EXHIBIT 10.31
FORM OF 100% QUOTA SHARE RETROCESSION AGREEMENT
(NON-TRADITIONAL - A)
BY AND BETWEEN
ST. XXXX REINSURANCE COMPANY LIMITED
(RETROCEDANT)
and
PLATINUM UNDERWRITERS REINSURANCE INC.
(RETROCESSIONAIRE)
DATED AS OF ________, 2002
2
This QUOTA SHARE RETROCESSION Agreement (this "AGREEMENT"), effective as of
12:01 a.m. London time on the later of the Business Day (such term and all other
capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in the Formation and Separation Agreement, as defined below)
following the Closing or July 1, 2002 (the "EFFECTIVE TIME", and such date the
"EFFECTIVE DATE"), is made by and between ST. XXXX REINSURANCE COMPANY LIMITED,
a United Kingdom domiciled insurance company ("RETROCEDANT"), and PLATINUM
UNDERWRITERS REINSURANCE INC. (formerly known as USF&G Family Insurance
Company), a Maryland domiciled stock insurance company ("RETROCESSIONAIRE").
WHEREAS, pursuant to a Formation and Separation Agreement dated as of [ ], 2002
(the "FORMATION AND SEPARATION AGREEMENT") between Platinum Underwriters
Holdings, Ltd. ("PLATINUM HOLDINGS"), the ultimate parent of Retrocessionaire
and The St. Xxxx Companies, Inc. ("THE ST. XXXX"), the ultimate parent of
Retrocedant, The St. Xxxx agreed to cause its insurance subsidiaries to cede
specified liabilities under certain reinsurance contracts of The St. Paul's
insurance subsidiaries; and Platinum Holdings agreed to cause its insurance
subsidiaries to reinsure such liabilities;
WHEREAS, Retrocedant has agreed to retrocede to Retrocessionaire, and
Retrocessionaire has agreed to assume by indemnity reinsurance, as of the
Effective Time, a one hundred percent (100%) quota share of the liabilities
arising pursuant to the Reinsurance Contracts (as defined hereunder), subject to
the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises and upon
the terms and conditions set forth herein, the parties hereto agree as follows:
1. BUSINESS COVERED
Retrocedant hereby obligates itself to retrocede to the
Retrocessionaire and the 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 listed in Exhibit A
hereto (the "REINSURANCE CONTRACTS"), provided that (for the avoidance
of doubt) Retrocedant shall not retrocede, and Retrocessionaire shall
not accept, any liability incurred by the Retrocedant under reinsurance
and retrocession contracts with United Kingdom cedants entered into
after the authorisation of Platinum Re UK Limited under Part IV of the
Financial Services and Markets Xxx 0000 of the United Kingdom to carry
on insurance business in the United Kingdom.
2. TERM
This Agreement shall be continuous as to the Reinsurance Contracts.
Except as mutually agreed in writing by the Retrocedant and the
Retrocessionaire or in accordance with the terms of this Agreement,
this Agreement shall remain
3
continuously in force until all Reinsurance Contracts are terminated,
expired, cancelled or commuted.
3. COVERAGE
3.1 SECTION A (RETROSPECTIVE) COVERAGE PERIOD
The Section A (Retrospective) Coverage Period will be the period from
and including January 1, 2002 to but not including the Effective Time.
3.2 SECTION B (PROSPECTIVE) COVERAGE PERIOD.
The Section B (Prospective) Coverage Period will be the period from and
including the Effective Time through and including the commutation,
expiration or final settlement of all liabilities under any of the
Reinsurance Contracts ("SECTION B COVERAGE").
4. PREMIUMS AND ADDITIONAL CONSIDERATION
4.1 SECTION A (RETROSPECTIVE) COVERAGE PERIOD - PREMIUM
(A) On the Effective Date, in respect of the Section A
(Retrospective) Coverage Period, Retrocedant shall pay to the
account of Retrocessionaire an amount (the "INITIAL SECTION A
PREMIUM") equal to one hundred percent (100%) of the carrying
value on the books of 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 with
respect to the Section A (Retrospective) Coverage Period,
determined in accordance with statutory accounting principles on
a basis consistent in all material respects with the methods,
principles, practices and policies employed in the preparation
and presentation of Retrocedant's annual statutory financial
statement as of [31 December 2001] as filed with the Financial
Services Authority and as submitted to The St. Xxxx, and subject
to the adjustments as set forth on Exhibit B hereto (the "LOSS
RESERVE ADJUSTMENTS"), as applicable.
(B) As soon as reasonably practicable, but in no event later than
[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 with respect to the Section
A (Retrospective) Coverage Period, as of the Effective Date,
determined in accordance with statutory accounting principles on
a basis consistent in all material respects with the methods,
principles, practices and policies employed in the preparation
and presentation of Retrocedant's annual statutory financial
statement as of [31 December 2001] as filed with the Financial
Services Authority and as submitted to The St. Xxxx, adjusted to
4
reflect the Loss Reserve Adjustments, as applicable (the "FINAL
SECTION A PREMIUM"). In the event the Final Section A Premium is
greater than the Initial Section A Premium, Retrocedant shall
promptly pay to the account of Retrocessionaire the difference
plus interest on such amount at the Applicable Rate (as defined
below) from and including the Effective Date to and including the
date of such payment. In the event the Initial Section A Premium
is greater than the Final Section A Premium, Retrocessionaire
shall promptly repay to the account of Retrocedant the difference
(as an adjustment to the amount payable pursuant to Section
4.1(A) above) plus interest on such amount of the Applicable Rate
from and including the Effective Date to and including the date
of such payment.
4.2 SECTION B (PROSPECTIVE) COVERAGE PERIOD -- PREMIUMS
(A) On the Effective Date, in respect of the Section B (Prospective)
Coverage Period, Retrocedant shall transfer to Retrocessionaire
an amount (the "INITIAL SECTION B PREMIUM") equal to the carrying
value on the books of Retrocedant as of June 30, 2002 of one
hundred percent (100%) of the unearned premium reserves relating
to the Reinsurance Contracts for the Section B Coverage Period,
determined in accordance with statutory accounting principles on
a basis consistent in all material respects with the methods,
principles, practices and policies employed in the preparation
and presentation of Retrocedant's annual statutory financial
statement as of [31 December 2001] as filed with the Financial
Services Authority and as submitted to The St. Xxxx, less the
applicable Ceding Commission, as defined below, and with respect
to all Reinsurance Contracts, one hundred percent (100%) of all
gross premiums written on or after the Effective Time, net of
premium returns, allowances and cancellations and less any
applicable Ceding Commission.
(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 for the
Section B (Prospective) Coverage Period, as of the Effective
Date, determined in accordance with statutory accounting
principles on a basis consistent in all material respects with
the methods, principles, practices and policies employed in the
preparation and presentation of Retrocedant's annual statutory
financial statement as of [31 December 2001] as filed with the
Financial Services Authority and as submitted to The St. Xxxx,
relating to the Reinsurance Contracts, net of the applicable
Ceding Commission (the "FINAL SECTION B PREMIUM"). In the event
the Final Section B Premium is greater than the Initial Section B
Premium, Retrocedant shall promptly pay to the account of
Retrocessionaire the difference plus interest on such amount at
the Applicable Rate from and including the Effective Date to and
including the date of such payment. In the event the Initial
Section B Premium is greater than the Final Section B
5
Premium, Retrocessionaire shall promptly repay to the account of
Retrocedant the difference (as an adjustment to the amount
payable pursuant to Section 4.2(A) above) plus interest on such
amount at the Applicable Rate from and including the Effective
Date to and including the date of such payment.
(C) Notwithstanding the foregoing, the parties agree that all gross
estimated premiums written prior to the Effective Date and earned
but not yet billed ("EBUB", and also referred to as "estimated
premiums receivable" or "EBNR") as of the Effective Time and
relating to the Reinsurance Contracts, as determined, on or
before ______, 2002, in accordance with Retrocedant's customary
practices and procedures and as submitted to The St. Xxxx, shall
be allocated to Retrocedant. All payments received after the
Effective Time by Retrocedant or Retrocessionaire in respect of
EBUB as of the Effective Time shall be retained by Retrocedant or
held on trust for and paid by Retrocessionaire to or to the order
of Retrocedant, and all rights to collect such amounts shall be
retained by or transferred to Retrocedant. Any changes made on or
after the Effective Time as to the amount of EBUB as of the
Effective Time shall be for the account of Retrocessionaire and
shall not affect the amount retained by Retrocedant. The parties
agree that as of the first anniversary of the date hereof,
Retrocessionaire shall pay to Retrocedant the difference, if any,
between the amount of EBUB as of the Effective Time and the
aggregate amount paid to and/or retained by Retrocedant prior to
that date with respect to EBUB as of the Effective Time. All
amounts, if any, in respect of EBUB which are in excess of EBUB
as of the Effective Time, calculated pursuant to the first
sentence of this Section 4.2(C), shall be for the account of
Retrocessionaire and all such amounts shall be retained by or
payable to Retrocedant.
4.3 DISPUTE RESOLUTION
(A) After receipt of the Proposed Accounting, together with the work
papers used in preparation thereof, Retrocessionaire shall have
30 days (the "REVIEW PERIOD") to review such Proposed Accounting.
Unless Retrocessionaire delivers written notice to Retrocedant on
or prior to the 30th day of the Review Period stating that it has
material objections thereto, Retrocessionaire shall be deemed to
have accepted and agreed to the Proposed Accounting.
Retrocessionaire shall not object to any method, principle,
practice or policy 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 [31 December 2001] as filed with the
Financial Services Authority and as submitted to The St. Xxxx. If
Retrocessionaire so notifies Retrocedant of its material
objections to the Proposed Accounting, the parties shall in good
faith attempt to resolve, within 30 days (or such longer period
as the parties may agree) following such notice (the "RESOLUTION
PERIOD") their differences with respect to such
6
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 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 London, England
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 finalised in accordance
with the above process, the Final Section A Premium and the Final
Section B Premium amounts shall be as set forth in the Proposed
Accounting, as determined by the Arbiters, if applicable. In the
event the sum of such amounts is greater than the amount paid by
Retrocedant to Retrocessionaire on the Effective Date,
Retrocedant shall promptly pay to the account of Retrocessionaire
the difference plus interest on such amount at the Applicable
Rate from and including the Effective Date to and including the
date of such payment. In the event the aggregate of such amounts
is lower than the amount paid by Retrocedant to Retrocessionaire
on the Effective Date, Retrocessionaire shall promptly repay to
the account of Retrocedant
7
the difference (as an adjustment to the amount payable pursuant
to Section 4.1(A) and/or 4.2(A) above, as applicable) plus
interest on such amount at the Applicable Rate from the Effective
Date to the date of such payment.
5. CEDING COMMISSION
With respect to the Reinsurance Contracts, Retrocessionaire shall pay
the Retrocedant a ceding commission (the "CEDING COMMISSION") with
respect to the Section B (Prospective) Coverage Period, and such Ceding
Commission shall equal one hundred percent (100%) of the actual
expenses incurred in writing each Reinsurance Contract, including
actual ceding commissions and brokerage paid, as determined in
accordance with Retrocedant's customary practices and procedures and as
submitted to The St. Xxxx, all as allocable pro rata to periods from
and after the Effective Time.
6. ORIGINAL CONDITIONS
This Agreement shall be subject to the same rates, terms, conditions,
waivers and interpretations, and to the same modifications and
alterations, as the respective Reinsurance Contracts.
7. INURING RETROCESSIONS
7.1 ALLOCATION TO RETROCESSIONAIRE
Retrocedant agrees that the retrocession contracts purchased from third
party retrocessionaires ("THIRD PARTY RETROCESSIONAIRES") by or on
behalf of Retrocedant prior to the Effective Time that are listed on
Exhibit C hereto shall inure to the benefit of Retrocessionaire to the
extent of liabilities covered under this Agreement ("INURING
RETROCESSIONS"), subject to the allocations in Exhibits D, E and F.
7.2 TRANSFER
Retrocedant and Retrocessionaire shall use their respective
commercially reasonable efforts to obtain the consent of Third Party
Retrocessionaires under the Inuring Retrocessions to include
Retrocessionaire as a direct reinsured with respect to the Reinsurance
Contracts 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 D hereto, and to seek all payments,
to the extent allocable to the Reinsurance Contracts, in the manner set
forth herein in Exhibit E hereto, directly from Retrocessionaire, it
being understood that Retrocessionaire shall bear all risk of
non-payment or non-collectibility under the Inuring Retrocessions.
7.3 INURING RETROCESSIONS CLAIMS
(A) Each of the parties agrees to transfer to the other party all
recoveries or any portion thereof that such party receives on or
after the Effective Time pursuant to the Inuring Retrocessions
and are allocated to the other party, in
8
the manner set forth in Exhibit D 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 hold them
on trust for and pay them to or to the order of Retrocessionaire.
The parties agree that Retrocessionaire's obligations to make
payments pursuant to the Inuring Retrocessions or to reimburse
Retrocedant pursuant to this Agreement shall not be waived by
non-receipt of any such amounts. Retrocessionaire shall reimburse
Retrocedant for one hundred percent (100%) of any expenses
reasonably incurred by Retrocedant in attempting to make such
collection, including all allocated expenses, as determined in
accordance with The St. Paul's customary practices and
procedures. Retrocessionaire shall have the right to associate
with Retrocedant, at Retrocessionaire's own expense, in any
actions brought by Retrocedant to make such collections.
(B) In the event claims of Retrocedant and Retrocessionaire aggregate
in excess of the applicable limit under an Inuring Retrocession,
all limits applicable to either Retrocedant or Retrocessionaire
shall be allocated between Retrocedant and Retrocessionaire in
the manner set forth in Exhibit F hereto.
7.4 INITIAL CONSIDERATION
On the Effective Date, Retrocessionaire shall reimburse Retrocedant for
one hundred percent (100%) of any and all unearned premiums paid by
Retrocedant under such Inuring Retrocessions net of any applicable
unearned ceding commissions paid to Retrocedant thereunder.
7.5 ADDITIONAL CONSIDERATION
Retrocessionaire agrees to pay directly to Third Party
Retrocessionaires under the Inuring Retrocessions all future premiums
Retrocedant is obligated to pay pursuant to the terms of the Inuring
Retrocessions to the extent that such premiums are allocable to
Retrocessionaire in the manner set forth in Exhibit E and to indemnify
Retrocedant for all such premiums paid directly by Retrocedant, net of
any ceding commissions and similar amounts paid by Third Party
Retrocessionaires to Retrocedant.
7.6 CANCELLATION 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
9
written consent of the other party, such consent not to be
unreasonably withheld.
8. LOSS AND LOSS EXPENSE; SALVAGE AND SUBROGATION FOLLOW THE FORTUNES
8.1 (A) Retrocessionaire shall be liable for one hundred percent (100%)
of all future loss, loss adjustment expenses, incurred but not
reported losses and other payment obligations that arise under
the Reinsurance Contracts on and after January 1, 2002 and are
payable as of or after the Effective Time and shall reimburse
Retrocedant for any losses, loss adjustment expenses and other
payment obligations paid by Retrocedant following the Effective
Time in respect of the Reinsurance Contracts, net of any
recoveries received by Retrocedant with respect thereto,
including recoveries under Inuring Retrocessions.
Retrocessionaire shall have the right to all salvage and
subrogation on the account of claims and settlements with respect
to the Reinsurance Contracts.
(B) In the event of a claim under a Reinsurance Contract, the
Retrocedant will assess the validity of the claim and make a
determination as to payment, consistent with the claims handling
guidelines previously provided to Retrocedant in writing by
Retrocessionaire and Retrocessionaire may exercise its rights
under Section 10.1 in respect thereof. Retrocessionaire shall
provide prompt notice of any claim in excess of $500,000 to
Retrocessionaire. All payments made by Retrocedant, whether under
strict contract terms or by way of compromise, shall be binding
on Retrocessionaire. In addition, if Retrocedant refuses to pay a
claim in full and a legal proceeding results, Retrocessionaire
will be unconditionally bound by any settlement agreed to by
Retrocedant or the adverse judgment of any court or arbitrator
(which could include any judgment for bad faith, punitive
damages, excess policy limit losses or extra contractual
obligations) and Retrocedant may recover with respect to such
settlements and judgments under this Agreement. Though
Retrocedant will settle such claims and litigation in good faith,
Retrocessionaire is bound to accept the settlements paid by
Retrocedant and such settlements may be for amounts that could be
greater than the amounts that would be agreed to by
Retrocessionaire if Retrocessionaire were to settle such claims
or litigation directly. It is the intent of this Agreement that
Retrocessionaire shall in every case in which this Agreement
applies and in the proportions specified herein, "follow the
fortunes" of Retrocedant in respect of risks Retrocessionaire has
accepted under this Agreement.
9. EXTRA CONTRACTUAL OBLIGATIONS
In the event Retrocedant or Retrocessionaire is held liable to pay any
punitive, exemplary, compensatory or consequential damages because of
alleged or actual bad faith or negligence related to the handling of
any claim under any Reinsurance Contract or otherwise in respect of
such Reinsurance Contract, the parties shall be
10
liable for such damages in proportion to their responsibility for the
conduct giving rise to the damages. Such determination shall be made by
Retrocedant and Retrocessionaire, acting jointly and in good faith, and
in the event the parties are unable to reach agreement as to such
determination, recourse shall be had to Article 15 hereof.
10. ADMINISTRATION OF REINSURANCE CONTRACTS
10.1 (A) The parties agree that, as of the Effective Time, Retrocedant
shall have the sole authority to administer the Reinsurance
Contract in all respects, which authority shall include, but not
be limited to, authority to xxxx for and collect premiums, adjust
all claims and handle all disputes thereunder and to effect any
and all amendments, commutations and cancellations of the
Reinsurance Contract, 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 9 hereof,
Retrocessionaire shall indemnify Retrocedant for all Losses,
including punitive, exemplary, compensatory or consequential
damages arising from such assumption of the conduct of such
settlement pursuant to Article 14 herein.
10.2 REPORTING AND REGULATORY MATTERS
Each party shall provide the notices and filings required to be made by
it to relevant regulatory authorities as a result of this Agreement.
Notwithstanding the foregoing, each party shall provide to the other
party any information in its possession regarding the Reinsurance
Contracts as reasonably required by the other party to make such
filings and in a form as agreed to by the parties.
10.3 DUTY TO COOPERATE
Upon the terms and subject to the conditions and other agreements set
forth herein, each party agrees to use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause
to be done, and to assist and cooperate with
11
the other party in doing, all things necessary or advisable to perform
the transactions contemplated by this Agreement.
10.4 COMMUNICATIONS RELATING TO THE REINSURANCE CONTRACTS
Following the Effective Time, Retrocedant and Retrocessionaire shall
each promptly forward to the other copies of all material notices and
other written communications it receives relating to the Reinsurance
Contracts (including, without limitation, all inquiries and complaints
from relevant insurance regulators, brokers and other service providers
and reinsureds and all notices of claims, suits and actions for which
it receives service of process.)
11. REPORTS AND REMITTANCES
11.1 REPORT FROM RETROCEDANT
Within thirty days following the end of each month, Retrocedant shall
provide Retrocessionaire with a summary statement of account for the
previous month showing all activity relating to each of the Reinsurance
Contracts, including related administration costs and expenses incurred
by Retrocedant in the form set forth as Exhibit G. The monthly
statement of account shall also provide a breakdown of any amounts due
to 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.
11.2 REMITTANCES
Within five Business Days after delivery of each monthly report
pursuant to Section 11.01, Retrocedant and Retrocessionaire shall
settle all amounts then due under this Agreement for that month.
11.3 LATE PAYMENTS
Should any payment due any party to this Agreement be received by such
party after the due date for such payment under this Agreement,
interest shall accrue from the date on which such payment was due until
payment is received by the party entitled thereto, at an annual rate
equal to the London Interbank Offered Rate quoted for six month periods
as reported in The Wall Street Journal on the first Business Day of the
month in which such payment first becomes due plus one hundred basis
points (the "APPLICABLE RATE").
11.4 COST REIMBURSEMENT
Retrocessionaire shall reimburse for its allocated share of all costs
and expenses incurred by Retrocedant in administering the Reinsurance
Contracts as set forth in Exhibit H hereto.
12
12. MAINTENANCE OF LICENSES
Each of Retrocedant and Retrocessionaire hereby covenants to maintain
at all times all licences and authorisations required to undertake the
actions contemplated hereby.
13. ACCESS TO RECORDS
From and after the Closing Date, Retrocedant shall afford to
Retrocessionaire and its respective authorised accountants, counsel and
other designated representatives (collectively, "REPRESENTATIVES")
reasonable access (including using commercially reasonable best efforts
to give access to Persons possessing information) during normal
business hours to all data and information that is specifically
described in writing (collectively, "INFORMATION") within the
possession of Retrocedant relating to the liabilities transferred
hereunder, insofar as such information is reasonably required by
Retrocessionaire. Similarly, from and after the Closing Date,
Retrocessionaire shall afford to Retrocedant, any Post-closing
Subsidiary of Retrocedant and their respective Representatives
reasonable access (including using commercially reasonable best efforts
to give access to Persons possessing information) during normal
business hours to Information within Retrocessionaire's possession
relating to Retrocedant, insofar as such information is reasonably
required by Retrocedant. Information may be requested under this
Article 13 for, without limitation, audit, accounting, claims,
litigation (other than any claims or litigation between the parties
hereto) and tax purposes, as well as for purposes of fulfilling
disclosure and reporting obligations and for performing this Agreement
and the transactions contemplated hereby.
From and after the Closing Date, Retrocessionaire and Retrocedant or
their designated representatives may inspect, at the place where such
records are located, any and all data and information that is
specifically described in writing within the possession of the other
party hereto reasonably relating to this Agreement, on reasonable prior
notice and during normal business hours. The rights of the parties
under this Article 13 shall survive termination of this Agreement and
shall continue for as long as there may be liabilities under the
Reinsurance Contracts or reporting or retention requirements under
applicable law. In addition, each party shall have the right to take
copies (including electronic copies) of any information held by the
other party that reasonably relates to this Agreement or the
Reinsurance Contracts. Each party shall, and shall cause its designated
representative to, treat and hold as confidential information any
information it receives or obtains pursuant to this Article 13, except
(i) to the extent required to be disclosed by law or any securities
exchange or regulatory or governmental body to which that party is
subject (whether or not the requirement for information has the force
of law); or (ii) to the extent that the information has come into the
public domain through no fault or that party.
13
14. INDEMNIFICATION
14.1 INDEMNIFICATION BY RETROCEDANT
Retrocedant agrees to indemnify, defend and hold harmless
Retrocessionaire, and its officers, directors and employees with
respect to any and all Losses arising from any breach by Retrocedant of
any representation, warranty or covenant herein. Retrocedant further
agrees to indemnify, defend and hold harmless Retrocessionaire and its
officers, directors and employees against any and all Losses arising
out of Retrocedant's administration of the Reinsurance Contracts,
including but not limited to extracontractual obligations, payments in
excess of policy limits and settlements made in respect of any such
claims to the extent arising from the negligence or wilful 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 11.4 hereof.
14.2 INDEMNIFICATION BY RETROCESSIONAIRE
Retrocessionaire agrees to indemnify, defend and hold harmless
Retrocedant, and its officers, directors and employees with respect to
any and all Losses arising from any breach by Retrocessionaire of any
representation, warranty or covenant herein. Retrocessionaire further
agrees to indemnify, defend and hold harmless Retrocedant and its
officers, directors and employees against any and all Losses arising
out of Retrocessionaire's administration of the Reinsurance Contracts,
including but not limited to extracontractual obligations, payments in
excess of policy limits and settlements made in respect of any such
claims.
14.3 INDEMNIFICATION PROCEDURES
(A) If a party seeking indemnification pursuant to this Article 14
(each, an "INDEMNITEE") receives notice or otherwise learns of
the assertion by a Person (including, without limitation, any
governmental entity) who is not a party to this Agreement or an
Affiliate thereof, of any claim or of the commencement by any
such Person of any Action (a "THIRD PARTY CLAIM") with respect to
which the party from whom indemnification is sought (each, an
"INDEMNIFYING PARTY") may be obligated to provide indemnification
pursuant to this Section 14.1 or 14.2, such Indemnitee shall give
such Indemnifying Party written notice thereof promptly after
becoming aware of such Third Party Claim; PROVIDED that the
failure of any Indemnitee to give notice as provided in this
Section 14.3 shall not relieve the Indemnifying Party of its
obligations under this Article 14, except to the extent that such
Indemnifying Party is prejudiced by such failure to give notice.
Such notice shall describe the Third Party Claim in as much
detail as is reasonably possible and, if ascertainable, shall
indicate the amount (estimated if necessary) of the Loss that has
been or may be sustained by such Indemnitee.
14
(B) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within
[30] days of the receipt of notice from an Indemnitee in
accordance with Section 14.3(A) (or sooner, if the nature of such
Third Party Claim so requires), the Indemnifying Party shall
notify the Indemnitee of its election whether the Indemnifying
Party will assume responsibility for defending such Third Party
Claim, which election shall specify any reservations or
exceptions. After notice from an Indemnifying Party to an
Indemnitee of its election to assume the defense of a Third Party
Claim, such Indemnifying Party shall not be liable to such
Indemnitee under this Article 14 for any legal or other expenses
(except expenses approved in writing in advance by the
Indemnifying Party) subsequently incurred by such Indemnitee in
connection with the defense thereof; PROVIDED that, if the
defendants in any such claim include both the Indemnifying Party
and one or more Indemnitees and in any Indemnitee's reasonable
judgment a conflict of interest between one or more of such
Indemnitees and such Indemnifying Party exists in respect of such
claim or if the Indemnifying Party shall have assumed
responsibility for such claim with reservations or exceptions
that would materially prejudice such Indemnitees, such
Indemnitees shall have the right to employ separate counsel to
represent such Indemnitees and in that event the reasonable fees
and expenses of such separate counsel (but not more than one
separate counsel for all such Indemnitees reasonably satisfactory
to the Indemnifying Party) shall be paid by such Indemnifying
Party. If an Indemnifying Party elects not to assume
responsibility for defending a Third Party Claim, or fails to
notify an Indemnitee of its election as provided in this Article
14, such Indemnitee may defend or (subject to the remainder of
this Article 14) seek to compromise or settle such Third Party
Claim at the expense of the Indemnifying Party.
(C) Neither an Indemnifying Party nor an Indemnitee shall consent to
entry of any judgment or enter into any settlement of any Third
Party Claim which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such
Indemnitee, in the case of a consent or settlement by an
Indemnifying Party, or the Indemnifying Party, in the case of a
consent or settlement by the Indemnitee, of a written release
from all liability in respect to such Third Party Claim.
(D) If an Indemnifying Party chooses to defend or to seek to
compromise or settle any Third Party Claim, the Indemnitee shall
make available at reasonable times to such Indemnifying Party any
personnel or any books, records or other documents within its
control or which it otherwise has the ability to make available
that are necessary or appropriate for such defense, settlement or
compromise, and shall otherwise cooperate in a reasonable manner
in the defense, settlement or compromise of such Third Party
Claim.
(E) Notwithstanding anything in this Article 14 to the contrary,
neither an Indemnifying Party nor an Indemnitee may settle or
compromise any claim over the objection of the other; PROVIDED
that consent to settlement or
15
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.
14.4 SURVIVAL
This Article 14 shall survive termination of this Agreement.
15. ARBITRATION
(A) All disputes and differences arising under or in connection with
this contract shall be referred to arbitration under XXXXX
Arbitration Rules.
(B) The Arbitration Tribunal shall consist of three arbitrators, one
to be appointed by the Claimant, one to be appointed by the
Respondent and the third to be appointed by the two appointed
arbitrators.
16
(C) The third member of the Tribunal shall be appointed as soon as
practicable (and no later than 28 days) after the appointment of
the two party-appointed arbitrators. The Tribunal shall be
constituted upon the appointment of the third arbitrator.
(D) The Arbitrator shall be persons (including those who have
retired) with not less than ten years' experience of insurance or
reinsurance within the industry or as lawyers or other
professional advisers serving the industry.
(E) Where a party fails to appoint an arbitrator within 14 days of
being called upon to do so or where the two party-appointed
arbitrators fails to appoint a third within 28 days of their
appointment, then upon application XXXXX (UK) will appoint an
arbitrator to fill the vacancy. At any time prior to the
appointment by XXXXX (UK) the party or arbitrators in default may
make such appointment.
(F) The Tribunal may in its sole discretion make such orders and
directions as it considers to be necessary for the final
determination of the matters in dispute. The Tribunal shall have
the widest discretion permitted under the law governing the
arbitral procedure when making such orders or directions.
(G) The seat of arbitration shall be London.
(H) If any matter in difference between the parties is related to a
matter of difference in the United States of America, such matter
will be subject to the arbitration procedure set out in Article
14 of the 100 per cent. Quota Share Retrocession Agreement [of
even date] between St. Xxxx Fire and Marine Insurance Company and
Platinum Underwriters Reinsurance, Inc., provided that the panel
of arbitrators shall apply English law in respect of those
aspects of the matter which relate to the United Kingdom.
(I) This Article 15 shall survive termination of this Agreement.
16. INSOLVENCY
(A) On the occurrence of an Insolvency Event affecting Retrocedant,
this reinsurance shall be payable directly to Retrocedant, or to
its liquidator, receiver, conservator or statutory successor on
the basis of the liability of Retrocedant without diminution
because of the insolvency of Retrocedant or because the
liquidator, receiver, conservator or statutory successor of
Retrocedant has failed to pay all or a portion of any claim.
(B) It is agreed, however, that the liquidator, receiver, conservator
or statutory successor of Retrocedant shall give written notice
to Retrocessionaire of the pendency of a claim against
Retrocedant indicating the Reinsurance Contract, which claim
would involve a possible liability on the part of
Retrocessionaire within a reasonable time after such claim is
filed in the conservation or liquidation proceeding or in the
receivership, and that during
17
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 Retrocessionaire to Retrocedant or to its
liquidator, receiver, conservator or statutory successor, except
(1) where the Reinsurance Contracts specifically provide another
payee on the occurrence of an Insolvency Event affecting
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.
(D) For the purposes of this Article 16, an Insolvency Event shall
occur if:
(i) a winding up petition is presented in respect of
Retrocedant or a provisional liquidator is appointed over
it or if Retrocedant goes into administration,
administrative receivership or receivership or if
Retrocedant has a scheme of arrangement or voluntary
arrangement proposed in relation to all or any part of its
affairs; or
(ii) Retrocedant goes into compulsory or voluntary liquidation;
or, in each case, if Retrocedant becomes subject to any other
similar insolvency process (whether under the laws of England and
Wales or elsewhere); and
(iii) Retrocedant is unable to pay its debts as and when they
fall due within the meaning of Section 123 of the
Insolvency Act 1986 (or any statutory amendment or
re-enactment of that section).
17. OFFSET
Retrocedant and Retrocessionaire shall have the right to offset any
balance or amounts due form one party to the other under the terms of
this Agreement. The party asserting the right of offset may exercise
such right at any time whether the balances due are on account of
premiums, losses or otherwise.
18
18. ERRORS AND OMISSIONS
Any inadvertent delay, omission, error or failure shall not relieve
either party hereto from any liability which would attach hereunder if
such delay, omission, error or failure had not been made provided such
delay, omission, error or failure is rectified as soon as reasonably
practicable upon discovery.
19. CREDIT FOR REINSURANCE; SECURITY
19.1 CREDIT FOR REINSURANCE
Retrocessionaire shall take all actions reasonably necessary, if any,
to permit Retrocedant to obtain full financial statement credit in all
applicable 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 19, 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.
19.2 EXPENSES
All expenses of establishing and maintaining any letter of credit or
other security arrangement shall be paid by Retrocessionaire.
19.3 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
19
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
$-million as of two successive calendar year ends.
(F) Retrocedant shall bear the reasonable costs and expenses of the
trustee relating to the trust.
20. MISCELLANEOUS PROVISIONS
20.1 SEVERABILITY
If any term or provision of this Agreement shall be held void, illegal,
or unenforceable, the validity of the remaining portions or provisions
shall not be affected thereby.
20.2 SUCCESSORS AND ASSIGNS
This Agreement may not be assigned by either party without the prior
written consent of the other. The provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors and assigns as permitted
herein.
20
20.3 NO THIRD PARTY BENEFICIARIES
Except as otherwise specifically provided for in Article 14 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.
20.4 EQUITABLE RELIEF
Each party hereto acknowledges that if it or its employees or agents
violate the terms of this Agreement, the other party will not have an
adequate remedy at law. In the event of such a violation, the other
party shall have the right, in addition to any other rights that may be
available to it, to obtain in any court of competent jurisdiction
injunctive relief to restrain any such violation and to compel specific
performance of the provisions of this Agreement. The seeking or
obtaining of such injunctive relief shall not foreclose or limit in any
way relief against either party hereto for any monetary damage arising
out of such violation.
20.5 EXECUTION IN COUNTERPARTS
This Agreement may be executed by the parties hereto in any number of
counterparts and by each of the parties hereto in separate
counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
20.6 NOTICES
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly
given if delivered by hand (with receipt confirmed), or by facsimile
(with transmission confirmed), or by certified mail, postage prepaid
and return receipt requested, addressed as follows (or to such other
address as a party may designate by written notice to the others) and
shall be deemed given on the date on which such notice is received:
If to Retrocedant:
[ ]
Facsimile: [ No. ]
Attention: [TITLE]
If to Retrocessionaire:
[ ]
Facsimile: [ No. ]
Attention: [TITLE]
21
20.7 WIRE TRANSFER
All settlements in accordance with this Agreement shall be made by wire
transfer of immediately available funds on the due date, or if such day
is not a Business Day, on the next day which is a Business Day,
pursuant to the following wire transfer instructions: [ ]. Payment may
be made by cheque payable in immediately available funds in the event
the party entitled to receive payment has failed to provide wire
transfer instructions.
20.8 HEADINGS
Headings used herein are not a part of this Agreement and shall not
affect the terms hereof.
20.9 FURTHER ASSURANCES
Each of the parties shall from time to time, on being reasonably
requested to do so by the other party to this Agreement, shall do such
acts and/or execute such documents in a form reasonably satisfactory to
the party concerned as may be necessary to give full effect to this
Agreement and securing to that party the full benefit of the rights,
powers and remedies conferred upon it by this Agreement.
20.10 THIRD PARTY RIGHTS
(A) Article 14 confers a benefit on the officers, directors and
employees of Retrocedant and of Retrocessionaire (the "Third
Parties") and, subject to the remaining provisions of this
clause, is intended to be enforceable by the Third Parties by
virtue of the Contracts (Rights of Third Parties) Xxx 0000.
(B) The parties to this agreement do not intend that any term of this
agreement, apart from Article 14, should be enforceable, by
virtue of the Contracts (Rights of Third Parties) Xxx 0000, by
any person who is not a party to this agreement.
(C) Notwithstanding the provisions of Article 20.10(A), this
agreement may be rescinded or varied in any way and at any time
by the parties to this agreement without the consent of any or
all of the Third Parties.
20.11 AMENDMENTS; ENTIRE AGREEMENT
This Agreement may be amended only by written agreement of the parties.
This Agreement, together with the Formation and Separation Agreement,
supersedes all prior discussions and written and oral agreements and
constitutes the sole and entire agreement between the parties with
respect to the subject matter hereof.
20.12 GOVERNING LAW
This Agreement shall be governed by English law.
22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorised representatives as of the date first above written.
ST. XXXX REINSURANCE COMPANY LIMITED
By
------------------------------------
Name:
Title:
PLATINUM UNDERWRITERS REINSURANCE INC.
By
------------------------------------
Name:
Title:
