FACULTATIVE OBLIGATORY
QUOTA SHARE RETROCESSIONAL AGREEMENT
BETWEEN
PXRE REINSURANCE COMPANY
AND
PXRE REINSURANCE LTD.
FACULTATIVE OBLIGATORY QUOTA SHARE RETROCESSIONAL AGREEMENT, dated
as of October 14, 1999 and effective as of October 1, 1999 (hereinafter
referred to as the "Agreement"), between PXRE REINSURANCE LTD., a Bermuda
company (hereinafter referred to as "Reinsurer"), and PXRE REINSURANCE COMPANY,
a Connecticut corporation (hereinafter referred to as "Company").
W I T N E S S E T H :
WHEREAS, the Company and the Reinsurer wish to enter into a quota share
retrocessional arrangement pursuant to which the Company will offer to cede to
the Reinsurer, and the Reinsurer may assume from the Company, a quota share of
the Company's liabilities arising from the Company's reinsurance business, upon
the terms and subject to the conditions described below.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
contained herein and of the mutual benefits herein provided, the parties hereto
agree as follows:
ARTICLE I
CLASSES OF BUSINESS REINSURED
This Agreement shall cover liability ceded under all Contracts written by the
Company in the manner set forth in ARTICLE II - REINSURANCE CLAUSE and subject
to the exclusions set forth in ARTICLE V - EXCLUSIONS. The terms "Contracts",
"Contracts written by the Company" and "Contracts of the Company" shall mean any
and all binders, policies, certificates, agreements and contracts of reinsurance
and insurance in force on the effective date hereof or issued, renewed, accepted
or held, covered provisionally or otherwise in the name of the Company on or
after the effective date.
ARTICLE II
REINSURANCE CLAUSE
Commencing with the effective date of this Agreement, the Company shall offer to
cede to the Reinsurer the quota share ("Quota Share") set forth on the Quota
Share Endorsement attached hereto of the Company's Net Retained Line on all
Contracts coming within the scope of this Agreement. The Reinsurer shall have
the right to accept or reject such cession offer in respect of any Contract (or
all such Contracts), in its sole discretion, but shall be deemed to have
accepted each Contract cession not rejected by notice given in writing to the
Company promptly following receipt of
underwriting detail in respect of the proposed Contract cession. Each Contract
cession accepted (or deemed accepted) by the Reinsurer shall be deemed a
Contract ceded to, and in force under, this Agreement. If this Agreement is
renewed pursuant to Article III and the Parties desire to vary the Quota Share,
the Parties shall execute a Quota Share Endorsement (substantially in the form
of the Quota Share Endorsement attached hereto).
Limitations per reinsurance program, if any, on cessions to this Agreement shall
also be as set forth on the Quota Share Endorsement.
Subject to the conditions of the following paragraph, the term "Net Retained
Line" shall mean the amount of liability which the Company maintains per
reinsurance program after deduction of liability ceded, if any, to any general
or specific retrocessions to protect the Company and its quota share reinsurers
(including, without limitation, the Reinsurer).
The term "reinsurance program" shall be defined as:
1. Treaty Underlying Reinsurance Program - The portion of a ceding
company's program consisting of Pro Rata Treaties and/or Risk Excess of
Loss Contracts involving one or more layers where appropriate, and
subject to the same loss from an original insured.
2. Treaty Catastrophe Reinsurance Program - The portion of a ceding
company's program consisting of Catastrophe Excess of Loss and/or
Aggregate Excess of Loss Contracts involving one or more layers where
appropriate.
ARTICLE III
TERM AND CANCELLATION
This Agreement shall be effective from 12:01 a.m. Eastern Time, October 1, 1999
and shall be continuously in force until 11:59 p.m. Eastern Time, December 31,
2000 (the "Termination Date"). This Agreement shall automatically renew for a
one year term at each subsequent December 31 unless either Party has given
written notice to the other Party at least 90 days prior to December 31 of the
subject year of its intention not to renew this Agreement. If this Agreement is
so renewed, the "Termination Date" shall be the following December 31.
This Agreement may be terminated:
(a) by the Company prior to the Termination Date by notice to the
Reinsurer in the event that the Reinsurer's shareholders' equity
(calculated under United States generally accepted accounting
principles) shall have declined by 50% or more from the amount of such
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shareholders' equity as at the previous December 31;
(b) by the Company prior to the Termination Date upon:
(i) a material breach by the Reinsurer of its obligations
under this Agreement (x) which breach has not been cured
within ten (10) days following receipt by the Reinsurer of
written notice of such breach or (y) if such breach is not
susceptible to cure within such ten (10) day period steps
reasonably designed to cure such breach are not commenced
within such period, such steps are not diligently pursued or
such breach is not cured within a reasonable period following
such written notice of breach, or
(ii) the conviction of, or plea of nolo contendere by, the
Reinsurer or any of its directors or executive officers
("Reinsurer Persons") to a felony or a crime involving moral
turpitude, or the entry of a judgment no longer subject to
appeal against the Reinsurer or any of the Reinsurer Persons
finding a common law fraud, or other unlawful conduct by the
Reinsurer or any of the Reinsurer Persons that is injurious to
the financial condition or reputation of, or is otherwise
materially injurious to, the Company or any of its
subsidiaries or affiliates; or
(c) by the Reinsurer prior to the Termination Date upon:
(i) a material breach by the Company of its obligations under
this Agreement (x) which breach has not been cured within ten
(10) days following receipt by the Company of written notice
of such breach or (y) if such breach is not susceptible to
cure within such ten (10) day period steps reasonably designed
to cure such breach are not commenced within such period, such
steps are not diligently pursued or such breach is not cured
within a reasonable period following such written notice of
breach, or
(ii) the conviction of, or plea of nolo contendere by, the
Company or any of its directors or executive officers (the
"Company Persons") to a felony or a crime involving moral
turpitude, or the entry of a judgment no longer subject to
appeal against the Company or any of the Company Persons
finding a common law fraud, or other unlawful conduct by the
Company or any of the Company Persons that is injurious to the
financial condition or reputation of, or is otherwise
materially injurious to, the Reinsurer or any of its
subsidiaries or affiliates.
The party desiring to terminate this Agreement pursuant to clause (a) through
(c) above shall give prompt written notice of such termination to the other
party. No termination of this Agreement pursuant to clause (a) through (c) above
by a party will relieve the other party from any liability for
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any breach of this Agreement or from the performance of any obligation due with
respect to any period preceding such termination.
In the event of the termination of this Agreement, the Reinsurer shall remain
liable for all cessions in force prior to the termination until the natural
expiration date and final disposition of all losses and loss expenses occurring
hereunder during the period of its participation, and any amounts due under this
Agreement applicable to periods prior to termination (for whatever reason) shall
remain due after such termination.
Notwithstanding the foregoing, in the event of a termination of this Agreement
prior to its Termination Date as provided in clauses (a) or (b) above the
Company may, at its option, reassume all reinsurances in force at such
termination in which case the Reinsurer shall return to the Company the unearned
premium reserve calculated as of such date less the related Commissions.
ARTICLE IV
TERRITORY
This Agreement shall follow the territorial scope of the Contracts written by
the Company.
ARTICLE V
EXCLUSIONS
This Agreement shall be subject to the exclusions contained in the original
Contracts of the Company.
ARTICLE VI
ORIGINAL CONDITIONS
The true intent of this Agreement being that the Reinsurer shall follow the
fortunes of the Company, all reinsurances hereunder shall be subject to the same
rates, terms, conditions, waivers and modifications as the respective Contracts
of the Company, and the Reinsurer shall be credited with its exact proportion of
the original premium written by the Company, subject to the provisions of the
second sentence of ARTICLE II hereof.
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ARTICLE VII
PREMIUM AND COMMISSION
The Company shall keep a record of each and every Contract ceded to this
Agreement and shall promptly cede to the Reinsurer its applicable Quota Share
part of unearned premiums on the Contracts in force at the inception of this
Agreement and, thereafter, the Company shall cede to the Reinsurer its
applicable Quota Share part of all gross premiums written by the Company in
respect of each and every Contract issued, renewed, accepted or held, covered
provisionally or otherwise in the name of the Company on or after the effective
date of this Agreement after deducting from such premiums any Return Premiums
(as defined herein).
The Reinsurer shall allow the Company a commission on the Contracts ceded
hereunder equal to the applicable Quota Share part of the actual acquisition
cost paid by the Company in obtaining said Contracts ("Written Commission"). For
purposes of this Agreement, actual acquisition cost shall mean original
commission plus premium tax and any brokerage paid by the Company.
In addition, the Reinsurer shall allow the Company the following override
commissions as an allowance for the Company's overhead expense ("Override
Commission"; together with the Written Commission, the "Commissions"):
1. Casualty business: 1% of the applicable Quota Share part of all
unearned premiums and gross premiums written in respect of Contracts
ceded to this Agreement (after deducting Return Premiums) primarily
involving such business.
2. All other business: 5% of the applicable Quota Share part of all
unearned premiums and gross premiums written in respect of Contracts
ceded to this Agreement (after deducting Return Premiums) primarily
involving such business.
In addition to the Commissions paid the Company as set forth herein, the
Reinsurer shall pay the Company in respect of each Period during which this
Agreement is in effect a profit commission ("Profit Commission") allowance of
25% on the applicable Quota Share part of the net profits in respect of all
Contracts ceded to this Agreement with respect to such Period. Notwithstanding
that the term of this Agreement is for fifteen months, the Parties intend the
Profit Commission to operate on a 3 Period block basis. If, with respect to the
first or any subsequent 3 Period block, this Agreement is not renewed for a
second annual term, the Profit Commission percentage shall be reduced from 25%
to 10%. Similarly, if this Agreement is not renewed for a third annual term, the
Profit Commission percentage shall be reduced from 25% to 15%. The Profit
Commission shall be computed as follows:
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INCOME
1. Premiums earned during the Period.
OUTGO
2. Losses incurred during the Period.
3. Written Commission, brokerage and Override Commission plus deferred
acquisition costs at the beginning of the Period less deferred
acquisition costs at the end of the Period.
4. Federal excise taxes ("FET") paid during the Period.
5. Allowances for Reinsurer's management expense equal to five percent
(5%) of the premiums earned in (1) above.
The calculation of profit or loss shall be made by the Company within ninety
(90) days after the close of the applicable Period and any monies due shall be
remitted forty-five (45) days thereafter; provided, however, that if this
Agreement is renewed on the same or different terms beyond December 31, 2000 or
the Company and the Reinsurer enter into any other retrocessional arrangement
pursuant to which the Company offers to cede to the Reinsurer a share of the
Company's liabilities arising from the Company's reinsurance contracts, then
Profit Commission shall be calculated on a 3 Period block basis. The
calculations of profit or loss for the first two Periods shall be deemed
provisional and a final calculation for the entire 3 Period block shall be made
at the end of the third Period. If the aggregate of the items under Outgo exceed
the total of premiums earned as shown under Income (the amount of such excess,
if any, hereinafter the "Deficit") for the 3 Period block, the amount of the
Deficit shall be carried forward as a debit item in the calculation of income
and outgo for the ensuing 3 Period blocks until the Deficit has been made good;
provided, however, in no event shall any portion of any such Deficit otherwise
be recoverable from the Company, whether on termination of this Agreement or
otherwise. The first 3 Period block, if applicable, shall commence on October 1,
1999 and end on December 31, 2002.
For the purposes of this Agreement, the following definitions will apply:
(a) "Period" shall mean the actual time covered by each calculation of income
and outgo as set forth in this Agreement. The first Period shall be the period
October 1, 1999 through December 31, 2000 and, thereafter, each Period shall be
an annual period from January 1 to December 31 unless this Agreement is
terminated prior to such December 31 pursuant to ARTICLE III.
(b) "Premiums earned" shall mean the total of the net written premiums ceded to
the Reinsurer during the Period less unearned premiums at the close of the
Period, if any, plus unearned premiums
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at the beginning of the Period, if any.
(c) "Net written premiums" shall mean gross premiums written and ceded to the
Reinsurer as recorded by the Company less any returns and/or cancellations also
recorded.
(d) "Losses incurred" shall mean losses paid, plus loss adjustment expense paid,
by the Reinsurer, less salvages or subrogations recovered, during the Period,
plus loss and loss adjustment expenses outstanding (included IBNR) at the end of
the Period, less loss and loss adjustment expenses (including IBNR) outstanding
at the beginning of the Period, if any.
ARTICLE VIII
REPORTS AND REMITTANCES
Within forty five (45) days after the close of each quarter, the Company will
furnish the Reinsurer with a report summarizing the reported and estimated
written premiums ceded less the related reported and estimated Commissions and
FET, and less reported losses paid and reported loss adjustment expense paid,
and the net balance (disregarding estimated items) due either party. In
addition, the Company will furnish the Reinsurer a quarterly statement showing
the total reserves for outstanding losses, loss adjustment expense, unearned
premiums, Profit Commissions (if any) and such other information as may be
required by the Reinsurer for completion of any reports or statements required
to be filed with Bermuda or other applicable insurance regulatory authorities.
Reinsurer agrees (i) to provide to the Company such information as may be
reasonably requested from time to time by the Company which information is
required by the Company to comply with any requests or requirements of
applicable insurance regulatory authorities (including, without limitation, the
Connecticut Insurance Department) and (ii) to take such other commercially
reasonable actions as the Company shall request, which actions are necessary or
desirable in order for the Company to comply with any applicable insurance
regulatory requirements respecting its ability to take credit, or reduce its
liabilities, by reason of the reinsurance cessions which are the subject of this
Agreement.
The Reinsurer agrees that it will on its books and records maintain reserves for
outstanding losses and loss adjustment expense (including IBNR) that are at
least equal to the amounts set forth in the statements provided by the Company
respecting the Contracts ceded to this Agreement.
Amounts due the Reinsurer by the Company will be remitted with the quarterly
report. Amounts due the Company by the Reinsurer will be remitted within forty
five (45) days following receipt of the report. Should payment due from the
Reinsurer exceed $250,000 as respects any one loss, the Company may give the
Reinsurer notice of payment made, or its intention to make payment, on a
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certain date. If the Company has paid the loss, payment will be made by the
Reinsurer immediately. If the Company intends to pay the loss by a certain date
and has submitted a satisfactory proof of loss or similar document, payment will
be due from the Reinsurer twenty four (24) hours prior to that date, provided
the Reinsurer has a period of five (5) business days after receipt of said
notice to dispatch the payment. Cash loss amounts specifically remitted by the
Reinsurer as set forth herein will be credited to its next quarterly report in
which such cash loss amounts are reported.
ARTICLE IX
LOSSES AND LOSS ADJUSTMENT EXPENSES
All loss settlements (other than ex-gratia payments), whether under strict
policy conditions or by way of compromise, shall be unconditionally binding upon
the Reinsurer in the amount of its applicable Quota Share part thereof. The
Reinsurer shall bear its applicable Quota Share part of all loss adjustment
expenses incurred under the ceded Contracts.
In addition to indemnity amounts recoverable hereunder, the Reinsurer shall bear
its proportionate share of all expenses incurred by the Company in the
investigation, adjustment, appraisal or defense of all claims under policies
reinsured hereunder (excluding office expenses and compensation of officers and
regular employees of the Company, other than staff field adjusters and out of
pocket expense of the Company's officers incurred in connection with the loss),
and shall receive its proportionate share of any recoveries of such expenses.
ARTICLE X
EXTRA CONTRACTUAL OBLIGATIONS
The Reinsurer shall be liable hereunder for its share of 100% of any loss to the
Company in respect of Extra Contractual Obligations.
"Extra Contractual Obligations" are defined as those liabilities (excluding
office expenses and compensation of officers and regular employees of the
Company, other than staff field adjusters and out of pocket expense of the
Company's officers incurred in connection with the loss) not covered under any
other provision of this Agreement and which arise from the handling of any claim
on business covered hereunder, such liabilities arising because of, but not
limited to, the following: failure by the Company to settle within the policy
limit, or by reason of alleged or actual negligence, fraud or bad faith in
rejecting an offer of settlement or in the preparation of the defense or in the
trial of any action against its insured or reinsured or in the preparation or
prosecution of an appeal consequent upon such action.
The date on which any Extra Contractual Obligation is incurred by the Company
shall be
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deemed, in all circumstances, to be the date of the original loss. The time any
amount is due from the Reinsurer hereunder shall be based upon the time the
Company has made a payment to which these provisions relate.
For purposes of Extra Contractual Obligations coverage there shall be no
recovery hereunder where the loss has been incurred due to or to the extent
caused by fraud by a member of the board of directors or a corporate officer of
the Company acting individually or collectively or in collusion with any
individual or corporation or other organization or party involved in the
presentation, defense or settlement of a claim on behalf of the Company.
ARTICLE XI
JUDGMENTS IN EXCESS OF POLICY LIMITS
This Agreement shall protect the Company for the Reinsurer's share in connection
with 100% of any loss in excess of the limit of its original policy, such loss
in excess of the limit having been incurred because of failure by the Company to
settle within the policy limit or by reason of alleged or actual negligence,
fraud or bad faith in rejecting an offer of settlement, or in the preparation of
the defense, or in the trial of any action against its insured or reinsured or
in the preparation or prosecution of an appeal consequent upon such action.
However, this Article shall not apply where the loss has been incurred due to or
to the extent caused by fraud by a member of the board of directors or a
corporate officer of the Company acting individually or collectively or in
collusion with any individual or corporation or any other organization or party
involved in the presentation, defense or settlement of any claim.
For purposes of this Article the word "loss" shall mean any amounts for which
the Company would have been contractually liable to pay had it not been for the
limit of the original policy (excluding office expenses and compensation of
officers and regular employees of the Company, other than staff field adjusters
and out of pocket expense of the Company's officers incurred in connection with
the loss).
ARTICLE XII
UNAUTHORIZED REINSURANCE
The obligations of the Reinsurer hereunder shall be secured by one or more trust
accounts and/or by one or more clean, irrevocable and unconditional letters of
credit, all as more fully described below. As regards Contracts issued by the
Company coming within the scope of this Agreement, the Company agrees that when
it shall file with the insurance regulatory authority or set up on its books
reserves for unearned premium and losses covered hereunder which it shall be
required by
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law to set up, it will forward to the Reinsurer a statement showing the
proportion of such reserves which is applicable to the Reinsurer. The Reinsurer
hereby agrees to fund such reserves in respect of unearned premium, known
outstanding losses that have been reported to the Reinsurer and allocated loss
adjustment expense relating thereto, losses and allocated loss adjustment
expense paid by the Company but not recovered from the Reinsurer, plus reserves
for losses incurred but not reported, as shown in the statement prepared by the
Company (hereinafter referred to as "Obligations") by funds withheld, cash
advances, a reinsurance trust account or a letter of credit. The Reinsurer shall
have the option of determining the method of funding provided it is acceptable
to the Connecticut Insurance Department and any other insurance regulatory
authorities having jurisdiction over the Company's reserves.
A. Reinsurance Trust
If the Reinsurer elects to secure its Obligations through a reinsurance trust
account, the Reinsurer shall promptly establish a trust account (the "Statutory
Trust") with terms and bank acceptable to the regulatory authority(ies) having
jurisdiction over the Company. The trust agreement shall establish a trust that
names the Company as beneficiary of the trust and the Reinsurer as grantor of
the trust and shall satisfy applicable insurance regulatory requirements (the
"Statutory Trust Agreement").
At all times during the term of this Agreement, the Reinsurer shall have on
deposit in the Statutory Trust assets equal to the amount of the Obligations as
of the last day of the immediately preceding fiscal quarter (the "Statutory
Trust Amount"); provided, that the amount of the assets so deposited in the
Statutory Trust may be less than the Statutory Trust Amount if the Reinsurer
provides the Company with one or more letters of credit complying with Section B
of this ARTICLE XII. Adjustments to the Statutory Trust Amount shall be made
within thirty (30) days of Reinsurer's receipt of the report provided for in
Article VIII.
Assets deposited in the Statutory Trust shall be valued according to their
current fair market value and shall consist only of cash (United States legal
tender), certificates of deposit (issued by a United States bank and payable in
United States legal tender), and investments of the types permitted for a
domestic property/casualty reinsurance company under the provisions of the
applicable insurance laws and regulations of the State of Connecticut, or any
combination of the above, provided that any such investments are not issued by
an institution that is the parent, subsidiary, or affiliate of either the
Company or the Reinsurer.
Upon notification by the Company that the value of the assets on deposit in the
Statutory Trust is less than the Statutory Trust Amount (unless a letter of
credit has been provided for the amount of such deficiency), the Reinsurer
shall, within ten (10) days of receipt of such notice, deposit sufficient
additional assets in the Statutory Trust to increase the value of the assets or
deposit therein to the Statutory Trust Amount.
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The Reinsurer, prior to depositing assets in the Statutory Trust, shall execute
assignments, endorsements in blank, or transfer legal title to the trustee of
all shares, obligations or any other assets requiring assignments, in order that
the Company, or the trustee upon the direction of the Company, may whenever
necessary negotiate, withdraw or dispose of any such assets without consent or
signature from the Reinsurer or any other entity.
The Reinsurer and the Company agree that, notwithstanding any other provision of
this Agreement, the assets in the Statutory Trust established pursuant to the
provisions of this Agreement may be withdrawn by the Company at any time,
without notice to the Reinsurer, upon the presentation of a letter signed by the
President or any Vice President of the Company stating that amounts are due and
owing with respect to this Agreement and stating the amounts due. Such withdrawn
assets shall be utilized and applied by the Company or its successors in
interest by operation of law, including without limitation any liquidator,
rehabilitator, receiver, or conservator of the Company, without diminution
because of the insolvency of the Company or the Reinsurer, only for the
following purposes:
1. To reimburse the Company for the Reinsurer's share of premiums returned
to the owners of Contracts ceded to this Agreement because of
cancellations of such Contracts ("Return Premiums").
2. To pay the Reinsurer's share or to reimburse the Company for the
Reinsurer's share of any Obligations, as stipulated in the annual
statement submitted by the Company to the Reinsurer, which share is due
to the Company and not otherwise paid by the Reinsurer.
3. To withdraw the balance of the Statutory Trust Account and place such
sums in an interest bearing trust account to secure the continuing
liabilities of the Reinsurer under this Agreement, in the event the
Company has received effective notice of termination of the Statutory
Trust Account and the Reinsurer's liability remains unliquidated and
undischarged ten (10) days prior to the termination date of the
Statutory Trust Account. Such sums will remain in an interest bearing
trust account until a renewal Trust Agreement acceptable to the
regulatory authority(ies) having jurisdiction over the Company, or a
substitute in lieu thereof acceptable to the regulatory authority(ies)
having jurisdiction over the Company, has been received by the Company.
The Company shall provide to the Reinsurer payment of any interest
thereon accruing from such account.
4. To refund any sum which is in excess of 102% of the actual amount
required to fund the Obligations under this Agreement.
5. To pay any Commissions, Profit Commissions or other amounts the Company
claims are due under this Agreement.
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The Company agrees to return to the Reinsurer any amounts withdrawn from the
Statutory Trust which are in excess of the actual amounts required for items 1,
2, and 3 above or, in the case of item 5 above, any amounts that are
subsequently determined not to be due.
The Company further agrees to utilize all of the assets in the Statutory Trust
Account prior to drawing on any letter of credit established pursuant to Section
B of this ARTICLE XII.
B. Letters of Credit
By January 1 of each year during the term of this Agreement, the Reinsurer
shall, in the event that assets equal to the Statutory Trust Amount are not on
deposit in the Statutory Trust, establish and provide to the Company a clean,
irrevocable and unconditional Letter of Credit issued by a bank and containing
provisions acceptable to the insurance regulatory authorities having
jurisdiction over the Company's reserves in an amount equal to the shortfall in
the Statutory Trust. Such Letter of Credit shall be issued for a period of not
less than one year, and shall be automatically extended for one year from its
date of expiration or any future expiration date unless thirty (30) days (sixty
(60) days where required by insurance regulatory authorities) prior to any
expiration date the issuing bank shall notify the Company by certified or
registered mail that the issuing bank elects not to consider the Letter of
Credit extended for any additional period.
The Reinsurer and Company agree that the Letter of Credit provided by the
Reinsurer pursuant to the provisions of this Agreement may be drawn upon at any
time, notwithstanding any other provision of this Agreement, and be utilized by
the Company or any successor, by operation of law, of the Company including,
without limitation, any liquidator, rehabilitator, receiver or conservator of
the Company for the following purposes:
1. to reimburse the Company for the Obligations, the payment of which is
due under the terms of this Agreement and which has not been otherwise
paid;
2. to make refund of any sum which is in excess of the actual amount
required to pay the Obligations under this Agreement;
3. to fund an account with the Company for the Obligations. Such cash
deposit shall be held in an interest bearing account separate from the
Company's other assets, and interest thereon not in excess of the prime
rate shall accrue to the benefit of the Reinsurer;
4. to pay the Reinsurer's share of any other amounts the Company claims
are due under this Agreement.
In the event the amount drawn by the Company on any Letter of Credit is in
excess of the actual
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amount required for 1, 2 or 3, or in the case of 4, the actual amount determined
to be due, the Company shall promptly return to the Reinsurer the excess amount
so drawn. All of the foregoing shall be applied without diminution because of
insolvency on the part of the Company or the Reinsurer.
The issuing bank shall have no responsibility whatsoever in connection with the
propriety of withdrawals made by the Company or the disposition of funds
withdrawn, except to ensure that withdrawals are made only upon the order of
properly authorized representatives of the Company.
From time to time, the Company shall reduce the amounts of any letters of credit
established under this ARTICLE XII, or release assets from the Statutory Trust
established pursuant to this ARTICLE XII by such amounts as the Company
reasonably determines (in its sole discretion) are no longer required to secure
the obligations of the Reinsurer to the Company hereunder; provided, however,
that in no event shall the value of the assets held in the Statutory Trust plus
the amount of such letters of credit be less than the Obligations.
ARTICLE XIII
TAXES
In consideration of the terms under which this Agreement is issued, the Company
undertakes not to claim any deduction of the premium hereon when making tax
returns, other than on Income or Profits Tax returns, to any state or territory
of the United States of America or to the District of Columbia.
ARTICLE XIV
FEDERAL EXCISE TAX
The Reinsurer and the Company agree that the Company shall withhold and pay over
to the United States Treasury Department, together with all necessary forms and
reports, the Excise Tax imposed by Section 4371 of the Internal Revenue Code of
1986, as amended, in accordance with the provisions of Sections 4370 through
4374 thereof. The Company will provide the Reinsurer copies of all such returns
and reports. In the event of any Return Premium becoming due hereunder, the
Company will either (i) offset the Excise Tax applicable to the Return Premium
against future Excise Taxes payable to the Treasury Department, or (ii) pay to
the Reinsurer the amount which the Company recovers from the Treasury Department
with respect to the Return Premium. In the event any amount offset pursuant to
subsection (i) of the previous sentence is
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disallowed by the Internal Revenue Service, the Reinsurer shall indemnify the
Company for any such disallowed amount. The Company will use reasonable efforts
to offset or recover any such tax previously withheld on the returned portion of
the premium and the Reinsurer will cooperate with the Company to the extent
reasonably necessary to assist the Company in offsetting or recovering the tax
previously withheld on the returned portion of the premium from the Treasury
Department.
ARTICLE XV
CURRENCY
Wherever the word "Dollars" or sign "$" appear in this Agreement they shall be
construed to mean United States Dollars.
For purposes of this Agreement, where the Company receives premiums or pays
losses and/or commissions in currencies other than United States currency, such
premiums or losses and commissions shall be converted into United States Dollars
at the same rates of exchange as entered in the Company's books.
ARTICLE XVI
ACCESS TO RECORDS
The Reinsurer or its duly accredited representatives shall have full access to
the books and records (other than any list or lists of brokers through which the
Company has written the business ceded hereunder) of the Company at all
reasonable times for the purpose of obtaining information concerning this
Agreement or the subject matter hereof. Upon request, the Company shall supply
the Reinsurer, at the Reinsurer's expense, with copies of the whole or any part
of such books and records relating to this Agreement or the subject matter
hereof.
The Reinsurer agrees, on behalf of itself and its representatives, to hold and
keep confidential, and not to disclose to any third party (unless requested or
required by relevant insurance regulatory authorities or otherwise compelled to
do so by applicable law), any confidential and proprietary information of the
Company which it receives or has access to pursuant to the above paragraph. The
Reinsurer further agrees, on behalf of itself and its representatives, that it
shall not use any underwriting or related information received from the Company,
except for the sole purpose of analyzing the risks to be ceded to the Reinsurer
hereunder or in the application of the terms of this Agreement. The Reinsurer
agrees to abide by any determination by the Company
- 14 -
that any information provided to the Reinsurer constitutes confidential and
proprietary information.
ARTICLE XVII
ERRORS AND OMISSIONS
Except as provided in the second sentence of ARTICLE II hereof, 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 had not been made, provided such delay, omission or error is rectified
promptly upon discovery.
ARTICLE XVIII
INSOLVENCY
In the event of the insolvency of the Company, this reinsurance shall be payable
by the Reinsurer directly to the Company, or to its liquidator, receiver,
conservator or statutory successor on the basis of the liability of the Company
without diminution because of the insolvency of the Company or because the
liquidator, receiver, conservator, or statutory successor of the Company has
failed to pay all or portion of any claim. It is agreed, however, that the
liquidator, receiver, conservator, or statutory successor of the Company shall
give written notice to the Reinsurer of the pendency of a claim against the
Company indicating the policy or bond reinsured which claim would involve a
possible liability on the part of the Reinsurer 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, the Reinsurer may
investigate such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated any defense or defenses that it may deem
available to the Company or its liquidator, receiver, conservator, or statutory
successor.
The expense thus incurred by the Reinsurer shall be chargeable, subject to the
approval of the court, against the Company as part of the expense of
conservation or liquidation to the extent of a pro rata share of the benefit
which may accrue to the Company solely as a result of the defense undertaken by
the Reinsurer.
Where two or more reinsurers are involved in the same claim and a majority in
interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of their respective reinsurance
agreements as though such expense had been incurred by the Company.
- 15 -
The reinsurance shall be payable by the Reinsurer to the Company or its
liquidator, receiver, conservator, or statutory successor, except as provided by
Section 4118(a) of the New York Insurance Law or except (a) where the agreement
specifically provides another payee of such reinsurance in the event of the
insolvency of the Company, and (b) where the Reinsurer, with the consent of the
direct insured or insureds, has assumed such policy obligations of the Company
as direct obligations of the Reinsurer to the payees under such policies and in
substitution for the obligations of the Company to such payees.
ARTICLE XIX
ARBITRATION
As a condition precedent to any right of action hereunder, if any dispute, claim
or controversy shall arise between the Company and the Reinsurer with respect to
this Agreement, the interpretation or breach thereof or the rights of the
parties with respect to any transaction contemplated hereunder (a "Dispute"),
whether such Dispute arises before or after termination of this Agreement, such
dispute, upon the written demand of either party, shall be arbitrated in
accordance with this ARTICLE XIX. Any such demand for arbitration shall be made
within a reasonable time after the Dispute has arisen, and in any event shall
not be made after the date when institution of legal or equitable proceedings
based on such Dispute would be barred by the applicable statute of limitations.
Any Dispute to be arbitrated hereunder shall be submitted to three arbitrators,
one to be appointed by each party, and an umpire to be chosen by the two so
appointed. If either party refuses or neglects to appoint an arbitrator within
thirty (30) days after the receipt of written notice from the other party
requesting it to do so, the requesting party may appoint two arbitrators. If the
two arbitrators fail to agree in the selection of the umpire within thirty (30)
days of their appointment, each arbitrator shall nominate three candidates
within ten (10) days thereafter, two of whom the other shall decline, and the
choice between the remaining two shall be made by drawing lots. All arbitrators
shall be active or retired executive officers of insurance or reinsurance
companies or underwriters at Lloyd's, London not under the control of, or having
had in the previous 3 years direct and material business relations with, or
related by birth or marriage to any employee of, either party to this Agreement,
and having no other personal or financial interest in the outcome of the
arbitration. Any determination by a majority of the arbitrators shall be binding
and conclusive upon the parties hereto.
Each party shall submit its case to the arbitrators within thirty (30) days of
the appointment of the umpire. All proceedings before the arbitration panel
shall be informal and the arbitrators shall have the power to fix all procedural
rules relating to the arbitration proceeding.
- 16 -
The arbitration panel shall render its decision within thirty (30) days after
termination of the proceeding, which decision shall be in writing, stating the
reasons therefor. Judgment upon the final decision of the arbitrators may be
entered in any court having jurisdiction or application may be made to such
court for a judicial confirmation of the award and an order of enforcement, as
the case may be. Unless otherwise allocated by the arbitrators, each party shall
bear the expense of its own arbitrator and shall jointly and equally bear with
the other party the expense of the umpire and of any other expenses of the
arbitration. The arbitration shall take place in the city in which the Company's
head office is located unless some other place is mutually agreed upon by the
Company and the Reinsurer.
Notwithstanding the foregoing provisions of this ARTICLE XIX, it is hereby
agreed that no arbitration panel shall have any power to add to, alter or modify
the terms and conditions of this Agreement or to decide any issue which does not
arise from the interpretation or application of the provisions of this
Agreement.
ARTICLE XX
SERVICE OF SUIT
In the event of the failure of the Reinsurer to pay any amount claimed to be due
hereunder following an arbitration decision, or if court action is necessary to
aid arbitration, the Reinsurer, at the request of the Company, will submit to
the jurisdiction of any court of competent jurisdiction in the State and City of
New York and will comply with all requirements necessary to give such court
jurisdiction. All matters arising hereunder shall be determined in accordance
with the law and practice of such court. Nothing in this ARTICLE XX constitutes
or should be understood to constitute a waiver of the Reinsurer's rights to
commence an action in any court of competent jurisdiction in the United States,
to remove an action to a United States District Court, or to seek a transfer of
a case to another court as permitted by the laws of the United States or of any
state in the United States.
Service of process in such suit may be made upon Xxxxxx, Xxxxx & Xxxxxxx LLP,
000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000 (the "agent for service of process") and in
any suit instituted upon this Agreement, the Reinsurer will abide by the final
decision of such court or of any appellate court in the event of an appeal whose
decision is no longer subject to appeal. The above-named agent for service of
process is authorized and directed to accept service of process on behalf of the
Reinsurer in any such suit and the Reinsurer hereby agrees that any such service
shall be deemed good and sufficient service under the New York Civil Practice
Laws and Rules.
Further, pursuant to any statute of any state, territory or district of the
United States of America
- 17 -
which requires that the Reinsurer appoint a person designated by such statute as
its agent for service of process, Reinsurer hereby designates the
Superintendent, Commissioner, Director of Insurance, or other officer specified
for that purpose in such statute, or his successor or successors in office, as
its true and lawful attorney upon whom may be served any lawful process in any
action, suit or proceeding instituted by or on behalf of the Company or any
beneficiary hereunder arising out of this Agreement, and hereby designates the
agent for service of process as the firm to whom the said officer is authorized
to mail such process or a true copy thereof if such agent must be in the United
States, otherwise such process shall be mailed to the Reinsurer at its address
for notice under Article XXII hereof.
ARTICLE XXI
LIMITATIONS ON LIABILITY
The parties acknowledge that all business ceded under this Agreement shall be
subject to acceptance or rejection by the Reinsurer in its sole judgment.
Accordingly, in no event shall the Company be liable to the Reinsurer respecting
(i) the volume of business ceded pursuant to this Agreement (provided the Quota
Share, if any, is offered to be ceded) or (ii) any losses on any business ceded
pursuant to this Agreement.
Subject to the provisions of the preceding paragraph, the liability of the
Company to the Reinsurer in respect of any failure to comply with the provisions
of this Agreement shall be limited to amounts actually owed hereunder and
damages directly caused by the willful misconduct or gross negligence of the
Company. In no event shall the Company be liable for indirect, incidental,
special or consequential damages.
The parties shall each be entitled to specific performance of the terms of this
Agreement.
ARTICLE XXII
NOTICES
All notices, requests, demands and other communications hereunder must be in
writing (including facsimile transmission) and shall be deemed to have been duly
given (i) when received if delivered by hand against written receipt, (ii) when
sent if sent by facsimile transmission between 9:00 a.m. and 5:00 p.m. on a day
when the Federal Reserve Bank and the Bank of Bermuda are open for business,
provided such transmission is confirmed by the transmitting machine, (iii) 5
days after being mailed if mailed by prepaid, first class certified mail, return
receipt requested, or (iv) if sent by overnight courier, 2 days after delivery
to a
- 18 -
recognized major overnight courier service, fees prepaid. In each case notices
shall be addressed as follows:
If to the Company:
PXRE Reinsurance Company
000 Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Attention: President
Facsimile No.: 000-000-0000
If to the Reinsurer:
PXRE Reinsurance Ltd.
00 Xxxxx Xxxxxx
Xxxxxxxx
Xxxxxxx
Xxxxxxxxx: President
Facsimile No.:
Any party by notice in writing sent to the other may change the name, address or
facsimile number to which notices, requests, demands or other communications to
it shall be given.
ARTICLE XXIII
MISCELLANEOUS
Both the Reinsurer and the Company shall have, and may exercise at any time, the
right to offset any balance or balances due from one party to the other or, to
the extent permitted by applicable law, such other's successor, including a
successor by operation of law. Such offset may only include balances due under
this Agreement and any other reinsurance agreements heretofore or hereafter
entered into between the Reinsurer and the Company, regardless of whether such
balances are in respect of premiums, or losses or otherwise, and regardless of
the capacity of any party, whether as reinsurer or reinsured, under the various
agreements involved.
This Agreement (including any Endorsements hereto) contains the entire agreement
between the parties, and supersedes all prior or contemporaneous discussions,
negotiations, representations, or agreements, relating to the subject matter
hereof.
- 19 -
This Agreement shall be construed and enforced in accordance with, and governed
by, the laws of the State of New York (other than any conflict of law rule which
might result in the application of the law of any other jurisdiction).
This Agreement is intended for the exclusive benefit of the parties to this
Agreement and their respective successors and permitted assigns, and nothing
contained in this Agreement shall be construed as creating any rights or
benefits in or to any third party.
The captions of the various sections of this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning thereof.
This Agreement may not be modified or amended or any term or provision hereof
waived or discharged except in writing signed by the party against whom such
amendment, modification, waiver or discharge is sought to be enforced.
Except as otherwise provided in this Agreement, any failure or delay on the part
of any party in exercising any power or right hereunder shall not operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power preclude any other or further exercise thereof or the exercise of any
other right or power hereunder or otherwise available at law or in equity.
No party may assign any of its rights or obligations under this Agreement
without the written consent of the other party to this Agreement, which consent
may be arbitrarily withheld by such party, any such non-consented to assignments
being void. Except as otherwise provided in this Agreement, this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by and against the
respective successors and assigns of each party to this Agreement.
This Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized officers in Hamilton, Bermuda as of the date first
written above.
PXRE REINSURANCE LTD.
By /s/ Xxxxxx X. Xxxxx
____________________________________________
Name: Xxxxxx X. Xxxxx
Title: President
- 20 -
PXRE REINSURANCE COMPANY
By /s/ Xxxxxx X. Xxxxx
___________________________________________
Name: Xxxxxx X. Xxxxx
Title: Chairman and Chief Executive Officer
- 21 -
ANNEX I
QUOTA SHARE
ENDORSEMENT
TO
FACULTATIVE OBLIGATORY
RETROCESSIONAL AGREEMENT
(hereinafter referred to as the "Reinsurance Agreement")
between
PXRE REINSURANCE COMPANY
(hereinafter referred to as the "Company)
and
PXRE REINSURANCE LTD.
(hereinafter referred to as the "Reinsurer")
It is understood and agreed that for the Period commencing October 1, 1999:
(i) the applicable quota share for purposes of the
Reinsurance Agreement shall be thirty percent (30%);
and
(ii) Cessions to the Reinsurance Agreement shall not
exceed $3,000,000 per reinsurance program.
Signed in Hamilton, Bermuda, as of October 14, 1999
PXRE REINSURANCE LTD.
By /s/ Xxxxxx X. Xxxxx
____________________________________________
Name: Xxxxxx X. Xxxxx
Title: President
PXRE REINSURANCE COMPANY
By /s/ Xxxxxx X. Xxxxx
___________________________________________
Name: Xxxxxx X. Xxxxx
Title: Chairman and Chief Executive Officer
AGGREGATE EXCESS OF LOSS AGREEMENT
BETWEEN
PXRE REINSURANCE COMPANY
AND
PXRE REINSURANCE LTD.
AGGREGATE EXCESS OF LOSS AGREEMENT, dated as of October 14, 1999 and effective
as of October 1, 1999 (hereinafter referred to as the "Agreement"), between PXRE
REINSURANCE LTD., a Bermuda company (hereinafter referred to as the "Company"),
and PXRE REINSURANCE COMPANY, a Connecticut corporation (hereinafter referred to
as "Reinsurer").
W I T N E S S E T H :
WHEREAS, the Company and the Reinsurer wish to enter into an aggregate excess of
loss arrangement pursuant to which the Company will cede to the Reinsurer, and
the Reinsurer will assume from the Company, certain of the Company's excess
liabilities arising from the Company's reinsurance business, upon the terms and
subject to the conditions described below.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
contained herein and of the mutual benefits herein provided, the parties hereto
agree as follows:
ARTICLE I
REINSURANCE CLAUSE
Commencing with the effective date of this Agreement and subject to the
Aggregate Limit of Liability, the Reinsurer hereby reinsures the aggregate
liability of the Company resulting from losses in excess of the Aggregate
Retention that occur during the term of this Agreement under the Company's
Contracts, in force at the inception of this Agreement or written or renewed
during the term of this Agreement, subject to the terms and conditions set forth
herein.
In no event shall the Reinsurer be required to pay any losses hereunder (a)
unless and until the Company's Ultimate Net Loss has exceeded the Aggregate
Retention set forth in Annex I attached hereto; or (b) after the exhaustion of
the Aggregate Limit of Liability set forth in Annex I attached hereto. If this
Agreement is renewed pursuant to Article II and the Parties desire to vary the
Aggregate Retention or Aggregate Limit of Liability, the Parties shall execute
an endorsement (substantially in the form of the Annex I attached hereto).
The terms "Contracts", "Contracts written by the Company" and "Contracts of the
Company" shall mean any and all binders, policies, certificates, agreements and
contracts of reinsurance and insurance in force on the effective date hereof or
issued, renewed, accepted or held, covered provisionally or otherwise in the
name of the Company on or after the effective date.
The term "Ultimate Net Loss" means the actual loss, including loss adjustment
expense, 100% of loss in excess of policy limits and 100% of extra contractual
obligations, paid or to be paid by the Company on its Net Retained Line after
making deductions for all recoveries, salvages, subrogations
and all claims on inuring reinsurance, whether collectible or not; provided,
however, that in the event of the insolvency of the Company, payment by the
Reinsurer shall be made in accordance with the provisions of the Insolvency
Article. Nothing herein shall be construed to mean that losses under this
Agreement are not recoverable until the Company's ultimate net loss has been
ascertained.
The term "Net Retained Line" shall mean the amount of liability which the
Company maintains per reinsurance program after deduction of liability ceded, if
any, to any general or specific retrocessions to protect the Company and its
reinsurers (including, without limitation, the Reinsurer).
ARTICLE II
TERM AND CANCELLATION
This Agreement shall be effective from 12:01 a.m. Eastern Time, October 1, 1999
and shall be continuously in force until 11:59 p.m. Eastern Time, December 31,
2000 (the "Termination Date"). This Agreement shall automatically renew for a
one year term at each subsequent December 31 unless either Party has given
written notice to the other Party at least 90 days prior to December 31 of the
subject year of its intention not to renew this Agreement. If this Agreement is
so renewed, the "Termination Date" shall be the following December 31.
This Agreement may be terminated:
(a) by the Company prior to the Termination Date by notice to the
Reinsurer in the event that the Reinsurer's shareholders' equity
(calculated under statutory accounting principles) shall have declined
by 50% or more from the amount of such shareholders' equity as at the
previous December 31;
(b) by the Company prior to the Termination Date upon:
(i) a material breach by the Reinsurer of its obligations
under this Agreement (x) which breach has not been cured
within ten (10) days following receipt by the Reinsurer of
written notice of such breach or (y) if such breach is not
susceptible to cure within such ten (10) day period steps
reasonably designed to cure such breach are not commenced
within such period, such steps are not diligently pursued or
such breach is not cured within a reasonable period following
such written notice of breach, or
(ii) the conviction of, or plea of nolo contendere by, the
Reinsurer or any of its directors or executive officers
("Reinsurer Persons") to a felony or a crime involving moral
turpitude, or the entry of a judgment no longer subject to
appeal against the
- 2 -
Reinsurer or any of the Reinsurer Persons finding a common law
fraud, or other unlawful conduct by the Reinsurer or any of
the Reinsurer Persons that is injurious to the financial
condition or reputation of, or is otherwise materially
injurious to, the Company or any of its subsidiaries or
affiliates; or
(c) by the Reinsurer prior to the Termination Date upon:
(i) a material breach by the Company of its obligations under
this Agreement (x) which breach has not been cured within ten
(10) days following receipt by the Company of written notice
of such breach or (y) if such breach is not susceptible to
cure within such ten (10) day period steps reasonably designed
to cure such breach are not commenced within such period, such
steps are not diligently pursued or such breach is not cured
within a reasonable period following such written notice of
breach, or
(ii) the conviction of, or plea of nolo contendere by, the
Company or any of its directors or executive officers (the
"Company Persons") to a felony or a crime involving moral
turpitude, or the entry of a judgment no longer subject to
appeal against the Company or any of the Company Persons
finding a common law fraud, or other unlawful conduct by the
Company or any of the Company Persons that is injurious to the
financial condition or reputation of, or is otherwise
materially injurious to, the Reinsurer or any of its
subsidiaries or affiliates.
The party desiring to terminate this Agreement pursuant to clause (a) through
(c) above shall give prompt written notice of such termination to the other
party. No termination of this Agreement pursuant to clause (a) through (c) above
by a party will relieve the other party from any liability for any breach of
this Agreement or from the performance of any obligation due with respect to any
period preceding such termination.
In the event of the termination of this Agreement, the Reinsurer shall remain
liable for all cessions in force prior to the termination until the natural
expiration date and final disposition of all losses and loss expenses occurring
hereunder during the period of its participation, and any amounts due under this
Agreement applicable to periods prior to termination (for whatever reason) shall
remain due after such termination.
Notwithstanding the foregoing, in the event of a termination of this Agreement
prior to its Termination Date as provided in clauses (a) or (b) above the
Company may, at its option, reassume all reinsurances in force at such
termination in which case the Reinsurer shall return to the Company the unearned
premium reserve calculated as of such date.
- 3 -
ARTICLE III
TERRITORY
This Agreement shall follow the territorial scope of the Contracts written by
the Company.
ARTICLE IV
EXCLUSIONS
This Agreement shall be subject to the exclusions contained in the original
Contracts of the Company.
ARTICLE V
ORIGINAL CONDITIONS
The true intent of this Agreement being that the Reinsurer shall follow the
fortunes of the Company, all reinsurances hereunder shall be subject to the same
terms, conditions, waivers and modifications as the respective Contracts of the
Company.
ARTICLE VI
PREMIUM
As premium for the reinsurance provided hereunder, the Company shall pay the
Reinsurer the premium set forth in Annex I hereto.
ARTICLE VII
REPORTS AND REMITTANCES
Within forty five (45) days after the close of each quarter, the Company will
furnish the Reinsurer a quarterly statement showing the total reserves for
outstanding losses, loss adjustment expense, unearned premiums, and such other
information as may be required by the Reinsurer for completion of any reports or
statements required to be filed with the Connecticut Insurance Department or
other applicable insurance regulatory authorities. Reinsurer agrees (i) to
provide to the Company such information as may be reasonably requested from time
to time by the Company which information is required by the Company to comply
with any requests or requirements of applicable insurance
- 4 -
regulatory authorities and (ii) to take such other commercially reasonable
actions as the Company shall request, which actions are necessary or desirable
in order for the Company to comply with any applicable insurance regulatory
requirements respecting its ability to take credit, or reduce its liabilities,
by reason of the reinsurance cessions which are the subject of this Agreement.
Amounts due the Reinsurer by the Company will be remitted with the quarterly
report. Amounts due the Company by the Reinsurer will be remitted within forty
five (45) days following receipt of the report. Should payment due from the
Reinsurer exceed $250,000 as respects any one loss, the Company may give the
Reinsurer notice of payment made, or its intention to make payment, on a certain
date. If the Company has paid the loss, payment will be made by the Reinsurer
immediately. If the Company intends to pay the loss by a certain date and has
submitted a satisfactory proof of loss or similar document, payment will be due
from the Reinsurer twenty four (24) hours prior to that date, provided the
Reinsurer has a period of five (5) business days after receipt of said notice to
dispatch the payment. Cash loss amounts specifically remitted by the Reinsurer
as set forth herein will be credited to its next quarterly report in which such
cash loss amounts are reported.
ARTICLE VIII
EXTRA CONTRACTUAL OBLIGATIONS
Subject to the Aggregate Retention and Aggregate Limit of Liability, the
Reinsurer shall be liable hereunder for 100% of any loss to the Company in
respect of Extra Contractual Obligations.
"Extra Contractual Obligations" are defined as those liabilities (excluding
office expenses and compensation of officers and regular employees of the
Company, other than staff field adjusters and out of pocket expense of the
Company's officers incurred in connection with the loss) not covered under any
other provision of this Agreement and which arise from the handling of any claim
on business covered hereunder, such liabilities arising because of, but not
limited to, the following: failure by the Company to settle within the policy
limit, or by reason of alleged or actual negligence, fraud or bad faith in
rejecting an offer of settlement or in the preparation of the defense or in the
trial of any action against its insured or reinsured or in the preparation or
prosecution of an appeal consequent upon such action.
The date on which any Extra Contractual Obligation is incurred by the Company
shall be deemed, in all circumstances, to be the date of the original loss. The
time any amount is due from the Reinsurer hereunder shall be based upon the time
the Company has made a payment to which these provisions relate.
For purposes of Extra Contractual Obligations coverage there shall be no
recovery hereunder where the loss has been incurred due to or to the extent
caused by fraud by a member of the
- 5 -
board of directors or a corporate officer of the Company acting individually or
collectively or in collusion with any individual or corporation or other
organization or party involved in the presentation, defense or settlement of a
claim on behalf of the Company.
ARTICLE IX
JUDGMENTS IN EXCESS OF POLICY LIMITS
Subject to the Aggregate Retention and Aggregate Limit of Liability, this
Agreement shall protect the Company for 100% of any loss in excess of the limit
of its original policy, such loss in excess of the limit having been incurred
because of failure by the Company to settle within the policy limit or by reason
of alleged or actual negligence, fraud or bad faith in rejecting an offer of
settlement, or in the preparation of the defense, or in the trial of any action
against its insured or reinsured or in the preparation or prosecution of an
appeal consequent upon such action.
However, this Article shall not apply where the loss has been incurred due to or
to the extent caused by fraud by a member of the board of directors or a
corporate officer of the Company acting individually or collectively or in
collusion with any individual or corporation or any other organization or party
involved in the presentation, defense or settlement of any claim.
For purposes of this Article the word "loss" shall mean any amounts for which
the Company would have been contractually liable to pay had it not been for the
limit of the original policy (excluding office expenses and compensation of
officers and regular employees of the Company, other than staff field adjusters
and out of pocket expense of the Company's officers incurred in connection with
the loss).
ARTICLE X
TAXES
In consideration of the terms under which this Agreement is issued, the Company
undertakes not to claim any deduction of the premium hereon when making tax
returns, other than on Income or Profits Tax returns, to any state or territory
of the United States of America or to the District of Columbia.
ARTICLE XI
CURRENCY
Wherever the word "Dollars" or sign "$" appear in this Agreement they shall be
construed to mean United States Dollars.
- 6 -
For purposes of this Agreement, where the Company receives premiums or pays
losses in currencies other than United States currency, such premiums or losses
shall be converted into United States Dollars at the same rates of exchange as
entered in the Company's books.
ARTICLE XII
ACCESS TO RECORDS
The Reinsurer or its duly accredited representatives shall have full access to
the books and records (other than any list or lists of brokers through which the
Company has written the business ceded hereunder) of the Company at all
reasonable times for the purpose of obtaining information concerning this
Agreement or the subject matter hereof. Upon request, the Company shall supply
the Reinsurer, at the Reinsurer's expense, with copies of the whole or any part
of such books and records relating to this Agreement or the subject matter
hereof.
The Reinsurer agrees, on behalf of itself and its representatives, to hold and
keep confidential, and not to disclose to any third party (unless requested or
required by relevant insurance regulatory authorities or otherwise compelled to
do so by applicable law), any confidential and proprietary information of the
Company which it receives or has access to pursuant to the above paragraph. The
Reinsurer further agrees, on behalf of itself and its representatives, that it
shall not use any underwriting or related information received from the Company,
except for the sole purpose of analyzing the risks to be ceded to the Reinsurer
hereunder or in the application of the terms of this Agreement. The Reinsurer
agrees to abide by any determination by the Company that any information
provided to the Reinsurer constitutes confidential and proprietary information.
ARTICLE XIII
ERRORS AND OMISSIONS
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 had not been made, provided such delay, omission or
error is rectified promptly upon discovery.
ARTICLE XIV
INSOLVENCY
In the event of the insolvency of the Company, this reinsurance shall be payable
by the Reinsurer
- 7 -
directly to the Company, or to its liquidator, receiver, conservator or
statutory successor on the basis of the liability of the Company without
diminution because of the insolvency of the Company or because the liquidator,
receiver, conservator, or statutory successor of the Company has failed to pay
all or portion of any claim. It is agreed, however, that the liquidator,
receiver, conservator, or statutory successor of the Company shall give written
notice to the Reinsurer of the pendency of a claim against the Company
indicating the policy or bond reinsured which claim would involve a possible
liability on the part of the Reinsurer 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, the Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding where such claim is
to be adjudicated any defense or defenses that it may deem available to the
Company or its liquidator, receiver, conservator, or statutory successor.
The expense thus incurred by the Reinsurer shall be chargeable, subject to the
approval of the court, against the Company as part of the expense of
conservation or liquidation to the extent of a pro rata share of the benefit
which may accrue to the Company solely as a result of the defense undertaken by
the Reinsurer.
Where two or more reinsurers are involved in the same claim and a majority in
interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of their respective reinsurance
agreements as though such expense had been incurred by the Company.
The reinsurance shall be payable by the Reinsurer to the Company or its
liquidator, receiver, conservator, or statutory successor, except as provided by
Section 4118(a) of the New York Insurance Law or except (a) where the agreement
specifically provides another payee of such reinsurance in the event of the
insolvency of the Company, and (b) where the Reinsurer, with the consent of the
direct insured or insureds, has assumed such policy obligations of the Company
as direct obligations of the Reinsurer to the payees under such policies and in
substitution for the obligations of the Company to such payees.
ARTICLE XV
ARBITRATION
As a condition precedent to any right of action hereunder, if any dispute, claim
or controversy shall arise between the Company and the Reinsurer with respect to
this Agreement, the interpretation or breach thereof or the rights of the
parties with respect to any transaction contemplated hereunder (a "Dispute"),
whether such Dispute arises before or after termination of this Agreement, such
dispute, upon the written demand of either party, shall be arbitrated in
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accordance with this ARTICLE XV. Any such demand for arbitration shall be made
within a reasonable time after the Dispute has arisen, and in any event shall
not be made after the date when institution of legal or equitable proceedings
based on such Dispute would be barred by the applicable statute of limitations.
Any Dispute to be arbitrated hereunder shall be submitted to three arbitrators,
one to be appointed by each party, and an umpire to be chosen by the two so
appointed. If either party refuses or neglects to appoint an arbitrator within
thirty (30) days after the receipt of written notice from the other party
requesting it to do so, the requesting party may appoint two arbitrators. If the
two arbitrators fail to agree in the selection of the umpire within thirty (30)
days of their appointment, each arbitrator shall nominate three candidates
within ten (10) days thereafter, two of whom the other shall decline, and the
choice between the remaining two shall be made by drawing lots. All arbitrators
shall be active or retired executive officers of insurance or reinsurance
companies or underwriters at Lloyd's, London not under the control of, or having
had in the previous 3 years direct and material business relations with, or
related by birth or marriage to any employee of, either party to this Agreement,
and having no other personal or financial interest in the outcome of the
arbitration. Any determination by a majority of the arbitrators shall be binding
and conclusive upon the parties hereto.
Each party shall submit its case to the arbitrators within thirty (30) days of
the appointment of the umpire. All proceedings before the arbitration panel
shall be informal and the arbitrators shall have the power to fix all procedural
rules relating to the arbitration proceeding.
The arbitration panel shall render its decision within thirty (30) days after
termination of the proceeding, which decision shall be in writing, stating the
reasons therefor. Judgment upon the final decision of the arbitrators may be
entered in any court having jurisdiction or application may be made to such
court for a judicial confirmation of the award and an order of enforcement, as
the case may be. Unless otherwise allocated by the arbitrators, each party shall
bear the expense of its own arbitrator and shall jointly and equally bear with
the other party the expense of the umpire and of any other expenses of the
arbitration. The arbitration shall take place in the city in which the Company's
head office is located unless some other place is mutually agreed upon by the
Company and the Reinsurer.
Notwithstanding the foregoing provisions of this ARTICLE XV, it is hereby agreed
that no arbitration panel shall have any power to add to, alter or modify the
terms and conditions of this Agreement or to decide any issue which does not
arise from the interpretation or application of the provisions of this
Agreement.
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ARTICLE XVI
SERVICE OF SUIT
In the event of the failure of the Reinsurer to pay any amount claimed to be due
hereunder following an arbitration decision, or if court action is necessary to
aid arbitration, the Reinsurer, at the request of the Company, will submit to
the jurisdiction of any court of competent jurisdiction in the State and City of
New York and will comply with all requirements necessary to give such court
jurisdiction. All matters arising hereunder shall be determined in accordance
with the law and practice of such court. Nothing in this ARTICLE XVI constitutes
or should be understood to constitute a waiver of the Reinsurer's rights to
commence an action in any court of competent jurisdiction in the United States,
to remove an action to a United States District Court, or to seek a transfer of
a case to another court as permitted by the laws of the United States or of any
state in the United States.
Service of process in such suit may be made upon Xxxxxx, Xxxxx & Xxxxxxx LLP,
000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000 (the "agent for service of process") and in
any suit instituted upon this Agreement, the Reinsurer will abide by the final
decision of such court or of any appellate court in the event of an appeal whose
decision is no longer subject to appeal. The above-named agent for service of
process is authorized and directed to accept service of process on behalf of the
Reinsurer in any such suit and the Reinsurer hereby agrees that any such service
shall be deemed good and sufficient service under the New York Civil Practice
Laws and Rules.
Further, pursuant to any statute of any state, territory or district of the
United States of America which requires that the Reinsurer appoint a person
designated by such statute as its agent for service of process, Reinsurer hereby
designates the Superintendent, Commissioner, Director of Insurance, or other
officer specified for that purpose in such statute, or his successor or
successors in office, as its true and lawful attorney upon whom may be served
any lawful process in any action, suit or proceeding instituted by or on behalf
of the Company or any beneficiary hereunder arising out of this Agreement, and
hereby designates the agent for service of process as the firm to whom the said
officer is authorized to mail such process or a true copy thereof if such agent
must be in the United States, otherwise such process shall be mailed to the
Reinsurer at its address for notice under Article XVIII hereof.
ARTICLE XVII
LIMITATIONS ON LIABILITY
The liability of the Company to the Reinsurer in respect of any failure to
comply with the provisions of this Agreement shall be limited to amounts
actually owed hereunder and damages
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directly caused by the willful misconduct or gross negligence of the Company. In
no event shall the Company be liable for indirect, incidental, special or
consequential damages.
The parties shall each be entitled to specific performance of the terms of this
Agreement.
ARTICLE XVIII
NOTICES
All notices, requests, demands and other communications hereunder must be in
writing (including facsimile transmission) and shall be deemed to have been duly
given (i) when received if delivered by hand against written receipt, (ii) when
sent if sent by facsimile transmission between 9:00 a.m. and 5:00 p.m. on a day
when the Federal Reserve Bank and the Bank of Bermuda are open for business,
provided such transmission is confirmed by the transmitting machine, (iii) 5
days after being mailed if mailed by prepaid, first class certified mail, return
receipt requested, or (iv) if sent by overnight courier, 2 days after delivery
to a recognized major overnight courier service, fees prepaid. In each case
notices shall be addressed as follows:
If to the Reinsurer:
PXRE Reinsurance Company
000 Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Attention: President
Facsimile No.: 000-000-0000
If to the Company:
PXRE Reinsurance Ltd.
00 Xxxxx Xxxxxx
Xxxxxxxx
Xxxxxxx
Xxxxxxxxx: President
Facsimile No.:
Any party by notice in writing sent to the other may change the name, address or
facsimile number to which notices, requests, demands or other communications to
it shall be given.
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ARTICLE XIX
MISCELLANEOUS
Both the Reinsurer and the Company shall have, and may exercise at any time, the
right to offset any balance or balances due from one party to the other or, to
the extent permitted by applicable law, such other's successor, including a
successor by operation of law. Such offset may only include balances due under
this Agreement and any other reinsurance agreements heretofore or hereafter
entered into between the Reinsurer and the Company, regardless of whether such
balances are in respect of premiums, or losses or otherwise, and regardless of
the capacity of any party, whether as reinsurer or reinsured, under the various
agreements involved.
This Agreement (including any Annexes or Endorsements hereto) contains the
entire agreement between the parties, and supersedes all prior or
contemporaneous discussions, negotiations, representations, or agreements,
relating to the subject matter hereof.
This Agreement shall be construed and enforced in accordance with, and governed
by, the laws of the State of New York (other than any conflict of law rule which
might result in the application of the law of any other jurisdiction).
This Agreement is intended for the exclusive benefit of the parties to this
Agreement and their respective successors and permitted assigns, and nothing
contained in this Agreement shall be construed as creating any rights or
benefits in or to any third party.
The captions of the various sections of this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning thereof.
This Agreement may not be modified or amended or any term or provision hereof
waived or discharged except in writing signed by the party against whom such
amendment, modification, waiver or discharge is sought to be enforced.
Except as otherwise provided in this Agreement, any failure or delay on the part
of any party in exercising any power or right hereunder shall not operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power preclude any other or further exercise thereof or the exercise of any
other right or power hereunder or otherwise available at law or in equity.
No party may assign any of its rights or obligations under this Agreement
without the written consent of the other party to this Agreement, which consent
may be arbitrarily withheld by such party, any such non-consented to assignments
being void. Except as otherwise provided in this Agreement, this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by
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and against the respective successors and assigns of each party to this
Agreement.
This Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized officers in Hamilton, Bermuda as of the date first
written above.
PXRE REINSURANCE LTD.
By /s/ Xxxxxx X. Xxxxx
___________________________________________
Name: Xxxxxx X. Xxxxx
Title: President
PXRE REINSURANCE COMPANY
By /s/ Xxxxxx X. Xxxxx
___________________________________________
Name: Xxxxxx X. Xxxxx
Title: Chairman and Chief Executive Officer
- 13 -
ANNEX I
TO
AGGREGATE EXCESS OF LOSS AGREEMENT
(hereinafter referred to as the "Reinsurance Agreement")
between
PXRE REINSURANCE COMPANY
(hereinafter referred to as the "Reinsurer")
and
PXRE REINSURANCE LTD.
(hereinafter referred to as the "Company")
It is understood and agreed that for the Period commencing October 1, 1999 and
terminating on December 31, 2000:
1. Aggregate Retention. The "Aggregate Retention" shall be the lesser of:
(A) $40,000,000, or
(B) 80% of the Company's Bermuda statutory capital
through January 1, 2000.
2. Aggregate Limit of Liability. In no event shall the Reinsurer be liable
during the term of this Agreement for losses in excess of the Aggregate
Limit of Liability of $30,000,000.
3. Premium. $450,000, payable quarterly in arrears in five equal installments
of $90,000.
Signed in Hamilton, Bermuda, as of October 14, 1999
PXRE REINSURANCE LTD.
By /s/ Xxxxxx X. Xxxxx
___________________________________________
Name: Xxxxxx X. Xxxxx
Title: President
PXRE REINSURANCE COMPANY
By /s/ Xxxxxx X. Xxxxx
___________________________________________
Name: Xxxxxx X. Xxxxx
Title: Chairman and Chief Financial Officer
