent, all reinsurance under this Retrocession Agreement shall be payable
by Retrocessionaire on the basis of the liability of Retrocedent under the
Reinsured Contracts without diminution because of the insolvency of Retrocedent.
In the event of insolvency and the appointment of a conservator, liquidator or
statutory successor of Retrocedent, all amounts payable by Retrocessionaire
hereunder to Retrocedent shall be payable directly to Retrocedent or to such
conservator, liquidator or statutory successor.
Section 9.2 Notice of Pendency of Claim. It is understood, however,
that in the event of the insolvency of Retrocedent the liquidator or receiver or
statutory successor of Retrocedent shall give written notice to Retrocessionaire
of the pendency of a claim against Retrocedent on the Reinsured Contracts
reinsured hereunder within a reasonable time after such claim is filed in the
insolvency proceeding and 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 which it may deem
available to Retrocedent or its liquidator or receiver or statutory successor.
It is further understood that the expense thus incurred by Retrocessionaire
shall be chargeable, subject to court approval, against Retrocedent as part of
the expense of liquidation to the extent of a proportionate share of the benefit
which may accrue to Retrocedent as a result of the defense undertaken by
Retrocessionaire.
18
Section 9.3 Notice of Insolvency. If either Retrocedent or
Retrocessionaire becomes insolvent, such party shall notify the other party of
the insolvency within five (5) Business Days thereof.
ARTICLE X
DURATION AND TERMINATION
Section 10.1 Effective Date. This Retrocession Agreement shall
commence on the Effective Date. This Retrocession Agreement shall remain in
effect until all Reinsured Liabilities have been finally settled or expired,
unless earlier terminated according to the provisions of Section 10.2.
Section 10.2 Termination. This Retrocession Agreement may be
terminated by a writing stating the effective date of termination by mutual
written agreement of the parties at the time specified in such written
agreement.
ARTICLE XI
DUTY OF COOPERATION
Section 11.1 Full Cooperation. The parties hereto shall cooperate
using reasonable best efforts in order to accomplish the objectives of this
Retrocession Agreement including, without limitation, making available to each
other their respective officers and employees for interviews and meetings with
Governmental Entities and furnishing any additional assistance, information and
documentation as may be reasonably requested by the other party from time to
time. In addition, Retrocedent and Retrocessionaire shall cooperate and use
reasonable best efforts to obtain all consents, approvals and agreements of, and
to give and make all notices and filings with, any Governmental Entity necessary
to authorize, approve or permit the transactions contemplated hereby or by the
Administrative Services Agreement.
19
Section 11.2 Furnishing of Relevant Information. Upon request, each
party hereto shall furnish to the other relevant information concerning the
Reinsured Contracts and Reinsured Liabilities, including but not limited to
studies used in the determination of reserves and other Reinsured Liabilities,
and each shall have the right to review and copy the books and records of the
other concerning such Reinsured Contracts and Reinsured Liabilities upon
reasonable notice, during normal business hours and at the requesting parties
own cost and expense.
ARTICLE XII
INDEMNIFICATION
Section 12.1 Indemnification by Retrocessionaire. Retrocessionaire
hereby indemnifies Retrocedent and its Affiliates and its and their respective
officers, directors, employees, agents and representatives against and agrees to
hold each of them harmless from any and all Damages incurred or suffered by any
of them arising out of or relating to (i) Reinsured Liabilities (ii) any breach
or nonfulfillment by Retrocessionaire of, or any failure by Retrocessionaire to
perform, any of the terms or conditions of, or any duties or obligations under,
this Retrocession Agreement, and (iii) any enforcement of this indemnity.
Section 12.2 Indemnification by Retrocedent. Retrocedent hereby
indemnifies Retrocessionaire and its Affiliates and its and their respective
officers, directors, employees, agents and representatives against and agrees to
hold each of them harmless from any and all Damages incurred or suffered by any
of them arising out of or relating to (i) Excluded Liabilities, (ii) any breach
or nonfulfillment by Retrocedent of, or any failure by Retrocedent to perform,
any of the terms or conditions of, or any duties or
20
obligations under, this Retrocession Agreement, and (iii) any enforcement of
this indemnity.
ARTICLE XIII
REINSURANCE CREDIT AND SECURITY FOR REINSURED LIABILITIES
Section 13.1 Reinsurance Credit. Notwithstanding any other provision
of this Retrocession Agreement to the contrary, if Retrocessionaire becomes
unauthorized or otherwise unaccredited in the domiciliary jurisdiction of the
Retrocedent, Retrocessionaire, upon the request of Retrocedent, will immediately
establish, at its sole cost and option, any escrow accounts, trust accounts for
the benefit of Retrocedent, letters of credit, methods for premium withholding
by Retrocedent or similar funds or a combination thereof in an amount necessary
to permit Retrocedent to obtain full credit for such reinsurance in such
jurisdiction.
Section 13.2 Security for Reinsured Liabilities. If under any
Reinsured Contract the Retrocedent is required to provide security to the party
reinsured (including letters of credit, trust fund or cash collateral) relating
to a Reinsured Liability, the Retrocessionaire, at its option and at its own
cost and expense, shall do one of the following: (i) provide such security on
behalf of or in lieu of the Retrocedent or (ii) provide such security to the
Retrocessionaire and reimburse the Retrocedent for the cost of making such
security available to the Reinsureds under the Reinsured Contracts.
ARTICLE XIV
ARBITRATION
Section 14.1 Arbitration. (a) If any dispute shall arise out of
or with reference to this Retrocession Agreement or any breach thereof, whether
such dispute arises before or after termination of this Retrocession Agreement,
such dispute, upon the
21
written request of either party, shall be submitted to three arbitrators, one to
be chosen by each party, and the third by the two so chosen. If either party
refuses or neglects to appoint an arbitrator (b) within thirty (30) days after
the receipt of written notice from the other party requesting it to do so, the
requesting party may appoint two arbitrators. If the two arbitrators fail to
agree in the selection of a third arbitrator within thirty (30) days of their
appointment, either of the parties may apply to the Bermuda Supreme Court for
the appointment of the third arbitrator pursuant to Section 15(i)(c) of the
Bermuda Arbitration Act 1986 and in such case the person so appointed shall be
deemed and shall act as the third arbitrator. All arbitrators shall be active or
retired disinterested officers of insurance or reinsurance companies or
Underwriters at Lloyd's, London not under the control of either party to this
Retrocession Agreement.
(b) The arbitrators shall be relieved of all judicial formalities
and may abstain from following the strict rules of evidence. Each party shall
submit its case to the arbitrators within thirty days of the appointment of the
third arbitrator.
(c) The decision in writing of any two arbitrators, when filed with
the parties hereto, shall be final and binding on both parties. Judgment may be
entered upon the final decision of the arbitrators in any court having
jurisdiction. Each party shall bear the expense of its own arbitrator and shall
jointly and equally bear with the other party the expense of the third
arbitrator and of the arbitration. Said arbitration shall take place in Bermuda
unless some other place is mutually agreed upon by the parties to this
Retrocession Agreement, subject to the provisions of the Bermuda Arbitration Xxx
0000 or any re-enactment or statutory modification thereof.
22
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.1 Amendment, Modification and Waiver. This Retrocession
Agreement may not be amended, modified or waived except by an instrument or
instruments in writing signed and delivered on behalf of each of the parties
hereto. No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies therein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 15.2 Entire Agreement. This Retrocession Agreement (together
with the exhibits hereto and the other agreements, documents and instruments
delivered in connection herewith), the Administrative Services Agreement, the
Transfer and Purchase Agreement, and the other Related Documents (as defined in
the Transfer and Purchase Agreement) constitute the entire agreement among the
parties with respect to the subject matter hereof and thereof and supersede all
other prior agreements and understandings, both written and verbal, among the
parties or any of them with respect to the subject matter hereof.
Section 15.3 Governing Law. This Retrocession Agreement shall be
governed by and construed in accordance with the laws of Bermuda, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 15.4 Severability. Any term or provision of this
Retrocession Agreement which is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without
23
rendering invalid or unenforceable the remaining terms and provisions of this
Retrocession Agreement or affecting the validity or enforce ability of any of
the terms or provisions of this Retrocession Agreement in any other
jurisdiction. If any provision of this Retrocession Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as
would be enforceable.
Section 15.5 Counterparts. This Retrocession Agreement may be
executed in counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
Section 15.6 Third Party Beneficiaries. Nothing in this Retrocession
Agreement, express or implied, is intended to or shall confer upon any person
other than the parties hereto any rights, benefits or remedies of any nature
whatsoever under or by reason of this Retrocession Agreement.
Section 15.7 Binding; Assignment. This Retrocession Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns and legal representatives. Neither this
Retrocession Agreement, nor any rights, interests or obligations hereunder, may
be directly or indirectly assigned, delegated, sublicensed or transferred by any
party to this Retrocession Agreement, in whole or in part, to any other person
(including any bankruptcy trustee) by operation of law or otherwise, whether
voluntarily or involuntarily, without the prior written consent of the parties
hereto; provided, however, notwithstanding the foregoing, the Retrocessionaire
may assign this Retrocession Agreement to an Affiliate reasonably satisfactory
to the Retrocedent with an A. M. Best credit rating at least equal to that of
the
24
Retrocessionaire, upon prior written consent of the Retrocedent, which consent
shall not be unreasonably withheld, conditioned or delayed.
Section 15.8 Descriptive Headings. The descriptive article and
section headings herein are inserted for convenience of reference only and are
not intended to be part of or to affect the meaning or interpretation of this
Retrocession Agreement.
Section 15.9 Reasonableness. Each of the parties will act reasonably
and in good faith on all matters within the terms of this Retrocession
Agreement.
Section 15.10 Expenses. Unless otherwise specifically provided
herein, all costs and expenses incurred in connection with this Retrocession
Agreement shall be paid by the party incurring such cost or expense.
Section 15.11 Survival. The provisions of Articles XII, XIV and XV
hereof shall survive the termination of this Retrocession Agreement.
Section 15.12 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
telecopy (which is confirmed), or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties to this
Retrocession Agreement as follows:
25
If to Retrocedent:
LaSalle Re Limited
00 Xxxxxx Xxxxxx
Xxxxxxxx XX 00 Xxxxxxx
Xxxxxxxxx: Xxxxx X. Xxxxxxx, Xx.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy to (which shall not constitute notice to Retrocedent for
purposes of this Section 15.12):
Trenwick America Corporation
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxx Del Col
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and
Xxxxx & XxXxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Retrocessionaire:
Endurance Specialty Insurance Ltd.
Xxxxx Xxxxx
0 Xxx-xx-xxxxx Xxxx
Xxxxxxxx XX 00 Xxxxxxx
Xxxxxxxxx: Xxxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
26
With a copy to (which shall not constitute notice to
Retrocessionaire for purposes of this Section 15.12):
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. In
no event shall the provision of notice pursuant to this Section 15.12 constitute
notice for service of any writ, process or summons in any suit, action or other
proceeding.
Section 15.13 Construction. This Agreement is the result of
arms-length negotiations between the parties hereto and has been prepared
jointly by the parties. In applying and interpreting the provisions of this
Retrocession Agreement, there shall be no presumptions that this Retrocession
Agreement was prepared by any one party or that this Retrocession Agreement
shall be construed in favor of or against any one party.
27
IN WITNESS WHEREOF, Retrocedent and Retrocessionaire have caused
their names to be subscribed by their respective authorized officers this May
16, 2002, in Hamilton, Bermuda.
LASALLE RE LIMITED
By: \s\ Xxx X. Xxxxxxxxxxx
---------------------------------
Name: Xxx X. Xxxxxxxxxxx
Title: President and Chief
Executive Officer
ENDURANCE SPECIALTY INSURANCE LTD.
By: \s\ Xxxxxxx X. XxXxxxxxx
---------------------------------
Name: Xxxxxxx X. XxXxxxxxx
Title: Chief Executive Officer
