Exhibit 10.23
LMX QUOTA SHARE RETROCESSIONAL
AGREEMENT AR 1846
RENEWAL PLACEMENT SLIP
----------------------
RETROCEDENT: Continental Casualty Company (20443)
Chicago, Illinois
EFFECTIVE: As respects original contracts written or renewed during the 12
month term beginning January 1, 1995.
Cessions in force to run off until natural expiry, plus an
additional 12 month period. In addition, run off provisions
hereunder will extend to cover all standard run off obligations
under each original cession in force at the time of cancellation.
In the event a Retrocessionaire opts not to continue its
participation on the Agreement replacing this Agreement, it will
remit to the Retrocedent 30 days after the close of the year 90%
of the positive balance of premium received, less losses paid,
and less ceding commission and other commissions paid. This
provision will not apply in the event that this contract is not
renewed.
BUSINESS
COVERED: All London Market Catastrophe Excess of Loss business, where 100%
of the layer is written by the Retrocedent and coded Product Type
6308.
EXCLUSIONS: As per original.
TERRITORY: Losses wheresoever arising
LIMIT: LAYER A
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33.33% Quota Share of $20,000,000 (or $6,666,000) of aggregate
cover any one occurrence. Subject to a maximum of up to
$5,000,000 in the aggregate or Sterling equivalent any one
occurrence, any one original reinsured.
LAYER B
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33.33% Quota Share of $17,500,000 (or $5,832,750) of aggregate
cover any one occurrence. Subject to a maximum of up to
$5,000,000 in the aggregate or Sterling equivalent any one
occurrence, any one original reinsured.
Page 1 of 6
RATE: Original Gross Reinsurance Premium less any commissions paid
under reinsured original contracts and ceding commission.
CEDING
COMMISSION: 3.0% (FLAT)
WARRANTY: The Retrocedent and Retrocessionaires hereunder shall retain all
business subject to this Agreement net and unreinsured in any
way.
FUNDING OF
RESERVES: Letters of Credit (Citibank Scheme) as required by Retrocedent,
in respect of unearned premium and known outstanding losses
reported to Retrocessionaires, excluding losses incurred but not
reported to Retrocessionaires, in compliance with
statutory/regulatory requirements from non-admitted
Retrocessionaires only.
CASH
LOSSES: $250,000 (on a 100% basis).
REPORTS &
REMITTANCES: Both 30 days after the close of each quarter. Annual report 60
days after the expiration of the Agreement. (Per attached)
CURRENCY: All transactions hereunder to be in U.S. Dollars, losses in other
currencies to be converted to U.S. Dollars at the same rates of
exchange used by the Retrocedent in their own books.
WORDING: To be agreed.
GENERAL
CONDITIONS: All cessions hereunder will be at the same terms, conditions and
warranties as original and will follow original settlement made
by the Retrocedent.
Inter-Company Pooling Clause
Confidentiality Clause (per attached)
Salvage and Subrogation Clause
Settlements Clause (per attached)
Offset Clause
ECO Clause--N.M.X. 100
Page 2 of 6
GENERAL
CONDITIONS:
(con't.) Errors and Omissions Clause
Amendments Clause
Access to Records Clause (per attached)
Interest Penalty Clause (per attached)
Insolvency Clause
Arbitration Clause
Taxes Clause
FET Clause
Service of Suit Clause
Aon Re Inc. Intermediary Clause
Please indicate your desired participation by signing and returning one (1) copy
of this Placement Slip to Aon Re Inc.
REINSURER: La Salle Re Limited
------------------------------------------------
THRU:
----------------------------------------------------
AUTHORIZED REFERENCE
PERCENTAGE: 47.50% NUMBER: TBA
----------------------------- -------------
(Layer A)
AUTHORIZED REFERENCE
PERCENTAGE: 31.43% NUMBER: TBA
----------------------------- -------------
(Layer B)
BY: /s/ Xxx Xxxxxxxxxxx DATED: 4 January 1995
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(For processing purposes it is important that you provide your Company's
reference number for this program.)
Page 3 of 6
REPORTS AND REMITTANCES
-----------------------
Within 30 days after the close of each quarter, the Retrocedent shall furnish
the Retrocessionaires with a report summarizing the gross premium, commission
allowed on the gross premium, premium ceded less return premium and commission,
losses paid, loss expenses paid, salvage recovered, and net balance due either
party. The quarterly report also shall contain a statement showing the total
reserves for outstanding losses including loss expenses and a list of all
catastrophic code numbers assigned by the Property Claims Services division of
the American Insurance Services Group, Inc. for paid and outstanding catastrophe
losses and expenses incurred during the quarter. All amendments or adjustments,
including reinstatement premium, shall be accounted for on a year-of-account
basis. Amounts due the Retrocessionaires shall be remitted with said report.
Amounts due the Retrocedent shall be remitted within 30 days following receipt
of report.
Within 60 days following the expiration of the Agreement, the Retrocedent shall
furnish the Retrocessionaires with a report detailing the unearned premium,
calculated on a monthly pro rata basis, as well as the December 31st state of
each year's loss or losses. The Retrocedent shall also furnish the
Retrocessionaires with any additional information they may require to prepare
their financial statements.
Should payment due from the Retrocessionaires exceed their share of $250,000,
the Retrocedent may give the Retrocessionaires notice of payment made or its
intention to make payment on a certain date. If the Retrocedent has paid the
loss, payment shall be made by the Retrocessionaires immediately. If the
Retrocedent intends to pay the loss by a certain date and has submitted a proof
of loss or similar document, payment shall be due from the Retrocessionaires
24 hours prior to that date, provided the Retrocessionaires have a period of
five working days after receipt of said notice to dispatch the payment. Cash
loss amounts specifically remitted by the Retrocessionaires as set forth herein
shall be credited to their next quarterly account.
CONFIDENTIALITY
---------------
It is a condition precedent to any indemnification under this Agreement that the
Retrocedent shall not disclose any details of this Agreement at any time to any
third party without the approval of the Retrocessionaires. Notwithstanding the
foregoing, the Retrocedent may disclose details of this Agreement to Names and
their agents, auditors, accountants, and other third parties as may be required
in order to comply with law or with the bylaws of Lloyd's, provided that they
themselves respect the confidentiality of this undertaking.
Page 4 of 6
SETTLEMENTS
-----------
The Retrocedent shall have the right to settle all claims under its original
contracts. All settlements, provided they are within the terms of this
Agreement, shall be unconditionally binding on the Retrocessionaires in
proportion to their participation in the Agreement, upon provision by the
Retrocedent of the following: identification of loss including date and
documented settlement/loss amounts and expenses received by the Retrocedent
subject to this Agreement.
ACCESS TO RECORDS
-----------------
The Retrocessionaires, or their duly accredited representatives, shall have
access to the books and records of the Retrocedent on matters reasonably
relating to this reinsurance at all reasonable times for the purpose of
obtaining information concerning this Agreement or the subject matter hereof.
Except as provided in the following sentence, access to premium records is
restricted to within four years of the expiration of this Agreement. A
Retrocessionaire shall be permitted access to premium records subsequent to the
aforementioned period only on the condition that either a) there are no balances
payable hereunder by the Retrocessionaire which are overdue as provided in the
Interest Penalty Article of this Agreement, or b) the Retrocessionaire has
funded all balances due hereunder in an interest-bearing trust fund or with a
Letter of Credit as hereinafter provided.
Should the Retrocessionaire choose option b) of the foregoing paragraph, the
Retrocessionaire agrees to provide the Retrocedent a Trust Agreement established
at Xxxxxx Guaranty Trust Company of New York, New York, or at a mutually agreed
successor Trustee, or a clean, irrevocable, and evergreen Letter of Credit,
issued by Xxxxxx Guaranty Trust Company of New York, New York, or by a mutually
agreed bank, of which the Retrocedent shall be the beneficiary, which shall
secure in full all balances due from the Retrocessionaire to the Retrocedent
with respect to this Agreement. Such Trust Agreement and/or Letter of Credit
shall be established under the laws of the state of New York and shall meet all
requirements of the state regulatory authorities applicable to the Retrocedent.
The Retrocessionaire is responsible for all costs associated with providing such
Trust Agreement and/or Letters of Credit as required under this Article.
Page 5 of 6
INTEREST PENALTY
----------------
The interest amounts provided for in this Article shall apply to the
Retrocessionaire or to the Retrocedent in the following circumstances:
A. Loss payment owed by the Retrocessionaire to the Retrocedent shall
have a due date to the Retrocedent of 90 calendar days following the
date of the billing/proof of loss.
B. Payment of any premium shall be due to the Retrocessionaires within 90
calendar days of the date specified in this Agreement. Any premium
adjustments shall be due by the debtor party within 150 calendar days
of the expiry of this Agreement.
C. Payment on return of premiums, commissions, profit sharing, or any
amounts not provided in paragraphs A. or B. above, shall have the due
date as specified in this Agreement. If no due date is specified, the
due date shall be 90 days following the date of billing.
D. Failure by the Retrocessionaire or the Retrocedent to comply with
their respective payment obligations within the time periods as herein
provided shall result in a compound interest penalty payable at a rate
equal to the 90-day Treasury Xxxx rate as published in the Money Rate
Section or any successor section of The Wall Street Journal on the
first business day following the date a remittance becomes due, plus
1% per annum, to be compounded and adjusted quarterly. Any interest
which occurs pursuant to this Article shall be calculated by the party
to which it is owed. The accumulation of the number of days that any
payment is past due shall stop on the date that the Intermediary,
where applicable, receives payment.
E. The validity of any claim or payment may be contested under the
provisions of this Agreement. If the debtor party prevails in an
arbitration or any other proceeding, there shall be no interest
penalty due. Otherwise, any interest shall be calculated and due as
outlined above.
F. If a Retrocessionaire advances payment of any claim it is contesting,
and prevails in the contest, the Retrocedent shall return such payment
plus pay interest on same, calculated as per the provisions of this
Article.
G. Any interest that occurs pursuant to this Article may be waived by the
party to which it is owed. Further, any interest which is calculated
pursuant to this Article that is $100 or less shall be waived. Waiver
of such interest, however, shall not affect the waiving party's rights
to similar interest for any other failure by the other party to make
payment when due under this Article.
H. Nothing in this Article shall diminish any legal remedies that either
party may have against the other.
Page 6 of 6
ENDORSEMENT NO. 1
to
INTERESTS AND LIABILITIES AGREEMENT
attaching to and forming a part of
LMX CATASTROPHE QUOTA SHARE RETROCESSIONAL AGREEMENT
between
CONTINENTAL CASUALTY COMPANY
an ILLINOIS corporation
(hereinafter called the "Retrocedent")
and
LASALLE RE LIMITED
a BERMUDA corporation
(hereinafter called the "Subscribing Retrocessionaire")
It is hereby mutually understood and agreed by and between the Retrocedent
and the Retrocessionaire that Addendum No. 1 attaches to and forms a part of the
captioned Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Endorsement to be
executed in duplicate by their duly authorized representatives.
Signed at CHICAGO, ILLINOIS
CONTINENTAL CASUALTY COMPANY
Signature: /s/ X. X. Xxxxxxxx Title: Director
---------------------- ----------------------------
Attest: /s/ Xxxxxx Xxx Date: April 22, 1996
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Signed at XXXXXXXX, BERMUDA
LASALLE RE LIMITED
Signature: /s/ X. X. Xxxxxxxx Title: Vice President & Underwriter
---------------------- ----------------------------
Xxxx Xxxxxxxx
Attest: /s/ Xxx Xxxx Date: June 21st, 1996
---------------------- ----------------------------
INTERESTS AND LIABILITIES AGREEMENT
attaching to and forming a part of
LMX CATASTROPHE QUOTA SHARE RETROCESSIONAL AGREEMENT
between
CONTINENTAL CASUALTY COMPANY
an ILLINOIS corporation
(hereinafter called the "Retrocedent")
and
LASALLE RE LIMITED
a BERMUDA corporation
(hereinafter called the "Subscribing Retrocessionaire")
If is hereby mutually understood and agreed by and between the Retrocedent
and the Subscribing Retrocessionaire that effective 12:01 a.m., Standard Time,
January 1, 1995 to 12:01 a.m., Standard Time, January 1, 1996, the Subscribing
Retrocessionaire's share in the interests and liabilities of the
Retrocessionaires on the attached Agreement will be 47.50%.
The share of the Subscribing Retrocessionaire will be separate and apart
from the shares of the other Retrocessionaires and will not be joint with those
of the other Retrocessionaires, and the Subscribing Retrocessionaire will in no
event participate in the interests and liabilities of the other
Retrocessionaires.
If the Subscribing Retrocessionaire wishes to designate an alternate party
to that named in the Service of Suit Article contained in the attached
Agreement, then service of process will be made upon the party hereinafter
named:
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IN WITNESS WHEREOF, the parties hereto have caused this Interests and
Liabilities Agreement to be executed in duplicate by their duly authorized
representatives.
Signed at CHICAGO, ILLINOIS
CONTINENTAL CASUALTY COMPANY
Signature: /s/ X. X. Xxxxxxxx Title: Director
-------------------------------- ----------------------------
Attest: /s/ Xxxxxx Xxx Date: April 22, 1996
------------------------------------ -----------------------------
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Signed at XXXXXXXX, BERMUDA
LASALLE RE LIMITED
Signature: /s/ X. X. Xxxxxxxx Title: Vice President & Underwriter
------------------------------ -----------------------------
Xxxx Xxxxxxxx
Attest: /s/ Xxx Xxxx Date: June 21st, 1996
--------------------------------- ------------------------------
2
ADDENDUM NO. 1
--------------
Attaching to and forming a part of
LMX CATASTROPHE QUOTA SHARE RETROCESSIONAL AGREEMENT
ISSUED TO: CONTINENTAL CASUALTY COMPANY
CHICAGO, ILLINOIS
ISSUED BY: VARIOUS RETROCESSIONAIRES IDENTIFIED BY
INTERESTS AND LIABILITIES AGREEMENTS
It is hereby mutually understood and agreed that as respects losses
occurring on original contracts written or renewed with an effective date during
the 12-month term commencing May 10, 1995 at 12:01 a.m. Standard Time, the
Inter-Company Pooling Arrangement Article of the captioned Agreement shall be
amended in its entirety to read as follows:
"INTER-COMPANY POOLING ARRANGEMENT
---------------------------------
"The Retrocedent has entered into reinsurance agreements whereby
it assumes 100% of the liability of other member companies of the CNA
Insurance Group. This Agreement protects such assumed liability and
attaches prior to redistribution, if any, within the Group. Such
redistribution shall be disregarded for all purposes of this
Agreement. For all purposes of this Agreement, "other member companies
of the CNA Insurance Group" are: National Fire Insurance Company of
Hartford, American Casualty Company of Reading Pennsylvania,
Transportation Insurance Company, Transcontinental Insurance Company,
Valley Forge Insurance Company, CNA Casualty of California, CNA
Lloyd's of Texas, and Columbia Casualty Company.
"The Retrocedent shall include the insurance companies of the
Continental Corporation which are affiliated with, controlled by or
under common management of CNA Insurance Group.
"Notice shall be given to the Retrocessionaires within 45 days of
the acquisition of a company not previously a member of the CNA
Insurance Group having in-force business that the Retrocedent wishes
to have covered by this Agreement. In the event either party hereto
maintains that the inclusion hereunder of some portion of the in force
business of any such new acquisition calls for alteration in the
existing terms of this Agreement, and the parties are unable to
negotiate terms that are mutually acceptable, then that portion of the
newly acquired in force business not considered mutually acceptable
shall be covered for an additional period of
1
45 days from the date the dissenting party gives to the other written
notice that said portion of the newly acquired in force business is
unacceptable."
All other terms and conditions of the captioned Agreement shall remain
unchanged.
2
LMX CATASTROPHE QUOTA SHARE RETROCESSIONAL AGREEMENT
----------------------------------------------------
ARTICLE PAGE
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COVERAGE I 2
TERM II 3
TERRITORY III 4
EXCLUSIONS IV 4
DEFINITIONS V 4
REINSURANCE PREMIUM AND CEDING COMMISSION VI 5
EXTRA CONTRACTUAL OBLIGATIONS VII 5
REPORTS AND REMITTANCES VIII 5
RESERVES AND LETTERS OF CREDIT IX 7
INTEREST PENALTY X 9
SETTLEMENTS XI 10
OFFSET XII 10
SALVAGE AND SUBROGATION XIII 11
WARRANTY XIV 11
DELAYS, ERRORS, OR OMISSIONS XV 11
AMENDMENTS XVI 12
ACCESS TO RECORDS XVII 12
CONFIDENTIALITY XVIII 13
INSOLVENCY XIX 13
ARBITRATION XX 15
TAXES XXI 16
FEDERAL EXCISE TAX XXII 16
CURRENCY XXIII 17
SERVICE OF SUIT XXIV 17
INTER-COMPANY POOLING ARRANGEMENT XV 18
INTERMEDIARY XXVI 19
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LMX CATASTROPHE QUOTA SHARE RETROCESSIONAL AGREEMENT
----------------------------------------------------
THIS AGREEMENT is made and entered into by and between CONTINENTAL CASUALTY
COMPANY, CHICAGO, ILLINOIS, (hereinafter called the "Retrocedent") of the one
part, and the various Retrocessionaires as identified by the attached Interests
and Liabilities Agreements (hereinafter called the "Retrocessionaires") of the
other part.
WITNESSETH:
That in consideration of the mutual covenants hereinafter contained and
upon the terms and conditions hereinbelow set forth, the parties hereto agree as
follows:
ARTICLE I
---------
COVERAGE
--------
The Retrocedent shall cede to the Retrocessionaires, and the
Retrocessionaires shall accept, a 33.33% of $5,000,000 (i.e., $1,666,500) quota
share participation in respect to all original contracts written or renewed by
the Retrocedent with an effective date during the term of this Agreement and
classified by the Retrocedent as "London Market Catastrophe Excess of Loss
Reinsurance," where 100% of the layer is written by the Retrocedent and coded
Product Type 6308.
The limit of liability to the Retrocessionaires shall not exceed 33.33% of
$5,000,000 (i.e., $1,666,500) any one occurrence, any one original reinsured,
subject to an aggregate limitation of no more than 33.33% of $20,000,000 (i.e.,
$6,666,000) any one occurrence. Should any loss involve this reinsurance, the
obligation of the Retrocessionaires shall be automatically reinstated as to any
subsequent loss for the full amount of reinsurance as set forth above. The
Retrocedent shall retain a minimum of 66.67% of $5,000,000 (i.e., $3,333,500) of
all cessions to this Agreement net.
2
All reinsurance for which the Retrocessionaires shall be obligated by
virtue of this Agreement shall be subject to the same terms, rates, conditions,
interpretations, waivers, modifications, and alterations as the respective
original contracts of the Retrocedent to which this reinsurance applies. Nothing
herein shall in any manner create any obligations or establish any rights
against the Retrocessionaires in favor of any third parties or any persons not
parties to this Agreement except as provided in the Insolvency Article. The
Retrocedent shall be the sole judge of what constitutes any one occurrence, any
one original insured.
ARTICLE II
----------
TERM
----
This Agreement shall apply to all losses occurring on original contracts
written or renewed with an effective date during the 12-month period commencing
January 1, 1995, 12:01 a.m. Standard Time. The Retrocessionaires shall remain
liable for all losses under original contracts in force until their expiration
or renewal dates, whichever come first, plus an additional 12 month period
should an original contract be renewed at an original reinsured's option. In
addition, the Retrocessionaires shall remain liable as respects any run-off
obligations under the original contracts covered hereunder.
In the event a Retrocessionaire opts not to continue its participation on
the agreement replacing this Agreement, the Retrocessionaire shall remit to the
Retrocedent 90% of the Retrocessionaire's share of the positive balance of
premium received, less losses paid, and less ceding and other commissions within
30 days after the termination of the Agreement. This provision shall not apply
in the event this Agreement is not renewed.
Notwithstanding the cancellation of this Agreement as hereinabove provided,
its provisions shall continue to apply to all unfinished business hereunder to
the end that all
3
obligations and liabilities incurred by each party hereunder prior to such
termination shall be fully performed and discharged.
ARTICLE III
-----------
TERRITORY
---------
This Agreement shall apply to losses wheresoever arising.
ARTICLE IV
----------
EXCLUSIONS
----------
No indemnity shall be provided hereunder for any liability excluded under
the Retrocedent's original contracts.
ARTICLE V
---------
DEFINITIONS
-----------
"Original contracts" as used in this Agreement shall mean reinsurance
treaties, binders, cover notes, slips, policies, contracts, or agreements,
whether written or oral.
"Occurrence" as used in this Agreement is defined as on the original
contracts covered hereunder.
"Loss" as used in this Agreement shall mean the amount of any settlement,
award, or judgment paid by the Retrocedent or for which the Retrocedent has
become liable to pay after deduction of all recoveries, salvages, subrogations,
and other reinsurances whether recovered or not. Loss shall not include loss
expense, unless the original contracts reinsured hereunder define loss as
including loss expense.
"Loss expense" as used in this Agreement shall mean all expenses incurred
by the Retrocedent in the investigation, appraisal, adjustment, litigation
and/or defense of claims under original contracts reinsured hereunder, including
court costs and interest accrued before and after final judgment, but excluding
internal office expenses, salaries, and other
4
remuneration of regular employees (other than staff field adjusters) of the
original reinsureds or the Retrocedent. The Retrocessionaires shall bear their
pro rata shares of all such loss expense (unless defined as part of loss in
reinsured original contracts) and shall benefit pro rata in all salvages,
subrogations, discounts and other recoveries.
ARTICLE VI
----------
REINSURANCE PREMIUM AND CEDING COMMISSION
-----------------------------------------
The Retrocedent shall cede to the Retrocessionaires their proportionate
share of the original premium on all original contracts written or renewed with
an effective date on or after the inception of this Agreement for the business
described in the Coverage Article, less the ceding commission set forth below.
The Retrocessionaires shall allow the Retrocedent a 3% flat ceding
commission in addition to any commissions being paid under the original
contracts reinsured hereunder.
ARTICLE VII
-----------
EXTRA CONTRACTUAL OBLIGATIONS
-----------------------------
This Agreement shall protect the Retrocedent, within the limits hereof, for
liability incurred in accordance with the provisions of the extra contractual
obligations clauses contained in the original contracts covered hereunder.
ARTICLE VIII
------------
REPORTS AND REMITTANCES
-----------------------
Within 30 days after the close of each quarter, the Retrocedent shall
furnish the Retrocessionaires with a report summarizing the gross premium,
commission allowed on the gross premium, premium ceded less return premium and
commission, losses paid, loss expenses paid, salvage recovered, and net balance
due either party. The quarterly report also shall contain a statement showing
the total reserves for outstanding losses including
5
loss expenses and a list of all catastrophe code numbers assigned by the
Property Claim Services division of American Insurance Services Group, Inc. for
paid and outstanding catastrophe losses and loss expense incurred during the
quarter. All amendments or adjustments, including reinstatement premium, shall
be accounted for on a year-of-account basis. Amounts due the Retrocessionaires
shall be remitted with said report. Amounts due the Retrocedent shall be
remitted within 30 days following receipt of the report.
Within 60 days following the expiration of this Agreement, the Retrocedent
shall furnish the Retrocessionaires with a report detailing the unearned
premium, calculated on a monthly pro rata basis, as well as the December 31st
state of losses. The Retrocedent shall also furnish the Retrocessionaires with
any additional information they may require to prepare their financial
statements.
Should payment due from the Retrocessionaires exceed their share of
$250,000, the Retrocedent may give the Retrocessionaires notice of payment made
or its intention make payment on a certain date. If the Retrocedent has paid
the loss, payment shall be made by the Retrocessionaires immediately. If the
Retrocedent intends to pay the loss by a certain date and has submitted a proof
of loss or similar document, payment shall be due from the Retrocessionaires 24
hours prior to that date, provided the Retrocessionaires have a period of five
working days after receipt of said notice to dispatch the payment. Cash loss
amounts specifically remitted by the Retrocessionaires as set forth herein shall
be credited to their next quarterly account.
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ARTICLE IX
----------
RESERVES AND LETTERS OF CREDIT
------------------------------
(This Article is only applicable to those Retrocessionaires who cannot
qualify for credit by each governmental authority having jurisdiction over
the Retrocedent's reserves.)
As regards original contracts issued by the Retrocedent coming within the
scope of this Agreement, the Retrocedent agrees that, when it files with the
Insurance Department or sets up on its books reserves for known losses that have
been reported to the Retrocessionaires (including loss and loss expense paid by
the Retrocedent and loss and loss expense reported and outstanding) and/or
reserves for unearned premium, which it is required by law to set up, it shall
forward to the Retrocessionaires a statement showing the proportion of such loss
reserves applicable to them. The Retrocessionaires hereby agree that they shall
apply for and secure delivery to the Retrocedent of a clean, irrevocable, and
unconditional Letter of Credit, dated on or before December 31 of the year in
which the request is made, and issued by Citibank, N.A., and containing
provisions acceptable to the insurance regulatory authorities having
jurisdiction over the Retrocedent's reserves, in an amount equal to the
Retrocessionaire's proportion of such reserves applicable to them as shown in
the statement prepared by the Retrocedent. Under no circumstances shall any
amount relating to reserves in respect of Incurred But Not Reported losses be
included in the amount of the Letter of Credit.
The Letter of Credit shall be issued for a period of not less than one
year, and shall be automatically extended for one year from its date of
expiration or any future expiration date unless 30 days prior to any expiration
date Citibank N.A. notifies the Retrocedent by registered mail that it elects
not to consider the Letter of Credit extended for any additional period.
Notwithstanding any other provisions of this Agreement, the Retrocedent or
its court-appointed successor in interest may draw upon such credit at any time
without
7
diminution because of the insolvency of the Retrocedent or of any
Retrocessionaire for one or more of the following purposes only:
A. To reimburse the Retrocedent for the Retrocessionaire's share of
unearned premium on original contracts reinsured hereunder or account
of cancellations of such original contracts.
B. To pay the Retrocessionaires share or to reimburse the Retrocedent for
the Retrocessionaire's share of any loss reinsured by this Agreement,
which has not been otherwise paid.
C. To make refund of any sum in excess of the actual amount required to
pay the Retrocessionaire's share of any liability reinsured by this
Agreement.
D. In the event of non-extension of the Letter of Credit as provided for
above, to establish deposit of the Retrocessionaire's share for
unearned premium and/or losses, including reserves for incurred but
not reported losses under this Agreement. Such cash deposit shall be
held in an interest bearing account separate from the Retrocedent's
other assets, and interest thereon shall accrue to the benefit of the
Retrocessionaires.
Citibank, N.A. shall have no responsibility whatsoever in connection with
the propriety of withdrawals made by the Retrocedent or the disposition of
funds withdrawn, except to ensure that withdrawals are made only upon the order
of properly authorized representatives of the Retrocedent.
At annual intervals, or more frequently as agreed but never more frequently
than semi-annually, the Retrocedent shall prepare, for the sole purpose of
amending the Letter of Credit, a specific statement of the Retrocessionaires'
share of reserves for losses and/or unearned premium. If the statement shows
that the Retrocessionaires' share of such reserves exceeds the balance of credit
as of the statement date, the Retrocessionaires shall, within 30 days after
receipt of notice of such excess, secure delivery to the Retrocedent of an
amendment of the Letter of Credit, increasing the amount of credit by the amount
of such difference. If, however, the statement shows that the Retrocessionaires'
share of such reserves is less than the balance of credit as of the statement
date, the Retrocedent
8
shall, within 30 days after receipt of written request from the
Retrocessionaires, release such excess credit by agreeing to secure an amendment
to the Letter of Credit, reducing the amount of credit available by the amount
of such excess credit.
ARTICLE X
---------
INTEREST PENALTY
----------------
The interest amounts provided for in this Article will apply to the
Retrocessionaires or to the Retrocedent in the following circumstances:
A. Loss payments owed by the Retrocessionaires to the Retrocedent shall
have a due date to the Retrocedent of 90 calendar days following the
date of the billing/proof of loss.
B. Payment of any premium shall be due the Retrocessionaires within 90
calendar days of the date specified in this Agreement. Any premium
adjustments will be due by the debtor party within 150 calendar days
of the expiry of this Agreement.
C. Payment on return of premiums, commissions, profit sharing, or any
amounts not provided in paragraphs A. or B. above, shall have the due
date as specified in this Agreement. If no due date is specified, the
due date shall be 90 days following the date of billing.
D. Failure by a Retrocessionaire or the Retrocedent to comply with their
respective payment obligations within the time periods as herein
provided will result in a compound interest penalty payable at a rate
equal to the 90-day Treasury Xxxx rate as published in the Money Rate
Section or any successor section of The Wall Street Journal on the
first business day following the date a remittance becomes due, plus
1% per annum, to be compounded and adjusted quarterly. Any interest
which occurs pursuant to this Article shall be calculated by the party
to which it is owed. The accumulation of the number of days that any
payment is past due will stop on the date that the Intermediary, where
applicable, receives payment.
E. The validity of any claim or payment may be contested under the
provisions of this Agreement. If the debtor party prevails in an
arbitration or any other proceeding, there shall be no interest
penalty due. Otherwise, any interest will be calculated and due as
outlined above.
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F. If a Retrocessionaire advances payment of any claim it is contesting,
and prevails in the contest, the Retrocedent shall return such payment
plus pay interest on same, calculated as per the provisions of this
Article.
G. Any interest that occurs pursuant to this Article may be waived by the
party to which it is owed. Further, any interest which is calculated
pursuant to this Article that is $100 or less shall be waived. Waiver
of such interest, however, shall not affect the waiving party's rights
to similar interest for any other failure by the other party to make
payment when due under this Article.
H. Nothing in this Article shall diminish any legal remedies that either
party may have against the other.
ARTICLE XI
----------
SETTLEMENTS
-----------
The Retrocedent shall have the right to settle all claims under its
original contracts. All settlements, provided they are within the terms of this
Agreement, shall be unconditionally binding on the Retrocessionaires in
proportion to their participation in the Agreement, upon provision by the
Retrocedent of the following: identification of loss including date and
documented settlement/loss amounts and expenses received by the Retrocedent
subject to this Agreement.
Inadvertent omission in dispatching the aforementioned documentation will
in no way affect the obligation of the Retrocessionaires under this Agreement,
provided the Retrocedent informs the Retrocessionaires of such omission promptly
upon discovery.
ARTICLE XII
-----------
OFFSET
------
The Retrocedent or any Retrocessionaire hereunder shall be entitled to
deduct from amounts due the other party under this Agreement any amounts due
itself from the other party under this Agreement; however, in the event of the
insolvency of any party hereto, offset shall be in accordance with applicable
law.
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ARTICLE XIII
------------
SALVAGE AND SUBROGATION
-----------------------
The Retrocessionaires shall be credited with their share of salvage and/or
subrogation in respect of claims and settlements under this Agreement, less
their share of recovery expense. Unless the Retrocedent and the
Retrocessionaires agree to the contrary, the Retrocedent shall enforce its right
to salvage and/or subrogation and shall prosecute all claims arising out of such
right.
ARTICLE XIV
-----------
WARRANTY
--------
It is hereby warranted that the Retrocedent and the Retrocessionaires
hereon shall retain all business subject to this Agreement net and unreinsured
in any way, subject to the limits expressed in the Coverage Article.
ARTICLE XV
----------
DELAYS, ERRORS, OR OMISSIONS
----------------------------
Inadvertent delays, errors, or omissions made in connection with this
Agreement shall not relieve either party from any liability which should have
attached to either party had such delay, error, omission not occurred, provided
always that such error or omission is rectified immediately upon discovery.
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ARTICLE XVI
-----------
AMENDMENTS
----------
This Agreement may be altered or amended in any of its terms and conditions
by mutual consent of the Retrocedent and the Retrocessionaires by addenda hereto
which will then constitute a part of this Agreement.
ARTICLE XVII
------------
ACCESS TO RECORDS
-----------------
The Retrocessionaires, or their duly accredited representatives, shall have
access to the books and records of the Retrocedent on matters reasonably
relating to this reinsurance at all reasonable times for the purpose of
obtaining information concerning this Agreement or the subject matter hereof.
Except as provided in the following sentence, access to premium records is
restricted to within four years of the expiration of this Agreement. A
Retrocessionaire shall be permitted access to premium records subsequent to the
aforementioned period only on the condition that either: a) there are no
balances payable hereunder by the Retrocessionaire which are overdue as provided
in the Interest Penalty Article of this Agreement, or b) the Retrocessionaire
has funded all balances due hereunder in an interest-bearing trust fund or with
a Letter of Credit as hereinafter provided.
Should a Retrocessionaire choose option b) of the foregoing paragraph, the
Retrocessionaire agrees to provide the Retrocedent a Trust Agreement established
at Xxxxxx Guaranty Trust Company of New York, New York, or at a mutually agreed
successor Trustee, or a clean, irrevocable, and evergreen Letter of Credit,
issued by Xxxxxx Guaranty Trust Company of New York, New York, or by a mutually
agreed bank, of which the Retrocedent shall be the beneficiary, which shall
secure in full all balances due from the Retrocessionaire to the Retrocedent
with respect to this Agreement.
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Such Trust Agreement and/or Letter of Credit shall be established under the laws
of the state of New York and shall meet all requirements of the state regulatory
authorities applicable to the Retrocedent. The Retrocessionaire is responsible
for all costs associated with providing such Trust Agreement and/or Letters of
Credit as required under this Article.
ARTICLE XVIII
-------------
CONFIDENTIALITY
---------------
It is a condition precedent to any indemnification under this Agreement
that the Retrocedent shall not disclose any details of this Agreement at any
time to any third party without the approval of the Retrocessionaires.
Notwithstanding the foregoing, the Retrocedent may disclose details of this
Agreement to Names and their agents, auditors, accountants, and other third
parties as may be required in order to comply with law or with the bylaws of
Lloyd's, provided that they themselves respect the confidentiality of this
undertaking.
ARTICLE XIX
-----------
INSOLVENCY
----------
In the event of the Retrocedent's insolvency, the reinsurance afforded by
this Agreement shall be payable by the Retrocessionaires on the basis of the
Retrocedent's liability under the original contracts reinsured without
diminution because of the Retrocedent's insolvency or because its liquidator,
receiver, conservator, or statutory successor has failed to pay all or a portion
of any claims, subject however to the right of the Retrocessionaires to offset
against such funds due hereunder, any sums that may be payable to them by said
insolvent Retrocedent in accordance with the Offset Article. The reinsurance
shall be payable by the Retrocessionaires directly to the Retrocedent, its
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liquidator, receiver, conservator, or statutory successor except (a) where this
Agreement specifically provides another payee of such reinsurance in the event
of the Retrocedent's insolvency or (b) where the Retrocessionaires, with the
consent of the direct insured or insureds, have assumed such policy obligations
of the Retrocedent as direct obligations of themselves to the payees under such
policies in substitution for the Retrocedent's obligation to such payees.
The Retrocedent's liquidator, receiver, conservator, or statutory successor
shall give written notice of the pendency of a claim against the Retrocedent
under the original contracts within a reasonable time after such claim is filed
in the insolvency proceeding. During the pendency of such claim, the
Retrocessionaires may investigate said claim and interpose in the proceeding
where the claim is to be adjudicated, at their own expense, any defense that
they may deem available to the Retrocedent, its liquidator, receiver,
conservator, or statutory successor. The expense thus incurred by the
Retrocessionaires shall be chargeable against the Retrocedent, subject to court
approval, as part of the expense of conservation or liquidation to the extent
that such proportionate share of the benefit shall accrue to the Retrocedent
solely as a result of the defense undertaken by the Retrocessionaires. Where
two or more Retrocessionaires 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 Agreement as though such
expense had been incurred by the Retrocedent.
In the event of insolvency of the Retrocedent, the Retrocessionaires under
this Agreement shall have all rights, as more fully set forth in Section 173 of
Illinois Insurance Code, as amended.
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