Exhibit 10.31
FORM OF 100% QUOTA SHARE RETROCESSION AGREEMENT
(NON-TRADITIONAL - A)
BY AND BETWEEN
ST. XXXX REINSURANCE COMPANY LIMITED
(RETROCEDANT)
and
PLATINUM UNDERWRITERS REINSURANCE INC.
(RETROCESSIONAIRE)
DATED AS OF________, 2002
2
THIS QUOTA SHARE RETROCESSION Agreement (this "AGREEMENT"), effective as of
12:01 a.m. London time on the later of the Business Day (such term and all other
capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in the Formation and Separation Agreement, as defined below)
following the Closing or July 1, 2002 (the "EFFECTIVE TIME", and such date the
"EFFECTIVE DATE"), is made by and between ST. XXXX REINSURANCE COMPANY LIMITED,
a United Kingdom domiciled insurance company ("RETROCEDANT"), and PLATINUM
UNDERWRITERS REINSURANCE INC. (formerly known as USF&G Family Insurance
Company), a Maryland domiciled stock insurance company ("RETROCESSIONAIRE").
WHEREAS, pursuant to a Formation and Separation Agreement dated as of [ ], 2002
(the "FORMATION AND SEPARATION AGREEMENT") between Platinum Underwriters
Holdings, Ltd. ("PLATINUM HOLDINGS"), the ultimate parent of Retrocessionaire
and The St. Xxxx Companies, Inc. ("THE ST. XXXX"), the ultimate parent of
Retrocedant, The St. Xxxx agreed to cause its insurance subsidiaries to cede
specified liabilities under certain reinsurance contracts of The St. Paul's
insurance subsidiaries; and Platinum Holdings agreed to cause its insurance
subsidiaries to reinsure such liabilities;
WHEREAS, Retrocedant has agreed to retrocede to Retrocessionaire, and
Retrocessionaire has agreed to assume by indemnity reinsurance, as of the
Effective Time, a one hundred percent (100%) quota share of the liabilities
arising pursuant to the Reinsurance Contracts (as defined hereunder), subject to
the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises and upon
the terms and conditions set forth herein, the parties hereto agree as follows:
1. BUSINESS COVERED
Retrocedant hereby obligates itself to retrocede to Retrocessionaire and
Retrocessionaire hereby obligates itself to accept, pursuant to the terms
of this Agreement, a one hundred percent (100%) quota share of any and
all liabilities incurred by Retrocedant on or after January 1, 2002 but
not yet paid as of the Effective Time, under all reinsurance and
retrocession contracts that:
(i) are listed in Exhibit A hereto; or
(ii) are new or renewal reinsurance or retrocession contracts [of the
kind listed in Exhibit A hereto] entered into by Retrocedant
pursuant to Clause 4.2 of Part B or (to the extent provided
therein) Clause 10 of Part C of the UK Underwriting Agency and
Underwriting Management Agreement (the "AGENCY AGREEMENT")
between Retrocedant and Platinum Re (UK) Limited of even date
herewith,
(together, the "REINSURANCE CONTRACTS"), provided that (for the avoidance
of doubt and save as provided in Clause 10 of Part C of the Agency
Agreement) Retrocedant shall not retrocede, and Retrocessionaire shall
not accept, any liability incurred by
3
Retrocedant under reinsurance and retrocession contracts to the extent
that they are entered into or renewed after the authorisation of Platinum
Re UK Limited under Part IV of the Financial Services and Markets Xxx
0000 of the United Kingdom to carry on reinsurance business in the United
Kingdom.
2. TERM
This Agreement shall be continuous as to the Reinsurance Contracts.
Except as mutually agreed in writing by Retrocedant and Retrocessionaire,
this Agreement shall remain continuously in force until all Reinsurance
Contracts are terminated, expired, cancelled or commuted.
3. COVERAGE
3.1 SECTION A (RETROSPECTIVE) COVERAGE PERIOD
The Section A (Retrospective) Coverage Period will be the period from and
including January 1, 2002 to but not including the Effective Time.
3.2 SECTION B (PROSPECTIVE) COVERAGE PERIOD.
The Section B (Prospective) Coverage Period will be the period from and
including the Effective Time through and including the commutation,
expiration or final settlement of all liabilities under any of the
Reinsurance Contracts referred to in sub-paragraph (i) of Clause 1
("SECTION B COVERAGE").
4. PREMIUMS AND ADDITIONAL CONSIDERATION
4.1 SECTION A (RETROSPECTIVE) COVERAGE PERIOD - PREMIUM
(A) On the Effective Date, in respect of the Section A
(Retrospective) Coverage Period, Retrocedant shall pay to the
account of Retrocessionaire an amount (the "INITIAL SECTION A
PREMIUM") equal to one hundred percent (100%) of the carrying
value on the books of Retrocedant as of June 30, 2002, of the
aggregate of all loss and loss adjustment expense and ceding
commission reserves relating to the Reinsurance Contracts with
respect to the Section A (Retrospective) Coverage Period,
determined in accordance with statutory accounting principles on
a basis consistent in all material respects with the methods,
principles, practices and policies employed in the preparation
and presentation of Retrocedant's annual statutory financial
statement as of 31st December, 2001 as filed with the Financial
Services Authority and as submitted to The St. Xxxx, and subject
to the adjustments as set forth on Exhibit B hereto (the "LOSS
RESERVE ADJUSTMENTS"), as applicable.
(B) As soon as reasonably practicable, but in no event later than
[90] days following the Effective Date, Retrocedant shall prepare
and deliver to Retrocessionaire an accounting, including the
calculation of all Loss Reserve Adjustments as provided for
herein (the "PROPOSED LOSS RESERVE
4
ACCOUNTING") of all loss and loss adjustment expense reserves and
ceding commission reserves relating to the Reinsurance Contracts
with respect to the Section A (Retrospective) Coverage Period, as
of the Effective Date, determined in accordance with statutory
accounting principles on a basis consistent in all material
respects with the methods, principles, practices and policies
employed in the preparation and presentation of Retrocedant's
annual statutory financial statement as of 31st December, 2001 as
filed with the Financial Services Authority and as submitted to
The St. Xxxx, adjusted to reflect the Loss Reserve Adjustments,
as applicable (the "FINAL SECTION A PREMIUM"). In the event the
Final Section A Premium is greater than the Initial Section A
Premium, Retrocedant shall promptly pay to the account of
Retrocessionaire the difference plus interest on such amount at
the Applicable Rate (as defined below) from and including the
Effective Date to and including the date of such payment. In the
event the Initial Section A Premium is greater than the Final
Section A Premium, Retrocessionaire shall promptly repay to the
account of Retrocedant the difference (as an adjustment to the
amount payable pursuant to Section 4.1(A) above) plus interest on
such amount at the Applicable Rate from and including the
Effective Date to and including the date of such payment.
4.2 SECTION B (PROSPECTIVE) COVERAGE PERIOD -- PREMIUMS
(A) On the Effective Date, in respect of the Section B (Prospective)
Coverage Period, Retrocedant shall transfer to Retrocessionaire
an amount (the "INITIAL SECTION B PREMIUM") equal to the carrying
value on the books of Retrocedant as of June 30, 2002 of one
hundred percent (100%) of the unearned premium reserves relating
to the Reinsurance Contracts for the Section B (Prospective)
Coverage Period, determined in accordance with statutory
accounting principles on a basis consistent in all material
respects with the methods, principles, practices and policies
employed in the preparation and presentation of Retrocedant's
annual statutory financial statement as of 31st December, 2001 as
filed with the Financial Services Authority and as submitted to
The St. Xxxx, less the applicable Ceding Commission, as defined
below, and with respect to all Reinsurance Contracts, one hundred
percent (100%) of all gross premiums written on or after the
Effective Time, net of premium returns, allowances and
cancellations and less any applicable Ceding Commission. [NOTE:
WOULD IT BE BETTER TO PUT THE LAST 3 1/2 LINES IN A SEPARATE
CLAUSE, SINCE IT DOES NOT RELATE TO THE CALCULATION AS AT 30TH
JUNE, 2002?]
(B) As soon as reasonably practicable, but in no event later than
[90] days following the Effective Date, Retrocedant shall prepare
and deliver to Retrocessionaire an accounting (the "PROPOSED
PREMIUM RESERVE ACCOUNTING", together with the Proposed Loss
Reserve Accounting, the "PROPOSED ACCOUNTING") of all unearned
premium reserves relating to the Reinsurance Contracts for the
Section B (Prospective) Coverage Period, as of the Effective
Date, determined in accordance with statutory accounting
principles on a basis consistent in all material respects with
the methods,
5
principles, practices and policies employed in the preparation
and presentation of Retrocedant's annual statutory financial
statement as of 31st December, 2001 as filed with the Financial
Services Authority and as submitted to The St. Xxxx, relating to
the Reinsurance Contracts, net of the applicable Ceding
Commission (the "FINAL SECTION B PREMIUM"). In the event the
Final Section B Premium is greater than the Initial Section B
Premium, Retrocedant shall promptly pay to the account of
Retrocessionaire the difference plus interest on such amount at
the Applicable Rate from and including the Effective Date to and
including the date of such payment. In the event the Initial
Section B Premium is greater than the Final Section B Premium,
Retrocessionaire shall promptly repay to the account of
Retrocedant the difference (as an adjustment to the amount
payable pursuant to Section 4.2(A) above) plus interest on such
amount at the Applicable Rate from and including the Effective
Date to and including the date of such payment.
(C) Notwithstanding the foregoing, the parties agree that all gross
estimated premiums written prior to the Effective Date and earned
but not yet billed ("EBUB", and also referred to as "estimated
premiums receivable" or "EBNR") as of the Effective Time and
relating to the Reinsurance Contracts, as determined on or before
______, 2002, in accordance with Retrocedant's customary
practices and procedures and as submitted to The St. Xxxx, shall
be allocated to Retrocedant. All payments received after the
Effective Time by Retrocedant or Retrocessionaire in respect of
EBUB as of the Effective Time shall be retained by Retrocedant or
held on trust for and paid by Retrocessionaire to or to the order
of Retrocedant, and all rights to collect such amounts shall be
retained by or transferred to Retrocedant. Any changes made on or
after the Effective Time as to the amount of EBUB as of the
Effective Time shall be for the account of Retrocessionaire and
shall not affect the amount retained by Retrocedant. The parties
agree that as of the first anniversary of the date hereof,
Retrocessionaire shall pay to Retrocedant the difference, if any,
between the amount of EBUB as of the Effective Time and the
aggregate amount paid to and/or retained by Retrocedant prior to
that date with respect to EBUB as of the Effective Time. All
amounts, if any, in respect of EBUB which are in excess of EBUB
as of the Effective Time, calculated pursuant to the first
sentence of this Section 4.2(C), shall be for the account of
Retrocessionaire and no such amounts shall be retained by or
payable to Retrocedant.
4.3 DISPUTE RESOLUTION
(A) After receipt of the Proposed Accounting, together with the work
papers used in preparation thereof, Retrocessionaire shall have
30 days (the "REVIEW PERIOD") to review such Proposed Accounting.
Unless Retrocessionaire delivers written notice to Retrocedant on
or prior to the 30th day of the Review Period stating that it has
material objections thereto, Retrocessionaire shall be deemed to
have accepted and agreed to the Proposed Accounting.
Retrocessionaire shall not object to any method, principle,
practice or policy
6
employed in the preparation of the Proposed Accounting if such
method, principle, practice or policy is consistent in all
material respects with that employed in the preparation and
presentation of Retrocedant's statutory annual financial
statement as of 31st December, 2001 as filed with the Financial
Services Authority and as submitted to The St. Xxxx. If
Retrocessionaire so notifies Retrocedant of its material
objections to the Proposed Accounting, the parties shall in good
faith attempt to resolve, within 30 days (or such longer period
as the parties may agree) following such notice (the "RESOLUTION
PERIOD"), their differences with respect to such material
objections and any resolution by them as to any disputed amounts
shall be final, binding and conclusive.
(B) Any amount remaining in dispute at the conclusion of the
Resolution Period ("UNRESOLVED CHANGES") shall be submitted to
arbitration in accordance with Clause 15 of this Agreement.
(C) Once the Proposed Accounting has been finalised in accordance
with the above process, the Final Section A Premium and the Final
Section B Premium amounts shall be as set forth in the Proposed
Accounting, as determined by the Arbiters, if applicable. In the
event the sum of such amounts is greater than the amount paid by
Retrocedant to Retrocessionaire on the Effective Date,
Retrocedant shall promptly pay to the account of Retrocessionaire
the difference plus interest on such amount at the Applicable
Rate from and including the Effective Date to and including the
date of such payment. In the event the aggregate of such amounts
is lower than the amount paid by Retrocedant to Retrocessionaire
on the Effective Date, Retrocessionaire shall promptly repay to
the account of Retrocedant the difference (as an adjustment to
the amount payable pursuant to Section 4.1(A) and/or 4.2(A)
above, as applicable) plus interest on such amount at the
Applicable Rate from the Effective Date to the date of such
payment.
5. CEDING COMMISSION
With respect to the Reinsurance Contracts, Retrocessionaire shall pay the
Retrocedant a ceding commission (the "CEDING COMMISSION") with respect to
the Section B (Prospective) Coverage Period, and such Ceding Commission
shall equal one hundred percent (100%) of the actual expenses incurred in
writing each Reinsurance Contract, including actual ceding commissions
and brokerage paid, as determined in accordance with Retrocedant's
customary practices and procedures and as submitted to The St. Xxxx, all
as allocable pro rata to periods from and after the Effective Time.
6. ORIGINAL CONDITIONS
All retrocessions assumed under this Agreement shall be subject to the
same rates, terms, conditions, waivers and interpretations, and to the
same modifications and alterations, as the respective Reinsurance
Contracts.
7
7. INURING RETROCESSIONS
7.1 ALLOCATION TO RETROCESSIONAIRE
Retrocedant agrees that the retrocession contracts purchased from third
party retrocessionaires ("THIRD PARTY RETROCESSIONAIRES") by or on behalf
of Retrocedant prior to the Effective Time that are listed on Exhibit C
hereto (as such Exhibit may be amended from time to time by agreement
between the parties) or that are entered into after the date hereof and
relate to the Reinsurance Contracts shall inure to the benefit of
Retrocessionaire to the extent of liabilities covered under this
Agreement ("INURING RETROCESSIONS"), subject to the allocations in
Exhibits D, E and F.
7.2 TRANSFER
[Retrocedant and Retrocessionaire shall use their respective commercially
reasonable efforts to obtain the consent of Third Party Retrocessionaires
under the Inuring Retrocessions to include Retrocessionaire as a direct
reinsured with respect to the Reinsurance Contracts.]
[IF NOT OBTAINED AT SIGNING, FURTHER AMENDMENTS WOULD BE NECESSARY. WE
CAN PROVIDE DRAFTING IF THIS WOULD BE HELPFUL]
7.3 INURING RETROCESSIONS CLAIMS
(A) Each of the parties agrees to transfer to the other party all
recoveries or any portion thereof that such party receives on or
after the Effective Time pursuant to the Inuring Retrocessions
which are allocated to the other party, in the manner set forth
in Exhibit D hereto, provided that each party shall be entitled
to set off any obligation to account for any such recovery to the
other party against any obligation arising under this Agreement
owed by the other party to the party so obliged to account.
Retrocedant shall use its commercially reasonable efforts to
collect any recoveries due to Retrocessionaire under the Inuring
Retrocessions that indemnify the Retrocedant for losses or
expenses payable or return of premium allocable to
Retrocessionaire and, subject to any right of set-off which may
have arisen under the foregoing provisions of this clause, hold
them on trust for and pay them to or to the order of
Retrocessionaire. The parties agree that Retrocessionaire's
obligations to make payments pursuant to the Inuring
Retrocessions or to reimburse Retrocedant pursuant to this
Agreement shall not be waived by non-receipt of any such amounts.
Retrocessionaire shall reimburse Retrocedant for one hundred
percent (100%) of any expenses reasonably incurred by Retrocedant
in attempting to make such collection, including all allocated
expenses, as determined in accordance with The St. Paul's
customary practices and procedures. Retrocessionaire shall have
the right to associate with Retrocedant, at Retrocessionaire's
own expense, in any actions brought by Retrocedant to make such
collections.
8
(B) In the event claims of Retrocedant and Retrocessionaire aggregate
in excess of the applicable limit under an Inuring Retrocession,
all limits applicable to either Retrocedant or Retrocessionaire
shall be allocated between Retrocedant and Retrocessionaire in
the manner set forth in Exhibit F hereto.
7.4 INITIAL CONSIDERATION
On the Effective Date, Retrocessionaire shall reimburse Retrocedant for
one hundred percent (100%) of any and all unearned premiums paid by
Retrocedant under such Inuring Retrocessions net of any applicable
unearned ceding commissions paid to Retrocedant thereunder.
7.5 ADDITIONAL CONSIDERATION
Retrocessionaire agrees to pay [directly to Third Party
Retrocessionaires] under the Inuring Retrocessions all future premiums
Retrocedant is obligated to pay pursuant to the terms of the Inuring
Retrocessions to the extent that such premiums are allocable to
Retrocessionaire [in the manner set forth in Exhibit E] [in a manner
consistent with Retrocedant's current practice], and to indemnify
Retrocedant for all such premiums paid directly by Retrocedant, net of
any ceding commissions and similar amounts paid by Third Party
Retrocessionaires to Retrocedant.
7.6 TERMINATION OR COMMUTATION OF INURING RETROCESSIONS
To the extent that any Inuring Retrocessions provide coverage for both
Reinsurance Contracts and business not covered under this Agreement,
neither party shall take any action or fail to take any action that would
reasonably result in the termination or commutation of any Inuring
Retrocession, without the prior written consent of the other party, such
consent not to be unreasonably withheld.
8. LOSS AND LOSS EXPENSE; SALVAGE AND SUBROGATION FOLLOW THE FORTUNES
8.1 (A) Retrocessionaire shall be liable for one hundred percent (100%)
of all future loss, loss adjustment expenses, incurred but not
reported losses and other payment obligations that arise under
the Reinsurance Contracts on and after January 1, 2002 and are
payable as of or after the Effective Time and shall reimburse
Retrocedant for any losses, loss adjustment expenses and other
payment obligations paid by Retrocedant following the Effective
Time in respect of the Reinsurance Contracts, net of any
recoveries received by Retrocedant with respect thereto,
including recoveries under Inuring Retrocessions.
Retrocessionaire shall have the right to all salvage and
subrogation on the account of claims and settlements with respect
to the Reinsurance Contracts.
(B) In the event of a claim under a Reinsurance Contract, the
Retrocedant will assess the validity of the claim and make a
determination as to payment, consistent with the claims handling
guidelines previously provided to
9
Retrocedant in writing by Retrocessionaire and Retrocessionaire
may exercise its rights under Section 10.1 in respect thereof.
Retrocedant shall provide prompt notice of any claim in excess of
$500,000 to Retrocessionaire. All payments made by Retrocedant,
whether under strict contract terms or by way of compromise,
shall be binding on Retrocessionaire. In addition, if Retrocedant
refuses to pay a claim in full and a legal proceeding results,
Retrocessionaire will be unconditionally bound by any settlement
agreed to by Retrocedant or the adverse judgment of any court or
arbitrator (which could include any judgment for bad faith,
punitive damages, excess policy limit losses or extra contractual
obligations) and Retrocedant may recover with respect to such
settlements and judgments under this Agreement. Though
Retrocedant will settle such claims and litigation in good faith,
Retrocessionaire is bound to accept the settlements paid by
Retrocedant and such settlements may be for amounts that could be
greater than the amounts that would be agreed to by
Retrocessionaire if Retrocessionaire were to settle such claims
or litigation directly. It is the intent of this Agreement that
Retrocessionaire shall in every case in which this Agreement
applies and in the proportions specified herein, "follow the
fortunes" of Retrocedant in respect of risks Retrocessionaire has
accepted under this Agreement.
9. EXTRA CONTRACTUAL OBLIGATIONS
In the event Retrocedant or Retrocessionaire is held liable to pay any
punitive, exemplary, compensatory or consequential damages because of
alleged or actual bad faith or negligence related to the handling of any
claim under any Reinsurance Contract or otherwise in respect of such
Reinsurance Contract, the parties shall be liable for such damages in
proportion to their responsibility for the conduct giving rise to the
damages. Such determination shall be made by Retrocedant and
Retrocessionaire, acting jointly and in good faith, and in the event the
parties are unable to reach agreement as to such determination, recourse
shall be had to Article 15 hereof.
10. ADMINISTRATION OF REINSURANCE CONTRACTS
10.1 (A) The parties agree that, as of the Effective Time, Retrocedant
shall have the sole authority to administer the Reinsurance
Contracts in all respects, which authority shall include, but not
be limited to, authority to xxxx for and collect premiums, adjust
all claims and handle all disputes thereunder and to effect any
and all amendments, commutations and cancellations of the
Reinsurance Contracts, subject, however, in the case of
administration of claims, to all claims handling guidelines
provided in advance in writing by Retrocessionaire to
Retrocedant. Retrocedant shall not, on its own, settle any claim,
waive any right, defense, setoff or counterclaim relating to the
Reinsurance Contracts with respect to amounts in excess of
$500,000, and shall not amend, commute or terminate any of the
Reinsurance Contracts without the prior written consent of
Retrocessionaire, not to be unreasonably withheld.
10
(B) Notwithstanding the foregoing, to the extent permitted by law
Retrocessionaire may, at its discretion and at its own expense,
assume the administration, defence and settlement of any claim
upon prior written notice to Retrocedant. Upon receipt of such
notice, Retrocedant shall not compromise, discharge or settle
such claim except with the prior written consent of
Retrocessionaire. Retrocessionaire shall not take any action in
the administration of such claim that would reasonably be
expected to adversely affect Retrocedant, its business or its
reputation, without the prior written consent of Retrocedant.
Subject to the terms of Article 9 hereof, Retrocessionaire shall
indemnify Retrocedant for all Losses, including punitive,
exemplary, compensatory or consequential damages arising from
such assumption of the conduct of such settlement pursuant to
Article 14 herein.
(C) Upon the grant to Platinum Re UK Limited of the necessary
authorisation to enable Platinum Re UK Limited lawfully to carry
on insurance business as principal in the United Kingdom of the
classes covered by this agreement, Retrocedant agrees with
Retrocessionaire that it will enter into undertakings in the
terms of sub-clauses (A) and (B) above with Platinum Re UK
Limited, subject only to Platinum Re UK Limited entering into
undertakings in the same terms with Retrocedant.
10.2 REPORTING AND REGULATORY MATTERS
Each party shall provide the notices and filings required to be made by
it to relevant regulatory authorities as a result of this Agreement.
Notwithstanding the foregoing, each party shall provide to the other
party any information in its possession regarding the Reinsurance
Contracts as reasonably required by the other party to make such filings
and in a form as agreed to by the parties.
10.3 DUTY TO COOPERATE
Upon the terms and subject to the conditions and other agreements set
forth herein, each party agrees to use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause
to be done, and to assist and cooperate with the other party in doing,
all things necessary or advisable to perform the transactions
contemplated by this Agreement.
10.4 COMMUNICATIONS RELATING TO THE REINSURANCE CONTRACTS
Following the Effective Time, Retrocedant and Retrocessionaire shall each
promptly forward to the other copies of all material notices and other
written communications it receives relating to the Reinsurance Contracts
(including, without limitation, all inquiries and complaints from
relevant insurance regulators, brokers and other service providers and
reinsureds and all notices of claims, suits and actions for which it
receives service of process).
11
11. REPORTS AND REMITTANCES
11.1 REPORT FROM RETROCEDANT
Within thirty days following the end of each month, Retrocedant shall
provide Retrocessionaire with a summary statement of account for the
previous month showing all activity relating to each of the Reinsurance
Contracts, including related administration costs and expenses incurred
by Retrocedant in the form set forth as Exhibit G. The monthly statement
of account shall also provide a breakdown of any amounts due to
Retrocedant or Retrocessionaire, as the case may be, as reimbursement for
paid claims, premiums or other amounts due pursuant to the terms of this
Agreement.
11.2 REMITTANCES
Within five Business Days after delivery of each monthly report pursuant
to Section 11.01, Retrocedant and Retrocessionaire shall settle all
amounts then due under this Agreement for that month.
11.3 LATE PAYMENTS
Should any payment due to any party to this Agreement be received by such
party after the due date for such payment under this Agreement, interest
shall accrue from the date on which such payment was due until payment is
received by the party entitled thereto, at an annual rate equal to the
London Interbank Offered Rate quoted for six month periods as reported in
The Wall Street Journal on the first Business Day of the month in which
such payment first becomes due plus one hundred basis points (the
"APPLICABLE RATE").
11.4 COST REIMBURSEMENT
Retrocessionaire shall reimburse for its allocated share of all costs and
expenses incurred by Retrocedant in administering the Reinsurance
Contracts as set forth in Exhibit H hereto.
11.5 CURRENCY
Premiums, losses and other items payable under this agreement in
currencies other than Pounds Sterling, United States Dollars and Euros
shall be converted into United States Dollars at the rate of exchange
used by Retrocedant for the purposes of its own books and shall be
included in the United States Dollar accounts hereunder.
12. MAINTENANCE OF LICENCES
Each of Retrocedant and Retrocessionaire hereby covenants to maintain at
all times all licences and authorisations required to undertake the
actions contemplated hereby.
12
13. ACCESS TO RECORDS
13.1 From and after the Closing Date, Retrocedant shall afford to
Retrocessionaire and its respective authorised accountants, counsel and
other designated representatives (collectively, "Representatives")
reasonable access (including using commercially reasonable best efforts
to give access to Persons possessing information) during normal business
hours to all data and information that is specifically described in
writing (collectively, "Information") within the possession of
Retrocedant relating to the liabilities transferred hereunder, insofar as
such information is reasonably required by Retrocessionaire. Similarly,
from and after the Closing Date, Retrocessionaire shall afford to
Retrocedant, any Post-closing Subsidiary of Retrocedant and their
respective Representatives reasonable access (including using
commercially reasonable best efforts to give access to Persons possessing
information) during normal business hours to Information within
Retrocessionaire's possession relating to Retrocedant, insofar as such
information is reasonably required by Retrocedant. Information may be
requested under this Article 13 for, without limitation, audit,
accounting, claims, litigation (other than any claims or litigation
between the parties hereto) and tax purposes, as well as for purposes of
fulfilling disclosure and reporting obligations and for performing this
Agreement and the transactions contemplated hereby.
13.2 From and after the Closing Date, Retrocessionaire and Retrocedant or
their designated representatives may inspect, at the place where such
records are located, any and all data and information that is
specifically described in writing within the possession of the other
party hereto reasonably relating to this Agreement, on reasonable prior
notice and during normal business hours. The rights of the parties under
this Article 13 shall survive termination of this Agreement and shall
continue for as long as there may be liabilities under the Reinsurance
Contracts or reporting or retention requirements under applicable law. In
addition, each party shall have the right to take copies (including
electronic copies) of any information held by the other party that
reasonably relates to this Agreement or the Reinsurance Contracts. Each
party shall, and shall cause its designated representative to, treat and
hold as confidential information any information it receives or obtains
pursuant to this Article 13.
14. INDEMNIFICATION
14.1 INDEMNIFICATION BY RETROCEDANT
Retrocedant agrees to indemnify, defend and hold harmless
Retrocessionaire, and its officers, directors and employees with respect
to any and all Losses arising from any breach by Retrocedant of any
representation, warranty or covenant herein. Retrocedant further agrees
to indemnify, defend and hold harmless Retrocessionaire and its officers,
directors and employees against any and all Losses arising out of
Retrocedant's administration of the Reinsurance Contracts, including but
not limited to extracontractual obligations, payments in excess of policy
limits and settlements made in respect of any such claims to the extent
arising from the gross negligence or wilful misconduct of Retrocedant
except to the extent such actions are taken with the
13
prior consent or direction of Retrocessionaire. Such indemnification
obligations shall be limited to the aggregate of all fees paid to
Retrocedant pursuant to Section 11.4 hereof.
14.2 INDEMNIFICATION BY RETROCESSIONAIRE
Retrocessionaire agrees to indemnify, defend and hold harmless
Retrocedant, and its officers, directors and employees with respect to
any and all Losses arising from any breach by Retrocessionaire of any
representation, warranty or covenant herein. Retrocessionaire further
agrees to indemnify, defend and hold harmless Retrocedant and its
officers, directors and employees against any and all Losses arising out
of Retrocessionaire's administration of the Reinsurance Contracts,
including but not limited to extracontractual obligations, payments in
excess of policy limits and settlements made in respect of any such
claims.
14.3 INDEMNIFICATION PROCEDURES
(A) If a party seeking indemnification pursuant to this Article 14
(each, an "INDEMNITEE") receives notice or otherwise learns of
the assertion by a Person (including, without limitation, any
governmental entity) who is not a party to this Agreement or an
Affiliate thereof, of any claim or of the commencement by any
such Person of any Action (a "THIRD PARTY CLAIM") with respect to
which the party from whom indemnification is sought (each, an
"INDEMNIFYING PARTY") may be obligated to provide indemnification
pursuant to this Section 14.1 or 14.2, such Indemnitee shall give
such Indemnifying Party written notice thereof promptly after
becoming aware of such Third Party Claim; PROVIDED that the
failure of any Indemnitee to give notice as provided in this
Section 14.3 shall not relieve the Indemnifying Party of its
obligations under this Article 14, except to the extent that such
Indemnifying Party is prejudiced by such failure to give notice.
Such notice shall describe the Third Party Claim in as much
detail as is reasonably possible and, if ascertainable, shall
indicate the amount (estimated if necessary) of the Loss that has
been or may be sustained by such Indemnitee.
(B) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within
[30] days of the receipt of notice from an Indemnitee in
accordance with Section 14.3(A) (or sooner, if the nature of such
Third Party Claim so requires), the Indemnifying Party shall
notify the Indemnitee of its election whether the Indemnifying
Party will assume responsibility for defending such Third Party
Claim, which election shall specify any reservations or
exceptions. After notice from an Indemnifying Party to an
Indemnitee of its election to assume the defense of a Third Party
Claim, such Indemnifying Party shall not be liable to such
Indemnitee under this Article 14 for any legal or other expenses
(except expenses approved in writing in advance by the
Indemnifying Party) subsequently incurred by such Indemnitee in
connection with the defense thereof; PROVIDED that, if the
defendants in any such claim include both the
14
Indemnifying Party and one or more Indemnitees and in any
Indemnitee's reasonable judgment a conflict of interest between
one or more of such Indemnitees and such Indemnifying Party
exists in respect of such claim or if the Indemnifying Party
shall have assumed responsibility for such claim with
reservations or exceptions that would materially prejudice such
Indemnitees, such Indemnitees shall have the right to employ
separate counsel to represent such Indemnitees and in that event
the reasonable fees and expenses of such separate counsel (but
not more than one separate counsel for all such Indemnitees
reasonably satisfactory to the Indemnifying Party) shall be paid
by such Indemnifying Party. If an Indemnifying Party elects not
to assume responsibility for defending a Third Party Claim, or
fails to notify an Indemnitee of its election as provided in this
Article 14, such Indemnitee may defend or (subject to the
remainder of this Article 14) seek to compromise or settle such
Third Party Claim at the expense of the Indemnifying Party.
(C) Neither an Indemnifying Party nor an Indemnitee shall consent to
entry of any judgment or enter into any settlement of any Third
Party Claim which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such
Indemnitee, in the case of a consent or settlement by an
Indemnifying Party, or the Indemnifying Party, in the case of a
consent or settlement by the Indemnitee, of a written release
from all liability in respect to such Third Party Claim.
(D) If an Indemnifying Party chooses to defend or to seek to
compromise or settle any Third Party Claim, the Indemnitee shall
make available at reasonable times to such Indemnifying Party any
personnel or any books, records or other documents within its
control or which it otherwise has the ability to make available
that are necessary or appropriate for such defense, settlement or
compromise, and shall otherwise cooperate in a reasonable manner
in the defense, settlement or compromise of such Third Party
Claim.
(E) Notwithstanding anything in this Article 14 to the contrary,
neither an Indemnifying Party nor an Indemnitee may settle or
compromise any claim over the objection of the other; PROVIDED
that consent to settlement or compromise shall not be
unreasonably withheld or delayed. If an Indemnifying Party
notifies the Indemnitee in writing of such Indemnifying Party's
desire to settle or compromise a Third Party Claim on the basis
set forth in such notice (provided that such settlement or
compromise includes as an unconditional term thereof the giving
by the claimant or plaintiff of a written release of the
Indemnitee from all liability in respect thereof) and the
Indemnitee shall notify the Indemnifying Party in writing that
such Indemnitee declines to accept any such settlement or
compromise, such Indemnitee may continue to contest such Third
Party Claim, free of any participation by such Indemnifying
Party, at such Indemnitee's sole expense. In such event, the
obligation of such Indemnifying Party to such Indemnitee with
respect to such Third Party Claim shall be equal to (i) the costs
and expenses of such Indemnitee prior to the date such
Indemnifying Party notifies such Indemnitee of the offer to
settle or compromise (to the extent such costs and expenses
15
are otherwise indemnifiable hereunder) PLUS (ii) the lesser of
(A) the amount of any offer of settlement or compromise which
such Indemnitee declined to accept and (B) the actual
out-of-pocket amount such Indemnitee is obligated to pay
subsequent to such date as a result of such Indemnitee's
continuing to pursue such Third Party Claim.
(F) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third Party Claim, such
Indemnifying Party shall be subrogated to and shall stand in the
place of such Indemnitee as to any events or circumstances in
respect of which such Indemnitee may have any right or claim
relating to such Third Party Claim against any claimant or
plaintiff asserting such Third Party Claim or against any other
Person. Such Indemnitee shall cooperate with such Indemnifying
Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
(G) Except with respect to claims relating to actual fraud, the
indemnification provisions set forth in this section are the sole
and exclusive remedy of the parties hereto for any and all claims
for indemnification under this Agreement.
14.4 SURVIVAL
This Article 14 shall survive termination of this Agreement.
15. ARBITRATION
(A) All disputes and differences arising under or in connection with
this contract shall be referred to arbitration under the
Arbitration Rules of XXXXX (UK).
(B) The Arbitration Tribunal shall consist of three arbitrators, one
to be appointed by the Claimant, one to be appointed by the
Respondent and the third to be appointed by the two appointed
arbitrators.
(C) The third member of the Tribunal shall be appointed as soon as
practicable (and no later than 28 days) after the appointment of
the two party-appointed arbitrators. The Tribunal shall be
constituted upon the appointment of the third arbitrator.
(D) The Arbitrator shall be persons (including those who have
retired) with not less than ten years' experience of insurance or
reinsurance within the industry or as lawyers or other
professional advisers serving the industry.
(E) Where a party fails to appoint an arbitrator within 14 days of
being called upon to do so or where the two party-appointed
arbitrators fails to appoint a third within 28 days of their
appointment, then upon application XXXXX (UK) will appoint an
arbitrator to fill the vacancy. At any time prior to the
appointment by XXXXX (UK) the party or arbitrators in default may
make such appointment.
16
(F) The Tribunal may in its sole discretion make such orders and
directions as it considers to be necessary for the final
determination of the matters in dispute. The Tribunal shall have
the widest discretion permitted under the law governing the
arbitral procedure when making such orders or directions.
(G) The seat of arbitration shall be London.
(H) Each party shall bear the expense of its own arbitrator, and
shall jointly and equally bear with the other the expense of the
third arbitrator and of the arbitration unless otherwise directed
by the arbitrators.
(I) Arbitration shall not be a condition precedent to any right of
action hereunder.
(J) This Article 15 shall survive termination of this Agreement.
16. INSOLVENCY
(A) On the occurrence of an Insolvency Event in respect of
Retrocedant, this reinsurance shall be payable directly to
Retrocedant, or to its liquidator, receiver, conservator or
statutory successor on the basis of the liability of Retrocedant
without diminution because of the insolvency of Retrocedant or
because the liquidator, receiver, conservator or statutory
successor of Retrocedant has failed to pay all or a portion of
any claim.
(B) It is agreed, however, that the liquidator, receiver, conservator
or statutory successor of Retrocedant shall give written notice
to Retrocessionaire of the pendency of a claim against
Retrocedant indicating the Reinsurance Contract, which claim
would involve a possible liability on the part of
Retrocessionaire 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,
Retrocessionaire may investigate such claim and interpose, at its
own expense, in the proceeding where such claim is to be
adjudicated any defence or defences that it may deem available to
Retrocedant or its liquidator, receiver, conservator or statutory
successor. The expense thus incurred by Retrocessionaire shall be
chargeable, subject to the approval of the court, against
Retrocedant as part of the expense of conservation or liquidation
to the extent of a pro rata share of the benefit which may accrue
to Retrocedant solely as a result of the defence undertaken by
Retrocessionaire.
(C) As to all reinsurance made, ceded, renewed or otherwise becoming
effective under this Agreement, the reinsurance shall be payable
as set forth above by Retrocessionaire to Retrocedant or to its
liquidator, receiver, conservator or statutory successor, except
(1) where the Reinsurance Contracts specifically provide another
payee on the occurrence of an Insolvency Event in respect of
Retrocedant, and (2) where Retrocessionaire, with the consent of
the reinsured or reinsureds under the Reinsurance Contracts, has
assumed such Reinsurance Contract obligations of Retrocedant as
direct obligations of
17
Retrocessionaire to the payees under such Reinsurance Contracts
and in substitution for the obligations of Retrocedant to such
payees.
(D) For the purposes of this Article 16, an Insolvency Event shall
occur if:
(i) a winding up petition is presented in respect of
Retrocedant or a provisional liquidator is appointed over
it or if Retrocedant goes into administration,
administrative receivership or receivership or if
Retrocedant has a scheme of arrangement or voluntary
arrangement proposed in relation to all or any part of its
affairs; or
(ii) Retrocedant goes into compulsory or voluntary liquidation;
or, in each case, if Retrocedant becomes subject to any other
similar insolvency process (whether under the laws of England and
Wales or elsewhere); and
(iii) Retrocedant is unable to pay its debts as and when they
fall due within the meaning of Section 123 of the
Insolvency Act 1986 (or any statutory amendment or
re-enactment of that section).
17. OFFSET
Retrocedant and Retrocessionaire shall have the right to offset any
balance or amounts due from one party to the other under the terms of
this Agreement. The party asserting the right of offset may exercise such
right at any time whether the balances due are on account of premiums,
losses or otherwise.
18. ERRORS AND OMISSIONS
Any inadvertent delay, omission, error or failure shall not relieve
either party hereto from any liability which would attach hereunder if
such delay, omission, error or failure had not been made provided such
delay, omission, error or failure is rectified as soon as reasonably
practicable upon discovery.
19. SECURITY
19.1 Retrocessionaire shall establish and maintain a trust fund for the
benefit of Retrocedant as security for the obligations of
Retrocessionaire under this Agreement. The trust fund shall be in a form
reasonably satisfactory to Retrocedant and shall comply with such
requirements (if any) as may be laid down by the Financial Services
Authority.
19.2 At the Closing Date, Retrocessionaire shall deposit qualifying assets
into the trust account equal to all payments and proceeds received by
Retrocessionaire in respect of the Reinsurance Contracts, including but
not limited to assets related to transferred reserves, premium payments,
reinsurance recoverables and other payments. As of the end of each
calendar quarter, Retrocessionaire shall calculate the balance of the
18
trust fund and the aggregate loss, loss adjustment expense reserves,
unearned premium reserves, ceding commission and other reserves related
to the Reinsurance Contracts as reported in the statutory financial
statements filed by Retrocessionaire with the Maryland Insurance
Commission for such quarter and shall provide such calculation to
Retrocedant within five days of the filing of such statutory financial
statements with the Maryland Insurance Commission. If the balance of the
trust fund is less than the aggregate of the related reserves,
Retrocessionaire promptly shall deposit sufficient qualifying assets to
cause the balance of the trust fund to equal at least one hundred percent
(100%) of such aggregate reserves. If the balance of the trust fund is
greater than the aggregate of the related reserves, Retrocessionaire may
withdraw assets equal to the amount of such excess.
19.3 Upon receipt of the quarterly calculation from Retrocessionaire,
Retrocedant shall have the right to reasonably object to such calculation
and to offer a reasonable proposal for reserve amounts. If the parties in
good faith are not able to resolve the disagreement within [two weeks] of
Retrocedant's indication of disagreement, the parties shall mutually
agree upon an independent actuarial firm to determine an appropriate
level of aggregate reserves with respect to the Reinsurance Contracts,
such level to be no more than the amount proposed by Retrocedant and no
less than the amount reported by Retrocessionaire, and both parties agree
to be bound by such determination.
19.4 Retrocessionaire shall retain the investment discretion with respect to
the assets in the trust, provided, however, that all assets held in the
trust shall qualify as admissible assets for United Kingdom regulatory
purposes.
19.5 Retrocessionaire shall be permitted to liquidate the trust at the earlier
of (i) such time as Retrocessionaire's obligations under this Agreement
have been met or are terminated or waived or (ii) the reserves so
reported by Retrocessionaire do not exceed $- million as of two
successive calendar year ends.
19.6 Retrocedant shall bear the costs and expenses of the trustee relating to
the trust.
20. MISCELLANEOUS PROVISIONS
20.1 SEVERABILITY
If any term or provision of this Agreement shall be held void, illegal,
or unenforceable, the validity of the remaining portions or provisions
shall not be affected thereby.
20.2 SUCCESSORS AND ASSIGNS
This Agreement may not be assigned by either party without the prior
written consent of the other. The provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors and assigns as permitted
herein.
19
20.3 THIRD PARTY RIGHTS
(A) Article 14 confers a benefit on the officers, directors and
employees of Retrocedant and of Retrocessionaire (the "Third
Parties") and, subject to the remaining provisions of this
clause, is intended to be enforceable by the Third Parties by
virtue of the Contracts (Rights of Third Parties) Xxx 0000.
(B) The parties to this Agreement do not intend that any term of this
Agreement, apart from Article 14, should be enforceable, by
virtue of the Contracts (Rights of Third Parties) Xxx 0000, by
any person who is not a party to this Agreement.
(C) Notwithstanding the provisions of Article 20.10(A), this
Agreement may be rescinded or varied in any way and at any time
by the parties to this Agreement without the consent of any or
all of the Third Parties.
20.4 EQUITABLE RELIEF
Each party hereto acknowledges that if it or its employees or agents
violate the terms of this Agreement, the other party will not have an
adequate remedy at law. In the event of such a violation, the other party
shall have the right, in addition to any other rights that may be
available to it, to obtain in any court of competent jurisdiction
injunctive relief to restrain any such violation and to compel specific
performance of the provisions of this Agreement. The seeking or obtaining
of such injunctive relief shall not foreclose or limit in any way relief
against either party hereto for any monetary damage arising out of such
violation.
20.5 EXECUTION IN COUNTERPARTS
This Agreement may be executed by the parties hereto in any number of
counterparts and by each of the parties hereto in separate counterparts,
each of which counterparts, when so executed and delivered, shall be
deemed to be an original, but all such counterparts shall together
constitute but one and the same instrument.
20.6 NOTICES
All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if
delivered by hand (with receipt confirmed), or by facsimile (with
transmission confirmed), or by certified mail, postage prepaid and return
receipt requested, addressed as follows (or to such other address as a
party may designate by written notice to the others) and shall be deemed
given on the date on which such notice is received:
If to Retrocedant:
[ ]
Facsimile: [No. ]
Attention: [TITLE]
20
If to Retrocessionaire:
[ ]
Facsimile: [No. ]
Attention: [TITLE]
20.7 WIRE TRANSFER
All settlements in accordance with this Agreement shall be made by wire
transfer of immediately available funds on the due date, or if such day
is not a Business Day, on the next day which is a Business Day, pursuant
to the following wire transfer instructions: [ ]. Payment may be made by
cheque payable in immediately available funds in the event the party
entitled to receive payment has failed to provide wire transfer
instructions.
20.8 HEADINGS
Headings used herein are not a part of this Agreement and shall not
affect the terms hereof.
20.9 FURTHER ASSURANCES
Each of the parties shall from time to time, on being reasonably
requested to do so by the other party to this Agreement, shall do such
acts and/or execute such documents in a form reasonably satisfactory to
the party concerned as may be necessary to give full effect to this
Agreement and securing to that party the full benefit of the rights,
powers and remedies conferred upon it by this Agreement.
20.10 AMENDMENTS; ENTIRE AGREEMENT
This Agreement may be amended only by written agreement of the parties.
This Agreement, together with the Formation and Separation Agreement,
supersedes all prior discussions and written and oral agreements and
constitutes the sole and entire agreement between the parties with
respect to the subject matter hereof.
20.11 GOVERNING LAW
This Agreement shall be governed by English law.
21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorised representatives as of the date first above written.
ST. XXXX REINSURANCE COMPANY LIMITED
By
---------------------------------------
Name:
Title:
PLATINUM UNDERWRITERS REINSURANCE INC.
By
---------------------------------------
Name:
Title:
EXHIBIT A
REINSURANCE CONTRACTS
EXHIBIT B
ADJUSTMENT OF LOSS RESERVES
Reserves to be transferred to Retrocessionaire shall include loss and loss
adjustment expense reserves, including incurred but not reported loss and loss
adjustment expense reserves, and ceding commission reserves as of the Effective
Time with respect to the Reinsurance Contracts net of retrocessional
recoverables under the Inuring Retrocessions. "Ceding commission reserves" shall
equal reserves for estimated contingent commissions, profit commissions and
sliding-scale commissions.
EXHIBIT C
INURING RETROCESSIONS
[To be provided by St. Xxxx Reinsurance Company Limited]
EXHIBIT D
ALLOCATION OF RECOVERIES
1. Recoveries available under an Inuring Retrocession shall be allocated
between the parties in proportion to the losses otherwise recoverable.
2. Any and all loss recoveries and premium adjustments resulting from
triggering the 2002 Holborn cover will be allocated between St. Xxxx
Companies and Platinum Re based on variance from plan and in accordance
with the existing methodology shown below.
Variance from plan at an underwriting year level will be the basis for
the allocation. The 2000, 2001 and 2002 underwriting year plan loss
ratios associated with the 2002 calendar year plan loss ratio will be
compared to indicated ultimate loss ratios for the same underwriting
years. These indicated ultimate loss ratios are the same ones used to
determine if the Holborn cover has been triggered. The 2002 underwriting
year must be segmented into three pieces. Namely, that business written
on Fire and Marine paper and subject to transfer, that written on Fire
and Marine paper and not subject to transfer and that written on Platinum
Re paper. The distinction is warranted as the cession to Platinum Re will
be net of the Holborn cover. The variance in loss ratio by underwriting
year will be multiplied by the respective underwriting year's EP
component in the 2002 calendar year. This is the same EP by underwriting
year that was used to calculate the total 2002 Holborn Year's EP. This
dollar variance will be the basis for determining the distribution to be
applied to the total loss recovery and AP. It is in this manner that the
total loss recovery and AP attributable to the 2002 Holborn Year will be
allocated to underwriting year. To the extent that the recoveries and
AP's have been allocated to the 2000 and 2001 underwriting year's they
will be afforded to St. Xxxx Companies. Similarly, the allocation to that
part of the 2002 underwriting year pertaining to non-transferred business
will also be realized by St. Xxxx Companies. The allocation pertaining to
business written on St Xxxx xxxxx and transferred will be used in
determining the net transferred business that will be ceded to Platinum
Re. The remaining allocation associated with 2002 underwriting year
business written on Platinum Re paper will inure to the benefit of
Platinum Re directly. The margin for the 2002 Holborn cover will be
distributed based on earned premium and allocated between St Xxxx
Companies and Platinum Re by underwriting year.
EXHIBIT E
ALLOCATION OF RETROCESSIONAL PREMIUMS
1. Ceded premium will be allocated to cedant and underwriting year in
proportion to the earned subject premium. Ceding commission will be
allocated in the same manner.
2. Any and all loss recoveries and premium adjustments resulting from
triggering the 2002 Holborn cover will be allocated between St. Xxxx
Companies and Platinum Re based on variance from plan and in accordance
with the existing methodology shown below.
Variance from plan at an underwriting year level will be the basis for
the allocation. The 2000, 2001 and 2002 underwriting year plan loss
ratios associated with the 2002 calendar year plan loss ratio will be
compared to indicated ultimate loss ratios for the same underwriting
years. These indicated ultimate loss ratios are the same ones used to
determine if the Holborn cover has been triggered. The 2002 underwriting
year must be segmented into three pieces. Namely, that business written
on Fire and Marine paper and subject to transfer, that written on Fire
and Marine paper and not subject to transfer and that written on Platinum
Re paper. The distinction is warranted as the cession to Platinum Re will
be net of the Holborn cover. The variance in loss ratio by underwriting
year will be multiplied by the respective underwriting year's EP
component in the 2002 calendar year. This is the same EP by underwriting
year that was used to calculate the total 2002 Holborn Year's EP. This
dollar variance will be the basis for determining the distribution to be
applied to the total loss recovery and AP. It is in this manner that the
total loss recovery and AP attributable to the 2002 Holborn Year will be
allocated to underwriting year. To the extent that the recoveries and
AP's have been allocated to the 2000 and 2001 underwriting year's they
will be afforded to St. Xxxx Companies. Similarly, the allocation to that
part of the 2002 underwriting year pertaining to non-transferred business
will also be realized by St. Xxxx Companies. The allocation pertaining to
business written on St Xxxx xxxxx and transferred will be used in
determining the net transferred business that will be ceded to Platinum
Re. The remaining allocation associated with 2002 underwriting year
business written on Platinum Re paper will inure to the benefit of
Platinum Re directly. The margin for the 2002 Holborn cover will be
distributed based on earned premium and allocated between St Xxxx
Companies and Platinum Re by underwriting year.
3. The $10 million of premium payable for 2002 under the Workers
Compensation $50 million excess of $75 million Payback Retrocession
Contract will be split $1 million for Platinum and $9 million for St.
Xxxx. Such contract has a feature that states that for certain
unfavorable experience on the Whole Account Stop Loss Cover the premium
on this cover could reduce by as much as $9 million. In this event the
reduction in ceded premium would benefit the St. Xxxx exclusively. The
Platinum share would remain at $1 million.
The contract has a feature that allows the Retrocessionaire to renew the
cover if it is in a loss position. In this event the subsequent years'
premium will be split in proportion to the losses incurred to the cover.
EXHIBIT F
ALLOCATION OF LIMITS
Available limits under an Inuring Retrocession shall be allocated between the
parties in proportion to the losses otherwise recoverable.
EXHIBIT G
FORM OF RETROCEDANT'S REPORT
[TBD]
EXHIBIT H
ALLOCATION OF ADMINISTRATIVE EXPENSES
Retrocessionaire shall pay to Retrocedant the "actual cost" to Retrocedant
(which shall consist of Retrocedant's direct and reasonable indirect costs) in
administering the Reinsurance Contracts, as certified in good faith by
Retrocedant. For greater certainty, the parties agree that "actual cost" will
include any incremental and out-of-pocket costs incurred by Retrocedant in
connection with the administration services provided hereunder, including the
conversion, acquisition and disposition cost of software and equipment acquired
for the purposes of providing the services and the cost of establishing
requisite systems and data feeds and hiring necessary personnel.
No later than 30 days following the last day of each calendar quarter,
Retrocedant shall provide Retrocessionaire with a report setting forth an
itemised list of the services provided to Retrocessionaire during such last
calendar quarter, in a form agreed to by the parties. Retrocessionaire shall
promptly (and in no event later than 30 days after receipt of such report,
unless Retrocessionaire is contesting the amount set forth in the report in good
faith) pay to Retrocedant by wire transfer of immediately available funds all
amounts payable as set forth in such report. Each party shall pay all taxes for
which it is the primary obligor as a result of the provision of services under
this Agreement, provided that Retrocessionaire shall be solely responsible for,
and shall reimburse Retrocedant in respect of, any sales, gross receipts, value
added or transfer tax payable with respect to the provision of any service under
this Agreement, and any such reimbursement obligation shall be in addition to
Retrocessionaire's obligation to pay for such service.
