AMTRUST INTERCOMPANY REINSURANCE AGREEMENT among
EXHIBIT
10.6
among
(1) Technology
Insurance Company, Inc.;
(2) Rochdale
Insurance Company;
(3) Wesco
Insurance Company; and
(4) AmTrust
International Insurance Limited
Effective
June 1, 2006
WHEREAS,
each of the parties hereto is, directly or indirectly, a wholly-owned subsidiary
of AmTrust Financial Services, Inc. (“AmTrust”); and
WHEREAS,
AmTrust wishes the parties to enter into this Agreement to allocate retained
premiums and losses within the Group in a manner consistent with applicable
laws
and regulations.
NOW,
THEREFORE, in consideration of the mutual covenants, terms and conditions set
forth herein, the Parties agree as follows:
ARTICLE
I. TERM:
This
Agreement shall be effective June 1, 2006, subject to all required regulatory
approvals, with respect to Business subject hereto, and shall continue in effect
until terminated in accordance with Article XVIII.
ARTICLE
II. TERRITORY:
This
Agreement provides reinsurance for Business in all territories in which the
Companies issue Policies and/or insure risks thereunder.
ARTICLE
III. BUSINESS REINSURED
All
Policies issued by the Companies.
ARTICLE
IV. DEFINITIONS
A. “Business”
means all Policies issued by the Companies.
B. “Company”
or “Companies” means each Technology Insurance Company, Inc. and Rochdale
Insurance Company when issuing Policies and Wesco Insurance Company and all
of
them, collectively.
C. “Gross
Earned Premium” means Gross Written Premium plus the Companies’ Unearned Premium
Reserves as of the commencement of the Term less the Companies’ Unearned Premium
Reserves as of the Termination Date.
D. “Gross
Written Premium” means any and all amounts charged to a policyholder or other
person on or with respect to a Policy less any such amounts returned for
cancellation of any such Policy.
E. “IBNR”
means the Companies’ reserves for liability for Losses which have occurred, but
have not yet been reported to the Companies, including expected development
of
Outstanding Loss Reserves.
F. “Incurred
Losses” means the sum of Losses Paid, Loss Adjustment Expenses Paid, Outstanding
Loss Reserves, and IBNR.
G. “Loss”
means a claim for coverage under a Policy.
H. “Losses
Paid” means payment made for Losses under Policies less related salvage and
subrogation recoveries.
I. “Loss
Adjustment Expenses” means all costs and expenses that are incurred by a Company
in the investigation, defense or appeal of a specific claim covered under a
Policy, including declaratory judgment expenses arising out of a coverage
question under a Policy.
J. “Net
Earned Premium” means Gross Earned Premium less all original acquisition and
administrative expenses, the cost of inuring reinsurance, Federal Excise Tax,
ceding commission, etc.
K. “Net
Retained Liability” means each Company’s gross liability on each Loss reinsured
hereunder after deducting recoveries from all inuring reinsurance, other than
the reinsurance provided hereunder.
L. “Net
Written Premium” means Gross Written Premium less all original acquisition and
administrative expenses, the cost of inuring reinsurance, Federal Excise Tax,
ceding commission, etc.
M. “Obligations”
mean:
(i) Losses
and Loss Adjustment Expenses paid by the Companies, but not recovered from
the
Reinsurers;
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(ii) Outstanding
Loss Reserves;
(iii) IBNR;
(iv) Loss
Adjustment Expense Reserves; and
(v) Any
amount that the Companies deem necessary to fully secure the Companies as
required by Article X.
N. “Outstanding
Loss Reserves” means, as of a specified date, losses reported to the Companies,
which have been reserved, but not yet paid.
O. “Policies”
mean any and all binders, certificates, policies, contracts of insurance,
accepted, held or covered, provisionally or otherwise.
P. “Reinsurer”
or “Reinsurers” means AmTrust International Insurance Limited and Technology
Insurance Company, Inc. and Rochdale Insurance Company, when acting as
reinsurers hereunder.
Q. “Ultimate
Net Loss” means (i) with respect to each Loss within the Companies Net Retained
Liability, Losses and Loss Adjustment Expenses Paid less salvage and subrogation
recoveries; and (ii) each Companies liability for bad debt resulting from unpaid
premium or premium audits, whether actual or statutory. All salvage, subrogation
or other recoveries made or received subsequent to Loss settlement hereunder
shall be applied as if made or recovered prior to such settlement, and all
necessary adjustments shall be made by the subject Parties. Nothing herein
shall
be construed to mean that losses are not recoverable hereunder until Ultimate
Net Loss has been ascertained.
R. “Unearned
Premium Reserve” means, as of a specified date, the pro rata portion of premium
represented by the unexpired portion of in-force Policies.
ARTICLE
V. INSURING CLAUSE
The
Companies shall cede to the Reinsurers and the Reinsurers shall assume from
the
Companies, the Companies’ Ultimate Net Loss as follows:
A. Technology
Insurance Company, Inc., as a Company, shall (i) cede to AmTrust International
Insurance Limited and AmTrust International Insurance shall assume 70% of its
Ultimate Net Loss; and (ii) cede to Rochdale Insurance Company and Rochdale
Insurance Company shall assume 10% of its Ultimate Net Loss;
B. Rochdale
Insurance Company, as a Company, shall(i) cede to AmTrust International
Insurance Limited and AmTrust International Insurance Limited shall assume
70%
of its Ultimate Net Loss; and (ii) cede to Technology Insurance Company,
Inc.
and
Technology Insurance Company, Inc. shall assume 20% of its Ultimate Net
Loss];
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C. Wesco
Insurance Company shall (i) cede to AmTrust International Insurance Limited
and
AmTrust International Insurance Limited shall assume 70% of its Ultimate Net
Loss; and
(ii)
cede to Technology Insurance Company, Inc. and Technology Insurance Company,
Inc. shall assume 20% of its Ultimate Net Loss;
D. The
Companies shall cede to AmTrust International Insurance Limited and AmTrust
International Insurance Limited shall assume 100% of the Companies Ultimate
Net
Loss resulting from the Companies’ memberships in or reinsurance of any assigned
risk or similar plans.
ARTICLE
VI. PREMIUM
For
the
reinsurance provided hereunder, the Companies shall cede and the Reinsurers
shall assume premiums as follows:
A. Technology
Insurance Company, Inc., as a Company, shall (i) cede to AmTrust International
Insurance Limited and AmTrust International Insurance shall assume 70% of Net
Written Premium and (ii) cede to Rochdale Insurance Company and Rochdale
Insurance Company shall assume 10% of Net Written Premium;
B. Rochdale
Insurance Company, as a Company, shall(i) cede to AmTrust International
Insurance Limited and AmTrust International Insurance Limited shall assume
70%
of Net Written Premium; and (ii) cede to Technology Insurance Company, Inc.
and
Technology Insurance Company, Inc. shall assume 20% of Net Written Premium;
and
C. Wesco
Insurance Company shall (i) cede to AmTrust International Insurance Limited
and
AmTrust International Insurance Limited shall assume 70% of Net Written Premium;
and (ii) cede to Technology Insurance Company, Inc. and Technology Insurance
Company, Inc. shall assume 20% of Net Written Premium.
D. Ceding
Commission. AmTrust International Insurance Limited shall allow the Companies
a
five percent ceding commission to cover deferred acquisition costs.
ARTICLE
VII. EXCLUSIONS
None.
ARTICLE
VIII. CLAIMS
The
Reinsurers agree to abide by the Loss settlements made by the Companies;
provided, that when so requested, the Companies, or any one of them, will afford
the Reinsurers the opportunity,
at the Reinsurers’ expense, to be associated in the defense of any claim, suit
or proceeding involving this reinsurance.
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ARTICLE
IX. REPORTS AND REMITTANCES
Within
30
days of the end of each month, the Companies shall render to the Reinsurers
an
account current showing the Net Cede, which is the sum of the ceded Net Written
Premium less Losses Paid and Loss Adjustment Expenses, and, if applicable,
funds
withheld and adjustments thereto, for the subject month. Within 30 days of
the
end of each calendar quarter, all net balances due shall be settled by the
parties.
ARTICLE
X. RESERVE DEPOSIT (NON-ADMITTED REINSURERS)
With
respect to premium received with respect to an insured risk located in any
jurisdiction in which a Reinsurer is non-admitted, the Companies or any of
them
may require that such Reinsurer secure an amount equal to the Reinsurers’
Obligations (the “Secured Amount”) through one or more of the following: (i) a
Letter of Credit which meets the requirements of the NAIC and applicable state
insurance laws and regulations; (ii) assets held in trust pursuant to
reinsurance trust agreement, which meets the requirements of the NAIC and
applicable state insurance laws and regulations (a “Reinsurance Trust”); or
(iii) cash.
The
Secured Amount shall be equal the Reinsurer’s Obligation, and shall be adjusted
quarterly. Upon default by any Reinsurer of sums due and owing to a Company,
the
Company, as provided in this Article X, may appropriate as much of the Letter
of
Credit, Reinsurance Trust Assets and/or cash as necessary to eliminate the
default. The Company may, however, at its discretion, require payment of any
sum
in default, and it shall be no defense to any such claim that the Company might
have had recourse to the Letter of Credit, Reinsurance Trust assets and/or
cash.
Each
of
the Companies and the Reinsurers hereby agree that the Letter of Credit,
Reinsurance Trust and/or cash, provided pursuant to this Agreement may be drawn
upon at any time, notwithstanding any other provisions herein contained. The
Letter of Credit, Reinsurance Trust and/or cash may be utilized by Company
or
any successor by operation of law, including, without limitation, any
liquidator, rehabilitator, receiver or conservator of the Company for any of
the
following reasons:
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(i)
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To
reimburse the Company for the Reinsurer’s share of unearned premiums
returned to the holders of Policy(ies) reinsured hereunder due to
cancellations of said Policy(ies);
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(ii)
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To
reimburse the Company for the Reinsurer’ share of Losses Paid by the
Company under the terms and provisions of the Policy(ies) reinsured
hereunder;
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(iii)
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To
fund an account in an amount at least equal to the deduction from
the
Company’s liabilities for reinsurance ceded hereunder. Such account shall
include, but not be limited to, amounts for Losses Paid, Outstanding
Loss
Reserves, IBNR and reserves for Loss Adjustment Expenses); and
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(iv)
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To
pay any other amounts due to the Company under this Agreement.
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All
of
the foregoing apply without diminution because of the insolvency of the Company
or the Reinsurers.
ARTICLE
XI: INDEMNIFICATION AND ERRORS AND OMISSIONS:
The
Reinsurers are reinsuring to the extent of the amount herein provided, the
obligations of the Companies under the Policies. The Company shall be the sole
judge as to what constitutes a claim or loss covered under a Policy and the
Reinsurers shall be bound by the judgment of the Company as to its liability
under Policies.
Any
inadvertent delay, error or omission in connection with this Agreement shall
not
relieve any party from any liability that would attach to it if such delay,
error or omission had not been made; provided that such delay, error or omission
is rectified as soon as possible.
ARTICLE
XII. TAXES:
The
Company will be liable for taxes (except Federal Excise Tax) on premiums
reported to the Reinsurers hereunder. Federal Excise Tax applies only to those
Reinsurers which are not exempt from Federal Excise Tax.
The
Reinsurers have agreed to allow for the purpose of paying the Federal Excise
Tax
(if applicable) One Percent (1%) of the subject premium referenced in Article
VII, or such other rate that may be in effect from time to time, to the extent
such premium is subject to Federal Excise Tax.
ARTICLE
XIII. INSPECTION:
Each
Company shall place at the disposal of the Reinsurers, and the Reinsurers shall
have the right to inspect, at all reasonable times, through its authorized
representatives, all books, records and papers of each Company in connection
with the reinsurance hereunder or any claims in connection herewith.
ARTICLE
XIV. FOLLOW THE FORTUNES CLAUSE:
The
Reinsurers’ liability shall attach simultaneously with that of the Company and
all reinsurance for which the Reinsurers shall be liable by virtue of this
Agreement shall be subject in all respects to the same risks, terms, rates,
conditions, interpretations, assessments, waivers, and to the same
modifications, alterations and cancellations, as the respective Policies of
each
of the Companies to which this Agreement relates.
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This
Agreement shall further protect the Company in connection with any Loss for
which the Company may be legally liable to pay in excess of the Policy limit(s)
or extra contractual
obligations which have been incurred because of failure by the Company to settle
within said limits or by reason of alleged negligence or bad faith in rejecting
an offer of settlement or in the preparation of the defense or in the trial
of
any action against its Insured or in the preparation or prosecution of any
appeal consequent upon such action.
The
true
intent of this Agreement being that the Reinsurers shall, in every case to
which
this Agreement applies and in the proportions specified herein, follow the
fortunes of the Company.
Notwithstanding
anything to the contrary herein, this Agreement shall not apply to any Loss
in
excess of Policy limits or extra contractual obligations incurred by a Company
as a result of any fraudulent or criminal act by any officer of director of
such
Company, acting individually or collectively, or in collusion with any
individual, corporation or any other organization or party involved in the
presentation, defense or settlement of any claim covered hereunder.
ARTICLE
XV. INSOLVENCY
In
the
event of the insolvency of a Company, reinsurance under this Agreement shall
be
payable by the Reinsurers (on the basis of the liability of said Company under
Policies reinsured hereunder without diminution because of the insolvency of
the
Company) to the Company or its liquidator, receiver, or statutory successor,
except as provided by the applicable provisions of New Hampshire, New York
or
Delaware insurance laws.
It
is
agreed, however, that the liquidator or receiver or statutory successor of
the
insolvent Company shall give written notice to the Reinsurers of the pendency
of
a claim against the insolvent Company on the contract or contracts reinsured
within a reasonable time after such claim is filed in the insolvency proceeding
and that, during the pendency of such claim, the Reinsurers may investigate
such
claim and interpose at their own expense in the proceeding where such claim
is
to be adjudicated, any defenses which they may deem available to the Company
or
its liquidator to the extent of a proportionate share of the benefit which
may
accrue to the Company solely as a result of the defense undertaken by the
Reinsurers.
ARTICLE
XVI. ARBITRATION CLAUSE:
All
disputes or differences arising out of the interpretation of this Agreement
except as covered by Article XIX—Service of Suit, shall be submitted to the
decision of two (2) disinterested and independent Arbitrators, one to be chosen
by each party, and in the event the Arbitrators fail to agree, to the decision
of an disinterested and independent Umpire to be chosen by the Arbitrators
before they enter upon arbitration. The Arbitrators and Umpire shall be current
or former executive officials of property/casualty insurance or reinsurance
companies or otherwise certified by XXXXX-US. If either of the parties fails
to
appoint an Arbitrator within one (1) month after being required by the other
party in writing to do so, the requesting party may choose two arbitrators
who
shall in
turn
choose an Umpire before they enter upon arbitration. If the Arbitrators fail
to
appoint an Umpire, within one (1) month of appointment, each Arbitrator shall
nominate three candidates within 10 days thereafter, two of whom the other
shall
decline and the decision shall be made by drawing lots.
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The
Arbitration proceedings shall take place at New York, New York, unless otherwise
agreed by the Parties. The applicant shall submit its case within one (1) month
after the appointment of the Umpire, and the respondent shall submit his reply
within one (1) month after receipt of a claim. The Arbitrators and Umpire are
relieved from all judicial formality and may abstain from following the strict
rule of law. They shall settle any dispute under this Agreement according to
an
equitable rather than a strictly legal interpretation of its terms and their
decision shall be final and not subject to appeal. Judgment may be entered
in
any court of competent jurisdiction.
Each
party shall bear the expenses of its Arbitrators and shall jointly and equally
share with the other the expenses of the Umpire and of the Arbitration. This
Article shall survive the termination of this Agreement.
ARTICLE
XVII. RESERVES:
The
Reinsurers will maintain legal reserves with respect to Outstanding Losses
and
Loss Expense Paid.
ARTICLE
XVIII. TERMINATION:
A. Any
party
shall have the right to terminate this Agreement upon sixty (60) days written
notice to the other parties, as provided herein.
B. Any
party
shall have the right to terminate this Agreement immediately by giving the
other
parties written notice:
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1.
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If
the performance of the whole or any part of this Agreement be prohibited
or rendered impossible de jure or de facto in particular and without
prejudice to the generality of the preceding words in consequence
of any
law or regulation which is or shall be in force in any country or
territory or if any law or regulation shall prevent directly or indirectly
the remittance of any or all or any part of the balance or payments
due to
or from either party.
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2.
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If
another party at any time shall:
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(i) Become
insolvent, or
(ii) Suffer
any impairment of capital, or
(iii) File
a
petition in bankruptcy, or
(iv) Go
into
liquidation or rehabilitation, or
(v) Have
a
receiver appointed, or
(vi) Be
acquired or controlled by any other insurance company or
organization
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C. All
notices of termination in accordance with any of the provisions of this
paragraph shall be by certified mail return receipt requested or by overnight
delivery by a recognized courier service and shall be deemed to be served upon
dispatch. All notices of termination in accordance with any of the provisions
of
this Article shall be addressed to the party concerned at its head office or
at
any other address previously designated by that party.
D. In
the
event of this Agreement being terminated at any date other than at an annual
anniversary date then the Net Written Premium due to the Reinsurers shall be
calculated up to date of termination. The rights and obligations of both parties
to this Agreement shall remain in full force until the effective date of
termination.
E. As
respects coverage hereunder, it is understood and agreed that upon termination
of this Agreement, coverage will continue hereunder beyond such termination
date
until the natural expiration date, the cancellation date, or the date which
the
Company, as a matter of law, may terminate coverage with respect to Policies
reinsured hereunder.
F. Should
this Agreement terminate while a loss occurrence is in progress, the Reinsurers
shall be liable to the extent of their interests, subject to the other
conditions of this contract, for all losses resulting from such loss occurrence
whether such losses arise before or after such termination.
ARTICLE
XIX. SERVICE OF SUIT:
It
is
agreed that in the event of the failure of the Reinsurers herein to pay any
amount claimed to be due hereunder or the breach of any other term or condition
of this Agreement and for which the Companies or any Company, in their or its
sole discretion, choses not to file for Arbitration under Article XVI, the
Reinsurers herein, at the request of the Company, will submit to the
jurisdiction of any court of competent jurisdiction within the United States
and
will comply with all requirements necessary to give such court jurisdiction
and
all matters arising hereunder shall be determined in accordance with the law
and
practice of such court.
It
is
further agreed that service of process involving AmTrust International Insurance
Limited in such suit may be made upon Xxxx and Associates,________, Attention:
Xxxxxxx Xxxx and that in any suit instituted against any of them upon this
contract, the Reinsurers will abide by the final decision of such court or
of
any appellate court in the event of an appeal.
The
above-mentioned are authorized and directed to accept service of process on
behalf of the Reinsurers in any such suit and/or upon the request of the Company
to give a written
undertaking to the Company that they will enter a general appearance upon
Reinsurers’ behalf in the event such a suit shall be instituted.
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Further,
pursuant to any statute of any state, territory, or district of the United
States which makes provisions therefor, Reinsurers herein hereby designate
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 Agreement of Reinsurance, and hereby
designate the above named as the person to whom the said office is authorized
to
mail such process or a true copy thereof.
ARTICLE
XX. FOREIGN EXCHANGE:
All
premium and loss payments hereunder shall be in the United States currency.
Premiums
due hereunder in other than United States currency shall be paid by the Company
in United States Dollars at the rates of exchange at which the original accounts
were settled. Failing this the rate of exchange applied shall be that used
by
the Company in their own books of or in accordance with any subsequent
adjustments thereto.
The
amounts recoverable for losses in other than United States currency shall be
converted into United States Dollars at the same rates of exchange as were
applied in the settlement of the original losses. Failing this the rate of
exchange applied shall be that used by the Company in their own books either
at
the time of the settlement or in accordance with any subsequent adjustments
thereto.
ARTICLE
XXI. OFFSET CLAUSE:
The
Company and the Reinsurers shall have the right to offset any balance(s) due
from one to the other under this Agreement. The party asserting the right of
offset may exercise such right at any time whether the balance(s) due are on
account of premiums or losses or otherwise. In the event of the insolvency
of a
party hereto, offsets shall only be allowed in accordance with the applicable
sections of the insurance laws of the States of New Hampshire, New York and
Delaware.
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by
their duty authorized representatives.
Technology
Insurance Company, Inc.
By:_______________________________
Xxxxx
X.
Xxxxxxx
President
Rochdale
Insurance Company
By:_______________________________
Xxxxx
X.
Xxxxxxx
President
Wesco
Insurance Company
By:_______________________________
Xxxxx
X.
Xxxxxxx
AmTrust
International Insurance Limited
By:
______________________________
Xxxxxxx
Xxxx
Manager
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