Exhibit 10.22
TICNY Q.S.
SMALL BUSINESS
PLACEMENT SLIP
TOWER INSURANCE COMPANY OF NEW YORK
2004 QUOTA SHARE REINSURANCE AGREEMENT
COMPANY Tower Insurance Company of New York.
REINSURER Converium Reinsurance (North America) Inc.
BUSINESS COVERED This Agreement shall indemnify the Company in respect
of the net excess liability as herein provided and
specified which may accrue to the Company as a result
of Ultimate Net Loss and Loss Adjustment Expenses
subject to this Agreement, under policies written by
the Company and classified as Property or Liability,
following the Company's original policies, including:
Fire and Allied Lines, Commercial Multiple Peril,
Homeowners Multiple Peril and Liability, Workers'
Compensation, Inland Marine and Automobile Liability
and Physical Damage, all subject to the terms,
conditions and exclusions of this Agreement.
FOLLOW THE FORTUNES The Reinsurer's liability shall attach simultaneously
with that of the Company and shall be subject in all
respects to the same risks, terms, conditions,
interpretations, waivers and to the same
modifications, alterations, and cancellations as the
respective policies issued by the Company, the true
intent of this Agreement being that the Reinsurer
shall, in every case to which this Agreement applies,
follow the fortunes of the Company, subject in all
cases to the limits, exclusions, terms and conditions
set forth in this Agreement.
TERRITORY In respect of business written by the Company, this
Agreement shall apply to policies issued in New York,
New Jersey, Pennsylvania and Connecticut.
To the extent that the Company becomes authorized to
transact insurance in any jurisdiction in addition to
those set forth above, the Company may request that
the Reinsurer amend this Agreement to include
policies issued in such jurisdictions. With respect
to policies issued in New Jersey, Pennsylvania and
Connecticut ("Non-New York Policies"), the maximum
overall New Written Premium that may be ceded by the
Company to this Agreement shall be 10% of Net Written
Premium in the aggregate for these states (the
"Premium Cap"). To the extent that the Company's
overall Net Written Premium for Non-New York Policies
exceeds the Premium Cap, the Cession Percentage for
Non-New York Policies shall be adjusted by dividing
10% (ten percent) of Net Written Premium by the
actual percentage of Net Written Premium and
multiplying that result by the Cession Percentage
elected in the Coverage Article.
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TERM A. This Agreement shall take effect 12:01 a.m.,
Eastern Standard Time, January 1, 2004 and shall
apply to all losses occurring on or after 12:01
a.m., Eastern Standard Time, January 1, 2004 in
respect of all new and renewal Business written
on and after 12:01 a.m., Eastern Standard Time,
January 1, 2004 up to 12:01 a.m., Eastern
Standard Time, January 1, 2005.
At 12:01 a.m., Eastern Standard Time, January 1,
2005, the Reinsurer shall be liable for the in
force Business Covered until the earlier of the
expiration or the anniversary date of the
Company's policies, but not to exceed 12 (twelve)
months plus odd time. In the event that any
policy is required by statute or regulation or
order to be continued in force, the Reinsurer
will continue to remain liable with respect to
each such policy until the Company may legally
cancel, non-renew or otherwise eliminate
liability under the policy.
B. The Company and the Reinsurer may agree to
terminate this Agreement or some portion of the
Business Covered on a cut-off basis. Upon such
termination, the Reinsurer shall incur no
liability for losses occurring subsequent to the
effective date of termination and the Reinsurer
shall return to the Company their respective
unearned premium reserve less previously paid
Ceding Commissions on such unearned premium
reserve.
C. Notwithstanding the above, this Agreement is
subject to each Reinsurer reaching an agreement
with State National Insurance Company and
Virginia Surety Company, Inc., effective on or
around January 1, 2004, for the same authorized
share for Small Market, Middle Market and Large
Lines combined business segments at economic
terms outlined in previous correspondence.
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If agreement is not reached by January 31, 2004
with State National Insurance Company and
Virginia Surety Company, Inc., the Company may
rescind this Agreement in its entirety from its
inception, all amounts paid by Company and
Reinsurer shall be returned to each respective
party, the funds withheld in the Funds Withheld
Account/Profit Sharing Account shall be released
by the Reinsurer and each party shall be returned
to the position it was in prior to the execution
of this Agreement.
COVERAGE BASIS Quota Share covering losses occurring, claims made
and losses discovered attaching to policies issued on
Business Covered incepting or renewing during the
Term.
EXCLUSIONS A. Nuclear Incident, in accordance with the
following clauses attached hereto:
1. Nuclear Incident Exclusion Clause - Physical
Damage - Reinsurance - U.S.A. - NMA 1119;
2. Nuclear Incident Exclusion Clause - Liability
- Reinsurance - U.S.A. - NMA 1590;
B. War Risks, in accordance with the War Risks
Exclusion Clause attached hereto;
C. Insolvency, in accordance with the Insolvency
Funds Exclusion Clause attached hereto;
X. Xxxxxxxxx assumed by the Company as a member of
any pool, association or syndicate, in accordance
with the Pools, Associations and Syndicates
Exclusion Clause attached hereto;
X. Xxxxxxxxxx, when written as such;
F. Liability arising out of ownership, maintenance
or use of any aircraft or flight operations;
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G. Professional Liability, when written as such,
however not to exclude when written as part of a
package policy or when written in conjunction
with other policies issued by the Company;
X. Xxxxxxxxxx and Financial Guarantee.
I. Any acquisitions of companies or books of
business outside of the normal course of business
("agent rollovers") without the prior written
consent of the Reinsurer hereon.
X. Xxxxxxxx liabilities of any nature
X. Xxxxxxxxx liabilities of any nature
L. Assumed reinsurance with the exception of
inter-affiliate reinsurance
M. Ex gratia payments in excess of $3,000 (three
thousand dollars)
COVERAGE The Reinsurer shall indemnify the Company for the
Cession Percentage of the net retained liability of
all Ultimate Net Loss and Loss Adjustment Expenses
billed by Towers Claim Service for the Term of this
Agreement, subject to the Retention, Per Risk - Per
Loss Occurrence Limits and the Aggregate Limit
hereon. The Reinsurer shall only be obligated to
indemnify the Company for underlying policies where
the Reinsurer have been paid respective premiums for
such underlying policies by the Company.
The Cession Percentage shall be 60% (sixty percent)
for the new and renewal Business Covered written
during the period January 1, 2004 through December
31, 2004, both days inclusive. However, the Cession
Percentage may be reduced to a minimum cession
percentage of 25% (twenty five percent) for each
quarter starting with the calendar quarter beginning
July 1, 2004 and only if the Company has increased
its December 31, 2003 Statutory Surplus Level by more
than 20% (twenty percent) on or before June 30, 2004.
The Company must advise the Reinsurer, with 30 days
advance written notice, of its election to reduce the
Cession Percentage for the forthcoming quarter.
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NET RETAINED LINES This Agreement applies only to that portion of
Business Covered which the Company retains net for
its own account, and in calculating the amount of any
Ultimate Net Loss and Loss Adjustment Expenses
hereunder and also in computing the amounts in
Coverage, Retention, Per Risk-Per Loss Occurrence
Limits and Aggregate Limit section to which this
Agreement applies, only Ultimate Net Loss and Loss
Adjustment Expenses in respect of that portion of
Business Covered which the Company retains net for
its own account shall be included. The Company
warrants that it will have a maximum net retained
line in accordance with the Per Risk-Per Loss
Occurrence Limits Article below for any one risk.
Recoveries from any form of insurance or reinsurance
that protects the Company against claims which are
Subject Business shall inure to the benefit of the
Reinsurer and shall be deducted to arrive at the
amount of the Company's Ultimate Net Loss and Loss
Adjustment Expense. The amount of the Reinsurer's
liability hereunder in respect of any Ultimate Net
Loss and Loss Adjustment Expense shall not be
increased by reason of the inability of the Company
to collect from any other reinsurer, whether specific
or general, any amounts which may have become due
from such reinsurer, whether such inability arises
from the insolvency of such reinsurer or otherwise.
RETENTION The Company shall retain net and unreinsured the
result of 100% (one hundred percent) minus the
Coverage Cession Percentage of all Ultimate Net Loss
in respect of the first 95.0% (ninety five point zero
percent) of Ultimate Net Loss Ratio and 100% (one
hundred percent) of Ultimate Net Loss in excess of
the first 95.0% (ninety five point zero percent) of
Ultimate Net Loss Ratio.
PER RISK-PER LOSS
OCCURRENCE LIMITS In no event shall the Reinsurer's limit of liability
exceed their pro rata share of $ 1,000,000 (one
million dollars) per risk, per Loss Occurrence in
respect of property business and $1,000,000 (one
million dollars) per Loss Occurrence for liability
business. In addition, in no event shall the
Reinsurer's aggregate limit of liability exceed 10%
(ten percent) of Reinsurance Premium earned for any
one Loss Occurrence in respect of ceded property
catastrophe Ultimate Net Loss plus associated Loss
Adjustment Expense. Furthermore, in no event shall
the Reinsurer's aggregate limit of liability exceed
10% (ten percent) of Reinsurance Premium in respect
of the combined amounts of property and casualty
Ultimate Net Loss plus associated Loss Adjustment
Expense emanating from Terrorist Acts, whether one or
multiple Terrorist Acts.
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AGGREGATE LIMIT The Reinsurer's maximum overall aggregate Ultimate
Net Loss and Loss Adjustment Expense liability under
this Agreement shall be 95.0% (ninety five point zero
percent) of ultimate Reinsurance Premium earned by
the Reinsurer.
REINSURANCE PREMIUM The Company shall pay to the Reinsurer the Cession
Percentage of the Net Written Premium as collected
for the Term of this Agreement (the "Reinsurance
Premium"). The Company shall retain any and all
Reinsurance Premium on a funds withheld basis. A
notional Funds Withheld Account/Profit Sharing
Account shall be calculated by the Company and
maintained until there is a complete and final
release of all the Reinsurer's past, present and
future obligations and liabilities to the Company of
any nature whatsoever arising under or related to
this Agreement. The Company shall credit Net Written
Premium to the Funds Withheld Account/Profit Sharing
Account on a monthly basis, and settlements shall be
made in accordance with the Remittances Article of
this Agreement.
The Company shall have the option, subject to the
Reinsurer's consent, to terminate this Agreement on a
cut-off basis. If the Company elects, and the
Reinsurer consent, to terminate this Agreement on a
cut-off basis, in accordance with Term Article of
this Agreement, then the Reinsurer shall return to
the Company the respective unearned premium less
previously paid Reinsurer's Margin and Ceding
Commissions on such unearned premium.
The maximum overall Net Written Premium for this
Agreement shall be $200,000,000 (two hundred million
dollars). The maximum overall ceded Net Written
Premium shall be $120,000,000 (one hundred twenty
million dollars) (the "Aggregate Premium Cap"). To
the extent that the Company's overall ceded Net
Written Premium exceeds the Aggregate Premium Cap,
the Cession Percentage shall be reduced by dividing
$200,000,000 (two hundred million dollars) by the
actual Net Written Premium and multiplying that
result by the Cession Percentage elected in the
Coverage Article.
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REINSURER'S MARGIN Reinsurer's Margin shall equal 8.0% (eight point zero
percent) of ultimate Reinsurance Premium. The Company
shall pay the Reinsurer the full amount of the
Reinsurer's Margin due each month on the date when
the time Reinsurance Premium is reported each month.
The Company shall effect payment of the Reinsurer's
Margin due each month by direct wire transfer to the
Intermediary to pay the Reinsurer. In the event the
Company fails to pay the full amount of any
Reinsurer's Margin due within 30 (thirty) business
days of the payment due date, the Reinsurer shall
provide the Company with a written demand for such
outstanding Reinsurer's Margin. The Company shall
have an additional 45 (forty five) from the date the
Reinsurer provides the written demand in which to pay
to the Reinsurer the outstanding Reinsurer's Margin
(the "Cure Period"). If the Company fails to pay the
full amount of any Reinsurer's Margin by the end of
the Cure Period, this Agreement shall be cancelled
retroactively for nonpayment of premium, effective as
of the date of the last day of the month preceding
for which the Reinsurer received actual payment of
its Reinsurer's Margin and the Reinsurer shall incur
no liability for losses occurring subsequent to the
effective date of cancellation.
CEDING COMMISSION The Reinsurer shall allow the Company a provisional
Ceding Commission equal to 39.1 (thirty nine point
one percent) of the Reinsurance Premium hereon. The
provisional Ceding Commission shall be debited or
credited, as applicable, to the Funds Withheld
Account/Profit Sharing Account as Reinsurance
Premiums are settled monthly and adjusted as the
Ultimate Net Loss Ratio is re-determined quarterly.
The first adjustment of Actual Ceding Commission for
purposes of crediting the interest due and owing to
the Funds Withheld Account/Profit Sharing Account
shall be calculated no later than February 29, 2005
for the quarter ended December 31, 2004. Thereafter
Actual Ceding Commission shall be recalculated each
quarter and based upon the Ultimate Net Loss Ratio
re-determined each quarter, in accordance with the
following table:
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Ceding Commission Rate Ultimate Net Loss Ratio
---------------------- -----------------------
Maximum 48.1% .9 for 1 47.0% or Lower
Provisional 39.1% .9 for 1 57.0%
Minimum 29.2% 68.0% or Higher
If the Ultimate Net Loss Ratio exceeds 47.0% (forty
seven point zero percent), the Ceding Commission
shall be reduced .9% (point nine percent) and any
portion thereof for each 1% (one percent) and any
portion thereof that the Ultimate Net Loss Ratio
exceeds 47.0% (forty seven point zero percent), down
to a Ceding Commission of 39.1% (thirty nine point
one percent) at a 57.0% (fifty seven point zero
percent) Ultimate Net Loss Ratio. If the Ultimate Net
Loss Ratio exceeds 57.0% (fifty seven point zero
percent), the Ceding Commission shall be reduced .9%
(point nine percent) and any portion thereof for each
1% (one percent) and any portion thereof that the
Ultimate Net Loss Ratio exceeds 57.0% (fifty seven
point zero percent), subject to a minimum Ceding
Commission of 29.2% (twenty nine point two percent)
at a 68.0% (sixty eight point zero percent) or higher
Ultimate Net Loss Ratio.
Beginning with the calendar quarter ending March 31,
2005, any adjustment of Ceding Commission shall
result in a special interest credit calculation from
the time of adjustment back to December 31, 2004 at
the annual Interest Credit rate of 2.5% (two point
five percent). Such special interest credit shall be
credited/debited to the Funds Withheld Account/Profit
Sharing Account at the time of calculation.
The Reinsurer shall remain liable for payment of
Ceding Commission whether or not the Funds Withheld
Account/Profit Sharing Account becomes depleted.
REPORTS Within 45 (forty five) days following the end of each
month, the Company shall report to the Reinsurer the
amount of:
1. Net Written Premium and ceded Net Written Premium
by line of business;
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2. Net Earned Premium and ceded Net Earned Premium
by line of business;
3. Ceding Commissions paid and unpaid;
4. Ceded Ultimate Net Loss and Loss Adjustment
Expenses paid by line of business;
5. Ceded Ultimate Net Loss and Loss Adjustment
Expenses outstanding by line of business
(including XXXX);
6. Xxxxxxx recovered and ceded Salvage recovered by
line of business;
7. Premium amounts calculated in accordance with
Reinsurance Premium and Reinsurer's Margin
Articles, including applicable Reinsurer's
Margin;
8. The balance of the Funds Withheld Account/Profit
Sharing Account as of that month end and activity
in the Funds Withheld Account/Profit Sharing
Account during the month
9. Ceded Net Written Premium, Net Earned Premium and
ceded Net Earned Premium, Ceded Ultimate Net Loss
and Loss Adjustment Expenses paid and Ceded
Ultimate Net Loss and Loss Adjustment Expenses
outstanding (including IBNR) specifically
allocable to Non-New York Policies.
Reports shall continue until the earlier of final
settlement of all Ultimate Net Loss hereunder, or
upon Commutation.
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In the event the Company fails to furnish the
Reinsurer complete reports containing the information
and data specified in this Agreement, within 45
(forty five) days after the end of the month, the
Company shall have an additional 45 (forty five) days
in which to furnish such reports to the Reinsurer
(the "Cure Period"). Such Cure Period shall commence
on the date that the Reinsurer provides Company with
a written demand for such outstanding reports. If the
Company fails to provide such reports to the
Reinsurer by the end of the Cure Period, the Company
shall pay an interest penalty to the Reinsurer,
utilizing an annual percentage rate of 200 (two
hundred) basis points, that shall be applied to the
cumulative amount of all payments/credits to the
Funds Withheld Account/Profit Sharing Account that
would have been set forth in the outstanding report.
The interest penalty shall be calculated from the
date such outstanding report was originally
contractually due until the date of Reinsurer's
actual receipt of the outstanding report. The
interest penalty shall be in addition to the normal
Interest Credit that is applied to the Funds Withheld
Account/Profit Sharing Account in accordance with the
Interest Credit Article of this Agreement. The
Company shall pay the Reinsurer the interest penalty
in cash by direct wire transfer to the Intermediary
to pay the Reinsurer and such interest penalty amount
shall not be credited to the Funds Withheld
Account/Profit Sharing Account.
REMITTANCES The Company shall credit or debit the Funds Withheld
Account/Profit Sharing Account by the amount of the
balance of the monthly account. Such monthly account
shall equal the Cession Percentage of Net Written
Premiums collected for new and renewal business for
the month, less Reinsurer's Margin due for the month,
less applicable Ceding Commission due for the month,
less all reinsurance premiums due from the Company in
respect of the inuring reinsurances, less the Cession
Percentage of Ultimate Net Loss and Loss Adjustment
Expenses paid for the month. Such remittances shall
be deemed settled by the debtor party to the creditor
party 60 (sixty) days in arrears from the month end,
except that amounts owed by the Reinsurer to the
Company shall be paid the later of 60 (sixty) days in
arrears from the month end or 15 (fifteen) days
following the Reinsurer's receipt of the monthly
report.
LOSS PAYMENTS Notwithstanding the above, the Company shall advise
the Reinsurer promptly of all Ultimate Net Losses and
Loss Adjustment Expense, which, in the opinion of the
Company, may result in a claim hereunder and of all
subsequent developments thereto which, in the opinion
of the Company, may materially affect the position of
the Reinsurer. Inadvertent omission or oversight in
dispatching such advises shall in no way affect the
liability of the Reinsurer. However, the Company
shall notify the Reinsurer of such omission or
oversight promptly upon its discovery.
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All Ultimate Net Loss settlements made by the Company
on Business Covered, with the exception of ex gratia
payments, whether under policy terms and conditions
or by way of compromise, shall be in the sole
discretion of the Company and shall be
unconditionally binding on the Reinsurer. Upon
satisfactory proof of loss, the Reinsurer shall pay
or allow, as applicable, their proportional share of
each such settlement in accordance with this
Agreement. All Ultimate Net Loss and Loss Adjustment
Expense amounts due to the Company from the Reinsurer
under this Agreement shall first be paid by way of
offset against the Funds Withheld Account/Profit
Sharing Account consistent with the Remittances
Article and such offset shall constitute payment
under this Agreement. Only upon the exhaustion of the
Funds Withheld Account/Profit Sharing Account shall
the Company be entitled to receive cash payment from
the Reinsurer.
FUNDS WITHHELD ACCOUNT/
PROFIT SHARING ACCOUNT For purposes of this Agreement, the Reinsurer shall
allow the Company to establish and maintain a
cumulative Funds Withheld Account/Profit Sharing
Account comprised of the following:
A. The Funds Withheld Account/Profit Sharing Account
at December 31, 2003 shall be equal to $0 (zero
dollars);
B. The Funds Withheld Account/Profit Sharing Account
at each subsequent month end shall be comprised
of the following cumulative amounts:
1. The Funds Withheld Account/Profit Sharing
Account at the end of the prior month; plus
2. Reinsurance Premium paid by the Company; less
3. Ceding Commission when paid by the Reinsurer,
excluding the Return Ceding Commission as per
the Trust Account Clause; plus
4. Special interest credit adjustments on ceding
commission adjustments; less
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5. Reinsurer's Margin; less
6. Ceded Ultimate Net Losses and Loss Adjustment
Expenses paid by the Reinsurer for the
respective month; plus
7. Interest Credit.
The Company shall determine and report the balance
and activity of the Funds Withheld Account/Profit
Sharing Account monthly within 45 (forty five) days
of the month end.
INTEREST CREDIT The Funds Withheld Account/Profit Sharing Account
shall be credited monthly, as of the end of the
respective month, by the Company with an Interest
Credit rate of .206% (point two zero six percent)
multiplied by the beginning monthly balance of the
Funds Withheld Account/Profit Sharing Account for
each respective month resulting in an effective
annual rate of 2.50% (two point five zero percent)
for the Funds Withheld Account/Profit Sharing
Account. In calculating the beginning monthly
balance, all amounts due to either party shall be
deemed settled, effective as of the actual date when
such items were due pursuant to the terms of this
Agreement in accordance with the Remittances Article
of this Agreement.
Interest Credit shall continue even in the event of
the Company's insolvency.
TRUST ACCOUNT
Confidential and The Company shall establish a segregated Trust
Proprietary Account for the benefit of the Reinsurer to secure
100% of its obligations and liabilities to the
Reinsurer for the Funds Withheld Account/Profit
Sharing Account. The Company agrees to establish such
Trust Account by executing the Trust Agreement
attached hereto as Exhibit A and incorporated herein
by reference. The Trust Agreement, including the
nature of the assets to be deposited in such Trust
Account, shall be compliant at all times with the
provisions of Section 114 of the New York Insurance
Regulations. The Company shall deposit Reinsurance
Premium less provisional Ceding Commission, plus
downward adjustments of the provisional ceding
commission, less Reinsurer's Margin, all as
contractually due hereunder. The Reinsurer shall
direct the Trustee to withdraw additional Ceding
Commission adjustments and the ceded paid portion of
Ultimate Net Loss and Loss Adjustment Expense amounts
from the Trust Account and remit such sums to the
Company when such are contractually due. The Company
shall invest such amounts to both (i) achieve a
minimum effective annual yield of 2.5% (two point
five percent) per annum and (ii) enable investments
to be admitted assets for statutory reporting on the
Company's financial statements. The Company shall
appoint Hyperion Capital Management Inc. ("Hyperion")
as its investment manager and shall direct Hyperion
on the investment of such amounts.
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If the market value of the assets in the Trust
Account at any calendar quarter end is less than the
Funds Withheld Account/Profit Sharing Account balance
at such calendar quarter end, the Company shall
deposit assets that are compliant with Section 114 of
the New York Insurance Regulations to achieve the
required Funds Withheld Account/Profit Sharing
Account balance at such quarter end. If the market
value of assets in the Trust Account at any calendar
quarter end exceeds the balance of the Funds Withheld
Account/Profit Sharing Account at such calendar
quarter end, such excess assets shall remain in the
Trust Account to pay Ultimate Net Loss and Loss
Adjustment Expenses or Profit Sharing under this
Agreement.
Within 60 (sixty) days of each calendar quarter end,
beginning with the quarter ending March 31, 2004, if
the Company fails to maintain the Trust Account equal
to the Funds Withheld Account/Profit Sharing Account
required level, then the cumulative amount of the
shortfall shall be deemed "Return Ceding Commission"
due the Reinsurer. Such actual amount shall be paid
in cash by the Company to the Reinsurer within 60
(sixty) days of the respective calendar quarter end
to reduce the Ceding Commission that otherwise would
have been due at the respective Ultimate Net Loss
Ratio as per the Ceding Commission table. The Company
shall calculate the cumulative shortfall, if any, and
redetermine the Return Ceding Commission due, within
60 (sixty) days of each subsequent calendar quarter
end until all liability under this Agreement is
finalized. The Company shall pay to the Reinsurer any
additional Return Ceding Commission due in excess of
any previously paid Return Ceding Commission and the
Reinsurer shall pay to the Company any reduction of
Return Ceding Commission due over the previously paid
Return Ceding Commission within 60 (sixty) days of
the calendar quarter end.
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Upon the occurrence of a Triggering Event, the
Reinsurer shall have the sole option of drawing any
and all assets from the segregated Trust Account. If
this option is exercised, the terms of this Agreement
will be changed to a funds transferred basis. The
Reinsurer will continue to calculate the Profit Share
Account and will credit the average monthly balance
of the Profit Share Account with the lesser of the
equivalent of the 2.5% annual interest rate or the 2
year annual t-bill rate plus 25 basis points. Except
for the fact that this Agreement shall be transacted
on a funds transferred basis if the Reinsurer
exercises its option (as described above), all
settlements between the parties will continue to be
governed by the terms set forth in this Agreement
(including, but not limited to, the settlement dates
of the items to be credited or debited as set forth
in the Remittances Article).
A "Triggering Event" is any of the following:
1. A.M. Best Rating of the Company falls below B++;
or
2. a reduction of more than 20% (twenty percent) of
the Company's statutory surplus from the
Company's Statutory Surplus Level at December 31,
2003; or
3. Insolvency, Rehabilitation, or Regulatory
Supervision of the Company; or
4. Company ceases underwriting new property and
casualty business;
5. Company fails to maintain the Trust Account at
the minimum balance required by this Agreement
for a period of seventy-five (75) days;
6. Company sells 50% or more of its assets or
reinsures 50% or more of its Net Written Premium
or net liabilities (all as of January 1, 2004) to
an unaffiliated third party; or
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7. An insurance regulatory authority or governmental
entity in any United States jurisdiction revokes,
suspends or forces the Company to withdraw its
certificate of authority in such jurisdiction
8. Company fails to pay Reinsurer's Margin in
accordance with the "Reinsurer's Margin" Article
of this Agreement.
COMMUTATION The Company shall have the option, only with the
consent of the Reinsurer, effective at any calendar
quarter end on or after the calendar quarter of
termination of this Agreement, to commute all ceded
Ultimate Net Loss outstanding hereunder. The date
that the Company and the Reinsurer mutually elect to
commute shall be deemed the commutation date.
Upon Commutation, the Reinsurer shall pay 100% (one
hundred percent) of the residual Funds Withheld
Account/Profit Sharing Account to the Company. Upon
payment of the Funds Withheld Account/Profit Sharing
Account by release of the Trust Account, the
Reinsurer shall be released from all past, current
and future liability under this Agreement.
In addition to the above, the Reinsurer shall have
the option of drawing assets from the segregated
Trust Account for the purposes of collecting amounts
due them under any and all other reinsurance
agreements for which Tower Insurance Company of New
York has failed to pay within 30 (thirty) days of
their respective due dates. In the event of
commutation, the segregated Trust Account must retain
an amount that is equal to the Company's potential
aggregate liability under all reinsurance agreements
that the Company has entered into with the Reinsurer
in the event amounts must be drawn upon to satisfy
the Company's obligations and liabilities to the
Reinsurer under all other reinsurance and/or
retrocession agreements with Reinsurer.
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SPECIAL TERMINATION
CLAUSE Either party may terminate this Agreement on a cutoff
basis upon the happening of any one of the following
circumstances at any time by the giving of 60 (sixty)
days prior written notice to the other party:
1. The Company's A.M. Best rating drops below a
"B+"; or
2. The Reinsurer A.M. Best ratings drops below
an "A-"; or
3. A reduction of more than 20% (twenty percent)
of the Company's statutory surplus from the
Company's Statutory Surplus Level at December
31, 2003; or
4. There is a change in the office of President
and CEO of the Company; or
5. Insolvency, Rehabilitation, or Regulatory
Supervision of the Company; or
6. Company ceases underwriting new property and
casualty business;
7. Company fails to maintain the Trust Account
at the minimum balance required by this
Agreement for a period of seventy-five (75)
days;
8. Company sells 50% or more of its assets or
reinsures 50% or more of its Net Written
Premium or net liabilities (all as of January
1, 2004) to an unaffiliated third party; or;
or
9. An insurance regulatory authority or
governmental entity in any United States
jurisdiction revokes, suspends or forces the
Company to withdraw its certificate of
authority in such jurisdiction.
10. Company fails to pay Reinsurer's Margin in
accordance with the "Reinsurer's Margin"
Article of this Agreement
Upon election of Special Termination, the Reinsurer
shall incur no liability for losses occurring
subsequent to the effective date of termination.
16
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GENERAL CLAUSES
ATTACHED - Currency
- Errors and Omissions
- Access to Records
- Arbitration
- Offset
- Confidentiality
- Definitions
- Taxes and FET
- Excess of Policy Limits
- Excess of Contractual Obligations
- Insolvency
- Service of Suit
- Reserves
INTERMEDIARY CLAUSE
ATTACHED Pegasus Advisors - Towers Xxxxxx Reinsurance
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PEGASUS ADVISORS - XXXXXX XXXXXX XXXXXXXXXXX
By: /s/ X. Xxxxx
-------------------------------------------------------------
Title: E.V.P.
----------------------------------------------------------
Accepted on behalf of Tower Insurance Company of New York, in confirmation of
the terms, conditions and Reinsurer hereon.
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------------------------------------
Title: Vice President
-----------------------------------------------------------
Accepted on behalf of Converium Reinsurance (North America) Inc. for a 33.333%
(thirty three point three three three percent) participation of the terms and
conditions herein.
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------------------------------------
Title: SVP
----------------------------------------------------------
18
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GENERAL CLAUSES
DEFINITIONS
A. "Declaratory Judgment Expenses" as used in this Agreement shall mean
legal expenses paid by the Company in the investigation, analysis,
evaluation or litigation of a coverage action between the Company and
any other party to determine if there is coverage under a policy or
policies issued by the Company for a specific claim or specific claims
reinsured under this Agreement or which would be reinsured under this
Agreement had the Company not been successful in the coverage action.
B. "Loss Adjustment Expenses" as used in this Agreement shall mean all
costs and expenses allocable to a specific claim that are incurred by
the Company in the investigation, appraisal, adjustment, settlement,
litigation, defense or appeal of a specific claim, including court
costs and costs of supersedeas and appeal bonds and including a)
prejudgment interest, unless included as part of the award or judgment;
b) post-judgment interest and c) legal expenses and costs incurred in
connection with coverage questions and legal actions connected thereto,
including pro rata Declaratory Judgment Expenses.
Loss Adjustment Expenses shall include in-house adjusters, defense
attorneys, and other claims personnel of Tower Insurance Company of New
York/Tower Risk Management who bill the Company for their services on
an hourly basis.
C. "Loss Occurrence" shall have the following meanings:
1. As respects property losses, "Loss Occurrence" shall mean
shall mean the sum of all individual losses directly
occasioned by any one disaster, accident or loss or series of
disasters, accidents or losses arising out of one event which
occurs within the area of one state of the United States or
province of Canada and states or provinces contiguous thereto
and to one another. However, the duration and extent of any
one "Loss Occurrence" shall be limited to all individual
losses sustained by the Company occurring during any period of
168 (one hundred sixty eight) consecutive hours arising out of
and directly occasioned by the same event except that the term
"Loss Occurrence" shall be further defined as follows:
a. As regards windstorm, hail, tornado, hurricane,
cyclone, including ensuing collapse and water damage,
all individual losses sustained by the Company
occurring during any period of 72 (seventy two)
consecutive hours arising out of and directly
occasioned by the same event. However, the event need
not be limited to one state or province or states or
provinces contiguous thereto.
b. As regards riot, riot attending a strike, civil
commotion, vandalism and malicious mischief, all
individual losses sustained by the Company occurring
during any period of 72 (seventy two) consecutive
hours within the area of one municipality or county
and the municipalities or counties contiguous thereto
arising out of and directly occasioned by the same
event. The maximum duration of 72 (seventy two)
consecutive hours may be extended in respect of
individual losses which occur beyond such 72 (seventy
two) consecutive hours during the continued
occupation of an assured's premises by strikers,
provided such occupation commenced during the
aforesaid period.
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c. As regards earthquake (the epicenter of which need
not necessarily be within the territorial confines
referred to in the opening paragraph of this clause)
and fire following directly occasioned by the
earthquake, only those individual fire losses which
commence during the period of 168 (one hundred sixty
eight) consecutive hours may be included in the
Company's "Loss Occurrence".
d. As regards "Freeze", only individual losses directly
occasioned by collapse, breakage of glass and water
damage (caused by bursting of frozen pipes and tanks)
may be included in the Company's "Loss Occurrence".
For all "Loss Occurrences" the Company may choose the date and
time when any such period of consecutive hours commences
provided that it is not earlier than the date and time of the
occurrence of the first recorded individual loss sustained by
the Company arising out of that disaster, accident or loss and
provided that only one such period of 168 (one hundred sixty
eight) consecutive hours shall apply with respect to one event
except for those "Loss Occurrences" referred to in
sub-paragraphs 1 and 2 of this Clause where only one such
period of 72 (seventy two) consecutive hours shall apply with
respect to one event.
No individual losses occasioned by an event that would be
covered by 72 (seventy two) hours clauses may be included in
any "Loss Occurrence" claimed under the 168 (one hundred sixty
eight) hours provision.
2. As respects casualty losses, "Loss Occurrence" shall mean any
one accident, disaster, casualty or happening, or series of
accidents, disasters, casualties or happenings arising out of
or following on one event, regardless of the number of
interests insured or the number of policies responding.
Except where specifically provided otherwise in this
Agreement, each Loss Occurrence shall be deemed to take place
as of the earliest date of loss as .determined by any original
policy responding to the Loss Occurrence.
3. As respects liability losses (bodily injury and property
damage) other than Automobile and Products, and at the option
of the Company, "Loss Occurrence" shall mean the sum of all
damages sustained by each insured during a period of twelve
consecutive months arising out of a continuous or repeated
injurious exposure to substantially the same general
conditions. For purposes of this definition, the date of loss
shall be deemed to be the inception or renewal date of the
original policy of insurance to which payment is charged.
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TICNY Q.S.
SMALL BUSINESS
As respects occupational disease and cumulative trauma:
A. In case the Company shall, within one original policy year,
sustain several losses arising out of such and occupational or
other disease or cumulative trauma of a specific kind or
class, suffered by several employees of one original insured,
all such losses shall be deemed to arise out of one
'occurrence' and the date of the occurrence for reinsurance
purposes shall be deemed to be the inception, anniversary or
renewal date of the Company's original policy.
B. With respect to an occupational disease or other disease
suffered by more than one employee of one or more employers,
such occupational disease or other disease shall be covered
under this Agreement if resulting from a sudden and accidental
event not exceeding 48 (forty eight) hours in duration. For
purposes of this Agreement, a 48 (forty eight) hour event will
be deemed as one Loss Occurrence. All such losses subsequently
arising out of such event and not otherwise classified except
as occupational disease or other disease shall be considered
as one Loss Occurrence or may be combined with losses
classified as other than occupational disease or other disease
which arise out of the same event, and the combination of such
losses shall be considered as one Loss Occurrence within the
meaning hereof.
D. "Net Earned Premium" shall mean the Net Written Premium of the
Company's Business Covered less the unearned premium reserve at the
respective date of calculation.
E. "Net Written Premium" shall mean gross premium of the Company's
Business Covered less cancellations and returns and less premium paid
for specific excess of loss reinsurance above $1,000,000 (one million
dollars), and facultative reinsurances, if any.
F. "Terrorist Acts" shall mean any act, or preparation in respect of
action, or threat of action designed to influence the government de
jure or de facto of any nation or any political division thereof, or in
pursuit of political, religious, ideological, or similar purposes to
intimidate the public or a section of the public of any nation by any
person or group(s) of persons whether acting alone or on behalf of or
in connection with any organization(s) or government(s) de jure or de
facto, and which:
(i) involves violence against one or more persons; or
(ii) involves damage to property; or
(iii) endangers life other than that of the person committing the
action; or
(iv) creates a risk to health or safety of the public or a section
of the public; or
(v) is designed to interfere with or to disrupt an electronic
system.
Loss, damage, cost or expense arising out of or in connection with any
action in controlling, preventing, suppressing, retaliating against, or
responding to any act of terrorism shall be considered part of
terrorism Ultimate Net Loss.
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SMALL BUSINESS
G. "Ultimate Net Loss" shall mean, subject to all limitations in this
Agreement including the Per Risk - Per Loss Occurrence Limits, actual
loss or losses arising out of Business Covered hereunder sustained by
the Company in respect of losses occurring during the Term, including
100% (one hundred percent) of Extra Contractual Obligations and 100%
(one hundred percent) of Excess Policy Limits, subject to the
limitations in Excess Policy Limits and Extra Contractual Obligations
clauses below, after making deductions for all recoveries and salvages
and inuring specific and facultative reinsurance, whether collectible
or not. The Reinsurer shall not be liable for more than $1,000,000 (one
million dollars) additional subject Ultimate Net Loss for any one claim
in respect of Excess of Policy Limits/Extra Contractual Obligations
liability and $5,000,000 (five million dollars) in the aggregate for
all Excess of Policy Limits/Extra Contractual Obligations liability.
H. "Ultimate Net Loss Ratio" shall mean the ratio of aggregate Ultimate
Net Losses incurred plus aggregate Loss Adjustment Expense divided by
Net Earned Premium as of the date of calculation.
CURRENCY
A. Whenever the word "dollars" or the "$" appears in this Agreement, they
shall be construed to mean United States Dollars and all transactions
under this Agreement shall be in United States Dollars.
B. Amounts paid or received by the Company in any other currency shall be
converted to United States Dollars at the rate of exchange at the date
such transaction is entered on the books of the Company.
TAXES AND FEDERAL EXCISE TAX
A. Taxes - In consideration of the terms under which this Agreement is
issued, the Company undertakes not to claim any deduction of the
Premium hereon when making Canadian tax returns or when making tax
returns other than Income or Profits Tax returns, to any State or
Territory of the United States of America or to the District of
Columbia.
B. Federal Excise Tax - (Applicable to those Reinsurer, excepting
Underwriters at Lloyd's London and other Reinsurer exempt from Federal
Excise Tax, who are domiciled outside the United States of America.)
The Reinsurer have agreed to allow for the purpose of paying the
Federal Excise Tax the applicable percentage of the Premium payable
hereon (as imposed under Section 4371 of the Internal Revenue Code) to
the extent such Premium is subject to the Federal Excise Tax.
In the event of any return of Premium becoming due hereunder, the
Reinsurer shall deduct the applicable percentage from the return
Premium payable hereon and the Company or its agent should take steps
to recover the tax from the United States Government.
22
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RESERVES
(This Clause only applies to Reinsurer domiciled outside the United States
and/or unauthorized in any state, territory or district of the United States
having jurisdiction over the Company.)
A. If a jurisdiction of the United States shall not permit the Company, in
the statements required to be filed with its regulatory authority(ies),
to receive full credit as admitted reinsurance for any Reinsurer's
share of obligations, the Company shall forward to such Reinsurer a
statement of the Reinsurer's share of such obligations. Upon receipt of
such statement, the Reinsurer shall promptly apply for and provide the
Company with a "clean", unconditional and irrevocable Letter of Credit
in the amount specified in the statement submitted, with terms and bank
acceptable to the regulatory authority(ies) having jurisdiction over
the Company.
B. "Obligations" as used in this Clause, shall mean the sum of losses paid
and Loss Adjustment Expenses paid by the Company but not yet recovered
from the Reinsurer, plus reserves for reported losses, Loss Adjustment
Expenses, losses incurred but not reported and premiums unearned, if
any.
C. The Reinsurer hereby agree that the Letter of Credit shall provide for
automatic extension of the Letter of Credit without amendment for one
year from the date of expiration of said Letter or any future
expiration date unless 30 (thirty) days prior to any expiration the
issuing bank shall notify the Company by registered mail that the
issuing bank elects not to consider the Letter of Credit renewed for
any additional period. An issuing bank, not a "qualified bank" as
defined by Regulation 133 promulgated by the Insurance Department of
the State of New York, shall provide 60 (sixty) days notice to the
Company prior to any expiration.
D. Notwithstanding any other provision of this Agreement, the Company or
any successor by operation of law of the Company including, without
limitation, any liquidator, rehabilitator, receiver or conservator of
the Company may draw upon such credit, without diminution because of
the insolvency of any party hereto, at any time and undertakes to use
and apply such credit for one or more of the following purposes only:
1. to pay the Reinsurer's share or to reimburse the Company for
the Reinsurer's share of any obligations, as stipulated in the
statement submitted by the Company to the Reinsurer, which is
due to the Company and not otherwise paid by the Reinsurer;
2. in the event the Company has received effective notice of
non-renewal of the Letter of Credit and the Reinsurer's
liability remains unliquidated and undischarged 30 (thirty)
days prior to the expiry date of the Letter of Credit to
withdraw the balance of the Letter of Credit and place such
sums in an interest bearing trust account to secure the
continuing liabilities of the Reinsurer under this Agreement
until a renewal Letter of Credit acceptable to the regulatory
authority(ies) having jurisdiction over the Company, or a
substitute in lieu thereof acceptable to the regulatory
authority(ies) having jurisdiction over the Company, has been
received by the Company. The Company shall provide to the
Reinsurer payment of any interest thereon accruing from such
account.
23
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SMALL BUSINESS
3. to make refund of any sum which is in excess of the actual
amount required for Sections 1 and 2 of this paragraph.
E. At annual intervals or more frequently as determined by the Company,
but never more frequently than quarterly, the Company shall prepare a
specific statement, for the sole purpose of amending the Letter of
Credit, of the Reinsurer's share of any obligations. If the statement
shows that the Reinsurer's share of obligations exceeds the balance of
credit as of the statement date, the Reinsurer shall, within 30
(thirty) days after receipt of notice of such excess, secure delivery
to the Company of an amendment of the Letter of Credit increasing the
amount of credit by the amount of such difference. If the statement
shows, however, that the Reinsurer's share of obligations is less than
the balance of credit as of the statement date, the Company shall,
within 30 (thirty) days after receipt of written request from the
Reinsurer, 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.
F. The bank shall have no responsibility whatsoever in connection with the
propriety of withdrawals made by the Company or the disposition of
funds withdrawn, except to assure that withdrawals are made only upon
the order of properly authorized representatives of the Company. The
Company shall incur no obligation to the bank in acting upon the
credit, other than as appears in the express terms thereof.
EXCESS OF POLICY LIMITS
This Agreement shall protect the Company for 100% (one hundred percent) of loss
in excess of the limit of its original policies of insurance, such loss in
excess of the limit having been incurred because of failure by the Company or
Tower Risk Management to settle within the policies of insurance limit or by
reason of alleged or actual negligence or bad faith in rejecting an offer of
settlement or in the preparation of the defense or in the trial of any action
against its insured or reinsured or in the preparation or prosecution of an
appeal consequent upon such action. The Reinsurer shall not be liable for more
than $1,000,000 (one million dollars) additional subject Ultimate Net Loss for
any one claim in respect of Excess of Policy Limits/Extra Contractual
Obligations liability and $5,000,000 (five million dollars) in the aggregate for
all Excess of Policy Limits/Extra Contractual Obligations liability.
However, this Clause shall not apply where the loss has been incurred due to a
fraud by a member of the board of directors or a corporate officer of the
Company or Tower Risk Management acting individually or collectively or in
collusion with any individual or corporation or any other organization or party
involved in the presentation, defense or settlement of any claim covered
hereunder.
For the purpose of this Clause, the word "loss" shall mean any amounts for which
the Company would have been contractually liable to pay had it not been for the
limit of the original Reinsurance Agreement.
24
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SMALL BUSINESS
EXTRA CONTRACTUAL OBLIGATIONS
This Agreement shall protect the Company for 100% (one hundred percent) of any
Extra Contractual Obligations. The term "Extra Contractual Obligations" is
defined as those liabilities not covered under any other provision of the
Company's original policies of insurance and which arise from the handling of
any claim on Business Covered hereunder, such liabilities arising because of,
but not limited to, the following: failure by the Company or Tower Risk
Management to settle within the policies of insurance limit, or by reason of
alleged or actual negligence or bad faith in rejecting an offer of settlement or
in the preparation of the defense or in the trial of any action against its
insured or reinsured or in the preparation or prosecution of an appeal
consequent upon such action. The Reinsurer shall not be liable for more than
$1,000,000 (one million dollars) additional subject Ultimate Net Loss for any
one claim in respect of Excess of Policy Limits/Extra Contractual Obligations
liability and $5,000,000 (five million dollars) in the aggregate for all Excess
of Policy Limits/Extra Contractual Obligations liability.
The date on which any Extra Contractual Obligation is incurred by the Company
shall be deemed, in all circumstances, to be the date of the original loss
event. However, this Clause shall not apply where the loss has been incurred due
to fraud by a member of the board of directors or a corporate officer of the
Company or Tower Risk Management acting individually or collectively or in
collusion with any individual or corporation or any other organization or party
involved in the presentation, defense or settlement of any claim covered
hereunder.
OFFSET
The Company and the Reinsurer shall have the right to offset any balance or
amounts due from one party to the other under the terms of this Agreement or any
other agreement between the Company and the Reinsurer. The party asserting the
right of offset may exercise such right any time whether the balances due are on
account of Reinsurance Premiums, Ceding Commissions, Ultimate Net Losses or
otherwise. However, in the event of insolvency of any party hereto, offset shall
only be allowed to the extent permitted by the provisions of New York Insurance
Law Section 7427.
ERRORS AND OMISSIONS
Inadvertent delays, errors or omissions made by the Company in connection with
this Agreement shall not relieve the Reinsurer from any liability which would
have attached had such delay, error or omission not occurred, provided always
that such delay, error or omission shall be rectified as soon as possible after
discovery by the Company's home office.
ACCESS TO RECORDS
The Company shall place at the disposal of the Reinsurer at all reasonable
times, and the Reinsurer shall have the right to inspect through their
designated representatives, during the Term of this Agreement and thereafter,
all books, records and papers of the Company in connection with any reinsurance
hereunder, or the subject matter hereof.
25
TICNY Q.S.
SMALL BUSINESS
INSOLVENCY
A. In the event of the insolvency of the Company, this reinsurance shall
be payable directly to the Company, or to its liquidator, receiver,
conservator, or statutory successor on the basis of the liability of
the Company without diminution because of the insolvency of the Company
or because the liquidator, receiver, conservator or statutory successor
of the Company has failed to pay all or a portion of any claim. It is
agreed, however, that the liquidator, receiver, conservator, or
statutory successor of the Company shall give written notice to the
Reinsurer of the pendency of a claim against the Company indicating the
policy insured which claim would involve a possible liability on the
part of the Reinsurer with a reasonable time after such claims is filed
in the conservation or liquidation proceeding or in the receivership,
and that during the pendency of such claim, the Reinsurer may
investigate such claim and interpose, at its own expense, in the
proceeding where such claim is to be adjudicated, any defense or
defenses that they may deem available to the Company or its liquidator,
receiver, conservator or statutory successor. The expense thus incurred
by the Reinsurer shall be chargeable, subject to the approval of the
court, against the Company as part of the expense of conservation or
liquidation to the extent of a pro rata share of the benefit which may
accrue to the Company solely as a result of the defense undertaken by
the Reinsurer.
B. Where two or more Reinsurer 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 insolvent
Company.
CONFIDENTIALITY
The parties acknowledge there may be portions of this Agreement, the Reinsurance
Agreement submission or the marketing package that may contain confidential,
proprietary information of the Company. The Reinsurer shall maintain the
confidentiality of such information concerning the Company and its business and
shall not disclose it to any third person without prior approval; provided,
however, that the Reinsurer may be required and are permitted under this
Agreement to disclose such information in answers to interrogatories, subpoenas
or other legal/arbitration processes as well as to the Company's Intermediaries,
to the Reinsurer's retrocessionaires and affiliated companies, its applicable
intermediaries, or in response to requests by governmental and regulatory
agencies. In addition, the Reinsurer may disclose such information to their
accountants and to their outside legal counsel as may be necessary.
ARBITRATION
A. Any dispute or other matter in question between the Company and the
Reinsurer arising out of, or relating to, the formation,
interpretation, performance or breach of this Agreement, whether such
dispute arises before or after termination of this Agreement, shall be
settled by arbitration. 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.
26
TICNY Q.S.
SMALL BUSINESS
B. If more than one reinsurer is involved in the same dispute, all such
Reinsurer shall constitute and act as one party, provided, however,
that nothing herein shall impair the rights of such Reinsurer to assert
several, rather than joint, defenses or claims, nor be construed as
changing the liability of the Reinsurer under the terms of this
Agreement from several to joint.
C. Each party shall appoint an individual as arbitrator and the two so
appointed shall then appoint a third arbitrator. If either party
refuses or neglects to appoint an arbitrator within 60 (sixty) days,
the other party may appoint the second arbitrator. If the two
arbitrators do not agree on a third arbitrator within 60 (sixty) days
of their appointment, each of the arbitrators shall nominate 3 (three)
individuals. Each arbitrator shall then decline two of the nominations
presented by the other arbitrator. The third arbitrator shall then be
chosen form the remaining two nominations by drawing lots. The
arbitrators shall be active or former officers of insurance or
reinsurance companies or Lloyd's Underwriters; the arbitrators shall
not have a personal or financial interest in the result of the
arbitration.
D. The arbitration hearings shall be held in New York, New York or such
other place as may be mutually agreed. Each party shall submit its case
to the arbitrators within 60 (sixty) days of the selection of the third
arbitrator or within such longer period as may be agreed by the
arbitrators. The arbitrators shall not be obliged to follow judicial
formalities or the rules of evidence except to the extent required by
governing law, that is, the state law of the situs of the arbitration
as herein agreed; they shall make their decisions according to the
practice of the reinsurance business. The decision rendered by a
majority of the arbitrators shall be final and binding on both parties.
Such decision shall be a condition precedent to any right of legal
action arising out of the arbitrated dispute which either party may
have against the other. Judgment upon the award rendered may be entered
in any court having jurisdiction thereof.
E. Each party shall pay the fee and expenses of its own arbitrator and
one-half of the fee and expenses of the third arbitrator. All other
expenses of the arbitration shall be equally divided between the
parties.
F. Except as provided above, arbitration shall be based, insofar as
applicable, upon the procedures of the American Arbitration
Association.
SERVICE OF SUIT
(This Clause only applies to Reinsurer domiciled outside the United States
and/or unauthorized in any state, territory or district of the United States
having jurisdiction over the Company.)
A. It is agreed that in the event of the failure of the Reinsurer hereon
to pay any amount claimed to be due hereunder, the Reinsurer hereon, at
the request of the Company, shall submit to the jurisdiction of a court
of competent jurisdiction within the United States. Nothing in this
Clause constitutes or should be understood to constitute a waiver of
the Reinsurer's right to commence an action in any court of competent
jurisdiction in the United States, to remove an action to a United
States District Court, or to seek a transfer of a case to another court
as permitted by the laws of the United States or of any state in the
United States. It is further agreed that service of process in such
suit may be made upon Xxxxxx, Xxxxx & Xxxxxxx LLP, 000 Xxxx Xxxxxx Xxx
Xxxx, Xxx Xxxx 00000, and that in any suit instituted, the Reinsurer
shall abide by the final decision of such court or of any Appellate
Court in the event of an appeal.
27
TICNY Q.S.
SMALL BUSINESS
B. The above-named are authorized and directed to accept service of
process on behalf of the Reinsurer in any such suit and/or upon the
request of the Company to give a written undertaking to the Company
that they shall enter a general appearance upon the Reinsurer's behalf
in the event such a suit shall be instituted.
C. Further, pursuant to any statute of any state, territory or district of
the United States which makes provision therefore, the Reinsurer hereon
hereby designate the Superintendent, Commissioner or Director of
Insurance or other officer specified for that purpose in the statute,
or his successor or successors in office, as their true and lawful
attorney upon whom may be served any lawful process in any action, suit
or proceeding instituted by or on behalf of the Company or any
beneficiary hereunder arising out of this Agreement of reinsurance, and
hereby designates the above-named as the person to whom the said
officer is authorized to mail such process or a true copy thereof.
INTERMEDIARY
Tower Risk Management Corporation and Pegasus Advisors -- Towers Xxxxxx
Xxxxxxxxxxx are hereby recognized as the Intermediaries negotiating this
Agreement for all business hereunder and through whom all communications
relating hereto (including but not limited to notices, statements and reports)
shall be transmitted to both parties. It is understood, as regards remittances
due either party hereunder, that payment by the Company to the Intermediaries,
shall constitute payment to the Reinsurer but payment by the Reinsurer to the
Intermediaries shall only constitute payment to the Company to the extend such
payments are actually received by the Company.
28
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NUCLEAR INCIDENT EXCLUSION CLAUSE
PHYSICAL DAMAGE --- REINSURANCE -- USA
NMA 1119
1. This Contract does not cover any loss or liability accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any
Pool of Insurers or Reinsurer formed for the purpose of covering Atomic or
Nuclear Energy risks.
2. Without in any way restricting the operation of paragraph (1) of
this Clause, this Contract does not cover any loss or liability accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any
insurance against Physical Damage (including business interruption or
consequential loss arising out of such Physical Damage) to:
I. Nuclear reactor power plants including all auxiliary
property on the site, or
II. Any other nuclear reactor installation, including
laboratories handling radioactive materials in
connection with reactor installations, and "critical
facilities" as such, or
III. Installations for fabricating complete fuel elements
or for processing substantial quantities of "special
nuclear material", and for reprocessing, salvaging,
chemically separating, storing or disposing of
"spent" nuclear fuel or waste materials, or
IV. Installations other than those listed in paragraph
(2) III above using substantial quantities of
radioactive isotopes or other products of nuclear
fission.
3. Without in any way restricting the operations of paragraphs (1) and
(2) hereof, this Contract does not cover any loss or liability by radioactive
contamination accruing to the Reassured, directly or indirectly, and whether as
Insurer or Reinsurer, from any insurance on property which is on the same site
as a nuclear reactor power plant or other nuclear installation and which
normally would be insured therewith except that this paragraph (3) shall not
operate
(a) where the Reassured does not have knowledge
of such nuclear reactor power plant or
nuclear installation, or
(b) where said insurance contains a provision
excluding coverage for damage to property
caused by or resulting from radioactive
contamination, however caused. However on
and after 1st January 1960, this
sub-paragraph (b) shall only apply provided
the said radioactive contamination exclusion
provision has been approved by the
Governmental Authority having jurisdiction
thereof.
4. Without in any way restricting the operations of paragraphs (1), (2)
and (3) hereof, this Contract does not cover any loss or liability by
radioactive contamination accruing to the Reassured, directly or indirectly, and
whether as Insurer or Reinsurer, when such radioactive contamination is a named
hazard specifically insured against.
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5. It is understood and agreed that this Clause shall not extend to
risks using radioactive isotopes in any form where the nuclear exposure is not
considered by the Reassured to be the primary hazard.
6. The term "special nuclear material" shall have the meaning given it
in the Atomic Energy Act of 1954 or by any law amendatory thereof.
7. The Reassured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site
NOTE: - Without in any way restricting the operation of paragraph (1) hereof, it
is understood and agreed that
(a) all policies issued by the Reassured on or
before 31st December 1957 shall be free from
the application of the other provisions of
this Clause until expiry date or 31st
December 1960 whichever first occurs
whereupon all the provisions of this Clause
shall apply.
(b) with respect to any risk located in Canada
policies issued by the Reassured on or
before 31st December 1958 shall be free from
the application of the other provisions of
this Clause until expiry date or 31st
December 1960 whichever first occurs
whereupon all the provisions of this Clause
shall apply.
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NUCLEAR INCIDENT EXCLUSION CLAUSE
LIABILITY -- REINSURANCE -- U.S.A.
NMA 1590
1. This Agreement does not cover any loss or liability accruing to the
Cedent as a member of, or subscriber to, any association of insurers or
Reinsurer formed for the purpose of covering nuclear energy risks or as
a direct or indirect reinsurer of any such member, subscriber or
association.
2. Without in any way restricting the operation of paragraph (1) of this
Clause it is understood and agreed that for all purposes of this
Agreement all the original policies of the Cedent (new, renewal and
replacement) of the classes specified in Clause II of this paragraph
(2) from the time specified in Clause III of this paragraph (2) shall
be deemed to include the following provision (specified as the Limited
Exclusion Provision):
Limited Exclusion Provision*
I. It is agreed that the policy does not apply under any
liability coverage, to (injury, sickness, disease, death or
destruction (bodily injury or property damage with respect to
which an insured under the policy is also an insured under a
nuclear energy liability policy issued by Nuclear Energy
Liability Insurance Association, Mutual Atomic Energy
Liability Underwriters or Nuclear Insurance Association of
Canada, or would be an insured under any such policy but for
its termination upon exhaustion of its limits of liability.
II. Family Automobile Policies (liability only), Special
Automobile Policies (private passenger automobiles, liability
only), Farmers Comprehensive Personal Liability Policies
(liability only), Comprehensive Personal Liability Policies
(liability only) or policies of a similar nature; and the
liability portion of combination forms related to the four
classes of policies stated above, such as the Comprehensive
Dwelling Policy and the applicable types of Homeowners
Policies.
III. The inception dates and thereafter of all original policies as
described in II above, whether new, renewal or replacement,
being policies which either
(a) become effective on or after 1st May, 1960, or
(b) become effective before that date and contain the
Limited Exclusion Provision set out above;
provided this paragraph (2) shall not be
applicable to Family Automobile Policies, Special
Automobile Policies or policies or combination
policies of a similar nature, issued by the
Cedent on New York risks, until 90 days following
approval of the Limited Exclusion Provision by
the Governmental Authority having jurisdiction
thereof.
3. Except for those classes of policies specified in Clause II of
paragraph (2) and without in any way restricting the operation of
paragraph (1) of this Clause, it is understood and agreed that for all
purposes of this Agreement the original liability policies of the
Cedent (new, renewal and replacement) affording the following
coverages:
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Owners, Landlords and Tenants Liability, Contractual Liability,
Elevator Liability, Owners or Contractors (including railroad),
Protective Liability, Manufacturers and Contractors Liability, Product
Liability, Professional and Malpractice Liability, Storekeepers
Liability, Garage Liability, Automobile Liability (including
Massachusetts Motor Vehicle or Garage Liability)
shall be deemed to include, with respect to such coverages, from the
time specified in Clause V of this paragraph (3), the following
provision (specified as the Broad Exclusion Provision):
I. Under any Liability Coverage, to (injury, sickness, disease,
death or destruction (bodily injury or property damage
(a) with respect to which an insured under the policy is
also an insured under a nuclear energy liability
policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability
Underwriters or Nuclear Insurance Association of
Canada, or would be an insured under any such policy
but for its termination upon exhaustion of its limit
of liability; or
(b) resulting from the hazardous properties of nuclear
material and with respect to which (1) any person or
organization is required to maintain financial
protection pursuant to the Atomic Energy Act of 1954,
or any law amendatory thereof, or (2) the insured is,
or had this policy not been issued would be, entitled
to indemnity from the United States of America, or
any agency thereof, under any agreement entered into
by the United States of America, or any agency
thereof, with any person or organization.
II. Under any Medical Payments Coverage, or under any
Supplementary Payments Provision relating to (immediate
medical or surgical relief, (first aid, to expenses incurred
with respect to (bodily injury, sickness, disease or death
(bodily injury resulting from the hazardous properties of
nuclear material and arising out of the operation of a nuclear
facility by any person or organization.
III. Under any Liability Coverage, to (injury, sickness, disease,
death or destruction (bodily injury or property damage
resulting from the hazardous properties of nuclear material if
(a) the nuclear material (1) is at any nuclear facility
owned by, or operated by or on behalf of, an insured
or (2) has been discharged or dispersed therefrom;
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(b) the nuclear material is contained in spent fuel or
waste at any time possessed, handled, used,
processed, stored, transported or disposed or by or
on behalf of an insured; or
(c) (the injury, sickness, disease, death or destruction
(the bodily injury or property damage arises out of
the furnishing by an insured of services, materials,
parts or equipment in connection with the planning,
construction, maintenance, operation or use of any
nuclear facility, but if such facility is located
within the United States of America, its territories,
or possessions or Canada, this exclusion (c) applies
only to (injury to or destruction of property at such
nuclear facility (property damage to such nuclear
facility and any property thereat.
IV. As used in this endorsement:
"hazardous properties" include radioactive, toxic or explosive
properties; "nuclear material" means source material, special
nuclear material or by-product material; "source material",
"special nuclear material" and "by-product material" have the
meanings given to them in the Atomic Energy Act of 1954 or in
any law amendatory thereof; "spent fuel" means any fuel
element or fuel component, solid or liquid, which has been
used or exposed to radiation in a nuclear reactor; "waste"
means any waste material (1) containing by-product material
and (2) resulting from the operation by any person or
organization of any nuclear facility included within the
definition of nuclear facility under paragraph (a) or (b)
thereof; "nuclear facility" means
(a) any nuclear reactor,
(b) any equipment or device designed or used for (1)
separating the isotopes of uranium or plutonium, (2)
processing or utilizing spent fuel, or (3) handling,
processing or packaging waste,
(c) any equipment or device used for the processing,
fabricating or alloying of special nuclear material
if at any time the total amount of such material in
the custody of the Insured at the premises where such
equipment or device is located consists of or
contains more than 25 grams of plutonium or uranium
233 or any combination thereof, or more than 250
grams of uranium 235,
(d) any structure, basin, excavation, premises or place
prepared or used for the storage or disposal of
waste,
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and includes the site on which any of the foregoing
is located, all operations conducted on such site and
all premises used for such operations; "nuclear
reactor" means any apparatus designed or used to
sustain nuclear fission in a self-supporting chain
reaction or to contain a xxxxxxxx xxxx of fissionable
material; (with respect to injury to or destruction
of property, the word "injury" or "destruction"
("property damage" includes all forms of radioactive
contamination of property, (includes all forms of
radioactive contamination of property.
V. The inception dates and thereafter of all original policies
affording coverages specified in this paragraph (3), whether
new, renewal or replacement, being policies which become
effective on or after 1st May, 1960, provided this paragraph
(3) shall not be applicable to
(i) Garage and Automobile Policies issued by the Cedent
on New York risks, or
(ii) Statutory liability insurance required under Chapter
90, General Laws of Massachusetts, until 90 days
following approval of the Board Exclusion Provision
by the Governmental Authority having jurisdiction
thereof.
4. Without in any way restricting the operation of paragraph (1) of this
Clause, it is understood and agreed that paragraphs (2) and (3) above
are not applicable to original liability policies of the Cedent in
Canada and that with respect of such policies this Clause shall be
deemed to include the Nuclear Energy Liability Exclusion Provisions
adopted by the Canadian Underwriters' Association or the Independent
Insurance Conference of Canada.
*Note The words printed in italics in the Limited Exclusion Provision
and in the Broad Exclusion Provision shall apply only in relation to
original liability policies which include a Limited Exclusion Provision
or a Broad Exclusion Provision containing those words.
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WAR RISK EXCLUSION CLAUSE (REINSURANCE)
As regards interests which at time of loss or damage are on shore, no
liability shall attach hereto in respect of any loss or damage which is
occasioned by war, invasion, hostilities, acts of foreign enemies, civil war,
rebellion, insurrection, military or usurped power, or martial law or
confiscation by order of any government or public authority.
This War Exclusion Clause shall not, however, apply to interest which
at time of loss or damage are within the territorial limits of the United States
of America (comprising the fifty States of the Union and the District of
Columbia, its territories and possessions, including the Panama Canal Zone and
the Commonwealth of Puerto Rico and including Bridges between the United States
of America and Mexico provided they are under United States ownership), Canada,
St. Pierre and Miquelon, provided such interests are insured under original
policies, endorsements or binders containing a standard war or hostilities or
warlike operations exclusion clause.
Nevertheless, this clause shall not be construed to apply to loss or
damage occasioned by riots, strikes, civil commotion, vandalism, malicious
damage, including acts committed by agents of any government, party or faction
engaged in war, hostilities or other warlike operation, provided such agents are
acting secretly and not in connection with any operations of military or naval
armed forces in the country where the interests insured are situated.
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INSOLVENCY FUND EXCLUSION CLAUSE
This Agreement excludes all liability of the Ceding Company arising by contract,
operation of law or otherwise, from its participation or membership, whether
voluntary or involuntary, in any insolvency fund. "Insolvency Fund" includes any
guarantee fund, insolvency fund, plan, pool, association, fund or other
arrangement, howsoever denominated, established or governed, which provides for
any assessment of or payment or assumption by the Ceding Company of part or all
of any claim, debt, charge, fee or other obligation of an insurer or its
successors or assigns which has been declared by any competent authority to be
insolvent or which is otherwise deemed unable to meet any claim, debt, charge,
fee or other obligation in whole or in part.
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POOLS, ASSOCIATIONS AND SYNDICATES EXCLUSION CLAUSE
Section A:
Excluding:
(a) All business derived directly or indirectly from any
Pool, Association, or Syndicate which maintains its
own reinsurance facilities.
(b) Any Pool or Scheme (whether voluntary or mandatory)
formed after March 1, 1968 for the purpose of
insurance property whether on a country-wide basis or
in respect of designated areas. This exclusion shall
not apply to so-called Automobile Insurance Plans or
other Pools formed to provide coverage for Automobile
Physical Damage.
Section B:
It is agreed that business written by the Company for the same perils, which is
known at the time to be insured by, or in excess of underlying amounts placed in
the following Pools, Associations or Syndicates, whether by way of insurance or
reinsurance, is excluded hereunder:
Industrial Risk Insurers,
Associated Factory Mutuals Improved Risk Mutuals
Any Pool, Association or Syndicate formed for the purpose of
writing Oil, Gas or Petro-Chemical Plants and/or Oil or Gas
Drilling Rigs, United States Aircraft Insurance Group,
Canadian Aircraft Insurance Group, Associated Aviation
Underwriters, American Aviation Underwriters
Section B does not apply:
(a) Where the Total Insured Value over all interests of
the risk in question is less than $250,000,000.
(b) To interests traditionally underwritten as Inland
Marine or stock and/or contents written on a blanket
basis.
(c) To Contingent Business Interruption, except when the
Company is aware that the key location is known at
the time to be insured in any Pool, Association, or
Syndicate named above other than as provided for
under Section B(a).
(d) To risks as follows:
Offices, Hotels, Apartments, Hospitals, Educational
Establishments, Public Utilities, (other than railroad
schedules) and builder's risks on the classes of risks
specified in this subsection (d) only where this clause
attaches to Catastrophe Excesses, the following Section C
is added:
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Section C:
Nevertheless the Reinsurer specifically agrees that liability accruing to the
Company from its participation in:
(1) The following so-called "Coastal Pools":
Alabama Insurance Underwriting Association Florida
Windstorm Underwriting Association Louisiana
Insurance Underwriting Association Mississippi
Windstorm Underwriting Association North Carolina
Insurance Underwriting Association South Carolina
Windstorm and Hail Underwriting Association Texas
Catastrophe Property Insurance Association
AND
(2) All "Fair Plan" and "Rural Risk Plan" business for all perils
otherwise protected hereunder shall not be excluded, except, however,
that this reinsurance does not include any increase in such liability
resulting from:
(i) The inability of any other participant in such
"Coastal Pool" and/or "Fair Plan" and/or "Rural Risk
Plan" to meet its liability.
(ii) Any claim against such "Coastal Pool" and/or "Fair
Plan" and/or "Rural Risk Plan" or any participant
therein, including the Company, whether by way of
subrogation or otherwise, brought by or on behalf of
any insolvency fund (as defined in the Insolvency
Fund Exclusion Clause incorporated in this Contract).
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PEGASUS ADVISORS-- TOWERS XXXXXX XXXXXXXXXXX
By:
-----------------------------------------------------------
Title:
--------------------------------------------------------
Accepted on behalf of Tower Insurance Company of New York, in confirmation of
the terms, conditions and Reinsurer hereon.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------------------------
Title: Secretary and General Counsel
Accepted on behalf of Converium Reinsurance (North America) Inc. for a 33.333%
(thirty three point three three three percent) participation of the terms and
conditions herein.
By: /s/ Xxxxxxx Xxxxxxx
----------------------------------------------------------
Title: SVP
--------------------------------------------------------
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