EXHIBIT 10.17
FORM OF 100% QUOTA SHARE RETROCESSION AGREEMENT
(TRADITIONAL)
BY AND BETWEEN
ST. XXXX FIRE AND MARINE INSURANCE COMPANY
(RETROCEDANT)
and
PLATINUM UNDERWRITERS REINSURANCE INC.
(RETROCESSIONAIRE)
DATED AS OF ________, 2002
THIS QUOTA SHARE RETROCESSION AGREEMENT (this "AGREEMENT"), effective as of
12:01 a.m. New York 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 FIRE AND MARINE INSURANCE
COMPANY, a Minnesota 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, Platinum Holdings acquired one hundred percent (100%) of the issued
and outstanding Shares; and
WHEREAS, pursuant to the Formation and Separation Agreement, 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; and
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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:
ARTICLE I
BUSINESS COVERED; EXCLUSIONS
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 underwritten by St. Xxxx Re on behalf of Retrocedant, incept on or after
January 1, 2002 and belong to the classes specified in Exhibit A-1 hereto
(solely for the convenience of the parties, Exhibit A-2 hereto sets forth a list
of such Reinsurance Contracts (including for each such Reinsurance Contract, the
applicable loss and loss adjustment expense and ceding commission reserve
amounts, each as of June 30, 2002)), or (ii) are new or renewal contracts
entered into by Retrocedant pursuant to Article III, paragraph (a) of the
Underwriting Management Agreement between Retrocedant and Retrocessionaire of
even date herewith (each, a "REINSURANCE CONTRACT"), but excluding reinsurance
contracts belonging to the classes specified in Exhibit B-1 hereto (the
"EXCLUDED CONTRACTS"), (solely for the convenience of the parties, Exhibit B-2
hereto sets forth a list of such reinsurance contracts) it being understood that
any reinsurance contract not meeting the criteria set forth in Exhibit A-1 shall
be deemed to be an Excluded Contract for purposes of this Agreement unless
otherwise agreed to by the parties. No retrocession shall attach with respect to
any contracts of reinsurance of any kind or type whatsoever issued and/or
assumed by Retrocedant, other than the Reinsurance Contracts.
ARTICLE II
TERM
This Agreement shall be continuous as to the Reinsurance Contracts. Except
as mutually agreed in writing by the Retrocedant and the Retrocessionaire, this
Agreement shall remain continuously in force until all Reinsurance Contracts are
terminated, expired, cancelled or commuted.
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ARTICLE III
COVERAGE
SECTION 3.01 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.
SECTION 3.02 SECTION B (PROSPECTIVE) COVERAGE PERIOD. The Section B
(Prospective) Coverage Period will be the period from and including the
Effective Time through the commutation, expiration or final settlement of all
liabilities under any of the Reinsurance Contracts.
ARTICLE IV
PREMIUMS AND ADDITIONAL CONSIDERATION
SECTION 4.01 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 the 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, 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
December 31, 2001 as filed with the Minnesota Department of Commerce and as
submitted to The St. Xxxx, and subject to the adjustments as set forth on
Exhibit C hereto (the "LOSS RESERVE ADJUSTMENTS"), as applicable.
(b) As soon as reasonably practicable, but in no event later than [75]
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 ACCOUNTING") of
all loss and loss adjustment expense reserves and ceding commission reserves
relating to the Reinsurance Contracts, 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 December 31, 2001 as filed with the Minnesota Department of
Commerce 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 pay to the account of Retrocedant the
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difference plus interest on such amount at the Applicable Rate from and
including the Effective Date to and including the date of such payment.
(c) In the event that a reinsurance contract is not included in one of
the classes set forth in Exhibit A-1, but is deemed to be a Reinsurance Contract
by the mutual agreement of the parties, the parties shall determine whether the
Final Section A Premium reflected one hundred percent of the associated reserves
with respect to such Reinsurance Contract as of the Effective Date. If the Final
Section A Premium did not so reflect such associated reserves with respect to
such Reinsurance Contract as of the Effective Date, Retrocedant shall promptly
pay to the account of Retrocessionaire an amount equal to the amount that should
have been included in the Final Section A Premium, as determined pursuant to
paragraph (b) of this Section 4.01, less any amounts paid by Retrocedant on or
after the Effective Date pursuant to such Reinsurance Contract relating to such
reserves, plus interest on such amount at the Applicable Rate calculated from
and including the Effective Date to and including the date of such payment to
Retrocessionaire.
SECTION 4.02 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, 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 December 31, 2001 as filed with the Minnesota Department of
Commerce 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.
(b) As soon as reasonably practicable, but in no event later than [75]
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, 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 December 31, 2001 as
filed with the Minnesota Department of Commerce 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
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promptly pay to the account of Retrocedant 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.
(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 or transferred to 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 4.02(c), shall be for the account of Retrocessionaire
and no such amounts shall be retained by or payable to Retrocedant.
SECTION 4.03 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
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 December 31, 2001, as filed with the Minnesota
Department of Commerce 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. One arbiter
(each arbiter, an "ARBITER") shall be chosen by Retrocedant, the other by
Retrocessionaire, and an umpire (the "UMPIRE") shall be chosen by the two
Arbiters before they enter upon arbitration. In the event that either party
should fail to choose an Arbiter within 30 days
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following a written request by the other party to do so, the requesting party
may choose two Arbiters, but only after providing 10 days' written notice of its
intention to do so and only if such other party has failed to appoint an Arbiter
within such 10 day period. The two Arbiters shall in turn choose an Umpire who
shall act as the umpire and preside over the hearing. If the two Arbiters fail
to agree upon the selection of an Umpire within 30 days after notification of
the appointment of the second Arbiter, the selection of the Umpire shall be made
by the American Arbitration Association. All Arbiters and Umpires shall be
active or retired disinterested property/casualty actuaries of insurance or
reinsurance companies or Lloyd's of London Underwriters.
(c) Each party shall present its case to the Arbiters within 30 days
following the date of appointment of the Umpire, unless the parties mutually
agree to an extension of time. The decision of the Arbiters shall be final and
binding on both parties; but failing to agree, they shall call in the Umpire and
the decision of the majority shall be final and binding upon both parties.
Judgment upon the final decision of the Arbiters may be entered in any court of
competent jurisdiction.
(d) Each party shall bear the expense of its own Arbiter, and shall
jointly and equally bear with the other the expense of the Umpire and of the
arbitration unless otherwise directed by the Arbiters.
(e) Any arbitration proceedings shall take place in New York, New York
unless the parties agree otherwise.
(f) Arbitration shall not be a condition precedent to any right of action
hereunder.
(g) Once the Proposed Accounting has been finalized 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 pay to
the account of Retrocedant the difference plus interest on such amount at the
Applicable Rate from the Effective Date to the date of such payment.
ARTICLE V
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
100 percent (100%) of the actual expenses incurred in writing each Reinsurance
Contract,
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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.
ARTICLE VI
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.
ARTICLE VII
INURING RETROCESSIONS
SECTION 7.01 ALLOCATION TO RETROCESSIONAIRE. Retrocedant agrees that the
retrocession contracts purchased by St. Xxxx Re from third party
retrocessionaires ("THIRD PARTY RETROCESSIONAIRES") on behalf of Retrocedant
prior to the Effective Time that are listed on Exhibit D hereto shall inure to
the benefit of Retrocessionaire to the extent of liabilities covered under this
Agreement ("INURING RETROCESSIONS"), subject to the agreed allocations in
Exhibits E, F and G.
SECTION 7.02 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 or, in the
alternative, to make all payments directly to the Retrocessionaire, to the
extent allocable to the Reinsurance Contracts, in the manner set forth in
Exhibit E hereto, and to seek all payments, to the extent allocable to the
Reinsurance Contracts, in the manner set forth herein in Exhibit F hereto,
directly from Retrocessionaire, it being understood that Retrocessionaire shall
bear all risk of non-payment or non-collectibility under the Inuring
Retrocessions.
SECTION 7.03 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 E hereto. 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 the Retrocessionaire and shall transfer any such recoveries
received to 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 St. Xxxx Re's customary practices and
procedures. Retrocessionaire shall have the right to
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associate with Retrocedant, at Retrocessionaire's own expense, in any actions
brought by Retrocedant to make such collections.
(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 G hereto.
SECTION 7.04 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.
SECTION 7.05 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 F hereto, 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.
SECTION 7.06 TERMINATION OR COMMUTATION OF INURING RETROCESSIONS.
(a) With respect to any Inuring Retrocessions providing coverage solely
with respect to the Reinsurance Agreements, Retrocedant agrees, on behalf of
itself and its affiliates, not to terminate or commute any such Inuring
Retrocession without the written consent of Retrocessionaire.
(b) With respect to any Inuring Retrocessions providing coverage for both
Reinsurance Agreements and to business not being transferred, 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.
ARTICLE VIII
LOSS AND LOSS EXPENSE; SALVAGE AND SUBROGATION; FOLLOW THE FORTUNES
(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
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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
Retrocedant in writing by Retrocessionaire and Retrocessionaire may exercise its
rights under Section 10.01 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.
ARTICLE IX
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 XV hereof.
ARTICLE X
ADMINISTRATION OF REINSURANCE CONTRACTS
SECTION 10.01 ADMINISTRATION.
(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,
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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.
(b) Notwithstanding the foregoing, Retrocessionaire may, at its
discretion and at its own expense, assume the administration, defense 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 IX 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 XIV herein.
SECTION 10.02 REPORTING AND REGULATORY MATTERS. Each party shall provide
the notices and filings required to be made by it to state 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.
SECTION 10.03 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.
SECTION 10.04 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 state insurance
regulators, brokers and other service providers and reinsureds and all notices
of claims, suits and actions for which it receives service of process.)
ARTICLE XI
REPORTS AND REMITTANCES
SECTION 11.01 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
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Contracts, including related administration costs and expenses incurred by
Retrocedant, in the form set forth as Exhibit H hereto. The monthly statement of
account shall also provide a breakdown of any amounts due to the 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.
SECTION 11.02 REMITTANCES. Within two 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.
SECTION 11.03 LATE PAYMENTS. Should any payment due 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").
SECTION 11.04 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 I hereto.
ARTICLE XII
MAINTENANCE OF LICENSES
Each of Retrocedant and Retrocessionaire hereby covenants to maintain at
all times all licenses and authorizations required to undertake the actions
contemplated hereby.
ARTICLE XIII
ACCESS TO RECORDS
From and after the Closing Date, Retrocedant shall afford to
Retrocessionaire and its respective authorized 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
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this Article XIII 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.
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 XIII 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 representatives to, treat and hold as confidential
information any information it receives or obtains pursuant to this Article
XIII.
ARTICLE XIV
INDEMNIFICATION
SECTION 14.01 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 willful misconduct of Retrocedant except to
the extent such actions are taken with the prior consent or direction of
Retrocessionaire. Such indemnification obligations shall be limited to the
aggregate of all fees paid to Retrocedant pursuant to Section 11.04 hereof.
SECTION 14.02 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.
SECTION 14.03 INDEMNIFICATION PROCEDURES. (a) If a party seeking
indemnification pursuant to this Article XIV (each, an "INDEMNITEE") receives
notice or
12
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 14.01 or 14.02, 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 14.03 shall not relieve the Indemnifying
Party of its obligations under this Article XIV, 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 14.03(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 XIV 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 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 XIV, such Indemnitee may
defend or (subject to the remainder of this Article XIV) 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.
13
(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 XIV 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 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.
SECTION 14.04 SURVIVAL. This Article XIV shall survive termination of this
Agreement.
14
ARTICLE XV
ARBITRATION
(a) As a condition precedent to any right of Action under this Agreement,
any dispute or difference between the parties hereto relating to the formation,
interpretation, or performance of this Agreement, or any transaction under this
Agreement, whether arising before or after termination, shall be submitted for
decision to a panel of three arbitrators (the "PANEL") at the offices of
Judicial Arbitration and Mediation Services, Inc. in accordance with the
Streamlined Arbitration Rules and Procedures of Judicial Arbitration and
Mediation Services, Inc.
(b) The party demanding arbitration shall do so by written notice
complying with the terms of Section 20.06. The arbitration demand shall state
the issues to be resolved and shall name the arbitrator appointed by the
demanding party.
(c) Within 30 days of receipt of the demand for arbitration, the
responding party shall notify the demanding party of any additional issues to be
resolved in the arbitration and the name of the responding party's appointed
arbitrator. If the responding party refuses or neglects to appoint an arbitrator
within 30 days following receipt of the written arbitration demand, then the
demanding party may appoint the second arbitrator, but only after providing 10
days' written notice of its intention to do so and only if such other party has
failed to appoint the second arbitrator within such 10 day period.
(d) The two arbitrators shall, before instituting the hearing, select an
impartial arbitrator who shall act as the umpire and preside over the hearing.
If the two arbitrators fail to agree on the selection of a third arbitrator
within 30 days after notification of the appointment of the second arbitrator,
the selection of the umpire shall be made by the American Arbitration
Association. Upon resignation or death of any member of the Panel, a replacement
will be appointed in the same fashion as the resigning or deceased member was
appointed. All arbitrators shall be active or former officers of
property/casualty insurance or reinsurance companies, or Lloyd's underwriters,
and shall be disinterested in the outcome of the arbitration.
(e) Within 30 days after notice of appointment of all arbitrators, the
Panel shall meet and determine timely periods for briefs, discovery procedures
and schedules for hearings. The Panel shall have the power to determine all
procedural rules for the holding of the arbitration, including but not limited
to the inspection of documents, examination of witnesses and any other matter
relating to the conduct of the arbitration. The Panel shall interpret this
Agreement as an honorable engagement and not as merely a legal obligation and
shall make its decision considering the custom and practice of the applicable
insurance and reinsurance business. The Panel shall be relieved of all judicial
formalities and may abstain from following the strict rules of law. The decision
of any two arbitrators shall be binding and final. The arbitrators shall render
their decision in writing within 60 days following the termination of the
hearing. Judgment upon the award may be entered in any court of competent
jurisdiction.
15
(f) Except as otherwise provided herein, all proceedings pursuant hereto
shall be governed by the laws of the State of Minnesota without giving effect to
any choice or conflict of laws provision or rule (whether of the State of
Minnesota or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Minnesota.
(g) The parties agree that any disputes subject to arbitration pursuant
to this Article XV that may also be subject to arbitration proceedings between
respective Affiliates of the parties shall be consolidated with and subject to
arbitration pursuant to this Article XV. The parties further agree that all
issues that are limited to a specific foreign jurisdiction under an agreement
between the respective affiliates of the parties shall be determined by this
Panel pursuant to the consolidation, in reference to the governing law of the
applicable agreement.
(h) Each party shall bear the expense of its own arbitrator and shall
share equally with the other party the expense of the umpire and of the
arbitration.
(i) Arbitration hereunder shall take place in New York, New York unless
the parties agree otherwise.
(j) This Article XV shall survive termination of this Agreement.
ARTICLE XVI
INSOLVENCY
(a) In the event of the insolvency 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 the
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 defense or defenses 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 defense 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
16
Retrocessionaire to Retrocedant or to its liquidator, receiver, conservator or
statutory successor, except (1) where the Reinsurance Contracts specifically
provide another payee in the event of the insolvency 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 Retrocessionaire to the payees under such
Reinsurance Contracts and in substitution for the obligations of the Retrocedant
to such payees.
ARTICLE XVII
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.
ARTICLE XVIII
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.
ARTICLE XIX
CREDIT FOR REINSURANCE; SECURITY
SECTION 19.01 CREDIT FOR REINSURANCE. Retrocessionaire shall take all
actions reasonably necessary, if any, to permit Retrocedant to obtain full
financial statement credit in all applicable U.S. jurisdictions for all
liabilities assumed by the Retrocessionaire pursuant to this Agreement,
including but not limited to loss and loss adjustment expense reserves, unearned
premium reserves, reserves for incurred but not reported losses, allocated loss
adjustment expenses and ceding commissions, and to provide the security required
for such purpose, in a form reasonably acceptable to Retrocedant. Any reserves
required by the foregoing in no event shall be less than the amounts required
under the law of the jurisdiction having regulatory authority with respect to
the establishment of reserves relating to the relevant Reinsurance Contracts.
For purposes of this Article XIX, such "actions reasonably necessary" may
include, without limitation, the furnishing of a letter of credit or the
establishment of a custodial or trust account, as permitted under applicable
law, to secure the payment of the amounts due the Retrocedant under this
Agreement.
SECTION 19.02 EXPENSES. All expenses of establishing and maintaining any
letter of credit or other security arrangement shall be paid by
Retrocessionaire.
17
SECTION 19.03 SECURITY.
(a) 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 in all material respects with the requirements
under Maryland Insurance Law applicable to trust funds established for credit
for reinsurance purposes.
(b) 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 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 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.
(c) 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.
(d) 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 admitted assets under Maryland Insurance Law.
(e) 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 $100 million as of two successive calendar year
ends.
(f) Retrocedant shall bear the costs and expenses of the trustee relating
to the trust.
18
ARTICLE XX
MISCELLANEOUS PROVISIONS
SECTION 20.01 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.
SECTION 20.02 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.
SECTION 20.03 NO THIRD PARTY BENEFICIARIES. Except as otherwise
specifically provided for in Article XIV of this Agreement, nothing in this
Agreement is intended or shall be construed to give any Person, other than the
parties hereto, their successors and permitted assigns, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein, and Retrocessionaire shall not be directly liable hereunder to
any reinsured under any Reinsurance Contract.
SECTION 20.04 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.
SECTION 20.05 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.
SECTION 20.06 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:
St. Xxxx Fire and Marine Insurance Company
000 Xxxxxxxxxx Xxxxxx
Xx. Xxxx, XX 00000
19
Facsimile: [ NO. ]
Attention: [TITLE]
If to Retrocessionaire:
Platinum Underwriters Reinsurance Inc.
Clarendon House, 0 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx XX00
Xxxxxxxxx: [ NO. ]
Attention: Secretary
SECTION 20.07 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 check payable in immediately available funds in the event
the party entitled to receive payment has failed to provide wire transfer
instructions.
SECTION 20.08 HEADINGS. Headings used herein are not a part of this
Agreement and shall not affect the terms hereof.
SECTION 20.09 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, 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.
SECTION 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.
SECTION 20.11 GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Minnesota, without giving effect to principles of conflicts of
laws thereof.
20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the date first above written.
ST. XXXX FIRE AND MARINE
INSURANCE COMPANY
By
---------------------------
Name:
Title:
PLATINUM UNDERWRITERS
REINSURANCE INC.
By
---------------------------
Name:
Title:
21
EXHIBIT A-1
LIST OF INCLUDED CLASSES
THE BUSINESS THAT WILL BE TRANSFERRED INTO PLATINUM RE IS DEFINED BY ALL
BUSINESS INCEPTING IN THE 2002 UNDERWRITING YEAR AND BELONGING TO THE INCLUDED
CLASSES LISTED BELOW.
NEW YORK CLASSES
1101 PROPERTY TREATY P-R, NY
1102 PROPERTY TREATY XS - RISK, NY
1103 PROPERTY TREATY EXCESS - CAT, NY
1104 RETROCESSIONS, NY
1105 CROP-HAIL, NY
1106 CASUALTY TREATY PRO-RATA, NY
1107 CAS FIRST DOLLAR WC, NY
1108 CASUALTY TREATY EXCESS, NY
1109 CAS FIRST DOLLAR AUTO, NY (NON-PROGRAM)
1110 LPIC, NY
1111 CAS FIRST DOLLAR GL/OTHER, NY (NON-PROGRAM)
1112 NA ACCIDENT & HEALTH, NY
1128 CASUALTY TREATY EXCESS - CLASH, NY
1201 INTL PROPERTY PRO RATA, NY
1202 INTL PROPERTY TREATY EXCESS - RISK, NY
1203 INTL PROPERTY TREATY EXCESS - CAT, NY
1204 INTL CASUALTY XXXXXX, XX
0000 INTL MOTOR PRO-RATA, NY
1206 INTL ACCIDENT & HEALTH, NY
1298 INTL PROP OUTWARD RETRO
1301 MARINE TREATY PRO RATA, NY
1302 MARINE TREATY EXCESS, NY
1303 MARINE FACULTATIVE, NY
1307 SATELLITE XS, NY
1500 NON-TRADITIONAL
1800 CCA AIG QS
2201 INTL PROPERTY TREATY EXCESS - RISK MIAMI
2202 INTL PROPERTY PRO RATA, MIAMI
2203 INTL CASUALTY TREATY, MIAMI
2204 MARINE TREATY PRO RATA, MIAMI
2205 INTL MOTOR PRO-RATA, MIAMI
A-1-1
LONDON CLASSES
L06 N. AM MED MAL
L08 N AM CASUALTY TREATY
L11 N. AM CAT
L17 N AM PROPERTY P-R
L18 N AM PROPERTY PER RISK
L74 MED MAL PR
L91 N. AM CROP
L21 INT'L MARINE P-R
L23 INT'L PROPERTY P-R
L24 INT'L PROPERTY PER RISK
L25 INT'L CAT
L26 INT'L MOTOR XS
L27 INT'L CASUALTY EXCESS
L32 INT'L MARINE XL
L33 U.K. PROPERTY PROPORTIONAL TREATY
L34 INT'L CASUALTY P-R
L79 SATELITE XS
L80 INT'L MOTOR LIABILITY PR
L88 INT'L XX 0000
L89 NA NT 1999
L40 N AM MOTOR PRO RATA
L41 N AM MOTOR XL
L43 N AM GL PRO RATA
L44 N AM GL XL
L48 N AM PI XL
L63 N AM PI PRO RATA
B21 BRUSSELS MARINE PR
B23 BRUSSELS INT'L PROPERTY P-R
B24 BRUSSELS INT'L PROPERTY PER RISK
B25 BRUSSELS INT'L CAT
B26 BRUSSES INT'L MOTOR
B27 BRUSSELS INT'L LIAB XS
X00 XXXXXXXX INT'L MARINE XS
X00 XXXXXXXX INT'L LIAB PR
B55 BRUSSELS INT'L PERSONAL ACC P-R
B60 BRUSSELS INT MOTOR PHYSICAL DAMAGE PR
B61 BRUSSELS ENGINEERING PR
B62 BRUSSELS ENGINEERING XL
X00 XXXXXXXX MOTOR PRO RATA
B88 BRUSSELS NON TRADITIONAL
M21 MUNICH - MARINE PR
M23 MUNICH - INT'L PROPERTY P-R
M24 MUNICH - INT'L PROPERTY PER RISK
M25 MUNICH - INT'L CAT
M26 MUNICH - INT'L MOTOR
M27 MUNICH - INT'L LIAB XS
M32 MUNICH - INT'L MARINE XS
M34 MUNICH INT'L LIABILITY PRO RATA
M55 MUNICH INT'L PROPORTIONAL PERSONAL ACCIDENT
M60 MUNICH INTERNATIONAL MOTOR PRO RATA TREATY (MAPD)
M61 MUNICH INTERNATIONAL ENGINEERING PRO RATA TREATY
M62 MUNICH INTERNATIONAL ENGINEERING EXCESS TREATY
LL1 L1 GTR SCALEBACK EUROPE CLASS 1
LL2 L2 GTR SCALEBACK EUROPE CLASS 2
LL3 L3 GTR SCALEBACK EUROPE CLASS 3
LL5 L5 GTR SCALEBACK EUROPE CLASS 5
LF1 F1 GTR SCALEBACK EUROPE CLASS 1
LF2 F2 GTR SCALEBACK EUROPE CLASS 2
LF3 F3 GTR SCALEBACK EUROPE CLASS 3
LF5 F5 GTR SCALEBACK EUROPE CLASS 5
A-1-2
EXHIBIT A-2
THE REINSURANCE CONTRACTS
A-2-1
EXHIBIT B-1
LIST OF EXCLUDED CLASSES
THE FOLLOWING BUSINESS IS TO BE EXCLUDED FROM TRANSFER.
NEW YORK CLASSES
1109 CAS FIRST DOLLAR AUTO, NY (PROGRAM)
1111 CAS FIRST DOLLAR GL/OTHER, NY (PROGRAM)
1304 OMPT_AVT
1305 AVIATION XS, NY
1306 SATELLITE PRO RATA, NY
1401 XXXX, XX
0000 CREDIT, NY
1403 OTHER SPECIALTY, NY
1600 FAC RUNOFF
1606 CASUALTY FAC XXXXXXX, XX
0000 INTL PROPERTY FACULTATIVE, MIAMI
3201 MOTOR PRO-RATA, SINGAPORE
3203 INTL PROPERTY PRO RATA, SINGAPORE
3204 INTL PROPERTY EXCESS, SINGAPORE
3205 INTL CASUALTY TREATY, SINGAPORE
3301 MARINE TREATY PRO RATA, SINGAPORE
3601 INTL PROPERTY FACULTATIVE, SINGAPORE
4201 MEDICAL MALPRACTICE, SYDNEY
4202 CASUALTY TREATY, SYDNEY
CREDIT, SYDNEY
ART, XXXXXX
LONDON CLASSES
L12 N. AM PROF
L13 INTL PROF
L14 NA PROPERTY BINDERS
L98 U.S. RUN-OFF BUSINESS
L20 LMX/RETRO PROP
L22 LMX/RETRO CAS
L30 N AM CAS E&S
L31 N AM BINDERS CAS
L15 AVIATION
L19 INT'L CREDIT
L35 FINANCIAL LONG TAIL
L67 SATTELITE
R21 MARINE RUNOFF
R22 CASUALTY RETRO RUNOF
L97 INT PROPERTY RUNOFF
X00 XX XXXXXXXX XXXXXX
X00 XXXXXXXX FINANCIAL LINES SHORT TAIL PR
B37 BRUSSELS FINANCIAL LINES SHORT TAIL XL
B56 BRUSSELS NON-MARINE FAC PRO RATA
X00 XXXXXXXX NON-MARINE FAC EXCESS
B58 BRUSSELS MARINE FAC PRO RATA
B59 BRUSSELS MARINE FAC EXCESS
B67 BRUSSELS SATTELITE PR
B77 BRUSSELS AVIATION LIABILITY PRO RATA TREATY
B78 BRUSSELS AVIATION HULL PRO RATA TREATY
B90 BRUSSELS FIN LINES PRO RATA
M97 MUNICH INT'L XXX-XXX XXXXXXXX
XX0 X0 XXX SCALEBACK EUROPE CLASS 4
LF4 F4 GTR SCALEBACK EUROPE CLASS 4
* NEED TO ADD AVIATION PRO RATA
B-1-1
EXHIBIT B-2
THE EXCLUDED CONTRACTS
B-2-1
EXHIBIT C
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.
C-1
EXHIBIT D
INURING RETROCESSIONS
[To be provided by Platinum]
F-1
EXHIBIT E
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.
G-1
EXHIBIT F
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.
H-1
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.
H-2
EXHIBIT G
ALLOCATION OF LIMITS
Available limits under an Inuring Retrocession shall be allocated between
the parties in proportion to the losses otherwise recoverable.
I-1
EXHIBIT H
FORM OF RETROCEDANT'S REPORT
[TBD]
J-1
EXHIBIT I
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), 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 administrative 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
itemized 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 will pay all taxes for
which it is the primary obligor as a result of the provision of any service
under this Agreement; PROVIDED, that Retrocessionaire shall be solely
responsible for, and shall reimburse Retrocedent in respect of, any sales, gross
receipts 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.
K-1
