QUOTA SHARE RETROCESSION CONTRACT
This QUOTA SHARE RETROCESSION CONTRACT is made and entered into by and
between DORINCO REINSURANCE COMPANY, Midland, Michigan (hereinafter
referred to as the "Retrocedant") and AMERICAN HALLMARK INSURANCE COMPANY
OF TEXAS, Dallas, Texas (hereinafter referred to as the
"Retrocessionaire").
WHEREAS the Retrocedant reinsures business produced and underwritten by or
through Van Wagoner Companies, Inc., Plano, Texas for and on behalf of
STATE AND COUNTY MUTUAL FIRE INSURANCE COMPANY, Fort Worth, Texas
(hereinafter called the "Underlying Reinsured") under a Reinsurance
Agreement styled 100% Quota Share Reinsurance Agreement (reference no.
S22907-070) (hereinafter called the "Underlying Agreement") and;
WHEREAS the Retrocedant desires to retrocede a portion of its liability
thereunder, the parties hereto, in consideration of the mutual covenants
hereinafter contained, agree as follows:
ARTICLE I
The Retrocedant agrees to retrocede to the Retrocessionaire and the
Retrocessionaire agrees to accept and does hereby accept from the
Retrocedant a 26.09% quota share of the Retrocedant s liability arising
from the Underlying Agreement.
ARTICLE II
A copy of the Underlying Agreement is attached to and made part of this
Retrocession Contract. The Retrocedant agrees to furnish the
Retrocessionaire with any material changes in the Underlying Agreement.
ARTICLE III
The liability of the Retrocessionaire will commence at 12:01 a.m., Central
Standard Time, September 1, 1998 and will follow in all respects the terms
and conditions of the Underlying Agreement and any amendments added
thereto, except as may be provided herein. The Retrocessionaire agrees to
follow the Retrocedant in all matters pertaining to the Underlying
Agreement.
It is understood and agreed by the parties that if the Underlying Agreement
is terminated for any reason, this Contract shall terminate automatically
at the same time. In the event the Contract is terminated because the
Underlying Agreement is terminated, the same termination provisions
applicable to the Underlying Agreement will apply to this Contract.
ARTICLE IV
A. 1. The Retrocedant shall furnish the Retrocessionaire an account
within 45 days following the end of each month. The Retrocedant shall
include in this report for informational purposes, the amount of ceded
unearned premium and outstanding loss reserves. The Retrocessionaire's
proportion (i.e., the percent stipulated in ARTICLE I) of the Retrocedant's
net written premiums under the Underlying Agreement, less a provisional
ceding commission of 24.0% of net written premiums and less loss and loss
adjustment expense paid on losses ascribed to the Underwriting Year, shall
be paid by the debtor party to the creditor within 75 days following the
end of each month.
2. In the event any amounts remain unpaid for more than 90 days,
the Retrocessionaire shall be subrogated to the Retrocedant's rights
against Texas Insurance Facilities.
B. 1. The final ceding commission shall be determined by the loss
experience under this Contract. The Retrocedant will calculate an adjusted
ceding commission for each Underwriting Year within 60 days following 24
months from the inception of the Underwriting Year based on premiums earned
and losses incurred. The provisional ceding commission will be adjusted
between the parties as appropriate. Adjustments for each Underwriting Year
will continue to be made annually until all losses ascribed to the
Underwriting Year have been paid or closed, at which time the ceding
commission will become final.
2. Premium earned for the Underwriting Year shall mean all net
written premium ceded to this Contract and ascribed to the Underwriting
Year (less cancellations and returns) less the unearned premium reserve at
the time of the adjustment, if any.
3. Losses incurred for the Underwriting Year shall mean the loss
and loss expense paid by the Retrocessionaire (less salvages and recoveries
received) on losses ascribed to the Underwriting Year, plus loss and loss
expense reserves outstanding on losses ascribed to the Underwriting Year,
and plus or minus any credit or debit carry forward as provided in this
Article.
C. 1. Should the ratio of losses incurred to premium earned be 68.5%
or higher, then the adjusted ceding commission shall be 24.0%.
2. Should the ratio of losses incurred to premium earned be less
than 68.5%, then the adjusted commission shall be determined by adding one
percent to the ceding commission for each one percent reduction of loss
ratio subject to a ceding commission of 30.0% at a loss ratio of 62.5%.
3. Should the ratio of losses incurred to premium earned be less
than 62.5%, then the commission shall be further adjusted by adding one
half of one percent (.5%) to the ceding commission for each one percent
reduction of loss ratio below 62.5%, subject to a maximum ceding commission
of 35.0% at a loss ratio of 52.5% or less.
4. Should the ratio of losses incurred to premium earned be
greater than 68.5% or less than 52.5%, the difference between the actual
loss ratio and 68.5% or 52.5%, as the case may be, will be multiplied by
the earned premium for the Underwriting Year and carried forward as a debit
or credit to the ensuing Underwriting Year calculation.
D. 1. Upon termination, any period of less than 12 months from
inception shall be considered as an Underwriting Year for purposes of this
Article; any period of less than 12 months from anniversary will be
considered as part of the preceding Underwriting Year.
2. Should this Contract be terminated on a run-off basis wherein
the Retrocessionaire is liable for losses occurring after the date of
termination, then such run-off period shall be considered as part of the
last Underwriting Year.
ARTICLE V
The term "Underwriting Year" as used in this Agreement shall mean those
Policies with inception, renewal or anniversary date during each 12-month
period commencing with each September 1, and all premium attributable to,
and all loss arising out of such Policies from such inception, renewal or
anniversary date until expiration, cancellation, or next anniversary,
whichever occurs first, will be ascribed to the Underwriting Year.
ARTICLE VI
All reinsurance falling under this Contract shall be subject to the same
terms, rates, conditions and waivers, and to the same modifications,
alterations and cancellations as the Policies to which such reinsurances
relate, and to liability whether or not incurred within the terms of such
Policies arising out of loss occurrences, the true intent of this Contract
being that the Retrocessionaire shall, in every case to which this Contract
applies and in the proportion specified herein, follow the fortunes of the
Retrocedant.
ARTICLE VII
The Retrocedant agrees to advise the Retrocessionaire promptly of all
claims coming under this Contract as provided by the Underlying Agreement.
The Retrocessionaire agrees to repay the Retrocedant the Retrocessionaire's
proportion (i.e., the percentage stipulated in ARTICLE I), of all losses
and/or loss expenses paid by the Retrocedant as respects losses ascribed to
the Underlying Agreement. The Retrocedant shall remit to the
Retrocessionaire the Retrocessionaire s pro rata share of all salvage
and/or other recoveries received by the Retrocedant under the Underlying
Agreement.
ARTICLE VIII
The Retrocedant shall furnish the Retrocessionaire accounts and all
necessary reports and statistics on the reinsurance ceded under this
Contract.
ARTICLE VIX
The reinsurance provided by this Contract shall be payable by the
Retrocessionaire directly to the Retrocedant or to is liquidator, receiver
or statutory successor on the basis of the liability of the Retrocedant
under the Underlying Agreement without diminution because of the insolvency
of the Retrocedant. In the event of the insolvency of the Retrocedant, the
liquidator or receiver or statutory successor of the Retrocedant shall give
written notice of the pendency of each claim against the Retrocedant under
the Underlying Agreement within a reasonable time after such claim is filed
in the insolvency proceeding; and during the pendency of such claim, the
Retrocessionaire may investigate such claim and interpose, at its own
expense, in the proceeding where such claim is to be adjudicated, any
defense or defenses which it may deem available to the Retrocedant, its
liquidator or statutory successor. The expense thus incurred by the
Retrocessionaire shall be chargeable, subject to court approval, against
the Retrocedant as part of the expense of liquidation to the extent of such
proportionate share of the benefit as shall accrue to the Retrocedant
solely as a result of the defense undertaken by the Retrocessionaire. The
reinsurance shall be payable as hereinbefore in this paragraph provided
except as otherwise provided by Section 4118(a) (relating to Fidelity and
Surety) of the Insurance Law of New York or except (a) where the contract
specifically provides another payee of such reinsurance in the event of the
insolvency of the Retrocedant, and (b) where the Retrocessionaire with the
consent of the direct insured or insureds has assumed such policy
obligations of the Retrocedant as direct obligations of the
Retrocessionaire to the payees under such policies and in substitution for
the obligations of the Retrocedant to such payees.
ARTICLE X
As a condition precedent to any right of action hereunder, any
irreconcilable dispute between the parties to this Contract will be
submitted for decision to a board of arbitration composed of two
arbitrators and an umpire meeting at the Home Office of the Retrocedant.
Arbitration shall be initiated by the delivery of a written notice of
demand for arbitration by one party to the other within a reasonable time
after the dispute has arisen.
The members of the board of arbitration shall be active or retired
disinterested officials of insurance or reinsurance companies, or
Underwriters at Lloyd's, London, not under the control or management of
either party to this Contract. Each party shall appoint its arbitrator and
the two arbitrators shall choose an umpire before instituting the hearing.
If the respondent fails to appoint its arbitrator within four weeks after
being requested to do so by the claimant, the latter shall also appoint the
second arbitrator. If the two arbitrators fail to agree upon the
appointment of an umpire within four weeks after their nominations, each of
them shall name three, of whom the other shall decline two, and the
decision shall be made by drawing lots.
The claimant shall submit its initial brief within 45 days from appointment
of the umpire. The respondent shall submit its brief within 45 days
thereafter and the claimant may submit a reply brief within 30 days after
filing of the respondent's brief.
The board shall make its decision with regard to the custom and usage of
the insurance and reinsurance business. The board shall issue its decision
in writing based upon a hearing in which evidence may be introduced without
following strict rules of evidence but in which cross-examination and
rebuttal shall be allowed. The board shall make its decision within 60
days following the termination of the hearings unless the parties consent
to an extension. The majority decision of the board shall be final and
binding upon all parties to the proceeding. Judgment may be entered upon
the award of the board in any court having jurisdiction.
Each party shall bear the expense of its own arbitrator and shall jointly
and equally bear with the other party the expense of the umpire. The
remaining costs of the arbitration proceedings shall be allocated by the
board.
ARTICLE XI
This Article applies only to Retrocessionaires domiciled outside the United
States of America.
In the event of the failure of the Retrocessionaire to pay any amount due
hereunder the Retrocessionaire shall, upon the request of the Retrocedant,
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.
Service of process may be made upon Mendes & Mount, 000 Xxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx, who are authorized and directed to accept service of
process in any such suit, and give a written undertaking to the Retrocedant
that they will enter a general appearance upon the Retrocessionaire's
behalf.
Further, pursuant to any statute of any state, territory or district of the
United States which makes provisions therefor, the Retrocessionaire hereby
designates 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 Retrocedant or any beneficiary hereunder arising out of
this Contract, and hereby designates the above-named as the person to whom
the said officer is authorized to mail such process or a true copy thereof.
ARTICLE XII
In consideration of the terms under which this Contract is issued, the
Retrocedant undertakes not to claim any deduction in respect of the premium
hereon when making tax returns other than Income or Profits Tax returns to
any state or territory or the District of Columbia.
Federal Excise Tax of 1%, as applicable, will be paid by the
Retrocessionaire, it being understood and agreed that in the event of any
return of premium becoming due hereunder the Retrocessionaire will deduct
1% from the amount of the return and the Retrocedant or its agent will take
steps to recover the Tax from the U.S. Government.
ARTICLE XIII
Sedgwick Re, Inc., is hereby recognized as the Intermediary negotiating
this Contract for all business hereunder. All communications including
notices, premiums, return premiums, commissions, taxes, losses, loss
adjustment expenses, salvages and loss settlements relating thereto shall
be transmitted to the Retrocessionaire or the Retrocedant through Sedgwick
Re, Inc. 0000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx 00000.
Payments by the Retrocedant to the Intermediary shall be deemed to
constitute payment to the Retrocessionaire. Payments by the
Retrocessionaire to the Intermediary shall be deemed only to constitute
payment to the Retrocedant to the extent that such payments are actually
received by the Retrocedant.
IN WITNESS WHEREOF, the parties hereto, by their authorized
representatives, have executed this Contract as of the following dates:
In Midland, Michigan, this ______ day of ____________, 1998.
DORINCO REINSURANCE COMPANY
By_________________________________________
(signature)
___________________________________________
(name)
___________________________________________
(title)
In Dallas, Texas, this ______ day of ____________, 1998.
AMERICAN HALLMARK INSURANCE COMPANY OF TEXAS
By_________________________________________
(signature)
___________________________________________
(name)
___________________________________________
(title)
