EXHIBIT 10.2
THIS TRANSFER AND ASSUMPTION AGREEMENT (this "AGREEMENT"), made and
effective the 5th day of May, 2000 (the "EFFECTIVE DATE"), by and between RISK
CAPITAL REINSURANCE COMPANY, a corporation organized and existing under the laws
of State of Nebraska (the "COMPANY"), and FOLKSAMERICA REINSURANCE COMPANY, a
corporation organized and existing under the laws of the State of New York (the
"REINSURER").
WITNESSETH THAT:
WHEREAS, pursuant to a certain Asset Purchase Agreement, dated as of
January 10, 2000, by and between Risk Capital Holdings, Inc. ("RCHI"), the
Company, Folksamerica Holding Company, Inc. (together with its affiliates other
than the Reinsurer, "FHC") and the Reinsurer (the "ASSET PURCHASE AGREEMENT"),
the parties thereto have agreed, subject to the terms and conditions herein, to
transfer the reinsurance operations of the Company to the Reinsurer;
WHEREAS, it is the intent of the parties hereto that the Reinsurer
shall completely replace and be substituted for the Company in all respects
under the Treaties (as defined) and the Retrocession Agreements (as defined);
WHEREAS, this Agreement has been approved by the Director of
Insurance of the State of Nebraska and certain other regulatory authorities; and
WHEREAS, since the Company is not a New York domestic company, the
Insurance Department of the State of New York (the "Department") advised the
Company on April 5, 2000 that the Department is not required to approve this
Agreement.
THEREFORE, in consideration of the mutual covenants hereinafter set
forth and subject to the terms and conditions stated herein, the parties hereto
agree as follows:
ARTICLE I
BUSINESS ASSUMPTIVELY REINSURED
1. The Company hereby cedes to the Reinsurer, and the Reinsurer
hereby assumes as reinsurance from the Company as direct obligations of the
Reinsurer, 100% of the Treaty Liabilities (as defined below) arising under the
Treaties; PROVIDED, HOWEVER, that the Reinsurer shall assume no liability for
the Xxxxxxxxx/Xxxxxxx (collectively "Xxxxxxxxx") Treaties identified by the
Company as Treaty Numbers AV 1009 and AV 1010 reinsuring Lloyds Syndicate Nos.
588, 861 and 1209. The terms "TREATY" or "TREATIES" shall mean all binders,
riders, facultative certificates, treaties, contracts of reinsurance and
insurance policies (including line slips, management agreements, pools or other
similar facilities) set forth on Section
3.17(b)(i) of the Disclosure Schedule to the Asset Purchase Agreement, as such
Schedule is amended and restated the date hereof, (the "Schedule of Assumed
Treaties"). The Reinsurer shall have no liability with respect to any binders,
riders, facultative certificates, treaties, contracts of reinsurance or
insurance policies which are not set forth on the Schedule of Assumed Treaties;
PROVIDED, HOWEVER, that to the extent that the Reinsurer receives premiums and
related case reserves hereunder which are attributable to a reinsurance
agreement not set forth on the Schedule of Assumed Treaties, then, promptly,
upon discovery thereof, the Reinsurer shall re-pay such premiums and related
case reserves to the Company.
2. All reinsurance for which the Reinsurer shall be liable by
virtue of this Agreement shall be subject in all respects to the same terms,
rates and conditions, interpretations and waivers and to the same modifications,
alterations and cancellations as the Treaties. The Reinsurer accepts and assumes
the Treaty Liabilities (as defined in Article V) subject to any and all
defenses, offsets (it being understood such offsets only include mutual
liabilities arising under the Assumed Business) and counterclaims to which the
Company would be entitled with respect to such Treaty Liabilities, it being
expressly understood and agreed by the parties hereto that no such defenses,
offsets or counterclaims are waived by the execution of this Agreement or
consummation of the transactions contemplated hereunder and that as of the
Effective Date, the Reinsurer shall be fully subrogated to all such defenses,
offsets and counterclaims.
3. As of the Effective Date, the Reinsurer is the successor to
the Company under the Treaties as if such Treaties were obligations of the
Reinsurer. The Reinsurer substitutes itself as of the Effective Date in the
place and stead of the Company as if named in the place of the Company, and each
ceding company under any Treaty may thereafter disregard the Company as a party
thereto and treat the Reinsurer as if it had been originally obligated
thereunder. From and after the Effective Date, this Agreement shall provide
direct insurance or reinsurance by the Reinsurer to each of the ceding companies
under the Treaties. Payments made to ceding companies in discharge of
obligations to provide direct reinsurance to ceding companies will diminish any
obligation in respect thereof which the Reinsurer may have to the estate of the
Company if it shall be in receivership, liquidation or rehabilitation
proceedings; PROVIDED, HOWEVER, that if any of such payments are returned by the
ceding companies to the Reinsurer, any such obligation shall be reinstated upon
receipt of such payment by the Reinsurer. After the Effective Date, the ceding
companies shall have the right to file claims arising under the Treaties with
the Reinsurer. The ceding companies shall have a direct right of action against
the Reinsurer, and the Reinsurer hereby consents to be subject to direct action
taken by any ceding company; PROVIDED, HOWEVER, that the rights of any ceding
company under any Treaty shall be limited to and consist of those rights set
forth in such Treaty (including any endorsement or amendment thereto) , and no
ceding company shall have the right to receive any greater amount under any
Treaty than such ceding company would have had in the absence of this Agreement
(except that in assessing such right no effect shall be given to any bankruptcy,
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liquidation, insolvency, reorganization or moratorium of the Company, or the
effect of laws or legal procedures affecting enforcement of creditors' rights
against the Company generally). As of the Effective Date, the Reinsurer shall
have all rights to subrogation and salvage proceeds from the business reinsured.
4. Promptly following the Closing, the Reinsurer shall mail by
first class mail to each cedent's broker of record (or to the cedent if there is
no broker of record) under in-force Treaties, a certificate of assumption in the
form attached hereto as Exhibit A. At the Closing, the Company shall deliver to
the Reinsurer a list setting forth each in-force Treaty and the address of the
cedents thereunder or such cedents' brokers of record.
5. To the extent permitted to be transferred to the Reinsurer,
the Company hereby assigns to the Reinsurer all of the Company's rights with
respect to any commitment or agreement whereby a cedent has agreed to cede
reinsurance after the Effective Date to the Company as part of an Integrated
Solutions program (as defined in the Asset Purchase Agreement). By this
assignment, the Reinsurer is not assuming any liabilities or obligations
relating to such Integrated Solutions (including any obligation to provide
reinsurance to any Integrated Solution cedent) other than such liabilities or
obligations as may expressly arise from a Treaty set forth on the Schedule of
Assumed Treaties and the Company is not assigning any rights other than those
related to commitments or agreements to cede reinsurance business to the
Company.
ARTICLE II
ASSIGNMENT OF RETROCESSION AGREEMENTS
Regardless of whether retrocessional reinsurance novation agreements are
entered into, the Reinsurer is hereby substituted for and succeeds to all of the
rights and liabilities of the Company under any reinsurance and retrocession
agreements in effect on the Effective Date between the Company and any
reinsurers or retrocessionnaires relating to the Treaties (the "RETROCESSION
AGREEMENTS") and is hereby recognized for all purposes as the "Company"
thereunder in substitution for the Company. As of the Effective Date, the
Company hereby sells, assigns, transfers and conveys, and the Reinsurer hereby
purchases, binds and assumes, any and all rights and obligations of the Company
under any Retrocession Agreement including amounts held by or which may become
due from reinsurers and retrocessionnaires for losses or loss adjustment
expenses on the Treaties for which the Reinsurer has assumed liability or for
losses paid by the Company prior to the Effective Date.
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ARTICLE III
CREDIT FOR REINSURANCE FACILITIES
1. The Reinsurer has full power and authority in accordance with
the designation of the Reinsurer as attorney-in-fact for the Company pursuant to
Article VII hereof for purposes of administering the Treaties, to act for and on
behalf of the Company with respect to any and all Credit for Reinsurance
Facilities outstanding with respect to the Treaties or any Retrocession
Agreements. The Company and the Reinsurer shall each use their commercially
reasonable efforts (as defined in the Asset Purchase Agreement) to:
(a) cause replacement letters of credit (or other acceptable form of
credit for reinsurance facility) to be issued for the account of the
Reinsurer to any cedent under a Treaty where such cedent is not able to
take full statutory credit for the reinsurance assumed by the Reinsurer
under such Treaty due to the Reinsurer's licensing status;
(b) cause the reinsurers and retrocessionnaires of the Company under
the Retrocession Agreements to cause replacement letters of credit to be
issued in favor, and for the benefit, of the Reinsurer; and
(c) amend any reinsurance trust agreements related to the
Retrocession Agreements to substitute the Reinsurer for the Company as the
beneficiary thereunder; PROVIDED, that all fees and other amounts payable
to issuing banks and other similar third parties relating to all Credit
for Reinsurance Facilities for periods after the Effective Date shall be
for the account of the Reinsurer.
B. For purposes of this Article III, the term "CREDIT FOR
REINSURANCE FACILITIES" means any and all reinsurance trusts, letters of
credit, statutory deposits, funds withheld deposits and other similar
agreements or mechanisms which have been established by, on behalf of, or
for the benefit of, the Company in connection with any Treaty or
Retrocession Agreement which permit the cedent thereunder or the Company
to take statutory credit for reinsurance ceded pursuant to such Treaty or
Retrocession Agreement.
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ARTICLE IV
TERRITORY
This Agreement shall apply to Treaties covering risks wherever
situated.
ARTICLE V
TREATY LIABILITIES
The term "TREATY LIABILITIES" shall mean the liabilities and
obligations of the Company arising out of the Treaties (including, without
limitation, the reserves for claims and claims expenses, net unearned premium
reserves, reinsurance balances payable, contingent commissions, funds withheld
and paid losses payable reflected on the Closing Date Balance Sheet (as defined
in the Asset Purchase Agreement)), before deduction for all other applicable
reinsurance and retrocessions, if any, under the Company's reinsurance programs,
and shall include losses arising as a result of the Company's participation in
guaranty funds, assigned risk plans, or governmental mandated insurance or
reinsurance programs or associations of any kind which are predicated on the
business reinsured hereunder or the premium volume generated by the Treaties or
are otherwise related to the Company's status as a reinsurer or an insurer prior
to the Effective Date.
ARTICLE VI
TREATY ADMINISTRATION
1. The Reinsurer will administer and service all of the Treaties
reinsured under this Agreement. The Company grants to the Reinsurer authority
(exclusive of the Company) in all matters relating to contract administration
(to the extent such authority may be granted pursuant to applicable law),
including but not limited to contract changes, reinstatement standards, rate
changes, contract renewals, commission, audits and administrative methods and
procedures, and the Reinsurer shall bear all expenses related to such
administration. With respect to the rights, duties, privileges and obligations
of the Company, in order to assist and to more fully evidence the substitution
of the Reinsurer in the place and stead of the Company, the Company hereby
nominates, constitutes and appoints the Reinsurer as the attorney-in-fact of the
Company with respect to the rights, duties, privileges and obligations of the
Company in and to the Treaties and the Retrocession Agreements, with full power
and authority to act in the name, place and stead of the Company with respect to
the Treaties and the Retrocession Agreements, including without limitation, the
power, without reservation, to service all contracts, to adjust, to
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defend, to compromise, to settle and to pay all claims, to recover salvage and
subrogation for any losses incurred under any of the Treaties and to take such
other and further actions as may be necessary or desirable to effect the
transactions contemplated by this Agreement and administer any trust
arrangements.
2. The Reinsurer shall have authority and discretion with respect
to all matters relating to claim settlement, salvage, arbitration, and
litigation concerning the Treaties, including, but not limited to, the selection
of counsel. The Reinsurer shall bear all expenses incurred in connection with
settling such claims, with recovering any salvage amounts, with exercising
rights of subrogation or with such litigation, including but not limited to the
cost of investigations, legal fees and interest charges and shall pay directly
on behalf of the Company all amounts due under the Treaties. The Reinsurer shall
have the obligation to assume authority for all matters relating to those claims
which are the subject of a complaint to any regulatory authority having
jurisdiction thereof.
ARTICLE VII
INDEMNIFICATION
The Reinsurer shall indemnify and hold harmless the Company from any
and all losses, claims, liabilities and expenses arising directly or indirectly
from acts or omissions required or permitted to be taken by the Reinsurer under
this Agreement (including, without limitation, under Article VI); PROVIDED,
HOWEVER, that the Company must notify the Reinsurer within sixty (60) days of
the date any such loss, suit, claim or other proceeding is served on the Company
directly or otherwise brought to the attention of the Company, or within such
shorter period as may be necessary to enable the Reinsurer to respond timely
thereto.
ARTICLE VIII
PREMIUMS: CONSIDERATION
1. The Reinsurer shall be entitled to 100% of all premiums and
other considerations received on or after the Effective Date by the Company or
the Reinsurer with respect to the Treaties. The Company shall promptly remit and
hereby assigns to the Reinsurer any premiums and other considerations received
by it or its Affiliates on or after the Effective Date in respect of any of the
Treaties, except for premiums attributable to Xxxxxxxxx. Furthermore, with
respect to any such remittance, the Company shall also promptly furnish
Reinsurer with appropriate information pertaining thereto to the extent the
Company has such information (E.G. the nature of the payment, source of funds,
Treaty identification and period or
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periods to which it relates and any special rates or instructions accompanying
same). Upon execution hereof, the Reinsurer shall assume the responsibility for
billing and collecting premiums.
2. As consideration for the assumption of the Treaty Liabilities
by the Reinsurer, as of the Effective Date, the Company (i) does hereby transfer
and assign to the Reinsurer all of its right, title and interest in all
Purchased Assets (as defined in the Asset Purchase Agreement) transferred
pursuant to the Asset Purchase Agreement, and (ii) does hereby assign to the
Reinsurer, pursuant to Article II hereof, its rights under all Retrocession
Agreements.
ARTICLE IX
RECORDS AND ACCOUNTING
1. Promptly following the Effective Date, the Company shall
forward to the Reinsurer all reports, records, underwriting files, claim files
and other information the Reinsurer reasonably believes is required to
administer the Treaties and shall cooperate with the Reinsurer in the transfer
of the administration of the Treaties to the Reinsurer; it being the intent of
the parties to this Agreement that the rights and obligations of the Company
under the Treaties become the rights and obligations of the Reinsurer. All
right, title and interest in the Treaties and the said reports, records,
underwriting files, claim files and other information shall vest in the
Reinsurer for utilization and disposition in any manner by the Reinsurer.
2. All premiums written and earned, and all losses and loss
adjustment expenses incurred after the Effective Date on Treaties will be
accounted for as business written by the Reinsurer. The Company will have no
further obligations for accounting for such business under this Agreement after
the Effective Date.
3. From time to time as the Company and the Reinsurer may
reasonably agree (but not less frequently than once per year) upon reasonable
notice during normal business hours, representatives of the Company (including
its independent public accountants and actuary) shall be permitted to inspect
the Reinsurer's books and records involving the Treaties, including those
relating to the settlement and payment of claims and work papers of the
Reinsurer's independent public accountants and actuary, and, at the Company's
expense, to make copies of
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them and to discuss them with the Reinsurer's representatives (including its
independent public accountants and actuaries).
ARTICLE X
INSOLVENCY
1. The Treaty Liabilities shall be payable by the Reinsurer in
accordance with the terms of this Agreement and without diminution because of
the insolvency of the Company.
2. In the event of Company's insolvency, any amounts payable by
the Reinsurer to the Company pursuant to this Agreement shall be payable,
without diminution because of such insolvency, on the basis of claims allowed
against the estate of the Company by any court of competent jurisdiction or by
the liquidator, receiver or statutory successor of the Company and immediately
upon demand of such liquidator, receiver or statutory successor of the Company
save only for such reasonable period as may be necessary for verification.
ARTICLE XI
GENERAL PROVISIONS
1. All notices and other communications shall be in writing and
shall be delivered personally or mailed postage prepaid, certified or registered
mail, return receipt requested, or telexed, to the party at the address set
forth after its name below or at such different address as such party shall have
advised the other party in writing:
IF TO THE REINSURER: Folksamerica Reinsurance Company
Xxx Xxxxxxx Xxxxx
Xxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: General Counsel
IF TO THE COMPANY: Risk Capital Reinsurance Company
00 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
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Attn: General Counsel
Delivery of notices and other communications by FAX shall be effective so long
as a confirming copy is mailed to the appropriate address and in the manner set
forth above within one (1) business day after the FAX transmission.
2. If any provision or portion hereof shall be invalid or
unenforceable for any reason, there shall be deemed to be made such minor
changes in such provision or portion as are necessary to make it valid or
enforceable. The invalidity or unenforceability of any provision or portion
hereof shall not affect the validity or enforceability of the other provisions
or portions hereof.
3. Any inadvertent delay, omission or error shall not be held to
relieve either party hereto from any liability which would attach to it
hereunder if such delay, omission or error is rectified immediately upon
discovery and will not prejudice the other party.
4. This Agreement:
(a) is not intended to confer any rights upon any person other than
the parties hereto and their respective successors and assigns;
(b) shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; and
(c) shall be governed by and construed in accordance with the laws
of the State of New York, other than any conflict of law rules which might
result in the application of the laws of any other jurisdiction.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duty authorized officers at New York, New York on the day and
year first above mentioned.
Attest: RISK CAPITAL REINSURANCE COMPANY
/s/ Xxxxxx Silver /s/ Xxxxx X. Xxxxxxxx
--------------------------------- ----------------------------------
Name: Xxxxxx Silver Name: Xxxxx X. Xxxxxxxx
Title: Vice President
Attest: FOLKSAMERICA REINSURANCE COMPANY
/s/ Xxxxx X. Xxxxxx /s/ Xxxxxx X. Xxxxxx, Xx.
--------------------------------- ----------------------------------
Name: Xxxxx X. Xxxxxx Name: Xxxxxx X. Xxxxxx, Xx.
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EXHIBIT A
NOTICE AND CERTIFICATION OF ASSUMPTION
BY
FOLKSAMERICA REINSURANCE COMPANY
Pursuant to the terms of a Transfer and Assumption Agreement, all
liability and obligations of RISK CAPITAL REINSURANCE COMPANY ("RISK CAPITAL", a
Nebraska Stock Insurance Corporation) under all contracts of assumed treaty and
facultative reinsurance and any amendment or modifications thereto (the
"Contract or Contracts") will be reinsured by FOLKSAMERICA REINSURANCE COMPANY
("FOLKSAMERICA", a New York Stock Insurance Corporation).
This change is effective as of May 5, 2000.
All terms and conditions of your Contract remain unchanged, except that
FOLKSAMERICA shall be substituted as the Reinsurer. All payments, notices,
claims and suits or actions on any of the Contracts shall hereafter be made to
FOLKSAMERICA as though it were the original Reinsurer.
Unless you object in writing within thirty days of receipt of this notice,
you will be presumed to have consented to a change in the named Reinsurer on
your Contract by the substitution of FOLKSAMERICA for RISK CAPITAL under any of
the Contracts in which you have an interest. Objections must be mailed to:
Xxxxxx X. Xxxxxx, Xx.
Senior Vice President,
General Counsel & Secretary
Folksamerica Reinsurance Company
Xxx Xxxxxxx Xxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
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IN WITNESS WHEREOF, FOLKSAMERICA has caused its corporate seal to be
affixed hereto and this Notice of Certification of Assumption to be executed by
its duly authorized officers.
By: ___________________________________
(SEAL) Name: Xxxxxx X. Xxxx
Title: President and CEO
By: ___________________________________
(SEAL) Name: Xxxxxx X. Xxxxxx, Xx.
Title: Senior Vice President,
General Counsel and Secretary
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