R:\97RIL\11339.DOC
Property Excess Per Risk
Reinsurance Contract
Effective: January 1, 1997
issued to
Associated International Insurance Company
Woodland Hills, California
Xxxxxxx Insurance Company
Hoboken, New Jersey
Timberline Insurance Company
Eugene, Oregon
and
any additional company established or acquired
by Associated International Insurance Company, Xxxxxxx Insurance
Company, Timberline Insurance Company or Gryphon Holdings, Inc.,
New York, New York,
to be included hereunder
X. X. Xxxxxx Co.
Reinsurance Services
0000 Xxxx 00xx Xxxxxx
Minneapolis, Minnesota 55431
Property Excess Per Risk
Reinsurance Contract
Effective: January 1, 1997
issued to
Associated International Insurance Company
Woodland Hills, California
Xxxxxxx Insurance Company
Hoboken, New Jersey
Timberline Insurance Company
Eugene, Oregon
and
any additional company established or acquired
by Associated International Insurance Company, Xxxxxxx Insurance
Company, Timberline Insurance Company or Gryphon Holdings, Inc.,
New York, New York,
to be included hereunder
First Property Excess Per Risk Reinsurance
Reinsurers Participations
Allmerica Re, A Division of The Hanover Insurance Company 1.40%
AXA Reinsurance Company 34.40
First Excess and Reinsurance Corporation 6.00
Xxxxxxx Global Reinsurance Corporation, U. S. Branch 2.00
Great Lakes American Reinsurance Company 5.00
PMA Reinsurance Corporation 3.00
Republic Western Insurance Company 3.20
St. Xxxx Reinsurance Management Corporation
(for St. Xxxx Fire and Marine Insurance Company) 29.00
SOREMA North America Reinsurance Company 1.00
Through Xxxxx X. Xxxxxxx & Co. Ltd.
Companies Per Signing Schedule(s) 15.00
Total 100.00%
Second Property Excess Per Risk Reinsurance
Reinsurers Participations
Allmerica Re, A Division of The Hanover Insurance Company 1.00%
AXA Reinsurance Company 30.00
Everest Reinsurance Company 10.80
First Excess and Reinsurance Corporation 5.00
Xxxxxxx Global Reinsurance Corporation, U. S. Branch 7.00
Hannover Ruckversicherungs-Aktiengesellschaft 5.00
Inter-Ocean Re-Insurance Company, Ltd. 7.00
Patriot Re Corporation (for Certain Underwriting Members of
Lloyd's) 3.00
PMA Reinsurance Corporation 3.00
Republic Western Insurance Company 3.20
St. Xxxx Reinsurance Management Corporation
(for St. Xxxx Fire and Marine Insurance Company) 7.00
SOREMA North America Reinsurance Company 2.00
USF RE Insurance Company 4.00
Through Xxxxx X. Xxxxxxx & Co. Ltd.
Lloyd's Underwriters and Companies
Per Signing Schedule(s 12.00
Total 100.00%
Third Property Excess Per Risk Reinsurance
Reinsurers Participations
First Excess and Reinsurance Corporation 6.00%
Xxxxxxx Global Reinsurance Corporation, U. S. Branch 4.00
Great Lakes American Reinsurance Company 2.00
Hannover Ruckversicherungs-Aktiengesellschaft 1.25
Inter-Ocean Re-Insurance Company, Ltd. 40.00
Munich American Reinsurance Company 5.00
SOREMA North America Reinsurance Company 2.00
Transatlantic Reinsurance Company 18.75
USF RE Insurance Company 6.00
Through Xxxxx Xxxxxx - Australia
GIO Insurance Ltd. (trading as XXX Xxxxxxxxxxx) 10.00
Through Xxxxx X. Xxxxxxx & Co. Ltd.
Companies Per Signing Schedule(s) 5.00
Total 100.00%
X. X. Xxxxxx Co.
Reinsurance Services
0000 Xxxx 00xx Xxxxxx
Minneapolis, Minnesota 55431
Table of Contents
Article Page
I Classes of Business Reinsured 1
II Term 1
III Territory 2
IV Exclusions 2
V Retention and Limit 4
VI Reinstatement: Third Property Excess Per Risk 5
VII Other Reinsurance 6
VIII Definitions 6
IX Losses and Loss Adjustment Expense 9
X Special Provisions 10
XI Salvage and Subrogation 10
XII Premium 10
XIII Offset (BRMA 36C) 12
XIV Access to Records (BRMA 1D) 12
XV Liability of the Reinsurer 12
XVI Net Retained Lines (BRMA 32E) 13
XVII Errors and Omissions (BRMA 14F) 13
XVIII Currency (BRMA 12A) 13
XIX Taxes (BRMA 50C) 13
XX Federal Excise Tax (BRMA 17A) 13
XXI Unauthorized Reinsurers 14
XXII Insolvency 15
XXIII Arbitration 16
XXIV Service of Suit (BRMA 49C) 17
XXV Agency Agreement 18
XXVI Intermediary (BRMA 23A) 18
Property Excess Per Risk
Reinsurance Contract
Effective: January 1, 1997
issued to
Associated International Insurance Company
Woodland Hills, California
Xxxxxxx Insurance Company
Hoboken, New Jersey
Timberline Insurance Company
Eugene, Oregon
and
any additional company established or acquired
by Associated International Insurance Company, Xxxxxxx Insurance
Company, Timberline Insurance Company or Gryphon Holdings, Inc.,
New York, New York,
to be included hereunder
(hereinafter referred to collectively as the "Company")
by
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the "Reinsurer")
Article I - Classes of Business Reinsured
By this Contract the Reinsurer agrees to reinsure the excess
liability which may accrue to the Company under its policies,
contracts and binders of insurance or reinsurance (hereinafter
called "policies") in force at the effective date hereof or
issued or renewed on or after that date, and classified by the
Company as Property business underwritten by Associated
International Insurance Company, Woodland Hills, California,
subject to the terms, conditions and limitations hereinafter set
forth.
Article II - Term
A. This Contract shall become effective on January 1, 1997, with
respect to losses occurring on or after that date, and shall
remain in force until December 31, 1997, both days inclusive.
B. Unless the Company elects that the Reinsurer have no liability
for losses occurring after the effective date of expiration,
and so notifies the Reinsurer prior to or as promptly as
possible after the effective date of expiration, reinsurance
hereunder on business in force on the effective date of
expiration shall remain in full force and effect until
expiration, cancellation or next premium anniversary of such
business, whichever first occurs, but in no event beyond
12 months plus odd time (not exceeding 18 months in all as
respects Builders' Risk policies) following the effective date
of expiration.
Article III - Territory
This Contract shall apply to the territorial limits set forth in
the Company's policies reinsured hereunder.
Article IV - Exclusions
A. This Contract does not apply to and specifically excludes the
following:
1. Loss or liability excluded under the provisions of
the "Pools, Associations and Syndicates Exclusion Clause"
attached to and forming part of this Contract.
2. Nuclear risks as defined in the "Nuclear Incident
Exclusion Clause - Physical Damage - Reinsurance (U.S.A.)"
and the "Nuclear Incident Exclusion Clause - Physical
Damage - Reinsurance (Canada)" attached to and forming
part of this Contract.
3. All reinsurance assumed, with the exception of intra-
company reinsurance and specific insureds whose
reinsurance is written through their own captive company
and quoted by a non-related entity.
4. Risks of war, whether or not declared, invasion,
civil war, insurrection, rebellion, revolution or
confiscation by duly constituted governmental or civil
authority as excluded under a standard policy containing a
standard War Exclusion Clause.
5. Hail insurance or reinsurance covering growing,
drying or standing crops when written as such.
6. Flood when written as such; however, this exclusion
shall not apply to flood when included in Difference in
Conditions, Inland Marine and All Risk policies.
7. All armored car business except when written in
excess of $500,000.
8. Credit, financial or insolvency guarantees.
9. Livestock insurance or reinsurance when written as
such.
10. Third Party Bodily Injury and Property Damage
Liability, Medical Payments, Workers' Compensation,
Fidelity and Surety, whether written separately or as part
of a Multiple Peril policy. However, nothing herein
contained shall be construed as excluding liability for
damage to property in an insured's care, custody or
control or for which the insured may be liable.
11. Ocean Marine when written as such.
12. Aircraft, meaning direct damage to hulls insured
under Aircraft Hull policies, but not to exclude aircraft
hulls insured under regular Fire, Inland Marine and All
Risk policies (other than Aircraft Hull policies). In no
event shall any liability attach to the Reinsurer
hereunder in respect of aircraft while in flight or
taxiing.
13. Offshore drilling rigs.
14. Automobile risks insured under Automobile policies
with the exception of floor plans.
15. Boiler and Machinery when written as such.
16. Space and space related risks for the intention of
ignition of the launch vehicle which includes taxiing
within the launch site area and in flight.
17. Grain elevators.
18. Mechanical breakdowns when written as such.
19. Petrochemical risks and refineries.
20. Underground mining.
21. Inland Marine policies covering jewelers block and
motor truck cargo.
22. Mortgage Impairment insurance.
23. All liability of the Company arising by contract,
operation of law, or otherwise, from its participation or
membership, whether voluntary or involuntary, in any
insolvency fund. "Insolvency fund" includes any guaranty
fund, insolvency fund, plan, pool, association, fund or
other arrangement, however denominated, established or
governed, which provides for any assessment of or payment
or assumption by the Company of part or all of any claim,
debt, charge, fee or other obligation of an insurer, or
its successors 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.
24. Kidnap and Xxxxxx.
25. Residual Value and Credit insurance.
26. Crop insurance.
27. Burglary and Theft when written as such.
28. Strike insurance.
29. Product impairment, recall and tampering.
30. Data processing companies whose sole purpose is to
provide data processing services to other companies which
include media exposures defined as material on which data
is to be or is already stored (i.e., disks, magnetic and
paper tapes, drums, cores and programs).
31. Transmission and distribution lines.
B. These exclusions do not apply where the excluded class or
operations constitutes a minor part of or incidental to the
main operations of the insured except for exclusions 2, 3, 4,
8, 11, 12, 13, 16, 23 and 31 of paragraph A.
Article V - Retention and Limit
A. First Property Excess Per Risk Reinsurance
The Company shall retain and be liable for the first $100,000
of ultimate net loss as respects any one risk, each loss. The
Reinsurer shall then be liable for the amount by which such
ultimate net loss exceeds the Company's retention, but the
liability of the Reinsurer shall not exceed $2,400,000 as
respects any one risk, each loss, nor shall it exceed
$7,500,000 as respects all risks involved in any one loss
occurrence.
B. Second Property Excess Per Risk Reinsurance
The Company shall retain and be liable for the first
$2,500,000 of ultimate net loss as respects any one risk, each
loss. The Reinsurer shall then be liable for the amount by
which such ultimate net loss exceeds the Company's retention,
but the liability of the Reinsurer shall not exceed $2,500,000
as respects any one risk, each loss, nor shall it exceed
$10,000,000 as respects all risks involved in any one loss
occurrence.
C. Third Property Excess Per Risk Reinsurance
The Company shall retain and be liable for the first
$5,000,000 of ultimate net loss as respects any one risk, each
loss. The Reinsurer shall then be liable for the amount by
which such ultimate net loss exceeds the Company's retention,
but the liability of the Reinsurer shall not exceed $5,000,000
as respects any one risk, each loss, nor shall it exceed
$10,000,000 as respects all risks involved in any one loss
occurrence.
D. The Company shall be the sole judge of what constitutes "one
risk," except that in no event shall a building and its
contents be considered more than one risk.
Article VI - Reinstatement: Third Property Excess Per Risk
A. As respects the Third Property Excess Per Risk layer
hereunder, in the event all or any portion of the reinsurance
hereunder is exhausted by loss arising out of any one loss
occurrence, the amount so exhausted shall be reinstated
immediately from the time the loss occurrence commences
hereon.
1. For the first $10,000,000 of ultimate net loss so
reinstated the Company shall pay no additional premium.
2. For the second $10,000,000 of ultimate net loss so
reinstated the Company agrees to pay additional premium
equal to the product of the following:
a. The percentage of the occurrence limit reinstated
(based on the ultimate net loss paid by the Reinsurer);
times
b. One-half of the earned reinsurance premium for
that excess layer for the term of this Contract
(exclusive of reinstatement premium).
3. For the third $10,000,000 of ultimate net loss so
reinstated the Company agrees to pay additional premium
equal to the product of the following:
a. The percentage of the occurrence limit reinstated
(based on the ultimate net loss paid by the Reinsurer);
times
b. The earned reinsurance premium for that excess
layer for the term of this Contract (exclusive of
reinstatement premium).
B. Whenever the Company requests payment by the Reinsurer of any
ultimate net loss hereunder, the Company shall submit a
statement to the Reinsurer of reinstatement premium due the
Reinsurer. If the earned reinsurance premium for the term of
this Contract has not been finally determined as of the date
of any such statement, the calculation of reinstatement
premium due shall be based on the annual deposit premium and
shall be readjusted when the earned reinsurance premium for
the term of this Contract has been finally determined. Any
reinstatement premium shown to be due the Reinsurer as
reflected by any such statement (less prior payments, if any)
shall be payable by the Company concurrently with payment by
the Reinsurer of the requested loss. Any return reinstatement
premium shown to be due the Company shall be remitted by the
Reinsurer as promptly as possible after receipt and
verification of the Company's statement.
C. Notwithstanding anything stated herein, the liability of the
Reinsurer under the Third Property Excess Per Risk reinsurance
shall not exceed $10,000,000 as respects all risks involved in
any one loss occurrence, nor shall it exceed $40,000,000 in
all during the term of this Contract.
Article VII - Other Reinsurance
A. The Company shall be permitted to carry excess catastrophe
reinsurance, recoveries under which shall inure solely to the
benefit of the Company and be entirely disregarded in applying
all of the provisions of this Contract.
B. With regard to business written in the General E&S division of
the Company, the Company shall be permitted to carry excess
and/or pro rata reinsurance, recoveries under which shall
inure solely to the benefit of the Company and be entirely
disregarded in applying all of the provisions of this
Contract.
C. The Company shall be permitted to purchase facultative
reinsurance, recoveries under which may inure to the benefit
of this Contract. If such reinsurance does not inure to the
benefit of this Contract, it will be entirely disregarded as
respects this Contract.
Article VIII - Definitions
A. The term "ultimate net loss" shall mean the actual loss
incurred by the Company under policies covered hereunder.
Such loss shall include sums paid in settlement of claims and
suits and in satisfaction of judgments, including prejudgment
interest when added to a judgment. Such loss also shall
include any losses in excess of policy limits and any extra
contractual obligations incurred by the Company.
All salvages, recoveries, payments and reversals or reductions
of verdicts or judgments whether recovered, received or
obtained prior or subsequent to loss settlement under this
Contract, including amounts recoverable under other
reinsurance whether collected or not, shall be applied as if
recovered, received or obtained prior to the aforesaid
settlement and shall be deducted from the actual losses
sustained to arrive at the amount of the net loss. Nothing
herein shall be construed to mean losses are not recoverable
until the net loss to the Company finally has been
ascertained.
B. "Loss adjustment expense" as used herein shall include:
1. Expenses sustained in connection with settlement and
litigation of claims and suits, satisfaction of judgments,
resistance to or negotiations concerning a loss (which
shall include the pro rata share of the Company's outside
employees according to the time occupied in adjusting such
loss and the salaries and expenses of the Company's
employees while diverted from their normal duties to the
service of field adjustment, but shall not include any
salaries of officers nor normal overhead expenses of the
Company);
2. Legal expenses and costs incurred in connection with
coverage questions and legal actions, including
declaratory judgment actions, connected thereto;
3. All interest on judgments other than prejudgment
interest when added to a judgment, and;
4. Expenses sustained to obtain recoveries, salvages and
other reimbursements, or to secure the reversal or
reduction of a verdict or judgment.
C. "Loss in excess of policy limits" and "extra contractual
obligations" as used herein shall be defined as follows:
1. "Loss in excess of policy limits" shall mean 90% of
any amount paid or payable by the Company in excess of its
policy limits, but otherwise within the terms of its
policy, as a result of an action against it by its insured
or its insured's assignee to recover damages the insured
is legally obligated to pay to a third party claimant
because of the Company's alleged or actual negligence or
bad faith in rejecting a settlement within policy limits,
or in discharging its duty to defend or prepare the
defense in the trial of an action against its insured, or
in discharging its duty to prepare or prosecute an appeal
consequent upon such an action.
2. "Extra contractual obligations" shall mean 90% of any
punitive, exemplary, compensatory or consequential
damages, other than loss in excess of policy limits, paid
or payable by the Company as a result of an action against
it by its insured, its insured's assignee or a third party
claimant, which action alleges negligence or bad faith on
the part of the Company in handling a claim under a policy
subject to this Contract.
There will be no recovery hereunder for an extra contractual
obligation or loss in excess of policy limits that has been
incurred due to fraud committed by a member of the board of
directors or a corporate officer of the Company, acting
individually, collectively, or in collusion with a member of
the board of directors, a corporate officer, or a partner of
any other corporation, partnership, or organization involved
in the defense or settlement of a claim on behalf of the
Company.
The date on which any extra contractual obligation and/or loss
in excess of policy limits is incurred by the Company will be
deemed, in all circumstances, to be the date of the original
loss occurrence. Nothing in this Article will be construed to
create a separate or distinct loss occurrence apart from the
original covered loss occurrence that gave rise to the extra
contractual obligations and/or loss in excess of policy limits
discussed in the preceding paragraphs. In no event will the
total liability of the Reinsurer exceeds its applicable limit
of liability as set forth in Article V.
Recoveries from any form of insurance or inuring reinsurance,
if any, which protects the Company against claims the subject
matter of this paragraph shall inure to the benefit of this
Contract.
D. The term "loss occurrence" shall mean the sum of all
individual losses directly occasioned by any one disaster,
accident or loss or series of disasters, accidents or losses
arising out of one event which occurs anywhere in the world
but limited in the United States of America and Canada to the
area of one state of the United States or province of Canada
and states or provinces contiguous thereto and to one another.
However, the duration and extent of any one "loss occurrence"
shall be limited to all individual losses sustained by the
Company occurring during any period of 168 consecutive hours
arising out of and directly occasioned by the same event,
except that the term "loss occurrence" shall be further
defined as follows:
1. As regards windstorm, hail, tornado, hurricane,
cyclone, including ensuing collapse and water damage, all
individual losses sustained by the Company occurring
during any period of 72 consecutive hours arising out of
and directly occasioned by the same event. However, the
event need not be limited to one state or province or
states or provinces contiguous thereto.
2. As regards riot, riot attending a strike, civil
commotion, vandalism and malicious mischief, all
individual losses sustained by the Company occurring
during any period of 72 consecutive hours within the area
of one municipality or county and the municipalities or
counties contiguous thereto arising out of and directly
occasioned by the same event. The maximum duration of
72 consecutive hours may be extended in respect of
individual losses which occur beyond such
72 consecutive hours during the continued occupation of an
assured's premises by strikers, provided such occupation
commenced during the aforesaid period.
3. As regards earthquake (the epicenter of which need
not necessarily be within the territorial confines
referred to in the introductory portion of this
paragraph D) and fire following directly occasioned by the
earthquake, only those individual fire losses which
commence during the period of 168 consecutive hours may be
included in the Company's "loss occurrence."
4. As regards "freeze," only individual losses directly
occasioned by collapse, breakage of glass and water damage
(caused by bursting frozen pipes and tanks) may be
included in the Company's "loss occurrence."
Except for those "loss occurrences" referred to in
subparagraphs 1 and 2 above, the Company may choose the date
and time when any such period of consecutive hours commences,
provided that it is not earlier than the date and time of the
occurrence of the first recorded individual loss sustained by
the Company arising out of that disaster, accident or loss,
and provided that only one such period of
168 consecutive hours shall apply with respect to one event.
However, as respects those "loss occurrences" referred to in
subparagraphs 1 and 2 above, if the disaster, accident or loss
occasioned by the event is of greater duration than
72 consecutive hours, then the Company may divide that
disaster, accident or loss into two or more "loss
occurrences," provided that no two periods overlap and no
individual loss is included in more than one such period, and
provided that no period commences earlier than the date and
time of the occurrence of the first recorded individual loss
sustained by the Company arising out of that disaster,
accident or loss.
No individual losses occasioned by an event that would be
covered by 72 hours clauses may be included in any "loss
occurrence" claimed under the 168 hours provision.
E. "Net earned premium" as used herein is defined as the
Company's gross earned premium for the classes of business
subject to this Contract, less only the earned portion of
premiums, if any, ceded by the Company for reinsurance which
inures to the benefit of this Contract.
F. "Losses incurred" as used herein shall mean losses and loss
adjustment expense paid by the Reinsurer as of the effective
date of calculation, plus the ceded reserves for losses and
loss adjustment expense outstanding as of the same date, all
as respects losses occurring during the term of this Contract.
For all loss occurrences during the term of this Contract
which have two or fewer policies with loss subject to this
Contract, up to two policies having the largest subject loss
recoverables during the term of this Contract shall be deemed
to have a maximum loss and loss adjustment expense recovery of
$900,000 included in losses incurred hereunder.
Article IX - Losses and Loss Adjustment Expense
A. Whenever a loss sustained by the Company appears likely to
result in a claim hereunder, the Company shall notify the
Reinsurer, and the Reinsurer shall have the right to
participate in the adjustment of the loss at its own expense.
B. All loss settlements made by the Company, provided they are
within the terms of this Contract, shall be binding upon the
Reinsurer, and the Reinsurer agrees to pay all amounts for
which it may be liable upon receipt of reasonable evidence of
the amount paid (or scheduled to be paid) by the Company.
C. In the event of loss hereunder, loss adjustment expenses (as
defined in Article VIII) incurred by the Company in connection
therewith shall be shared by the Company and the Reinsurer in
the proportion the ultimate net loss paid or payable by the
Reinsurer bears to the total ultimate net loss paid or payable
by the Company, prior to any reinsurance recoveries, but after
deduction of all salvage and other recoveries. The
Reinsurer's liability for loss adjustment expenses shall be in
addition to its limit of liability for ultimate net loss.
D. In the event the ultimate net loss subject to recovery
hereunder includes an amount of loss in excess of policy
limits and/or extra contractual obligations, then the actual
ultimate net loss recovered hereunder shall be allocated among
indemnity loss, loss in excess of policy limits and/or extra
contractual obligations as follows:
1. When the limits defined in paragraphs A, B and/or C
of Article V with regard to all risks subject to recovery
hereunder involved in any one loss occurrence have not
been exceeded, the actual ultimate net loss recovered
hereunder as respects any one risk, each loss shall be
allocated to indemnity loss, loss in excess of policy
limits and/or extra contractual obligations in the same
proportion that each bears to the total ultimate net loss
subject to recovery on that risk.
2. When the limits defined in paragraphs A, B and/or C
of Article V with regard to all risks subject to recovery
hereunder involved in any one loss occurrence have been
exceeded, the actual ultimate net loss recovered hereunder
as respects any one loss occurrence shall be allocated to
indemnity loss, loss in excess of policy limits and/or
extra contractual obligations in the same proportion that
each bears, before application of the applicable per
occurrence limit, to the total ultimate net loss subject
to recovery on that loss occurrence.
Article X - Special Provisions
As respects loss or damage or costs or expenses arising from
asbestos or seepage and/or pollution and/or contamination, other
than contamination from smoke damage, the maximum sublimit shall
be $25,000 per risk, each loss, or so deemed. Nevertheless, this
does not preclude payment of the cost of removal of debris of
property damaged by a loss otherwise covered hereunder.
Article XI - Salvage and Subrogation
The Reinsurer shall be credited with salvage (i.e., reimbursement
obtained or recovery made by the Company, less the actual cost,
excluding salaries of officials and employees of the Company and
sums paid to attorneys as retainer, of obtaining such
reimbursement or making such recovery) on account of claims and
settlements involving reinsurance hereunder. Salvage thereon
shall always be used to reimburse the excess carriers in the
reverse order of their priority according to their participation
before being used in any way to reimburse the Company for its
primary loss. The Company hereby agrees to enforce its rights to
salvage or subrogation relating to any loss, a part of which loss
was sustained by the Reinsurer, and to prosecute all claims
arising out of such rights.
Article XII - Premium
A. First Property Excess Per Risk Reinsurance
1. As provisional premium for the First Property Excess
Per Risk Reinsurance provided hereunder, the Company shall
pay the Reinsurer a deposit premium of $1,980,000 in four
equal installments of $495,000 on January 1, April 1,
July 1 and October 1 of 1997. The provisional premium
paid by the Company shall be adjusted periodically in
accordance with the provisions set forth herein. For
purposes hereof, the "term of this Contract" shall be from
the effective date of this Contract through the date of
expiration if this Contract expires on a "cutoff" basis or
the end of the runoff period if this Contract expires on a
"runoff" basis.
2. The adjusted premium for the term of this Contract
shall be equal to the Reinsurer's losses incurred for the
term of this Contract, plus 2.75% of the Company's net
earned premium for the term of this Contract, but the
adjusted premium shall not be less than an amount equal to
2.75% of the Company's net earned premium for the term of
this Contract, nor shall it exceed an amount equal to
5.50% of the Company's net earned premium for the term of
this Contract.
3. In the event this Contract expires on a "runoff"
basis, on January 1, 1998, the Company shall pay an
additional deposit premium of 4.50% of the Company's
subject net unearned premium as of December 31, 1997. The
Company shall calculate and report the adjusted premium
for the term of this Contract in accordance with
subparagraph 2 within 60 days following 12 months after
the expiration of this Contract and within 60 days after
the end of each 12-month period thereafter until all
losses occurring during the term of this Contract have
been finally settled. If the adjusted premium exceeds the
reinsurance premiums previously paid for the term of this
Contract, the Company shall remit the difference to the
Reinsurer with its report. If the adjusted premium is
less than reinsurance premiums previously paid for the
term of this Contract, the Reinsurer shall remit the
difference to the Company as promptly as possible after
receipt and verification of the Company's report.
B. Second Property Excess Per Risk Reinsurance
1. As premium for the Second Property Excess Per Risk
Reinsurance provided hereunder during the period
January 1, 1997 through December 31, 1997, the Company
shall pay the Reinsurer 6.50% of its net earned premium
for such period.
2. The Company shall pay the Reinsurer a deposit premium
of $2,860,000 in four equal installments of $715,000 on
January 1, April 1, July 1 and October 1 of 1997.
3. As promptly as possible after December 31, 1997, the
Company shall provide a report to the Reinsurer setting
forth the premium due hereunder, computed in accordance
with subparagraph 1, and any additional premium due the
Reinsurer or return premium due the Company shall be
remitted promptly.
4. In the event this Contract expires on a "runoff"
basis, on January 1, 1998, the Company shall pay an
additional deposit premium of 6.50% of the Company's
subject net unearned premium as of December 31, 1997. The
Company shall calculate and report the adjusted premium
for the term of this Contract in accordance with
subparagraph 1 within 60 days following 12 months after
the expiration of this Contract and within 60 days after
the end of each 12-month period thereafter until all
losses occurring during the term of this Contract have
been finally settled. If the adjusted premium exceeds the
reinsurance premiums previously paid for the term of this
Contract, the Company shall remit the difference to the
Reinsurer with its report. If the adjusted premium is
less than reinsurance premiums previously paid for the
term of this Contract, the Reinsurer shall remit the
difference to the Company as promptly as possible after
receipt and verification of the Company's report.
C. Third Property Excess Per Risk Reinsurance
1. As premium for the Third Property Excess Per Risk
Reinsurance provided hereunder during the period
January 1, 1997 through December 31, 1997, the Company
shall pay the Reinsurer 2.80% of its net earned premium
for such period, subject to a minimum premium of
$1,000,000 for the term of this Contract.
2. The Company shall pay the Reinsurer a deposit premium
of $1,200,000 in four equal installments of $300,000 on
January 1, April 1, July 1 and October 1 of 1997.
3. As promptly as possible after December 31, 1997, the
Company shall provide a report to the Reinsurer setting
forth the premium due hereunder, computed in accordance
with subparagraph 1, and any additional premium due the
Reinsurer or return premium due the Company shall be
remitted promptly.
4. In the event this Contract expires on a "runoff"
basis, on January 1, 1998, the Company shall pay an
additional deposit premium of 2.80% of the Company's
subject net unearned premium as of December 31, 1997. The
Company shall calculate and report the adjusted premium
for the term of this Contract in accordance with
subparagraph 1 within 60 days following 12 months after
the expiration of this Contract and within 60 days after
the end of each 12-month period thereafter until all
losses occurring during the term of this Contract have
been finally settled. If the adjusted premium exceeds the
reinsurance premiums previously paid for the term of this
Contract, the Company shall remit the difference to the
Reinsurer with its report. If the adjusted premium is
less than reinsurance premiums previously paid for the
term of this Contract, the Reinsurer shall remit the
difference to the Company as promptly as possible after
receipt and verification of the Company's report.
Article XIII - Offset (BRMA 36C)
The Company and the Reinsurer shall have the right to offset any
balance or amounts due from one party to the other under the
terms of this Contract. The party asserting the right of offset
may exercise such right any time whether the balances due are on
account of premiums or losses or otherwise.
Article XIV - Access to Records (BRMA 1D)
The Reinsurer or its designated representatives shall have access
at any reasonable time to all records of the Company which
pertain in any way to this reinsurance.
Article XV - Liability of the Reinsurer
A. The liability of the Reinsurer shall follow that of the
Company in every case and be subject in all respects to all
the general and specific stipulations, clauses, waivers and
modifications of the Company's policies and any endorsements
thereon. However, in no event shall this be construed in any
way to provide coverage outside the terms and conditions set
forth in this Contract.
B. Nothing herein shall in any manner create any obligations or
establish any rights against the Reinsurer in favor of any
third party or any persons not parties to this Contract.
Article XVI - Net Retained Lines (BRMA 32E)
A. This Contract applies only to that portion of any policy which
the Company retains net for its own account (prior to
deduction of any underlying reinsurance specifically permitted
in this Contract), and in calculating the amount of any loss
hereunder and also in computing the amount or amounts in
excess of which this Contract attaches, only loss or losses in
respect of that portion of any policy which the Company
retains net for its own account shall be included.
B. The amount of the Reinsurer's liability hereunder in respect
of any loss or losses shall not be increased by reason of the
inability of the Company to collect from any other
reinsurer(s), whether specific or general, any amounts which
may have become due from such reinsurer(s), whether such
inability arises from the insolvency of such other
reinsurer(s) or otherwise.
Article XVII - Errors and Omissions (BRMA 14F)
Inadvertent delays, errors or omissions made in connection with
this Contract or any transaction hereunder 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 rectified as soon as possible after
discovery.
Article XVIII - Currency (BRMA 12A)
A. Whenever the word "Dollars" or the "$" sign appears in this
Contract, they shall be construed to mean United States
Dollars and all transactions under this Contract shall be in
United States Dollars.
B. Amounts paid or received by the Company in any other currency
shall be converted to United States Dollars at the rate of
exchange at the date such transaction is entered on the books
of the Company.
Article XIX - Taxes (BRMA 50C)
In consideration of the terms under which this Contract is
issued, the Company will not claim a deduction in respect of the
premium hereon when making tax returns, other than income or
profits tax returns, to any state or territory of the United
States of America, the District of Columbia or Canada.
Article XX - Federal Excise Tax (BRMA 17A)
(Applicable to those reinsurers, excepting Underwriters at
Lloyd's London and other reinsurers exempt from Federal Excise
Tax, who are domiciled outside the United States of America.)
A. The Reinsurer has agreed to allow for the purpose of paying
the Federal Excise Tax the applicable percentage of the
premium payable hereon (as imposed under Section 4371 of the
Internal Revenue Code) to the extent such premium is subject
to the Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder
the Reinsurer will deduct the applicable percentage from the
return premium payable hereon and the Company or its agent
should take steps to recover the tax from the United States
Government.
Article XXI - Unauthorized Reinsurers
A. If the Reinsurer is unauthorized in any state of the United
States of America or the District of Columbia, the Reinsurer
agrees to fund its share of the Company's ceded United States
outstanding loss and loss adjustment expense reserves
(including incurred but not reported loss reserves) by:
1. Clean, irrevocable and unconditional letters of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
bank or banks meeting the NAIC Securities Valuation Office
credit standards for issuers of letters of credit and
acceptable to said insurance regulatory authorities;
and/or
2. Escrow accounts for the benefit of the Company;
and/or
3. Cash advances;
if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved. The Reinsurer,
at its sole option, may fund in other than cash if its method
and form of funding are acceptable to the insurance regulatory
authorities involved.
B. If the Reinsurer is unauthorized in any province or
jurisdiction of Canada, the Reinsurer agrees to fund 115% of
its share of the Company's ceded Canadian outstanding loss and
loss adjustment expense reserves (including incurred but not
reported loss reserves) by:
1. A clean, irrevocable and unconditional letter of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
Canadian bank or banks meeting the NAIC Securities
Valuation Office credit standards for issuers of letters
of credit and acceptable to said insurance regulatory
authorities, for no more than 15/115ths of the total
funding required; and/or
2. Cash advances for the remaining balance of the
funding required;
if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved.
C. With regard to funding in whole or in part by letters of
credit, it is agreed that each letter of credit will be in a
form acceptable to insurance regulatory authorities involved,
will be issued for a term of at least one year and will
include an "evergreen clause," which automatically extends the
term for at least one additional year at each expiration date
unless written notice of non-renewal is given to the Company
not less than 30 days prior to said expiration date. The
Company and the Reinsurer further agree, notwithstanding
anything to the contrary in this Contract, that said letters
of credit may be drawn upon by the Company or its successors
in interest at any time, without diminution because of the
insolvency of the Company or the Reinsurer, but only for one
or more of the following purposes:
1. To reimburse itself for the Reinsurer's share of
losses and/or loss adjustment expense paid under the terms
of policies reinsured hereunder, unless paid in cash by
the Reinsurer;
2. To reimburse itself for the Reinsurer's share of any
other amounts claimed to be due hereunder, unless paid in
cash by the Reinsurer;
3. To fund a cash account in an amount equal to the
Reinsurer's share of any ceded outstanding loss and loss
adjustment expense reserves (including incurred but not
reported loss reserves) funded by means of a letter of
credit which is under non-renewal notice, if said letter
of credit has not been renewed or replaced by the
Reinsurer 10 days prior to its expiration date;
4. To refund to the Reinsurer any sum in excess of the
actual amount required to fund the Reinsurer's share of
the Company's ceded outstanding loss and loss adjustment
expense reserves (including incurred but not reported loss
reserves), if so requested by the Reinsurer.
In the event the amount drawn by the Company on any letter of
credit is in excess of the actual amount required for C(1) or
C(3), or in the case of C(2), the actual amount determined to
be due, the Company shall promptly return to the Reinsurer the
excess amount so drawn.
Article XXII - Insolvency
A. In the event of the insolvency of one or more of the reinsured
companies, this reinsurance shall be payable directly to the
company or to its liquidator, receiver, conservator or
statutory successor immediately upon demand, with reasonable
provision for verification, on the basis of the liability of
the company without diminution because of the insolvency of
the company or because the liquidator, receiver, conservator
or statutory successor of the company has failed to pay all or
a portion of any claim. It is agreed, however, that the
liquidator, receiver, conservator or statutory successor of
the company shall give written notice to the Reinsurer of the
pendency of a claim against the company indicating the policy
or bond reinsured which claim would involve a possible
liability on the part of the Reinsurer within a reasonable
time after such claim is filed in the conservation or
liquidation proceeding or in the receivership, and that during
the pendency of such claim, the Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses
that it may deem available to the company or its liquidator,
receiver, conservator or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to the
approval of the Court, against the company as part of the
expense of conservation or liquidation to the extent of a pro
rata share of the benefit which may accrue to the company
solely as a result of the defense undertaken by the Reinsurer.
B. Where two or more reinsurers are involved in the same claim
and a majority in interest elect to interpose defense to such
claim, the expense shall be apportioned in accordance with the
terms of this Contract as though such expense had been
incurred by the company.
C. It is further understood and agreed that, in the event of the
insolvency of one or more of the reinsured companies, the
reinsurance under this Contract shall be payable directly by
the Reinsurer to the company or to its liquidator, receiver or
statutory successor, except as provided by Section 4118(a) of
the New York Insurance Law or except (1) where this Contract
specifically provides another payee of such reinsurance in the
event of the insolvency of the company or (2) where the
Reinsurer with the consent of the direct insured or insureds
has assumed such policy obligations of the company as direct
obligations of the Reinsurer to the payees under such policies
and in substitution for the obligations of the company to such
payees.
Article XXIII - Arbitration
A. As a condition precedent to any right of action hereunder, in
the event of any dispute or difference of opinion hereafter
arising with respect to this Contract, it is hereby mutually
agreed that such dispute or difference of opinion shall be
submitted to arbitration. One Arbiter shall be chosen by the
Company, the other by the Reinsurer, and an Umpire shall be
chosen by the two Arbiters before they enter upon arbitration,
all of whom shall be active or retired disinterested executive
officers of insurance or reinsurance companies or Xxxxx'x
London Underwriters. In the event that either party should
fail to choose an Arbiter within 30 days following a written
request by the other party to do so, the requesting party may
choose two Arbiters who shall in turn choose an Umpire before
entering upon arbitration. If the two Arbiters fail to agree
upon the selection of an Umpire within 30 days following their
appointment, each Arbiter shall nominate three candidates
within 10 days thereafter, two of whom the other shall
decline, and the decision shall be made by drawing lots.
B. Each party shall present its case to the Arbiters within
30 days following the date of appointment of the Umpire. The
Arbiters shall consider this Contract as an honorable
engagement rather than merely as a legal obligation and they
are relieved of all judicial formalities and may abstain from
following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but
failing to agree, they shall call in the Umpire and the
decision of the majority shall be final and binding upon both
parties. Judgment upon the final decision of the Arbiters may
be entered in any court of competent jurisdiction.
C. If more than one reinsurer is involved in the same dispute,
all such reinsurers shall constitute and act as one party for
purposes of this Article and communications shall be made by
the Company to each of the reinsurers constituting one party,
provided, however, that nothing herein shall impair the rights
of such reinsurers to assert several, rather than joint,
defenses or claims, nor be construed as changing the liability
of the reinsurers participating under the terms of this
Contract from several to joint.
D. Each party shall bear the expense of its own Arbiter, and
shall jointly and equally bear with the other the expense of
the Umpire and of the arbitration. In the event that the two
Arbiters are chosen by one party, as above provided, the
expense of the Arbiters, the Umpire and the arbitration shall
be equally divided between the two parties.
E. Any arbitration proceedings shall take place at Woodland
Hills, California, unless otherwise mutually agreed.
F. It is agreed that the jurisdiction of the Arbiters to make or
render any decision or award shall be limited by the limit of
liability expressly hereinbefore set forth, and that the
Arbiters shall have no jurisdiction to make any decision or
render any award exceeding such expressly stated limit of
liability of the Reinsurer, nor do they have the jurisdiction
to authorize any punitive, exemplary or consequential damage
awards between the parties hereto.
Article XXIV - Service of Suit (BRMA 49C)
(Applicable if the Reinsurer is not domiciled in the United
States of America, and/or is not authorized in any State,
Territory or District of the United States where authorization is
required by insurance regulatory authorities)
A. It is agreed that in the event the Reinsurer fails to pay any
amount claimed to be due hereunder, the Reinsurer, at the
request of the Company, will submit to the jurisdiction of any
court of competent jurisdiction within the United States.
Nothing in this Article constitutes or should be understood to
constitute a waiver of the Reinsurer's rights to commence an
action in any court of competent jurisdiction in the United
States, to remove an action to a United States District Court,
or to seek a transfer of a case to another court as permitted
by the laws of the United States or of any state in the United
States.
B. Further, pursuant to any statute of any state, territory or
district of the United States which makes provision therefor,
the Reinsurer hereby designates the party named in its
Interests and Liabilities Agreement, or if no party is named
therein, the Superintendent, Commissioner or Director of
Insurance or other officer specified for that purpose in the
statute, or his successor or successors in office, as its true
and lawful attorney upon whom may be served any lawful process
in any action, suit or proceeding instituted by or on behalf
of the Company or any beneficiary hereunder arising out of
this Contract.
Article XXV - Agency Agreement
Associated International Insurance Company shall be deemed the
agent of the other reinsured companies for purposes of sending or
receiving notices required by the terms and conditions of this
Contract, and for purposes of remitting or receiving any monies
due any party.
Article XXVI - Intermediary (BRMA 23A)
X. X. Xxxxxx Co. is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All
communications (including but not limited to notices, statements,
premium, return premium, commissions, taxes, losses, loss
adjustment expense, salvages and loss settlements) relating
thereto shall be transmitted to the Company or the Reinsurer
through X. X. Xxxxxx Co., Reinsurance Services, 0000 Xxxx 00xx
Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000. Payments by the Company to
the Intermediary shall be deemed to constitute payment to the
Reinsurer. Payments by the Reinsurer to the Intermediary shall be
deemed to constitute payment to the Company only to the extent
that such payments are actually received by the Company.
In Witness Whereof, the Company by its duly authorized
representative has executed this Contract as of the date
undermentioned at:
Woodland Hills, California,this _______ day of _______________________________
199___.
__________________________________________________
___
Associated International Insurance Company
Xxxxxxx Insurance Company
Timberline Insurance Company
POOLS, ASSOCIATIONS & SYNDICATES EXCLUSION CLAUSE
Section A:
Excluding:
(a) All business derived directly or indirectly from any
Pool, Association or Syndicate which maintains its own
reinsurance facilities.
(b) Any Pool or Scheme (whether voluntary or mandatory)
formed after March 1, 1968 for the purpose of insuring
property whether on a country-wide basis or in respect of
designated areas. This exclusion shall not apply to so-
called Automobile Insurance Plans or other Pools formed to
provide coverage for Automobile Physical Damage.
Section B:
It is agreed that business written by the Company for the
same perils, which is known at the time to be insured by, or in
excess of underlying amounts placed in the following Pools,
Associations or Syndicates, whether by way of insurance or
reinsurance, is excluded hereunder:
Industrial Risk Insurers,
Associated Factory Mutuals,
Improved Risk Mutuals,
Any Pool, Association or Syndicate formed for the purpose of
writing
Oil, Gas or Petro-Chemical Plants and/or Oil or Gas
Drilling Rigs,
United States Aircraft Insurance Group,
Canadian Aircraft Insurance Group,
Associated Aviation Underwriters,
American Aviation Underwriters.
Section B does not apply:
(a) Where The Total Insured Value over all interests of
the risk in question is less than $300,000,000.
(b) To interests traditionally underwritten as Inland
Marine or stock and/or contents written on a blanket
basis.
(c) To Contingent Business Interruption, except when the
Company is aware that the key location is known at the
time to be insured in any Pool, Association or Syndicate
named above, other than as provided for under Section
B(a).
(d) To risks as follows:
Offices, Hotels, Apartments, Hospitals, Educational
Establishments, Public Utilities (other than railroad
schedules) and builder's risks on the classes of risks
specified in this subsection (d) only.
Where this clause attaches to Catastrophe Excesses, the
following Section C is added:
Nevertheless the Reinsurer specifically agrees that
liability accruing to the Company from its participation in:
(1) The following so-called "Coastal Pools":
Alabama Insurance Underwriting Association
Florida Windstorm Underwriting Association
Louisiana Insurance Underwriting Association
Mississippi Insurance Underwriting Association
North Carolina Insurance Underwriting Association
South Carolina Windstorm and Hail Underwriting
Association
Texas Catastrophe Property Insurance Association
AND
(2) All "Fair Plan" business
for all perils otherwise protected hereunder shall not be
excluded, except, however, that this reinsurance does not include
any increase in such liability resulting from:
(i) The inability of any other participant in such
"Coastal Pool" or "Fair Plan" to meet its liability.
(ii) Any claim against such "Coastal Pool" or "Fair
Plan" or any participant therein, including the
Company, whether by way of subrogation or otherwise,
brought by or on behalf of any insolvency fund (as
defined in the Insolvency Fund Exclusion Clause
incorporated in this Contract).
