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EXHIBIT 10.31
FIRST COINSURED
AGGREGATE EXCESS OF LOSS REINSURANCE AGREEMENT
(hereinafter referred to as the "AGREEMENT")
In consideration of the mutual covenants hereinafter contained and upon the
terms and conditions hereinafter set forth
THE SUBSCRIBING REINSURERS EXECUTING THE INTERESTS &
LIABILITIES CONTRACTS ATTACHED TO AND FORMING A PART
OF THIS AGREEMENT
(hereinafter referred to as the "REINSURER")
does hereby indemnify, as herein provided and specified,
TRENWICK AMERICA REINSURANCE CORPORATION
Stamford, Connecticut
(hereinafter referred to as the "REINSURED")
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ARTICLE AND PAGE NUMBER
1. BUSINESS COVERED 3
2. TERM 3
3. TERRITORY 4
4. RETENTION, REINSURER'S SHARE, AND LIMIT 4
5. OTHER REINSURANCE 6
6. LOSS SETTLEMENTS 6
7. REINSURANCE PREMIUM 7
8. ADDITIONAL PREMIUM 7
9. EXPERIENCE ACCOUNT 7
10. REINSURER'S MARGIN 8
11. FUNDS WITHHELD 8
12. COMMUTATION 10
13. REPORTS AND REMITTANCES 11
14. TAXES 12
15. COVENANTS OF THE REINSURED 12
16. DEFINITIONS 13
17. ULTIMATE NET LOSS 14
18. NET RETAINED LINES 14
19. RIGHT OF OFFSET 15
20. ERRORS AND OMISSIONS 15
21. CURRENCY 16
22. EXTRA CONTRACTUAL OBLIGATIONS 16
23. EXCESS OF ORIGINAL POLICY LIMITS LOSS 16
24. ARBITRATION 17
25. ACCESS TO RECORDS 18
26. INSOLVENCY 18
27. GOVERNING LAW 19
28. SERVICE OF SUIT 19
29. AMENDMENTS AND ALTERATIONS 20
30. ASSIGNMENT 20
31. NO THIRD PARTY RIGHTS 20
32. NO IMPLIED WAIVER 20
33. SECURITY 20
34. MERGERS AND ACQUISITIONS 21
35. INTERMEDIARY 21
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ARTICLE 1 - BUSINESS COVERED
In consideration of the premium to be paid by the Reinsured and subject to the
terms, conditions, exclusions and limits hereafter set forth, the Reinsurer
agrees to indemnify the Reinsured on an aggregate excess of loss basis for the
Reinsurer's share of Ultimate Net Loss that the Reinsured has incurred in excess
of the retention as a result of losses occurring during the Term of this
Agreement as respects the Reinsured's contracts, agreements and other evidence
of reinsurance in respect of all casualty reinsurance assumed business entered
into by the Reinsured (the "POLICIES"), but specifically excluding the following
business:
- finite risk reinsurance
- pollution liability when written by the Reinsured as a named peril, but
excluding first party cleanup
- policyholder dividends
- nuclear incidents: in accordance with the attached Nuclear Incident
Exclusion Clauses:
a. Nuclear Incident Exclusion Clause - Liability - Reinsurance
- U.S.A. and Canada;
b. Nuclear Incident Exclusion Clause - Physical Damage-
Reinsurance - U.S.A. and Canada;
c. Nuclear Incident Exclusion Clause - Physical Damage and
Liability (Boiler and Machinery Policies) - Reinsurance -
U.S.A. and Canada;
d. Nuclear Energy Risks Exclusion Clause - Reinsurance -
Worldwide excluding U.S.A. and Canada.
- war risks (in accordance with the attached War Risk Exclusion Clause)
- insolvency and guarantee funds (in accordance with the attached
Insolvency And Guarantee Funds Exclusion Clause)
- residual market assessments, second injury fund assessments,
rehabilitation assessments, and any other similar type assessments
- financial guarantee business
- loss portfolio transfers
ARTICLE 2 - TERM
The term (the "TERM") of this Agreement shall be the period commencing at 12:01
a.m., Eastern Standard Time, January 1, 1997 (the "EFFECTIVE DATE") through to
and including the earlier of 11:59 p.m., Eastern Standard Time, December 31,
1997 or the date on which this Agreement is otherwise canceled as provided for
below (the "EXPIRATION DATE").
This Agreement may not be canceled by the Reinsured. The Reinsurer shall have
the right to
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cancel this Agreement as provided for in the articles entitled "COVENANTS OF THE
REINSURED", "MERGERS AND ACQUISITIONS", or "RIGHT OF OFFSET" and as provided for
below.
In the event that the Reinsured fails to pay the Reinsurance Premium and/or the
Additional Premium, if any, within 15 days of the date such premium is due, the
Reinsurer shall notify the Reinsured in writing via registered mail of the
overdue amounts. In the event that the Reinsured does not remit the overdue
amounts to the Reinsurer within 15 days of receiving such notification from the
Reinsurer, the Reinsurer shall have the right to immediately cancel this
Agreement by mailing the Reinsured a written notice of cancellation and the
Total Aggregate Limit, notwithstanding any provision to the contrary contained
herein, shall be immediately reduced to an amount equal to the positive balance
in the Experience Account (or zero if the Experience Account Balance is
negative) as of the date of cancellation. The mailing of such notice shall be
sufficient notice and the effective date of cancellation shall be the date the
notice of cancellation was posted.
In the event that the Reinsured fails to pay a Reinsurance Premium and/or an
Additional Premium, if any, that is due after the Expiration Date of this
Agreement within 15 days of the date such premium is due, the Reinsurer shall
notify the Reinsured in writing via registered mail of the overdue amounts. In
the event that the Reinsured does not remit the overdue amounts to the Reinsurer
within 15 days of receiving such notification from the Reinsurer, the Total
Aggregate Limit, notwithstanding any provision to the contrary contained herein,
shall immediately and without further notice be reduced to an amount equal to
the positive balance in the Experience Account (or zero if the Experience
Account Balance is negative).
ARTICLE 3 - TERRITORY
This Agreement shall apply only to losses occurring in the United States of
America, Canada and Europe.
ARTICLE 4 - RETENTION, REINSURER'S SHARE, AND LIMIT
1) LIMIT A:
The Reinsurer agrees to indemnify the Reinsured for the Reinsurer's Share of the
amount of the Reinsured's aggregate Ultimate Net Loss that is in excess of 53%
of Subject Earned Premium.
The "REINSURER'S SHARE" under Limit A shall be determined as follows:
If the Ultimate Net Loss is less than 53% of Subject Earned Premium,
the Reinsurer's Share under Limit A shall equal zero, otherwise, the
Reinsurer's Share under Limit A shall equal the lesser of (1) "A"
divided by "B" or (2) 100%,
Where:
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"A" is equal to 193.0% of the Reinsurance Premium
paid, plus the lesser of (1) the amount of Ultimate Net Loss
incurred from Clash losses, or (2) $7 million; and
"B" is equal to the amount of Ultimate Net Loss in
excess of 53% of Subject Earned Premium.
UNDER NO CIRCUMSTANCES SHALL THE REINSURER'S AGGREGATE LIMIT OF LIABILITY FOR
ULTIMATE NET LOSS UNDER THIS LIMIT A EXCEED 193.0% OF THE REINSURANCE PREMIUM
PAID, PLUS $7 MILLION.
2) LIMIT B:
The Reinsurer agrees to indemnify the Reinsured for the Reinsurer's Share of the
amount of the Reinsured's aggregate Ultimate Net Loss that is in excess of 90%
of Subject Earned Premium.
The "REINSURER'S SHARE" under Limit B shall be determined as follows:
If the Ultimate Net Loss is less than 90% of Subject Earned Premium,
the Reinsurer's Share under Limit B shall equal zero, otherwise, the
Reinsurer's Share under Limit B shall be equal to the lesser of (1) "C"
divided by "D" or (2) "E",
Where:
"C" is equal to 27.5% of the Reinsurance Premium
paid; and
"D" is equal to the amount of Ultimate Net Loss in
excess of 90% of Subject Earned Premium; and
"E" is equal to 100% less the Reinsurer's Share under
Limit A calculated above.
UNDER NO CIRCUMSTANCES SHALL THE REINSURER'S AGGREGATE LIMIT OF LIABILITY FOR
ULTIMATE NET LOSS UNDER THIS LIMIT B EXCEED 27.5% OF THE REINSURANCE PREMIUM
PAID.
3) TOTAL AGGREGATE LIMIT:
Notwithstanding the Reinsurer's obligations under Limit A and Limit B above, the
Reinsurer's maximum aggregate limit of liability for Ultimate Net Loss under
this Agreement shall be subject to a maximum aggregate limit (the "TOTAL
AGGREGATE LIMIT") equal to the lesser of:
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(1) 220.5% of Reinsurance Premium paid, plus the lesser of (1) the
amount of Ultimate Net Loss incurred from Clash losses, or (2) $7
million; or
(2) $36,250,000 plus the amount of Ultimate Net loss covered under
Limit A that exceeds 193.0% of the Reinsurance Premium paid.
Notwithstanding the foregoing, the Total Aggregate Limit of liability hereunder
is further subject to adjustment as provided for in the articles entitled
"TERM", "COVENANTS OF THE REINSURED", and "RIGHT OF OFFSET".
UNDER NO CIRCUMSTANCES SHALL THE TOTAL LIABILITY OF THE REINSURER UNDER OR
RELATED TO THIS AGREEMENT EXCEED THE TOTAL AGGREGATE LIMIT.
ARTICLE 5 - OTHER REINSURANCE
The Reinsured is hereby granted permission to carry Aggregate Excess of Loss
Reinsurance as specified in the SECOND COINSURED AGGREGATE EXCESS OF LOSS
REINSURANCE AGREEMENT between Continental Casualty Company, Centre Reinsurance
Company of New York, and the Reinsured as attached hereto and coverage further
described as follows:
14% of Subject Earned Premium in excess of 67% of Subject Earned
Premium in the annual aggregate; and
$3 million in excess of 92% of Subject Earned Premium in the annual
aggregate,
it being understood and agreed that, for all purposes of this Agreement,
including the calculation of the Reinsurance Premium, the Retention, the Limits,
and the Ultimate Net Loss hereunder, any amounts recoverable thereunder shall be
ignored.
ARTICLE 6 - LOSS SETTLEMENTS
The Reinsurer agrees to pay the Reinsured the amounts of Ultimate Net Loss due
hereunder and paid by the Reinsured (or payable by the Reinsured in case of
insolvency in accordance with the article entitled "INSOLVENCY") quarterly in
arrears and payment will be due within sixty (60) days following receipt and
verification of an account statement submitted by the Reinsured to the
Reinsurer. Ultimate Net Loss payments due by the Reinsurer in accordance with
the provisions herein shall first be paid by way of offset against the Funds
Withheld Balance until such balance is exhausted.
Notwithstanding any provision to the contrary contained herein, and except for
the articles entitled "EXTRA CONTRACTUAL OBLIGATIONS" and "EXCESS OF ORIGINAL
POLICY LIMITS LOSS", coverage under this Agreement is expressly limited to
claims or losses arising under the Reinsured's Policies; provided, however, that
such claims or losses are within the terms, conditions and limitations of the
original policies and within the terms, conditions and limitations of this
Agreement.
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ARTICLE 7 - REINSURANCE PREMIUM
Subject to the article entitled "FUNDS WITHHELD", the Reinsured shall pay to the
Reinsurer a premium (the "REINSURANCE PREMIUM") equal to 7.25% of the projected
Subject Earned Premium, payable in equal quarterly installments in advance,
subject to a maximum Reinsurance Premium equal to $18,125,000.
Within thirty (30) days following the end of each calendar quarter the Reinsured
shall make appropriate adjustments for the amount by which 7.25% of the Subject
Earned Premium for that calendar quarter exceeds or is less than the amounts
previously paid by the Reinsured for that calendar quarter.
ARTICLE 8 - ADDITIONAL PREMIUM
Subject to the article entitled "FUNDS WITHHELD", the Reinsured shall pay to the
Reinsurer an additional premium (the "ADDITIONAL PREMIUM") equal to 65% of the
Ultimate Net Loss covered under Limit A, in excess of 193% of the Reinsurance
Premium paid, subject to a maximum Additional Premium equal to $4.55 million,
and such Additional Premium shall be paid to the Reinsurer with the applicable
quarterly Ultimate Net Loss report as put forth in the article entitled "REPORTS
AND REMITTANCES".
Within thirty (30) days following the end of each calendar quarter the Reinsured
shall make appropriate adjustments for the amount by which 65% of the Ultimate
Net Loss covered under Limit A that is in excess of 193.0% of the Reinsurance
Premium paid to date, exceeds or is less than the amounts of Additional Premiums
previously paid by the Reinsured.
ARTICLE 9 - EXPERIENCE ACCOUNT
A notional account (the "EXPERIENCE ACCOUNT") shall be calculated by the
Reinsurer from the Effective Date of this Agreement and maintained until there
is a complete and final release of all of the Reinsurer's obligations to the
Reinsured under this Agreement.
The balance of the Experience Account (the "EXPERIENCE ACCOUNT BALANCE") as of
any December 31 shall be defined as:
(1) 100% of the Reinsurance Premium and Additional Premium, if any,
received by the Reinsurer (or Funds Withheld in accordance with the
article entitled "FUNDS WITHHELD"), less
(2) the Reinsurer's Margin paid to the Reinsurer, less
(3) 100% of Ultimate Net Loss paid (or offset) by the Reinsurer, plus
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(4) the Cumulative Experience Account Investment Credit.
The Reinsurance Premium, and Additional Premium, if any, shall be
credited to the Experience Account on the day said monies are received
by the Reinsurer's designated bank, or credited to the Funds Withheld
Balance in accordance with the article entitled "FUNDS WITHHELD", as
the case may be.
The Ultimate Net Loss due from the Reinsurer shall be charged against
the Experience Account on the day said monies are received by the
Reinsured's designated bank, or offset against the Funds Withheld
Balance in accordance with the article entitled "FUNDS WITHHELD", as
the case may be, and further subject to the article entitled "REPORTS
AND REMITTANCES".
For the purpose of calculating the balance of the Experience Account,
the Reinsurer's Margin shall be deemed to be deducted in proportion to
and at the same time as the crediting to the Experience Account of the
Reinsurance Premium.
The Experience Account investment credit (the "EXPERIENCE ACCOUNT
INVESTMENT CREDIT") for each calendar year shall equal the average
daily balance of the Experience Account for that calendar year (or
portion thereof), determined as if the Reinsurance Premium and
Additional Premium, if any, as finally computed were paid on January 1,
1997, multiplied by 7% (or the pro-rata portion thereof). The
cumulative Experience Account Investment Credit (the "CUMULATIVE
EXPERIENCE ACCOUNT INVESTMENT CREDIT") shall be equal to the sum of the
Experience Account Investment Credits for each calendar year, or
portion thereof, since the Effective Date of this Agreement.
ARTICLE 10 - REINSURER'S MARGIN
The Reinsurer's margin (the "REINSURER'S MARGIN") shall be equal to 7.0% of the
Reinsurance Premium payable under this Agreement, payable in equal quarterly
installments in advance on the first day of each calendar quarter.
ARTICLE 11 - FUNDS WITHHELD
Subject to the terms herein, the Reinsured shall retain the Reinsurance Premium
and Additional Premium, if any, due hereunder on a funds withheld basis,
provided however, that the Reinsurer's Margin shall be paid in cash to the
Reinsurer and shall not be affected by the terms of this "Funds Withheld"
article. The amount of such withheld Reinsurance Premium, net of Reinsurer's
Margin, and Additional Premium, if any, shall be called "FUNDS WITHHELD". In
consideration of the Reinsurer agreeing to the Funds Withheld, the Reinsured
agrees (i) to calculate a notional Funds Withheld account from the Effective
Date of this Agreement until there is a complete and final release of all of the
Reinsurer's obligations to the Reinsured under this Agreement and (ii) that the
Funds Withheld Balance may be set off by the Reinsurer against liability of any
nature whatsoever (whether then contingent, due and payable, or in the future
becoming due) that the Reinsurer may then have, or in the future may have under
this Agreement and (iii) that such
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setoff shall occur as a condition precedent to any payments by the Reinsurer
hereunder.
The balance of the Funds Withheld account (the "FUNDS WITHHELD BALANCE") as of
any December 31 shall be defined as:
(1) 100% of the Reinsurance Premium and Additional Premium, if any, due
hereunder, less
(2) the Reinsurer's Margin paid to the Reinsurer, less
(3) 100% of Ultimate Net Loss paid (or offset) by the Reinsurer, plus
(4) the Cumulative Funds Withheld Investment Credit.
The Reinsurance Premium, and Additional Premium, if any, shall be credited to
the Funds Withheld Balance on the date such monies are payable.
The Ultimate Net Loss due from the Reinsurer shall be charged against the Funds
Withheld Balance on the date such monies are due and further subject to article
entitled "REPORTS AND REMITTANCES".
For the purpose of calculating the balance of the Funds Withheld account, the
Reinsurer's Margin shall be deemed to be deducted in proportion to and at the
same time as the crediting to the Funds Withheld account of the Reinsurance
Premium.
The Funds Withheld investment credit (the "FUNDS WITHHELD INVESTMENT CREDIT")
for each calendar year shall equal the average daily balance of the Funds
Withheld account for that calendar year (or portion thereof), determined as if
the Reinsurance Premium and Additional Premium, if any, as finally computed was
paid on January 1, 1997, multiplied by 9% (or the pro-rata portion thereof). The
cumulative Funds Withheld Investment Credit (the "CUMULATIVE FUNDS WITHHELD
INVESTMENT CREDIT") shall be equal to sum of the Funds Withheld Investment
Credits for each calendar year, or portion thereof, since the Effective Date of
this Agreement.
At the Reinsurer's option, the Reinsured promises to pay to the Reinsurer the
Funds Withheld Balance immediately upon the sooner of: 1) commutation of this
Agreement, 2) an Event of Default, or 3) December 31, 2011. The Reinsured shall
not have the right to prepay all or a part of the Funds Withheld Balance without
the Reinsurer's express written consent.
The following shall be defined as "EVENTS OF DEFAULT" and shall cause the whole
of the Funds Withheld Balance to, upon demand of the Reinsurer, become
immediately due and payable, together with all accrued interest and other unpaid
sums owing in relation thereto.
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(1) Payment Defaults
The Reinsured fails to make any payment under this Agreement when due
and in the manner therein provided, except where the Reinsurer receives
the overdue payment within fifteen business days of the non-payment;
(2) Executions
Creditors attach or take possession of or distress, execution,
sequestration, seizure, attachment or other equivalent or analogous
process is levied or enforced upon or sued out against any material
amount of the Reinsured's assets; or
(3) Insolvency
The Reinsured commences a proceeding or proceedings are commenced
against it seeking dissolution, winding-up, liquidation,
administration, reorganization, suspension or compromise of payments or
other relief under any applicable bankruptcy, insolvency or other
similar law or seeking the appointment of an administrator or a
trustee, receiver, manager, receiver-manager, liquidator, custodian,
curator or other similar official of it or any substantial part of the
Reinsured's assets, or the Reinsured consents to any such relief
(including any bankruptcy petition) or appointment in involuntary
proceedings taken against it, or makes a bulk sale of its assets or a
general assignment or proposal for the benefit of creditors, or fails
or admits its inability to pay its debts as they become due, or
suspends or ceases or threatens to suspend or cease carrying on
business; or it takes any action in furtherance of any of the
foregoing.
ARTICLE 12 - COMMUTATION
(APPLICABLE TO CENTRE RE'S PARTICIPATION ONLY)
Subject to the terms of this article, the Reinsured may, at its sole option,
commute this Agreement at any December 31, beginning on December 31, 2001,
subject to ninety (90) days prior written notice by the Reinsured to the
Reinsurer by registered or certified mail, provided that as a condition
precedent to this right of commutation the Reinsured commutes all prior
reinsurance agreements in existence between the Reinsurer and the Reinsured at
such date. Such prior reinsurance agreements consist of Coinsured Aggregate
Excess of Loss Agreements incepting on January 1, 1994, January 1, 1995, and
January 1, 1996.
If the Reinsured elects to commute this Agreement, the Reinsured shall pay to
the Reinsurer as a condition precedent to the commutation the Funds Withheld
Balance as of the date of commutation of this Agreement and the Reinsurer shall
pay to the Reinsured the following amounts within sixty (60) business days of
the date of commutation:
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(1) Commuted Value of Ceded Unpaid Ultimate Net Loss
If, at the time of commutation, the Ceded Unpaid Ultimate Net Loss is less than
or equal to the balance in the Experience Account, the Reinsurer agrees to pay
all Ceded Unpaid Ultimate Net Loss at the amount valued by the Reinsured.
If, at the time of commutation, the Ceded Unpaid Ultimate Net Loss is greater
than the balance in the Experience Account, the Ceded Unpaid Ultimate Net Loss
shall be commuted at a present value amount to be mutually agreed. If the
present value amount of the Ceded Unpaid Ultimate Net Loss cannot be mutually
agreed by the Reinsured and the Reinsurer, then a mutually acceptable
independent third party actuary shall be called upon to make an independent
estimation of the present value amount of the Ceded Unpaid Ultimate Net Loss
(the cost of which shall be shared equally by the Reinsured and Reinsurer). If
the actuary's estimation is acceptable to both the Reinsurer and the Reinsured,
then this Agreement shall be commuted at the value as estimated by the actuary.
If the actuary's value is unacceptable to either the Reinsured or the Reinsurer,
or if the parties cannot agree on the selection of the actuary, then the
Agreement will not be commuted at that time.
(2) Premium Refund
Upon commutation under (1) above, the Reinsurer shall pay to the Reinsured a
"PREMIUM REFUND" equal to the positive balance, if any, of the Experience
Account after deducting the value of the commuted Ceded Unpaid Ultimate Net Loss
as per (1) above.
Payment of the Ceded Unpaid Ultimate Net Loss and Premium Refund, if any, by the
Reinsurer as described above shall constitute a complete and final release of
the Reinsurer in respect of any and all of the Reinsurer's obligations of any
nature whatsoever to the Reinsured under or related to this Agreement.
ARTICLE 13 - REPORTS AND REMITTANCES
1. The Reinsured shall furnish to the Reinsurer within fifteen (15) days prior
to the close of the calendar quarter an estimate of the amount of Ultimate
Net Loss ceded under this Agreement as of the close of that calendar
quarter, including a separate estimate of the amount of Ultimate Net Loss
incurred from Clash losses.
2. The Reinsured shall furnish to the Reinsurer within thirty (30) days after
the close of each calendar quarter:
(a) quarterly account of Subject Earned Premium segregated by line of
business (and for the total of all lines).
(b) quarterly accounts of paid and unpaid Ultimate Net Loss segregated by
line of business (and for the total of all lines of business).
(c) a reconciliation of the Funds Withheld Balance from inception to the
close of the most
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recent preceding calendar quarter.
3. The Reinsured shall furnish to the Reinsurer within thirty (30) days after
the end of each calendar quarter, quarterly accounts of paid Ultimate Net
Loss ceded under this Agreement which are due to be paid by the Reinsurer to
the Reinsured. As respects the Funds Withheld Balance, Ultimate Net Loss
amounts shall be deemed to be paid as of the date the Reinsurer agrees to
the amount to be paid and such agreement shall be made within sixty (60)
days after receipt of this account.
4. The Reinsured shall furnish to the Reinsurer within one hundred twenty (120)
days after the close of each calendar year annual paid projections of
Ultimate Net Loss, including Allocated Loss Adjustment Expense, segregated
by line of business.
5. The Reinsurer shall furnish to the Reinsured within thirty (30) days after
the close of each quarter a reconciliation of the Experience Account from
inception to the close of the most recent preceding calendar quarter.
6. All amounts due and payable under this Agreement shall be remitted directly
by wire transfer between the Reinsured and the Reinsurer with notice to the
Intermediary, unless such amounts are withheld by the Reinsured in
accordance with the Funds Withheld provision of this Agreement.
7. Any late payments by either party shall accrue interest at a rate equal to
the greater of 1% per month, compounded semi-annually, or the yield on the
one year United States Treasury Xxxx existent on the first business day
after the previous January 1, as published in the Wall Street Journal, plus
250 basis points.
ARTICLE 14 - TAXES
The Reinsured shall pay all taxes of any nature associated with this Agreement
and undertakes not to claim any deduction of the premium hereon when making
Canadian tax returns or when making tax returns, other than Income or Profits
tax returns, to any State or Territory of the United States of America or the
District of Columbia. Provided, however, that this Article shall not impose any
liability on the Reinsured for any income, capital gains, profits or other
similar taxes payable by the Reinsurer in respect of its operations or this
Agreement.
ARTICLE 15 - COVENANTS OF THE REINSURED
The Reinsured agrees not to change claims handling procedures, loss reserving
process, levels of ceding commissions in its underlying contracts, or the levels
of reinsurance protection in any manner from that in effect at the inception of
this Agreement which materially affects this Agreement or the obligations of the
parties hereunder, unless the Reinsured has received the prior written approval
of the Reinsurer to such changes, such approval not to be unreasonably withheld.
In the event that the Reinsured does not adhere to these Covenants, the
Reinsurer shall have the
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right to immediately cancel this Agreement by mailing the Reinsured a written
notice of cancellation and the remaining unpaid Total Aggregate Limit,
notwithstanding any provision to the contrary contained herein, shall be
immediately reduced to an amount equal to the positive balance in the Experience
Account (or zero if the Experience Account Balance is negative) as of the date
of cancellation. The mailing of such notice shall be sufficient notice and the
effective date of cancellation shall be the date the notice of cancellation was
posted.
In the event that the Reinsurer learns about a violation of these Covenants
after the Expiration Date of this Agreement, the remaining unpaid Total
Aggregate Limit, notwithstanding any provision to the contrary contained herein,
shall be reduced to an amount equal to the positive balance in the Experience
Account (or zero if the Experience Account Balance is negative) upon written
notice by the Reinsurer to the Reinsured by registered or certified mail.
Notwithstanding the foregoing, the remedy to the Reinsurer in the event of a
breach by the Reinsured of any of the foregoing covenants may not be invoked
unless the Reinsurer is called upon to pay Ultimate Net Loss under this
Agreement which is in excess of the Funds Withheld Balance.
ARTICLE 16 - DEFINITIONS
All words and phrases that have a capitalized initial letter in this Agreement
have a special meaning which is either introduced in certain Articles or which
is defined below and which shall include the plural as well as the singular.
"AGREEMENT" means this agreement as the same may be amended from time to time in
accordance with the terms hereof and all instruments supplemental hereto or in
amendment or confirmation hereof; additionally, the expressions "hereunder",
"herein", "hereof", "hereto", "above", "below" and similar expressions used in
any paragraph, subparagraph, section or article of this Agreement shall refer to
this Agreement and not to that paragraph, subparagraph, section or article only,
unless otherwise expressly provided.
"CEDED UNPAID ULTIMATE NET LOSS" shall mean the cumulative Ultimate Net Loss
ceded under this Agreement by the Reinsured from the Effective Date less
cumulative Ultimate Net Loss paid (or offset) under this Agreement by the
Reinsurer to the Reinsured from the Effective Date.
"SUBJECT EARNED PREMIUM" shall mean gross premiums earned on all casualty
business in-force, written or renewed by the Reinsured during the Term of this
Agreement less return premiums less premiums ceded for all reinsurance which
would inure to the benefit of the Reinsurer under this Agreement. For purposes
of this Agreement, the projected Subject Earned Premium is equal to $200
million.
"CLASH" loss shall mean the Reinsured's Ultimate Net Loss, as defined herein,
that is triggered by clash losses as classified by the Reinsured in accordance
with the Reinsured's underwriting guidelines.
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ARTICLE 17 - ULTIMATE NET LOSS
"ULTIMATE NET LOSS" shall mean the actual loss incurred by the Reinsured and
Allocated Loss Adjustment Expense ("ALAE") on Business Covered on the
Reinsured's Net Retained Lines, and shall include 80% of the amounts of any
Extra Contractual Obligations and 80% of the amounts of any Excess of Original
Policy Limits Loss after making deductions for all recoveries, salvages,
subrogations and all claims on inuring reinsurance, whether collectible or not.
ALAE shall mean all legal expenses and other expenses (including interest
accruing before and/or after entry of judgment) incurred by the Reinsured in
connection with the investigation, adjustment, settlement or litigation of
claims or losses, including salaries and expenses of the Reinsured's field
employees while adjusting such claims or losses and expenses of the Reinsured's
officials incurred in connection with claims or losses. However, salaries of the
Reinsured's officials or normal overhead charges such as rent, postal, lighting,
cleaning, heating, etc. shall not be included.
All salvages, recoveries or payments recovered or received subsequent to a loss
settlement under this Agreement shall be applied as if recovered or received
prior to the aforesaid settlement and all necessary adjustments shall be made by
the parties hereto, provided always that nothing in this clause shall be
construed to mean that Ultimate Net Loss under this Agreement is not recoverable
until the Reinsured's Ultimate Net Loss has been ascertained.
The Ultimate Net Loss, as determined by the Reinsured, is subject to agreement
by the Reinsurer. If the Reinsurer disagrees with the Ultimate Net Loss
determined by the Reinsured and the Reinsurer is called upon to pay Ultimate Net
Loss under this Agreement, a mutually agreed upon independent national actuarial
firm shall be engaged to evaluate the Ultimate Net Loss covered under this
Agreement and such evaluation shall be subject to the confines of the Ultimate
Net Loss determined by the Reinsured and the Ultimate Net Loss determined by the
Reinsurer and shall be binding. Such cost to be shared equally by the Reinsured
and the Reinsurer. If the parties fail to agree on the selection of an
independent national actuarial firm each of them shall name two, of whom the
other shall decline one, and the decision shall be made by drawing lots.
For the purposes of this Agreement, the maximum amount that any one loss
occurrence from business underwritten by the Reinsured on behalf of Xxxxxxxxx &
Xxxx (a subsidiary of UNUM Corp., Portland, Maine) may contribute to the
Ultimate Net Loss shall be equal to $10 million.
ARTICLE 18 - NET RETAINED LINES
This Agreement applies only to that portion of any policy which the Reinsured
retains net for its own account, and in calculating the amount of any loss
hereunder and also in computing the amount or amounts in excess of the
Retentions, only loss or losses in respect of that portion of any policy which
the Reinsured retains net for its own account shall be included.
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The amount of the Reinsurer's liability hereunder in respect of any loss or
losses shall not be increased by reason of the inability of the Reinsured to
collect from any other reinsurer(s), whether specific or general, any amounts
which may have become due from such reinsurer(s), whether such inability arises
from the insolvency of such other reinsurer(s) or otherwise.
ARTICLE 19 - RIGHT OF OFFSET
The Reinsured and the Reinsurer may offset any balance or amount due from one
party to the other under this Agreement or any other contract heretofore or
hereafter entered into between the Reinsured and the Reinsurer, whether acting
as assuming reinsurer or ceding company or in any other capacity.
In extension and not in limitation to the above, the Reinsurer shall have an
absolute right to offset any amounts due to the Reinsured against the Funds
Withheld Balance. In the event that this right of offset between the Reinsured
and the Reinsurer is specifically disallowed or judged to be unenforceable by
any court of competent jurisdiction, arbitration panel or regulatory body then
all amounts in the Funds Withheld Balance shall immediately become due and
payable in full to the Reinsurer by the Reinsured. If the Funds Withheld Balance
is not remitted to the Reinsurer within fifteen (15) days, the Reinsurer shall
have the option to immediately cancel this Agreement by mailing the Reinsured a
written notice of cancellation and the remaining unpaid Total Aggregate Limit,
notwithstanding any provision to the contrary contained herein, shall be
immediately reduced to an amount equal to the positive balance in the Experience
Account (or zero if the Experience Account Balance is negative) as of the date
of cancellation. The mailing of such notice shall be sufficient notice and the
effective date of cancellation shall be the date the notice of cancellation was
posted.
In the event that the Reinsured fails to remit to the Reinsurer the Funds
Withheld Balance that is due and payable in accordance with the provisions in
this article after the Expiration Date of this Agreement within 15 days of the
date such payment is due, the Reinsurer shall notify the Reinsured in writing
via registered mail of the overdue amounts. In the event that the Reinsured does
not remit the overdue amounts to the Reinsurer within 15 days of receiving such
notification from the Reinsurer, the remaining unpaid Total Aggregate Limit,
notwithstanding any provision to the contrary contained herein, shall be
immediately reduced to an amount equal to the positive balance in the Experience
Account (or zero if the Experience Account Balance is negative) without further
notice.
ARTICLE 20 - ERRORS AND OMISSIONS
Any omission or error by either party to this Agreement will not relieve either
party of liability hereunder, provided such act, omission, or error is not
prejudicial to the other party and is rectified promptly upon discovery by the
responsible party.
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ARTICLE 21 - CURRENCY
The provisions of this Agreement involving dollar designated amounts are
expressed in United States currency and all payments shall be made in this
currency.
ARTICLE 22 - EXTRA CONTRACTUAL OBLIGATIONS
This Agreement shall indemnify the Reinsured within the limits hereof, where the
Ultimate Net Loss includes 80% of any Extra Contractual Obligations.
"EXTRA CONTRACTUAL OBLIGATIONS" are defined as those liabilities 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 failure by the Reinsured 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 in the preparation or prosecution of
an appeal consequent upon such action.
The date on which any Extra Contractual Obligation is incurred by the Reinsured
shall be deemed, in all circumstances, to be the date of the original accident,
casualty, disaster or loss occurrence.
However, this Article shall not apply and there shall be no recovery hereunder
where the loss has been incurred due to the fraud by a member of the Board of
Directors, a corporate officer, or a supervisory employee of the Reinsured
acting individually or collectively or in collusion with a member of the Board
of Directors, a corporate officer, supervisory employee or partner of any other
corporation, partnership, or organization involved in the defense or settlement
of a claim on behalf of the Reinsured.
ARTICLE 23 - EXCESS OF ORIGINAL POLICY LIMITS LOSS
This Agreement shall indemnify the Reinsured, within the limits hereof, where
the Ultimate Net Loss includes 80% of any Excess of Original Policy Limits Loss.
"EXCESS OF ORIGINAL POLICY LIMITS LOSS" shall mean any loss of the Reinsured in
excess of the limit of its original policy, such loss in excess of the limit
having been incurred because of failure by it 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 in the preparation or prosecution of an appeal
consequent upon such action.
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However, this Article shall not apply and there shall be no recovery hereunder
where the loss has been incurred due to the fraud by a member of the Board of
Directors, a corporate officer, or a supervisory employee of the Reinsured
acting individually or collectively or in collusion with a member of the Board
of Directors, a corporate officer, supervisory employee or partner of any other
corporation, partnership, or organization involved in the defense or settlement
of a claim on behalf of the Reinsured.
For the purposes of this Article, the word "loss" shall mean any amounts for
which the Reinsured would have been contractually liable to pay had it not been
for the limit of the original policy.
ARTICLE 24 - ARBITRATION
Any dispute arising out of the interpretation, performance or breach of this
Agreement, including the formation or validity thereof, shall be submitted for
decision to a panel of three arbitrators. Notice requesting arbitration must be
in writing and sent certified or registered mail, return receipt requested.
One arbitrator shall be chosen by each party and the two arbitrators shall,
before instituting the hearing, choose an impartial third arbitrator (the
"Umpire") who shall preside at the hearing. If either party fails to appoint its
arbitrator within thirty (30) days after being requested to do so by the other
party, the latter, after ten (10) days notice by certified or registered mail of
its intention to do so, may appoint the second arbitrator.
If the two arbitrators are unable to agree upon the Umpire within thirty (30)
days of their appointment, the two arbitrators shall request the American
Arbitration Association ("AAA") to provide a list of possible Umpires with the
qualifications set forth in this Article and the parties shall then mutually
agree upon an Umpire from this list. If the parties are unable to agree upon the
Umpire within thirty (30) days of the receipt of the AAA list or if the AAA
fails to provide such a list within thirty (30) days of the request, either
party may apply to the United States Federal Court for the Southern District of
New York to appoint an Umpire with those qualifications. The Umpire shall
promptly notify in writing all parties to the arbitration of his selection.
All arbitrators shall be disinterested active or former executive officers of
insurance or reinsurance companies or Underwriters at Lloyd's of London.
Within thirty (30) days after notice of appointment of all arbitrators, the
panel shall meet and determine timely periods for briefs, discovery procedures
and schedules for hearings.
The panel shall be relieved of all judicial formality and shall not be bound by
the strict rules of procedure and evidence. Unless the panel agrees otherwise,
arbitration shall take place in New York, New York, but the venue may be changed
when deemed by the panel to be in the best interest of the arbitration
proceeding. Insofar as the arbitration panel looks to substantive law, it shall
consider the law of the State of New York. The decision of any two arbitrators
when rendered in writing shall be final and binding. The panel is empowered to
grant interim relief as
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it may deem appropriate.
To the extent, and only to the extent, that the provisions of this Agreement are
ambiguous or unclear, the panel shall make its decision considering the custom
and practice of the applicable insurance and reinsurance business. The panel
shall render its decision within sixty (60) days following the termination of
hearings, which decision shall be in writing, stating the reasons thereof.
Judgment upon the award may be entered in any court having jurisdiction thereof.
Each party shall bear the expense of its own arbitrator and shall jointly and
equally bear with the other party the cost of the third arbitrator. The
remaining costs of the arbitration shall be allocated by the panel. The panel
may, at its discretion, award such further costs and expenses as it considers
appropriate, including but not limited to attorneys fees, to the extent
permitted by law.
ARTICLE 25 - ACCESS TO RECORDS
The Reinsurer or its duly appointed representatives shall have free access to
the books, records and papers of the Reinsured or its agents at all reasonable
times during the continuance of this Agreement or any liability hereunder, for
the purpose of obtaining information concerning this Agreement or the subject
matter thereof.
ARTICLE 26 - INSOLVENCY
In the event of the insolvency of the Reinsured, reinsurance under this
Agreement shall be payable by the Reinsurer on the basis of the liability of the
Reinsured under Policy or Policies reinsured without diminution because of the
insolvency of the Reinsured, to the Reinsured or to its liquidator, receiver, or
statutory successor except as provided by Section 4118(a) of the New York
Insurance Law or except when the Agreement specifically provides another payee
of such reinsurance in the event of the insolvency of the Reinsured and when the
Reinsurer with the consent of the direct insured or insureds has assumed such
Policy obligations of the Reinsured as direct obligations of the Reinsurer to
the payees under such Policies and in substitution for the obligations of the
Reinsured to such payees.
It is agreed, however, that the liquidator or receiver or statutory successor of
the insolvent Reinsured shall give written notice to the Reinsurer of the
pendency of a claim against the insolvent Reinsured on the Policy or Policies
reinsured within a reasonable time after such claim is filed in the insolvency
proceeding and that during the pendency of such claim, the Reinsurer may
investigate such claim and interpose, at its own expense, in the proceeding when
such claim is to be adjudicated, any defense or defenses which it may deem
available to the Reinsured or its liquidator or receiver or statutory successor.
The expense thus incurred by the Reinsurer shall be chargeable, subject to court
approval, against the insolvent Reinsured as part of the expense of liquidation
to the extent of a proportionate share of the benefit which may accrue to the
Reinsured solely as a result of the defense undertaken by the Reinsurer.
When two or more Reinsurers are involved in the same claim and a majority in
interest elect to
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interpose defense to such claim, the expense shall be apportioned in accordance
with the terms of this Agreement as though such expense had been incurred by the
insolvent Reinsured.
Should any party hereto be placed in rehabilitation or liquidation or should a
rehabilitator, liquidator, receiver, conservator or other person or entity of
similar capacity be appointed as respects such party, all amounts due any of the
parties hereto whether by reason of premiums, losses or otherwise under this
Agreement or any other contract(s) of reinsurance heretofore or hereafter
entered into between the parties (whether or not any such contract(s) be assumed
or ceded) shall at all times be subject to the right of offset at any time and
from time to time, and upon the exercise of same, only the net balance shall be
due and payable in accordance with Section 7427 of the Insurance Law of the
State of New York to the extent such statute or any other applicable law,
statute or regulation governing such offset shall apply.
ARTICLE 27 -GOVERNING LAW
This Agreement shall be interpreted and governed by the laws of the State of New
York without regard to its principles of choice of law.
ARTICLE 28 - SERVICE OF SUIT
(This Article only applies to reinsurers domiciled outside of the United States
and/or unauthorized in any state, territory, or district of the United States
having jurisdiction over the Reinsured).
It is agreed that in the event of the failure of the Reinsurer to pay any amount
claimed to be due hereunder or to perform any other obligation under the
Agreement, the Reinsurer, at the request of the Reinsured, will submit to the
jurisdiction of a court of competent jurisdiction within the United States.
Nothing in this Article 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. It is
further agreed that service of process in such suit may be made upon Xxxxxxx
Xxxx and Xxxxxxxxx, Xxx Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000,
and that in any suit instituted, the Reinsurer will abide by the final decision
of such court or of any appellate court in the event of an appeal.
The above-named are authorized and directed to accept service of process on
behalf of the Reinsurer in any such suit and/or upon the request of the
Reinsured to give a written undertaking to the Reinsured that they will enter a
general appearance upon the Reinsurer's behalf in the event such a suit shall be
instituted.
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Further, pursuant to any statute of any state, territory or district of the
United States which makes provision therefor, the Reinsurer hereon hereby
designates the Superintendent, Commissioner or Director of Insurance or other
officer specified for that purpose in the statute, or his successor or
successors in office, as 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 Reinsured or any beneficiary hereunder arising out of this Agreement of
reinsurance, and hereby designates the above-named as the person to whom the
said officer is authorized to mail such process or a true copy thereof.
The foregoing is not intended to conflict with or override the obligation of the
parties hereto to arbitrate their disputes as provided in the Arbitration
clause.
ARTICLE 29 - AMENDMENTS AND ALTERATIONS
This Agreement may be changed, altered or amended as the parties may agree,
provided such change, alteration or amendment is evidenced in writing or by
endorsement executed by the Reinsured and the Reinsurer.
ARTICLE 30 - ASSIGNMENT
Except as expressly provided otherwise in the article entitled "INSOLVENCY",
neither party may assign or transfer any rights, interests or obligations under
this Agreement to any person or entity without the written consent of the other
party and any effort to so assign such rights, interests or obligations without
the consent of the other party shall be null and void.
ARTICLE 31 - NO THIRD PARTY RIGHTS
This Agreement is solely between the Reinsured and the Reinsurer, and in no
instance shall any other party have any rights under this Agreement except as
expressly provided otherwise in the Insolvency Article.
ARTICLE 32 - NO IMPLIED WAIVER
The failure of any party to enforce any of the provisions herein shall not be
construed to be a waiver of the right of such party to enforce any such
provision.
ARTICLE 33 - SECURITY
If the Reinsurer's surplus falls below $40 million, the Reinsured may require
the Reinsurer to post a "clean", unconditional, evergreen and irrevocable Letter
of Credit or to provide a reinsurance trust fund issued by a bank acceptable to
the Reinsured in favor of the Reinsured in an amount up to the excess of the
Ceded Unpaid Ultimate Net Loss over the Funds Withheld Balance.
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ARTICLE 34 - MERGERS AND ACQUISITIONS
It is understood and agreed that if at any time during the Term of this
Agreement the Reinsured acquires (by acquisition, reinsurance of, or renewal of)
any other insurance or reinsurance company or individual or groups of individual
book(s) of business of any other insurance or reinsurance company that comprises
not more than ten (10) percent (whether individually or in the aggregate with
respect to related transactions or parties) of Subject Earned Premium, such
company or book(s) of business will be covered hereunder, provided that written
notice is given to the Reinsurer of any such newly affiliated company or book(s)
of business as soon as practicable with full particulars as to how such
affiliation is likely to affect this Agreement. If such acquisition, as defined
above, comprises more than ten (10) percent (whether individually or in the
aggregate with respect to related transactions or parties) of Subject Earned
Premium, such company or book(s) of business will be covered hereunder provided
that prior written notice of such transaction is given to the Reinsurer with
full particulars as to how such transaction is likely to affect this Agreement,
and the Reinsurer agrees in its sole discretion in writing that this Agreement
applies to such acquired insurance or reinsurance company or book(s) of
business.
In the event that the Reinsured merges with another company at any time during
the Term of this Agreement, this Agreement shall survive such merger and the
surviving entity shall be covered hereunder provided that prior written notice
of such transaction is given to the Reinsurer with full particulars as to how
such transaction is likely to affect this Agreement, and the Reinsurer agrees in
its sole discretion in writing that this Agreement applies to such surviving
entity.
ARTICLE 35 - INTERMEDIARY
Xxxxx & Co., Inc. is hereby recognized as the Intermediary negotiating this
Agreement for all business hereunder. All communications (including but not
limited to notices and statements) relating to this Agreement shall be
transmitted to the Reinsured through Xxxxx & Co., Inc., Xxx Xxxxx Xxxxxx,
Xxxxxxxxxxxx, XX 00000-0000. All amounts due under this Agreement (including but
not limited to Reinsurance Premium and Ultimate Net Loss) shall be remitted
directly by wire transfer between the Reinsured and the Reinsurer with notice to
the Intermediary.
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SECOND COINSURED AGGREGATE EXCESS OF LOSS REINSURANCE
AGREEMENT
(hereinafter referred to as the "AGREEMENT")
In consideration of the mutual covenants hereinafter contained and upon the
terms and conditions hereinafter set forth
THE SUBSCRIBING REINSURERS EXECUTING THE INTERESTS &
LIABILITIES CONTRACTS ATTACHED TO AND FORMING A PART
OF THIS AGREEMENT
(hereinafter referred to as the "REINSURER")
does hereby indemnify, as herein provided and specified,
TRENWICK AMERICA REINSURANCE CORPORATION
Stamford, Connecticut
(hereinafter referred to as the "REINSURED")
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ARTICLE AND PAGE NUMBER
1. BUSINESS COVERED 3
2. TERM 3
3. TERRITORY 4
4. RETENTION, REINSURER'S SHARE, AND LIMIT 4
5. OTHER REINSURANCE 6
6. LOSS SETTLEMENTS 6
7. REINSURANCE PREMIUM 7
8. REINSURER'S MARGIN 7
9. FUNDS WITHHELD 7
10. COMMUTATION 9
11. REPORTS AND REMITTANCES 10
12. TAXES 11
13. COVENANTS OF THE REINSURED 11
14. DEFINITIONS 12
15. ULTIMATE NET LOSS 12
16. NET RETAINED LINES 13
17. RIGHT OF OFFSET 13
18. ERRORS AND OMISSIONS 14
19. CURRENCY 14
20. EXTRA CONTRACTUAL OBLIGATIONS 14
21. EXCESS OF ORIGINAL POLICY LIMITS LOSS 15
22. ARBITRATION 16
23. ACCESS TO RECORDS 17
24. INSOLVENCY 17
25. GOVERNING LAW 18
26. SERVICE OF SUIT 18
27. AMENDMENTS AND ALTERATIONS 19
28. ASSIGNMENT 19
29. NO THIRD PARTY RIGHTS 19
30. NO IMPLIED WAIVER 19
31. SECURITY 19
32. MERGERS AND ACQUISITIONS 20
33. INTERMEDIARY 20
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ARTICLE 1 - BUSINESS COVERED
In consideration of the premium to be paid by the Reinsured and subject to the
terms, conditions, exclusions and limits hereafter set forth, the Reinsurer
agrees to indemnify the Reinsured on an aggregate excess of loss basis for the
Reinsurer's share of Ultimate Net Loss that the Reinsured has incurred in excess
of the retention as a result of losses occurring during the Term of this
Agreement as respects the Reinsured's contracts, agreements and other evidence
of reinsurance in respect of all casualty reinsurance assumed business entered
into by the Reinsured (the "POLICIES"), but specifically excluding the following
business:
- finite risk reinsurance
- pollution liability when written by the Reinsured as a named peril, but
excluding first party cleanup
- policyholder dividends
- nuclear incidents: in accordance with the attached Nuclear Incident
Exclusion Clauses:
a. Nuclear Incident Exclusion Clause - Liability - Reinsurance
- U.S.A. and Canada;
b. Nuclear Incident Exclusion Clause - Physical Damage-
Reinsurance - U.S.A. and Canada;
c. Nuclear Incident Exclusion Clause - Physical Damage and
Liability (Boiler and Machinery Policies) - Reinsurance -
U.S.A. and Canada;
d. Nuclear Energy Risks Exclusion Clause - Reinsurance -
Worldwide excluding U.S.A. and Canada.
- war risks (in accordance with the attached War Risk Exclusion Clause)
- insolvency and guarantee funds (in accordance with the attached
Insolvency And Guarantee Funds Exclusion Clause)
- residual market assessments, second injury fund assessments,
rehabilitation assessments, and any other similar type assessments
- financial guarantee business
- loss portfolio transfers
ARTICLE 2 - TERM
The term (the "TERM") of this Agreement shall be the period commencing at 12:01
a.m., Eastern Standard Time, January 1, 1997 (the "EFFECTIVE DATE") through to
and including the earlier of 11:59 p.m., Eastern Standard Time, December 31,
1997 or the date on which this Agreement is otherwise canceled as provided for
below (the "EXPIRATION DATE").
This Agreement may not be canceled by the Reinsured. The Reinsurer shall have
the right to
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cancel this Agreement as provided for in the articles entitled "COVENANTS OF THE
REINSURED", "MERGERS AND ACQUISITIONS", or "RIGHT OF OFFSET" and as provided for
below.
In the event that the Reinsured fails to pay the Reinsurance Premium within 15
days of the date such premium is due, the Reinsurer shall notify the Reinsured
in writing via registered mail of the overdue amounts. In the event that the
Reinsured does not remit the overdue amounts to the Reinsurer within 15 days of
receiving such notification from the Reinsurer, the Reinsurer shall have the
right to immediately cancel this Agreement by mailing the Reinsured a written
notice of cancellation and the Total Aggregate Limit, notwithstanding any
provision to the contrary contained herein, shall be immediately reduced to an
amount equal to the positive balance in the Funds Withheld account (or zero if
the Funds Withheld Balance is negative) as of the date of cancellation. The
mailing of such notice shall be sufficient notice and the effective date of
cancellation shall be the date the notice of cancellation was posted.
In the event that the Reinsured fails to pay a Reinsurance Premium that is due
after the Expiration Date of this Agreement within 15 days of the date such
premium is due, the Reinsurer shall notify the Reinsured in writing via
registered mail of the overdue amounts. In the event that the Reinsured does not
remit the overdue amounts to the Reinsurer within 15 days of receiving such
notification from the Reinsurer, the Total Aggregate Limit, notwithstanding any
provision to the contrary contained herein, shall immediately and without
further notice be reduced to an amount equal to the positive balance in the
Funds Withheld account (or zero if the Funds Withheld Balance is negative).
ARTICLE 3 - TERRITORY
This Agreement shall apply only to losses occurring in the United States of
America, Canada and Europe.
ARTICLE 4 - RETENTION, REINSURER'S SHARE, AND LIMIT
1) LIMIT A:
The Reinsurer agrees to indemnify the Reinsured for the Reinsurer's Share of the
amount of the Reinsured's aggregate Ultimate Net Loss that is in excess of 67%
of Subject Earned Premium.
The "REINSURER'S SHARE" under Limit A shall be determined as follows:
If the Ultimate Net Loss is less than 67% of Subject Earned Premium,
the Reinsurer's Share under Limit A shall equal zero, otherwise, the
Reinsurer's Share under Limit A shall equal the lesser of (1) "A"
divided by "B" or (2) 100%,
Where:
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"A" is equal to 224.0% of the Reinsurance
Premium paid, and
"B" is equal to the amount of Ultimate Net
Loss in excess of 67% of Subject Earned Premium.
UNDER NO CIRCUMSTANCES SHALL THE REINSURER'S AGGREGATE LIMIT OF LIABILITY FOR
ULTIMATE NET LOSS UNDER THIS LIMIT A EXCEED 224.0% OF THE REINSURANCE PREMIUM
PAID.
2) LIMIT B:
The Reinsurer agrees to indemnify the Reinsured for the Reinsurer's Share of the
amount of the Reinsured's aggregate Ultimate Net Loss that is in excess of 92%
of Subject Earned Premium.
The "REINSURER'S SHARE" under Limit B shall be determined as follows:
If the Ultimate Net Loss is less than 92% of Subject
Earned Premium, the Reinsurer's Share under Limit B shall
equal zero, otherwise, the Reinsurer's Share under Limit B
shall be equal to the lesser of (1) "C" divided by "D" or (2)
"E",
Where:
"C" is equal to $3.0 million; and
"D" is equal to the amount of Ultimate Net
Loss in excess of 92% of Subject Earned Premium; and
"E" is equal to 100% less the Reinsurer's
Share under Limit A calculated above.
UNDER NO CIRCUMSTANCES SHALL THE REINSURER'S AGGREGATE LIMIT OF LIABILITY FOR
ULTIMATE NET LOSS UNDER THIS LIMIT B EXCEED $3.0 MILLION.
3) TOTAL AGGREGATE LIMIT:
Notwithstanding the Reinsurer's obligations under Limit A and Limit B above, the
Reinsurer's maximum aggregate limit of liability for Ultimate Net Loss under
this Agreement shall be subject to a maximum aggregate limit (the "TOTAL
AGGREGATE LIMIT") equal to the lesser of:
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(1) 224.0% of Reinsurance Premium paid, plus $3 million; or
(2) $38.0 million.
Notwithstanding the foregoing, the Total Aggregate Limit of liability hereunder
is further subject to adjustment as provided for in the articles entitled
"TERM", "COVENANTS OF THE REINSURED", and "RIGHT OF OFFSET".
UNDER NO CIRCUMSTANCES SHALL THE TOTAL LIABILITY OF THE REINSURER UNDER OR
RELATED TO THIS AGREEMENT EXCEED THE TOTAL AGGREGATE LIMIT.
ARTICLE 5 - OTHER REINSURANCE
The Reinsured is hereby granted permission to carry Aggregate Excess of Loss
Reinsurance as specified in the FIRST COINSURED AGGREGATE EXCESS OF LOSS
REINSURANCE AGREEMENT between Centre Reinsurance Company of New York,
Continental Casualty Company, and the Reinsured as attached hereto and coverage
further described as follows:
14% of Subject Earned Premium in excess of 53% of Subject Earned
Premium in the annual aggregate; and
2% of Subject Earned Premium in excess of 90% of Subject Earned Premium
in the annual aggregate,
it being understood and agreed that, for all purposes of this Agreement,
including the calculation of the Reinsurance Premium, the Retention, the Limits,
and the Ultimate Net Loss hereunder, any amounts recoverable thereunder shall be
ignored.
ARTICLE 6 - LOSS SETTLEMENTS
The Reinsurer agrees to pay the Reinsured the amounts of Ultimate Net Loss due
hereunder and paid by the Reinsured (or payable by the Reinsured in case of
insolvency in accordance with the article entitled "INSOLVENCY") quarterly in
arrears and payment will be due within sixty (60) days following receipt and
verification of an account statement submitted by the Reinsured to the
Reinsurer. Ultimate Net Loss payments due by the Reinsurer in accordance with
the provisions herein shall first be paid by way of offset against the Funds
Withheld Balance until such balance is exhausted.
Notwithstanding any provision to the contrary contained herein, and except for
the articles entitled "EXTRA CONTRACTUAL OBLIGATIONS" and "EXCESS OF ORIGINAL
POLICY LIMITS LOSS", coverage under this Agreement is expressly limited to
claims or losses arising under the Reinsured's Policies; provided, however, that
such claims or losses are within the terms, conditions and limitations of the
original policies and within the terms, conditions and limitations of this
Agreement.
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ARTICLE 7 - REINSURANCE PREMIUM
Subject to the article entitled "FUNDS WITHHELD", the Reinsured shall pay to the
Reinsurer a premium (the "REINSURANCE PREMIUM") equal to 6.25% of the projected
Subject Earned Premium, payable in equal quarterly installments in advance on
the first day of each calendar quarter, subject to a maximum Reinsurance Premium
equal to $15,625,000.
Within thirty (30) days following the end of each calendar quarter the Reinsured
shall make appropriate adjustments for the amount by which 6.25% of the Subject
Earned Premium for that calendar quarter exceeds or is less than the amounts
previously paid by the Reinsured for that calendar quarter.
ARTICLE 8 - REINSURER'S MARGIN
The Reinsurer's margin (the "REINSURER'S MARGIN") shall be equal to 9.0% of the
Reinsurance Premium payable under this Agreement, payable in equal quarterly
installments in advance on the first day of each calendar quarter.
ARTICLE 9 - FUNDS WITHHELD
Subject to the terms herein, the Reinsured shall retain the Reinsurance Premium
due hereunder on a funds withheld basis, provided however that the Reinsurer's
Margin shall be paid in cash to the Reinsurer and shall not be affected by the
terms of this "Funds Withheld" article. The amount of such withheld Reinsurance
Premium, net of Reinsurer's Margin, shall be called "FUNDS WITHHELD". In
consideration of the Reinsurer agreeing to the Funds Withheld, the Reinsured
agrees (i) to calculate a notional Funds Withheld account from the Effective
Date of this Agreement until there is a complete and final release of all of the
Reinsurer's obligations to the Reinsured under this Agreement and (ii) that the
Funds Withheld Balance may be set off by the Reinsurer against liability of any
nature whatsoever (whether then contingent, due and payable, or in the future
becoming due) that the Reinsurer may then have, or in the future may have under
this Agreement and (iii) that such setoff shall occur as a condition precedent
to any payments by the Reinsurer hereunder.
The balance of the Funds Withheld account (the "FUNDS WITHHELD BALANCE") as of
any December 31 shall be defined as:
(1) 100% of the Reinsurance Premium due hereunder, less
(2) the Reinsurer's Margin paid to the Reinsurer, less
(3) 100% of Ultimate Net Loss paid (or offset) by the Reinsurer, plus
(4) the Cumulative Funds Withheld Investment Credit.
The Reinsurance Premium shall be credited to the Funds Withheld Balance on the
date such
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monies are payable.
The Ultimate Net Loss due from the Reinsurer shall be charged against the Funds
Withheld Balance on the date such monies are due and further subject to the
article entitled "REPORTS AND REMITTANCES".
For the purpose of calculating the balance of the Funds Withheld account, the
Reinsurer's Margin shall be deemed to be deducted in proportion to and at the
same time as the crediting to the Funds Withheld account of the Reinsurance
Premium.
The Funds Withheld investment credit (the "FUNDS WITHHELD INVESTMENT CREDIT")
for each calendar year shall equal the average daily balance of the Funds
Withheld account for that calendar year (or portion thereof), determined as if
the Reinsurance Premium as finally computed was paid on January 1, 1997,
multiplied by 8.5% (or the pro-rata portion thereof). The cumulative Funds
Withheld Investment Credit (the "CUMULATIVE FUNDS WITHHELD INVESTMENT CREDIT")
shall be equal to sum of the Funds Withheld Investment Credits for each calendar
year, or portion thereof, since the Effective Date of this Agreement.
At the Reinsurer's option, the Reinsured promises to pay to the Reinsurer the
Funds Withheld Balance immediately upon the sooner of: 1) commutation of this
Agreement, 2) an Event of Default, or 3) December 31, 2011. The Reinsured shall
not have the right to prepay all or a part of the Funds Withheld Balance without
the Reinsurer's express written consent.
The following shall be defined as "EVENTS OF DEFAULT" and shall cause the whole
of the Funds Withheld Balance to, upon demand of the Reinsurer, become
immediately due and payable, together with all accrued interest and other unpaid
sums owing in relation thereto.
(1) Payment Defaults
The Reinsured fails to make any payment under this Agreement when due
and in the manner therein provided, except where the Reinsurer receives
the overdue payment within fifteen business days of the non-payment;
(2) Executions
Creditors attach or take possession of or distress, execution,
sequestration, seizure, attachment or other equivalent or analogous
process is levied or enforced upon or sued out against any material
amount of the Reinsured's assets; or
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(3) Insolvency
The Reinsured commences a proceeding or proceedings are commenced
against it seeking dissolution, winding-up, liquidation,
administration, reorganization, suspension or compromise of payments or
other relief under any applicable bankruptcy, insolvency or other
similar law or seeking the appointment of an administrator or a
trustee, receiver, manager, receiver-manager, liquidator, custodian,
curator or other similar official of it or any substantial part of the
Reinsured's assets, or the Reinsured consents to any such relief
(including any bankruptcy petition) or appointment in involuntary
proceedings taken against it, or makes a bulk sale of its assets or a
general assignment or proposal for the benefit of creditors, or fails
or admits its inability to pay its debts as they become due, or
suspends or ceases or threatens to suspend or cease carrying on
business; or it takes any action in furtherance of any of the
foregoing.
ARTICLE 10 - COMMUTATION
Subject to the terms of this article, the Reinsured may, at its sole option,
commute this Agreement at any December 31, beginning on December 31, 2001,
subject to ninety (90) days prior written notice by the Reinsured to the
Reinsurer by registered or certified mail.
If the Reinsured elects to commute this Agreement, the Reinsured shall pay to
the Reinsurer as a condition precedent to the commutation the Funds Withheld
Balance as of the date of commutation of this Agreement and the Reinsurer shall
pay to the Reinsured the following amounts within sixty (60) business days of
the date of commutation:
(1) Commuted Value of Ceded Unpaid Ultimate Net Loss
If, at the time of commutation, the Ceded Unpaid Ultimate Net Loss is less than
or equal to the balance in the Funds Withheld account, the Reinsurer agrees to
pay all Ceded Unpaid Ultimate Net Loss at the amount valued by the Reinsured.
If, at the time of commutation, the Ceded Unpaid Ultimate Net Loss is greater
than the balance in the Funds Withheld account, the Ceded Unpaid Ultimate Net
Loss shall be commuted at a present value amount to be mutually agreed. If the
present value amount of the Ceded Unpaid Ultimate Net Loss cannot be mutually
agreed by the Reinsured and the Reinsurer, then a mutually acceptable
independent third party actuary shall be called upon to make an independent
estimation of the present value amount of the Ceded Unpaid Ultimate Net Loss
(the cost of which shall be shared equally by the Reinsured and Reinsurer). If
the actuary's estimation is acceptable to both the Reinsurer and the Reinsured,
then this Agreement shall be commuted at the value as estimated by the actuary.
If the actuary's value is unacceptable to either the Reinsured or the Reinsurer,
or if the parties cannot agree on the selection of the actuary, then the
Agreement will not be commuted at that time.
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(2) Premium Refund
Upon commutation under (1) above, the Reinsurer shall pay to the Reinsured a
"PREMIUM REFUND" equal to the positive balance, if any, of the Funds Withheld
account after deducting the value of the commuted Ceded Unpaid Ultimate Net Loss
as per (1) above.
Payment of the Ceded Unpaid Ultimate Net Loss by the Reinsurer as described
above shall constitute a complete and final release of the Reinsurer in respect
of any and all of the Reinsurer's obligations of any nature whatsoever to the
Reinsured under or related to this Agreement.
Non-Commute Charge
If the Reinsured does not commute this Agreement on or before December 31, 2002,
the Reinsured shall pay to the Reinsurer each January 1 thereafter, beginning
January 1, 2003, an annual fee (the "Non-Commute Fee") of $100,000 until such
time as this Agreement is commuted.
The Non-Commute Fees shall not be included in the calculation of the Funds
Withheld Balance and shall be retained 100% by the Reinsurer.
ARTICLE 11 - REPORTS AND REMITTANCES
1. The Reinsured shall furnish to the Reinsurer within fifteen (15) days prior
to the close of the calendar quarter an estimate of the amount of Ultimate
Net Loss ceded under this Agreement as of the close of that calendar
quarter.
2. The Reinsured shall furnish to the Reinsurer within thirty (30) days after
the close of each calendar quarter:
(a) quarterly account of Subject Earned Premium segregated by line of
business (and for the total of all lines).
(b) quarterly accounts of paid and unpaid Ultimate Net Loss segregated by
line of business (and for the total of all lines of business).
(c) a reconciliation of the Funds Withheld Balance from inception to the
close of the most recent preceding calendar quarter.
3. The Reinsured shall furnish to the Reinsurer within thirty (30) days after
the end of each calendar quarter, quarterly accounts of paid Ultimate Net
Loss ceded under this Agreement which are due to be paid by the Reinsurer to
the Reinsured. As respects the Funds Withheld Balance, Ultimate Net Loss
amounts shall be deemed to be paid as of the date the Reinsurer agrees to
the amount to be paid and such agreement shall be made within sixty (60)
days after receipt of this account.
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4. The Reinsured shall furnish to the Reinsurer within one hundred twenty (120)
days after the close of each calendar year annual paid projections of
Ultimate Net Loss, including Allocated Loss Adjustment Expense, segregated
by line of business.
5. All amounts due and payable under this Agreement shall be remitted directly
by wire transfer between the Reinsured and the Reinsurer with notice to the
Intermediary, unless such amounts are withheld by the Reinsured in
accordance with the Funds Withheld provision of this Agreement.
6. Any late payments by either party shall accrue interest at a rate equal to
the greater of 1% per month, compounded semi-annually, or the yield on the
one year United States Treasury Xxxx existent on the first business day
after the previous January 1, as published in the Wall Street Journal, plus
250 basis points.
ARTICLE 12 - TAXES
The Reinsured shall pay all taxes of any nature associated with this Agreement
and undertakes not to claim any deduction of the premium hereon when making
Canadian tax returns or when making tax returns, other than Income or Profits
tax returns, to any State or Territory of the United States of America or the
District of Columbia. Provided, however, that this Article shall not impose any
liability on the Reinsured for any income, capital gains, profits or other
similar taxes payable by the Reinsurer in respect of its operations or this
Agreement.
ARTICLE 13 - COVENANTS OF THE REINSURED
The Reinsured agrees not to change claims handling procedures, loss reserving
process, levels of ceding commissions in its underlying contracts, or the levels
of reinsurance protection in any manner from that in effect at the inception of
this Agreement which materially affects this Agreement or the obligations of the
parties hereunder, unless the Reinsured has received the prior written approval
of the Reinsurer to such changes, such approval not to be unreasonably withheld.
In the event that the Reinsured does not adhere to these Covenants, the
Reinsurer shall have the right to immediately cancel this Agreement by mailing
the Reinsured a written notice of cancellation and the remaining unpaid Total
Aggregate Limit, notwithstanding any provision to the contrary contained herein,
shall be immediately reduced to an amount equal to the positive balance in the
Funds Withheld account (or zero if the Funds Withheld Balance is negative) as of
the date of cancellation. The mailing of such notice shall be sufficient notice
and the effective date of cancellation shall be the date the notice of
cancellation was posted.
In the event that the Reinsurer learns about a violation of these Covenants
after the Expiration Date of this Agreement, the remaining unpaid Total
Aggregate Limit, notwithstanding any provision to the contrary contained herein,
shall be reduced to an amount equal to the positive balance in the Funds
Withheld account (or zero if the Funds Withheld Balance is negative) upon
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written notice by the Reinsurer to the Reinsured by registered or certified
mail. Notwithstanding the foregoing, the remedy to the Reinsurer in the event of
a breach by the Reinsured of any of the foregoing covenants may not be invoked
unless the Reinsurer is called upon to pay Ultimate Net Loss under this
Agreement which is in excess of the Funds Withheld Balance.
ARTICLE 14 - DEFINITIONS
All words and phrases that have a capitalized initial letter in this Agreement
have a special meaning which is either introduced in certain Articles or which
is defined below and which shall include the plural as well as the singular.
"AGREEMENT" means this agreement as the same may be amended from time to time in
accordance with the terms hereof and all instruments supplemental hereto or in
amendment or confirmation hereof; additionally, the expressions "hereunder",
"herein", "hereof", "hereto", "above", "below" and similar expressions used in
any paragraph, subparagraph, section or article of this Agreement shall refer to
this Agreement and not to that paragraph, subparagraph, section or article only,
unless otherwise expressly provided.
"CEDED UNPAID ULTIMATE NET LOSS" shall mean the cumulative Ultimate Net Loss
ceded under this Agreement by the Reinsured from the Effective Date less
cumulative Ultimate Net Loss paid (or offset) under this Agreement by the
Reinsurer to the Reinsured from the Effective Date.
"SUBJECT EARNED PREMIUM" shall mean gross premiums earned on all casualty
business in-force, written or renewed by the Reinsured during the Term of this
Agreement less return premiums less premiums ceded for all reinsurance which
would inure to the benefit of the Reinsurer under this Agreement. For purposes
of this Agreement, the projected Subject Earned Premium is equal to $200
million.
ARTICLE 15 - ULTIMATE NET LOSS
"ULTIMATE NET LOSS" shall mean the actual loss incurred by the Reinsured and
Allocated Loss Adjustment Expense ("ALAE") on Business Covered on the
Reinsured's Net Retained Lines, and shall include 80% of the amounts of any
Extra Contractual Obligations and 80% of the amounts of any Excess of Original
Policy Limits Loss after making deductions for all recoveries, salvages,
subrogations and all claims on inuring reinsurance, whether collectible or not.
ALAE shall mean all legal expenses and other expenses (including interest
accruing before and/or after entry of judgment) incurred by the Reinsured in
connection with the investigation, adjustment, settlement or litigation of
claims or losses, including salaries and expenses of the Reinsured's field
employees while adjusting such claims or losses and expenses of the Reinsured's
officials incurred in connection with claims or losses. However, salaries of the
Reinsured's officials or normal overhead charges such as rent, postal, lighting,
cleaning, heating, etc. shall not be included.
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All salvages, recoveries or payments recovered or received subsequent to a loss
settlement under this Agreement shall be applied as if recovered or received
prior to the aforesaid settlement and all necessary adjustments shall be made by
the parties hereto, provided always that nothing in this clause shall be
construed to mean that Ultimate Net Loss under this Agreement is not recoverable
until the Reinsured's Ultimate Net Loss has been ascertained.
The Ultimate Net Loss, as determined by the Reinsured, is subject to agreement
by the Reinsurer. If the Reinsurer disagrees with the Ultimate Net Loss
determined by the Reinsured and the Reinsurer is called upon to pay Ultimate Net
Loss under this Agreement, a mutually agreed upon independent national actuarial
firm shall be engaged to evaluate the Ultimate Net Loss covered under this
Agreement and such evaluation shall be subject to the confines of the Ultimate
Net Loss determined by the Reinsured and the Ultimate Net Loss determined by the
Reinsurer and shall be binding. Such cost to be shared equally by the Reinsured
and the Reinsurer. If the parties fail to agree on the selection of an
independent national actuarial firm each of them shall name two, of whom the
other shall decline one, and the decision shall be made by drawing lots.
For the purposes of this Agreement, the maximum amount that any one loss
occurrence from business underwritten by the Reinsured on behalf of Xxxxxxxxx &
Xxxx (a subsidiary of UNUM Corp., Portland, Maine) may contribute to the
Ultimate Net Loss shall be equal to $10 million.
ARTICLE 16 - NET RETAINED LINES
This Agreement applies only to that portion of any policy which the Reinsured
retains net for its own account, and in calculating the amount of any loss
hereunder and also in computing the amount or amounts in excess of the
Retentions, only loss or losses in respect of that portion of any policy which
the Reinsured retains net for its own account shall be included.
The amount of the Reinsurer's liability hereunder in respect of any loss or
losses shall not be increased by reason of the inability of the Reinsured to
collect from any other reinsurer(s), whether specific or general, any amounts
which may have become due from such reinsurer(s), whether such inability arises
from the insolvency of such other reinsurer(s) or otherwise.
ARTICLE 17 - RIGHT OF OFFSET
The Reinsured and the Reinsurer may offset any balance or amount due from one
party to the other under this Agreement or any other contract heretofore or
hereafter entered into between the Reinsured and the Reinsurer, whether acting
as assuming reinsurer or ceding company or in any other capacity.
In extension and not in limitation to the above, the Reinsurer shall have an
absolute right to
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offset any amounts due to the Reinsured against the Funds Withheld Balance. In
the event that this right of offset between the Reinsured and the Reinsurer is
specifically disallowed or judged to be unenforceable by any court of competent
jurisdiction, arbitration panel or regulatory body then all amounts in the Funds
Withheld Balance shall immediately become due and payable in full to the
Reinsurer by the Reinsured. If the Funds Withheld Balance is not remitted to the
Reinsurer within fifteen (15) days, the Reinsurer shall have the option to
immediately cancel this Agreement by mailing the Reinsured a written notice of
cancellation and the remaining unpaid Total Aggregate Limit, notwithstanding any
provision to the contrary contained herein, shall be immediately reduced to an
amount equal to the positive balance in the Funds Withheld account (or zero if
the Funds Withheld Balance is negative) as of the date of cancellation. The
mailing of such notice shall be sufficient notice and the effective date of
cancellation shall be the date the notice of cancellation was posted.
In the event that the Reinsured fails to remit to the Reinsurer the Funds
Withheld Balance that is due and payable in accordance with the provisions in
this article after the Expiration Date of this Agreement within 15 days of the
date such payment is due, the Reinsurer shall notify the Reinsured in writing
via registered mail of the overdue amounts. In the event that the Reinsured does
not remit the overdue amounts to the Reinsurer within 15 days of receiving such
notification from the Reinsurer, the remaining unpaid Total Aggregate Limit,
notwithstanding any provision to the contrary contained herein, shall be
immediately reduced to an amount equal to the positive balance in the Funds
Withheld account (or zero if the Funds Withheld Balance is negative) without
further notice.
ARTICLE 18 - ERRORS AND OMISSIONS
Any omission or error by either party to this Agreement will not relieve either
party of liability hereunder, provided such act, omission, or error is not
prejudicial to the other party and is rectified promptly upon discovery by the
responsible party.
ARTICLE 19 - CURRENCY
The provisions of this Agreement involving dollar designated amounts are
expressed in United States currency and all payments shall be made in this
currency.
ARTICLE 20 - EXTRA CONTRACTUAL OBLIGATIONS
This Agreement shall indemnify the Reinsured within the limits hereof, where the
Ultimate Net Loss includes 80% of any Extra Contractual Obligations.
"EXTRA CONTRACTUAL OBLIGATIONS" are defined as those liabilities not covered
under any other provision of this Agreement and which arise from the handling of
any claim on Business
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Covered hereunder, such liabilities arising because of, but not limited to the
failure by the Reinsured 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 in the preparation or prosecution of an appeal consequent
upon such action.
The date on which any Extra Contractual Obligation is incurred by the Reinsured
shall be deemed, in all circumstances, to be the date of the original accident,
casualty, disaster or loss occurrence.
However, this Article shall not apply and there shall be no recovery hereunder
where the loss has been incurred due to the fraud by a member of the Board of
Directors, a corporate officer, or a supervisory employee of the Reinsured
acting individually or collectively or in collusion with a member of the Board
of Directors, a corporate officer, supervisory employee or partner of any other
corporation, partnership, or organization involved in the defense or settlement
of a claim on behalf of the Reinsured.
ARTICLE 21 - EXCESS OF ORIGINAL POLICY LIMITS LOSS
This Agreement shall indemnify the Reinsured, within the limits hereof, where
the Ultimate Net Loss includes 80% of any Excess of Original Policy Limits Loss.
"EXCESS OF ORIGINAL POLICY LIMITS LOSS" shall mean any loss of the Reinsured in
excess of the limit of its original policy, such loss in excess of the limit
having been incurred because of failure by it 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 in the preparation or prosecution of an appeal
consequent upon such action.
However, this Article shall not apply and there shall be no recovery hereunder
where the loss has been incurred due to the fraud by a member of the Board of
Directors, a corporate officer, or a supervisory employee of the Reinsured
acting individually or collectively or in collusion with a member of the Board
of Directors, a corporate officer, supervisory employee or partner of any other
corporation, partnership, or organization involved in the defense or settlement
of a claim on behalf of the Reinsured.
For the purposes of this Article, the word "loss" shall mean any amounts for
which the Reinsured would have been contractually liable to pay had it not been
for the limit of the original policy.
ARTICLE 22 - ARBITRATION
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Any dispute arising out of the interpretation, performance or breach of this
Agreement, including the formation or validity thereof, shall be submitted for
decision to a panel of three arbitrators. Notice requesting arbitration must be
in writing and sent certified or registered mail, return receipt requested.
One arbitrator shall be chosen by each party and the two arbitrators shall,
before instituting the hearing, choose an impartial third arbitrator (the
"Umpire") who shall preside at the hearing. If either party fails to appoint its
arbitrator within thirty (30) days after being requested to do so by the other
party, the latter, after ten (10) days notice by certified or registered mail of
its intention to do so, may appoint the second arbitrator.
If the two arbitrators are unable to agree upon the Umpire within thirty (30)
days of their appointment, the two arbitrators shall request the American
Arbitration Association ("AAA") to provide a list of possible Umpires with the
qualifications set forth in this Article and the parties shall then mutually
agree upon an Umpire from this list. If the parties are unable to agree upon the
Umpire within thirty (30) days of the receipt of the AAA list or if the AAA
fails to provide such a list within thirty (30) days of the request, either
party may apply to the United States Federal Court for the Southern District of
New York to appoint an Umpire with those qualifications. The Umpire shall
promptly notify in writing all parties to the arbitration of his selection.
All arbitrators shall be disinterested active or former executive officers of
insurance or reinsurance companies or Underwriters at Lloyd's of London.
Within thirty (30) days after notice of appointment of all arbitrators, the
panel shall meet and determine timely periods for briefs, discovery procedures
and schedules for hearings.
The panel shall be relieved of all judicial formality and shall not be bound by
the strict rules of procedure and evidence. Unless the panel agrees otherwise,
arbitration shall take place in New York, New York, but the venue may be changed
when deemed by the panel to be in the best interest of the arbitration
proceeding. Insofar as the arbitration panel looks to substantive law, it shall
consider the law of the State of New York. The decision of any two arbitrators
when rendered in writing shall be final and binding. The panel is empowered to
grant interim relief as it may deem appropriate.
To the extent, and only to the extent, that the provisions of this Agreement are
ambiguous or unclear, the panel shall make its decision considering the custom
and practice of the applicable insurance and reinsurance business. The panel
shall render its decision within sixty (60) days
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following the termination of hearings, which decision shall be in writing,
stating the reasons thereof. Judgment upon the award may be entered in any court
having jurisdiction thereof.
Each party shall bear the expense of its own arbitrator and shall jointly and
equally bear with the other party the cost of the third arbitrator. The
remaining costs of the arbitration shall be allocated by the panel. The panel
may, at its discretion, award such further costs and expenses as it considers
appropriate, including but not limited to attorneys fees, to the extent
permitted by law.
ARTICLE 23 - ACCESS TO RECORDS
The Reinsurer or its duly appointed representatives shall have free access to
the books, records and papers of the Reinsured or its agents at all reasonable
times during the continuance of this Agreement or any liability hereunder, for
the purpose of obtaining information concerning this Agreement or the subject
matter thereof.
ARTICLE 24 - INSOLVENCY
In the event of the insolvency of the Reinsured, reinsurance under this
Agreement shall be payable by the Reinsurer on the basis of the liability of the
Reinsured under Policy or Policies reinsured without diminution because of the
insolvency of the Reinsured, to the Reinsured or to its liquidator, receiver, or
statutory successor except as provided by Section 4118(a) of the New York
Insurance Law or except when the Agreement specifically provides another payee
of such reinsurance in the event of the insolvency of the Reinsured and when the
Reinsurer with the consent of the direct insured or insureds has assumed such
Policy obligations of the Reinsured as direct obligations of the Reinsurer to
the payees under such Policies and in substitution for the obligations of the
Reinsured to such payees.
It is agreed, however, that the liquidator or receiver or statutory successor of
the insolvent Reinsured shall give written notice to the Reinsurer of the
pendency of a claim against the insolvent Reinsured on the Policy or Policies
reinsured within a reasonable time after such claim is filed in the insolvency
proceeding and that during the pendency of such claim, the Reinsurer may
investigate such claim and interpose, at its own expense, in the proceeding when
such claim is to be adjudicated, any defense or defenses which it may deem
available to the Reinsured or its liquidator or receiver or statutory successor.
The expense thus incurred by the Reinsurer shall be chargeable, subject to court
approval, against the insolvent Reinsured as part of the expense of liquidation
to the extent of a proportionate share of the benefit which may accrue to the
Reinsured solely as a result of the defense undertaken by the Reinsurer.
When 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 this Agreement as though such
expense had been incurred by the insolvent Reinsured.
Should any party hereto be placed in rehabilitation or liquidation or should a
rehabilitator, liquidator, receiver, conservator or other person or entity of
similar capacity be appointed as
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respects such party, all amounts due any of the parties hereto whether by reason
of premiums, losses or otherwise under this Agreement or any other contract(s)
of reinsurance heretofore or hereafter entered into between the parties (whether
or not any such contract(s) be assumed or ceded) shall at all times be subject
to the right of offset at any time and from time to time, and upon the exercise
of same, only the net balance shall be due and payable in accordance with
Section 7427 of the Insurance Law of the State of New York to the extent such
statute or any other applicable law, statute or regulation governing such offset
shall apply.
ARTICLE 25 -GOVERNING LAW
This Agreement shall be interpreted and governed by the laws of the State of New
York without regard to its principles of choice of law.
ARTICLE 26 - SERVICE OF SUIT
(This Article only applies to reinsurers domiciled outside of the United States
and/or unauthorized in any state, territory, or district of the United States
having jurisdiction over the Reinsured).
It is agreed that in the event of the failure of the Reinsurer to pay any amount
claimed to be due hereunder or to perform any other obligation under the
Agreement, the Reinsurer, at the request of the Reinsured, will submit to the
jurisdiction of a court of competent jurisdiction within the United States.
Nothing in this Article 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. It is
further agreed that service of process in such suit may be made upon Xxxxxxx
Xxxx and Xxxxxxxxx, Xxx Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000,
and that in any suit instituted, the Reinsurer will abide by the final decision
of such court or of any appellate court in the event of an appeal.
The above-named are authorized and directed to accept service of process on
behalf of the Reinsurer in any such suit and/or upon the request of the
Reinsured to give a written undertaking to the Reinsured that they will enter a
general appearance upon the Reinsurer's behalf in the event such a suit shall be
instituted.
Further, pursuant to any statute of any state, territory or district of the
United States which makes provision therefor, the Reinsurer hereon hereby
designates the Superintendent, Commissioner or Director of Insurance or other
officer specified for that purpose in the statute, or his successor or
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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 Reinsured or any beneficiary hereunder arising out of this Agreement of
reinsurance, and hereby designates the above-named as the person to whom the
said officer is authorized to mail such process or a true copy thereof.
The foregoing is not intended to conflict with or override the obligation of the
parties hereto to arbitrate their disputes as provided in the Arbitration
clause.
ARTICLE 27 - AMENDMENTS AND ALTERATIONS
This Agreement may be changed, altered or amended as the parties may agree,
provided such change, alteration or amendment is evidenced in writing or by
endorsement executed by the Reinsured and the Reinsurer.
ARTICLE 28 - ASSIGNMENT
Except as expressly provided otherwise in the article entitled "INSOLVENCY",
neither party may assign or transfer any rights, interests or obligations under
this Agreement to any person or entity without the written consent of the other
party and any effort to so assign such rights, interests or obligations without
the consent of the other party shall be null and void.
ARTICLE 29 - NO THIRD PARTY RIGHTS
This Agreement is solely between the Reinsured and the Reinsurer, and in no
instance shall any other party have any rights under this Agreement except as
expressly provided otherwise in the Insolvency Article.
ARTICLE 30 - NO IMPLIED WAIVER
The failure of any party to enforce any of the provisions herein shall not be
construed to be a waiver of the right of such party to enforce any such
provision.
ARTICLE 31 - SECURITY
If the Reinsurer's surplus falls below $40 million, the Reinsured may require
the Reinsurer to post a "clean", unconditional, evergreen and irrevocable Letter
of Credit or to provide a reinsurance trust fund issued by a bank acceptable to
the Reinsured in favor of the Reinsured in an amount up to the excess of the
Ceded Unpaid Ultimate Net Loss over the Funds Withheld Balance.
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ARTICLE 32 - MERGERS AND ACQUISITIONS
It is understood and agreed that if at any time during the Term of this
Agreement the Reinsured acquires (by acquisition, reinsurance of, or renewal of)
any other insurance or reinsurance company or individual or groups of individual
book(s) of business of any other insurance or reinsurance company that comprises
not more than ten (10) percent (whether individually or in the aggregate with
respect to related transactions or parties) of Subject Earned Premium, such
company or book(s) of business will be covered hereunder, provided that written
notice is given to the Reinsurer of any such newly affiliated company or book(s)
of business as soon as practicable with full particulars as to how such
affiliation is likely to affect this Agreement. If such acquisition, as defined
above, comprises more than ten (10) percent (whether individually or in the
aggregate with respect to related transactions or parties) of Subject Earned
Premium, such company or book(s) of business will be covered hereunder provided
that prior written notice of such transaction is given to the Reinsurer with
full particulars as to how such transaction is likely to affect this Agreement,
and the Reinsurer agrees in its sole discretion in writing that this Agreement
applies to such acquired insurance or reinsurance company or book(s) of
business.
In the event that the Reinsured merges with another company at any time during
the Term of this Agreement, this Agreement shall survive such merger and the
surviving entity shall be covered hereunder provided that prior written notice
of such transaction is given to the Reinsurer with full particulars as to how
such transaction is likely to affect this Agreement, and the Reinsurer agrees in
its sole discretion in writing that this Agreement applies to such surviving
entity.
ARTICLE 33 - INTERMEDIARY
Xxxxx & Co., Inc. is hereby recognized as the Intermediary negotiating this
Agreement for all business hereunder. All communications (including but not
limited to notices and statements) relating to this Agreement shall be
transmitted to the Reinsured through Xxxxx & Co., Inc., Xxx Xxxxx Xxxxxx,
Xxxxxxxxxxxx, XX 00000-0000. All amounts due under this Agreement (including but
not limited to Reinsurance Premium and Ultimate Net Loss) shall be remitted
directly by wire transfer between the Reinsured and the Reinsurer with notice to
the Intermediary.
42
NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE
(Wherever the word "Reassured" appears in this Clause, it shall be deemed to
read "Reassured", "Reinsured", "Company", or whatever other word is employed
throughout the text of the reinsurance agreement to which this Clause is
attached to designate the company or companies reinsured.)
(1) This reinsurance does not cover any loss or liability accruing to the
Reassured as a member of, or subscriber to, any association of insurers
or reinsurers formed for the purpose of covering nuclear energy risks
or as a direct or indirect reinsurer of any such member, subscriber or
association.
(2) Without in any way restricting the operation of paragraph (1) of this
Clause, it is understood and agreed that for all purposes of this
reinsurance all the original policies of the Reassured (new, renewal
and replacement) of the classes specified in clause II of this
paragraph (2) from the time specified in clause III in this paragraph
(2) shall be deemed to include the following provision (specified as
the Limited Exclusion Provision):
LIMITED EXCLUSION PROVISION.*
I. It is agreed that the policy does not apply, under any
liability coverage, to
injury, sickness, disease, death or destruction
bodily injury or property damage
with respect to which an insured under the policy is also an
insured under a nuclear energy liability policy issued by
Nuclear Energy Liability Insurance Association, Mutual Atomic
Energy Liability Underwriters or Nuclear Insurance Association
of Canada, or would be an insured under any such policy but
for its termination upon exhaustion of its limit of liability.
II. Family Automobile Policies (liability only), Special
Automobile Policies (private passenger automobiles, liability
only), Farmers Comprehensive Personal Liability Policies
(liability only), Comprehensive Personal Liability Policies
(liability only) or policies of a similar nature; and the
liability portion of combination forms related to the four
classes of policies stated above, such as the Comprehensive
Dwelling Policy and the applicable types of Homeowners
Policies.
III. The inception dates and thereafter of all original policies as
described in II above, whether new, renewal or replacement,
being policies which either
(a) become effective on or after 1st May, 1960, or
(b) become effective before that date and contain the
Limited Exclusion Provision set out above;
provided this paragraph (2) shall not be applicable to Family
Automobile Policies, Special Automobile Policies, or policies
or combination policies of a similar nature, issued by the
Reassured on New York risks, until 90 days following approval
of the Limited Exclusion Provision by the Governmental
Authority having jurisdiction thereof.
43
2
(3) Except for those classes of policies specified in clause II of
paragraph (2) and without in any way restricting the operation of
paragraph (1) of this Clause, it is understood and agreed that for all
purposes of this reinsurance the original liability policies of the
Reassured (new, renewal and replacement) affording the following
coverages:
Owners, Landlords and Tenants Liability, Contractual
Liability, Elevator Liability, Owners or Contractors
(including railroad) Protective Liability, Manufacturers and
Contractors Liability, Products Liability, Professional and
Malpractice Liability, Storekeepers Liability, Garage
Liability, Automobile Liability (including Massachusetts Motor
Vehicle or Garage Liability)
shall be deemed to include, with respect to such coverages, from the
time specified in clause V of this paragraph (3), the following
provision (specified as the Broad Exclusion Provision):
BROAD EXCLUSION PROVISION.*
It is agreed that the policy does not apply:
I. Under any Liability Coverage, to
injury, sickness, disease, death or destruction
bodily injury or property damage
(a) with respect to which an insured under the policy is
also an insured under a nuclear energy liability
policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability
Underwriters or Nuclear Insurance Association of
Canada, or would be an insured under any such policy
but for its termination upon exhaustion of its limit
of liability; or
(b) resulting from the hazardous properties of nuclear
material and with respect to which (1) any person or
organization is required to maintain financial
protection pursuant to the Atomic Energy Act of 1954,
or any law amendatory thereof, or (2) the insured is,
or had this policy not been issued would be, entitled
to indemnity from the United States of America, or
any agency thereof, under any agreement entered into
by the United States of America, or any agency
thereof, with any person or organization.
II. Under any Medical Payments Coverage, or under any
Supplementary Payments Provision relating to
immediate medical or surgical relief
first aid,
to expenses incurred with respect to
bodily injury, sickness, disease or death
bodily injury
resulting from the hazardous properties of nuclear material
and arising out of the operation of a nuclear facility by any
person or organization.
44
3
III. Under any Liability Coverage, to
injury, sickness, disease, death or destruction
bodily injury or property damage
resulting from the hazardous properties of nuclear material,if
(a) the nuclear material (1) is at any nuclear facility
owned by, or operated by or on behalf of, an insured
or (2) has been discharged or dispersed therefrom;
(b) the nuclear material is contained in spent fuel or
waste at any time possessed, handled, used,
processed, stored, transported or disposed of by or
on behalf of an insured; or
(c) the
injury, sickness, disease, death or
destruction
bodily injury or property damage
arises out of the furnishing by an insured of
services, materials, parts or equipment in connection
with the planning, construction, maintenance,
operation or use of any nuclear facility, but if such
facility is located within the United States of
America, its territories or possessions or Canada,
this exclusion (c) applies only
to
injury to or destruction of property at such
nuclear facility.
property damage to such nuclear facility and
any property thereat.
IV. As used in this endorsement:
"HAZARDOUS PROPERTIES" include radioactive, toxic or explosive
properties; "NUCLEAR MATERIAL" means source material, special
nuclear material or byproduct material; "SOURCE MATERIAL",
"SPECIAL NUCLEAR MATERIAL", and "BYPRODUCT MATERIAL" have the
meanings given them in the Atomic Energy Act of 1954 or in any
law amendatory thereof; "SPENT FUEL" means any fuel element or
fuel component, solid or liquid, which has been used or
exposed to radiation in a nuclear reactor; "WASTE" means any
waste material (1) containing byproduct material and (2)
resulting from the operation by any person or organization of
any nuclear facility included within the definition of nuclear
facility under paragraph (a) or (b) thereof; "NUCLEAR
FACILITY" means
(a) any nuclear reactor,
(b) any equipment or device designed or used for (1)
separating the isotopes of uranium or plutonium, (2)
processing or utilizing spent fuel, or (3) handling,
processing or packaging waste,
45
4
(c) any equipment or device used for the processing,
fabricating or alloying of special nuclear material
if at any time the total amount of such material in
the custody of the insured at the premises where such
equipment or device is located consists of or
contains more than 25 grams of plutonium or uranium
233 or any combination thereof, or more than 250
grams of uranium 235,
(d) any structure, basin, excavation, premises or place
prepared or used for the storage or disposal of
waste,
and includes the site on which any of the foregoing is
located, all operations conducted on such site and all
premises used for such operations; "NUCLEAR REACTOR" means any
apparatus designed or used to sustain nuclear fission in a
self-supporting chain reaction or to contain a xxxxxxxx xxxx
of fissionable material;
With respect to injury to or destruction of property, the word
"injury" or "destruction" includes all forms of radioactive
contamination of property; "property damage" includes all
forms of radioactive contamination of property.
V. The inception dates and thereafter of all original policies
affording coverages specified in this paragraph (3), whether
new, renewal or replacement, being policies which become
effective on or after 1st May, 1960, provided this paragraph
(3) shall not be applicable to
(i) Garage and Automobile Policies issued by the
Reassured on New York risks, or
(ii) statutory liability insurance required under Chapter
90, General Laws of Massachusetts,
until 90 days following approval of the Broad Exclusion
Provision by the Governmental Authority having jurisdiction
thereof.
(4) Without in any way restricting the operation of paragraph (1) of this
Clause, it is understood and agreed that paragraphs (2) and (3) above
are not applicable to original liability policies of the Reassured in
Canada and that with respect to such policies this Clause shall be
deemed to include the Nuclear Energy Liability Exclusion Provisions
adopted by the Insurance Bureau of Canada or the Insurers' Advisory
Organization.
*NOTE: THE WORDS PRINTED IN ITALICS IN THE LIMITED EXCLUSION PROVISION AND IN
THE BROAD EXCLUSION PROVISION SHALL APPLY ONLY IN RELATION TO ORIGINAL
LIABILITY POLICIES WHICH INCLUDE A LIMITED EXCLUSION PROVISION OR A
BROAD EXCLUSION PROVISION CONTAINING THOSE WORDS.
46
NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE - CANADA
(Wherever the word "Reassured" appears in this Clause, it shall be deemed to
read "Reassured", "Reinsured", "Company", or whatever other word is employed
throughout the text of the reinsurance agreement to which this Clause is
attached to designate the company or companies reinsured.)
(1) This reinsurance does not cover any loss or liability accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer,
from any Pool of Insurers or Reinsurers formed for the purpose of
covering Atomic or Nuclear Energy risks.
(2) Without in any way restricting the operation of paragraph (1) of this
Clause, this reinsurance does not cover any loss or liability accruing
to the Reassured, directly or indirectly, and whether as Insurer or
Reinsurer, from any insurance against Physical Damage (including
business interruption or consequential loss arising out of such
Physical Damage) to:
(a) Nuclear reactor power plants including all auxiliary
property on the site, or
(b) Any other nuclear reactor installation, including
laboratories handling radioactive materials in connection with
reactor installations, and "critical facilities" as such, or
(c) Installations for fabricating complete fuel elements or
for processing substantial quantities of prescribed
substances, and for reprocessing, salvaging, chemically
separating, storing or disposing of "spent" nuclear fuel or
waste materials, or
(d) Installations other than those listed in (c) above using
substantial quantities of radioactive isotopes or other
products of nuclear fission.
(3) Without in any way restricting the operation of paragraphs (1) and (2)
of this Clause, this reinsurance does not cover any loss or liability
by radioactive contamination accruing to the Reassured, directly or
indirectly, and whether as Insurer or Reinsurer, from any insurance on
property which is on the same site as a nuclear reactor power plant or
other nuclear installation and which normally would be insured
therewith, except that this paragraph (3) shall not operate:
(a) where the Reassured does not have knowledge of such
nuclear reactor power plant or nuclear installation, or
(b) where the said insurance contains a provision excluding
coverage for damage to property caused by or resulting from
radioactive contamination, however caused.
(4) Without in any way restricting the operation of paragraphs (1), (2) and
(3) of this Clause, this reinsurance does not cover any loss or
liability by radioactive contamination accruing to the Reassured,
directly or indirectly, and whether as Insurer or Reinsurer, when such
radioactive contamination is a named hazard specifically insured
against.
(5) This Clause shall not extend to risks using radioactive isotopes in any
form where the nuclear
47
2
exposure is not considered by the Reassured to be the primary hazard.
(6) The term "prescribed substances" shall have the meaning given it by the
Atomic Energy Control Act or by any law amendatory thereof.
(7) The Reassured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
(8) Without in any way restricting the operation of paragraphs (1), (2),
(3) and (4) of this Clause, this reinsurance does not cover any loss or
liability accruing to the Reassured, directly or indirectly, and
whether as Insurer or Reinsurer, caused:
(a) by any nuclear incident as defined in the Nuclear Liability
Act or any other nuclear liability act, law or statute, or any
law amendatory thereof, or nuclear explosion, except for
ensuing loss or damage which results directly from fire,
lightning or explosion of natural, coal or manufactured gas;
or
(b) by contamination by radioactive material.
NOTE: Without in any way restricting the operation of paragraphs (1), (2),
(3) and (4) of this Clause, paragraph (8) of this Clause shall only
apply to all original contracts of the Reassured, whether new, renewal
or replacement, which become effective on or after December 31, 1992.
48
NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE -
CANADA
(Wherever the word "Reassured" appears in this Clause, it shall be deemed to
read "Reassured", "Reinsured", "Company", or whatever other word is employed
throughout the text of the reinsurance agreement to which this Clause is
attached to designate the company or companies reinsured.)
(1) This reinsurance does not cover any loss or liability accruing to the
Reassured as a member of, or subscriber to, any association of insurers
or reinsurers formed for the purpose of covering nuclear energy risks
or as a direct or indirect reinsurer of any such member, subscriber or
association.
(2) Without in any way restricting the operation of paragraph (1) of this
Clause, it is agreed that for all purposes of this reinsurance all the
original liability contracts of the Reassured, whether new, renewal or
replacement, of the following classes, namely,
Personal Liability,
Farmers Liability,
Storekeepers Liability,
which become effective on or after 31st December, 1984, shall be deemed
to include, from their inception dates and thereafter, the following
provision:
LIMITED EXCLUSION PROVISION.
This Policy does not apply to bodily injury or property damage with
respect to which an Insured is also insured under a contract of nuclear
energy liability insurance (whether the Insured is unnamed in such
contract and whether or not it is legally enforceable by the Insured)
issued by the Nuclear Insurance Association of Canada or any other
group or pool of insurers or would be an Insured under any such policy
but for its termination upon exhaustion of its limit of liability.
With respect to property, loss of use of such property shall be deemed
to be property damage.
(3) Without in any way restricting the operation of paragraph (1) of this
Clause, it is agreed that for all purposes of this reinsurance all the
original liability contracts of the Reassured, whether new, renewal or
replacement, of any class whatsoever (other than Personal Liability,
Farmers Liability, Storekeepers Liability or Automobile Liability
contracts), which become effective on or after 31st December, 1984,
shall be deemed to include, from their inception dates and thereafter,
the following provision:
BROAD EXCLUSION PROVISION.
It is agreed that this Policy does not apply:
(a) to liability imposed by or arising under the Nuclear
Liability Act; nor
(b) to bodily injury or property damage with respect to which
an Insured under this
49
2
policy is also insured under a contract of nuclear energy
liability insurance (whether the Insured is unnamed in such
contract and whether or not it is legally enforceable by the
Insured) issued by the Nuclear Insurance Association of Canada
or any other insurer or group or pool of insurers or would be
an Insured under any such policy but for its termination upon
exhaustion of its limit of liability; nor
(c) to bodily injury or property damage resulting directly or
indirectly from the nuclear energy hazard arising from:
(i) the ownership, maintenance, operation or
use of a nuclear facility by or on behalf of an
Insured;
(ii) the furnishing by an Insured of
services, materials, parts or equipment in connection
with the planning, construction, maintenance,
operation or use of any nuclear facility; and
(iii) the possession, consumption, use,
handling, disposal or transportation of fissionable
substances, or of other radioactive material (except
radioactive isotopes, away from a nuclear facility,
which have reached the final stage of fabrication so
as to be useable for any scientific, medical,
agricultural, commercial or industrial purpose) used,
distributed, handled or sold by an Insured.
AS USED IN THIS POLICY:
1. The term "NUCLEAR ENERGY HAZARD" means the radioactive, toxic,
explosive or other hazardous properties of radioactive material;
2. The term "RADIOACTIVE MATERIAL" means uranium, thorium, plutonium,
neptunium, their respective derivatives and compounds, radioactive
isotopes of other elements and any other substances that the Atomic
Energy Control Board may, by regulation, designate as being prescribed
substances capable of releasing atomic energy, or as being requisite
for the production, use or application of atomic energy;
3. The term "NUCLEAR FACILITY" means:
(a) any apparatus designed or used to sustain nuclear fission
in a self-supporting chain reaction or to contain a xxxxxxxx
xxxx of plutonium, thorium and uranium or any one or more of
them;
(b) any equipment or device designed or used for (i)
separating the isotopes of plutonium, thorium and uranium or
any one or more of them, (ii) processing or utilizing spent
fuel, or (iii) handling, processing or packaging waste;
(c) any equipment or device used for the processing,
fabricating or alloying of plutonium, thorium or uranium
enriched in the isotope uranium 233 or in the isotope uranium
235, or any one or more of them if at any time the total
amount of such material in the custody of the Insured at the
premises where such equipment or device is located
50
3
consists of or contains more than 25 grams of plutonium or
uranium 233 or any combination thereof, or more than 250 grams
of uranium 235;
(d) any structure, basin, excavation, premises or place
prepared or used for the storage or disposal of waste
radioactive material;
and includes the site on which any of the foregoing is located,
together with all operations conducted thereon and all premises used
for such operations.
4. The term "FISSIONABLE SUBSTANCE" means any prescribed substance that
is, or from which can be obtained, a substance capable of releasing
atomic energy by nuclear fission.
5. With respect to property, loss of use of such property shall be deemed
to be property damage.
51
NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE AND LIABILITY -
(BOILER AND MACHINERY POLICIES) - REINSURANCE
(Wherever the word "Reassured" appears in this Clause, it shall be deemed to
read "Reassured", "Reinsured", "Company", or whatever other word is employed
throughout the text of the reinsurance agreement to which this Clause is
attached to designate the company or companies reinsured.)
(1) This reinsurance does not cover any loss or liability accruing to the
Reassured as a member of, or subscriber to, any association of insurers
or reinsurers formed for the purpose of covering nuclear energy risks
or as a direct or indirect reinsurer of any such member, subscriber or
association.
(2) Without in any way restricting the operation of paragraph (1) of this
Clause, it is understood and agreed that for all purposes of this
reinsurance all original Boiler and Machinery Insurance or Reinsurance
contracts of the Reassured shall be deemed to include the following
provisions of this paragraph:
This policy does not apply to "loss", whether it be direct or
indirect, proximate or remote
(a) from an Accident caused directly or indirectly by
nuclear reaction, nuclear radiation or radioactive
contamination, all whether controlled or uncontrolled; or
(b) from nuclear reaction, nuclear radiation or
radioactive contamination, all whether controlled or
uncontrolled, caused directly or indirectly by, contributed to
or aggravated by an Accident.
(3) However, it is agreed that loss arising out of the use of Radioactive
Isotopes in any form is not hereby excluded from reinsurance
protection.
(4) Without in any way restricting the operation of paragraph (1) hereof,
it is understood and agreed that
(a) all policies issued by the Reassured effective on
or before 30th April, 1958, shall be free from the application
of the other provisions of this Clause until expiry date or
30th April, 1961, whichever first occurs, whereupon all the
provisions of this Clause shall apply.
(b) with respect to any risk located in Canada,
policies issued by the Reassured effective on or before 30th
June, 1958, shall be free from the application of the other
provisions of this Clause until expiry date or 30th June,
1961, whichever first occurs, whereupon all the provisions of
this Clause shall apply.
52
NUCLEAR ENERGY RISKS EXCLUSION CLAUSE (REINSURANCE) (1994)
(WORLDWIDE EXCLUDING U.S.A. AND CANADA)
(Wherever the word "Agreement" appears in this Clause, it shall be deemed to
read "Agreement", "Contract", "Policy" or whatever other word is employed
throughout the text of the reinsurance agreement to which this Clause is
attached to designate the attached reinsurance document.)
This Agreement shall exclude Nuclear Energy Risks whether such risks are written
directly and/or by way of reinsurance and/or via Pools and/or Associations.
For all purposes of this Agreement, Nuclear Energy Risks shall mean all first
party and/or third party insurances or reinsurances (other than Workers'
Compensation and Employers' Liability) in respect of:
(I) All Property on the site of a nuclear power station.
Nuclear Reactors, reactor buildings and plant and
equipment therein on any site other than a nuclear power
station.
(II) All Property, on any site (including but not limited to
the sites referred to in (I) above) used or having been used
for:
(a) the generation of nuclear energy; or
(b) the Production, Use or Storage of Nuclear
Material.
(III) Any other Property eligible for insurance by the
relevant local Nuclear Insurance Pool and/or Association but
only to the extent of the requirements of that local Pool
and/or Association.
(IV) The supply of goods and services to any of the sites,
described in (I) to (III) above, unless such insurances or
reinsurances shall exclude the perils of irradiation and
contamination by Nuclear Material.
Except as undernoted, Nuclear Energy Risks shall not include:
(i) Any insurance or reinsurance in respect of the
construction or erection or installation or replacement or
repair or maintenance or decommissioning of Property as
described in (I) to (III) above (including contractors' plant
and equipment);
(ii) Any Machinery Breakdown or other Engineering insurance or
reinsurance not coming within the scope of (i) above;
provided always that such insurance or reinsurance shall exclude the perils of
irradiation and contamination by Nuclear Material.
53
2
However, the above exemption shall not extend to:
(1) The provision of any insurance or reinsurance whatsoever in
respect of:
(a) Nuclear Material;
(b) Any Property in the High Radioactivity Zone or Area
of any Nuclear Installation as from the introduction of Nuclear Material or -
for reactor installations - as from fuel loading or first criticality where so
agreed with the relevant local Nuclear Insurance Pool and/or Association.
(2) The provision of any insurance or reinsurance for the
undernoted perils:
- fire, lightning, explosion;
- earthquake;
- aircraft and other aerial devices or
articles dropped therefrom;
- irradiation and radioactive contamination;
- any other peril insured by the relevant
local Nuclear Insurance Pool and/or
Association;
in respect of any other Property not specified in (1)
above which directly involves the Production, Use or Storage
of Nuclear Material as from the introduction of Nuclear
Material into such Property.
Definitions
"Nuclear Material" means:
(i) Nuclear fuel, other than natural uranium and
depleted uranium, capable of producing energy by a
self-sustaining chain process of nuclear fission outside a
Nuclear Reactor, either alone or in combination with some
other material; and
(ii) Radioactive Products or Waste.
"Radioactive Products or Waste" means any radioactive material produced
in, or any material made radioactive by exposure to the radiation
incidental to the production or utilization of nuclear fuel, but does
not include radioisotopes which have reached the final stage of
fabrication so as to be usable for any scientific, medical,
agricultural, commercial or industrial purpose.
"Nuclear Installation" means:
(i) Any Nuclear Reactor;
(ii) Any factory using nuclear fuel for the
production of Nuclear Material, or any factory for the
processing of Nuclear Material, including any factory for the
reprocessing of irradiated nuclear fuel; and
(iii) Any facility where Nuclear Material is stored,
other than storage incidental to the carriage of such
material.
54
3
"Nuclear Reactor" means any structure containing nuclear fuel in such an
arrangement that a self-sustaining chain process of nuclear fission can occur
therein without an additional source of neutrons.
"Production, Use or Storage of Nuclear Material" means the production,
manufacture, enrichment, conditioning, processing, reprocessing, use, storage,
handling and disposal of Nuclear Material.
"Property" shall mean all land, buildings, structures, plant, equipment,
vehicles, contents (including but not limited to liquids and gases) and all
materials of whatever description whether fixed or not.
"High Radioactivity Zone or Area" means:
(i) For nuclear power stations and Nuclear Reactors, the
vessel or structure which immediately contains the core (including its
supports and shrouding) and all the contents thereof, the fuel
elements, the control rods and the irradiated fuel store; and
(ii) For non-reactor Nuclear Installations, any area where the
level of radioactivity requires the provision of a biological shield.
N.M.A. 1975(a)
April 1, 1994
55
NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE AND
LIABILITY (BOILER AND MACHINERY POLICIES) - REINSURANCE - CANADA
1. This Reinsurance does not cover any loss or liability accruing to the
Reassured as a member of, or subscriber to, any association of insurers
or reinsurers formed for the purpose of covering nuclear energy risks
or as a direct or indirect reinsurer of any such member, subscriber or
association.
2. Without in any way restricting the operation of paragraph (1) of this
Clause it is understood and agreed that for all purposes of this
Reinsurance all original Boiler and Machinery Insurance or Reinsurance
contracts of the Reassured shall be deemed to include the following
provisions of this paragraph;
This Policy does not apply to loss, whether it be direct or indirect,
proximate or remote
(a) from an Accident caused directly or indirectly by
nuclear reaction, nuclear radiation or radioactive
contamination, all whether controlled or
uncontrolled; or
(b) from nuclear reaction, nuclear radiation or
radioactive contamination, all whether controlled or
uncontrolled, caused directly or indirectly by,
contributed to or aggravated by an Accident.
3. However, it is agreed that loss arising out of the use of Radioactive
Isotopes in any form is not hereby excluded from reinsurance
protection.
4. Without in any way restricting the operation of paragraph (1) hereof,
it is understood and agreed that policies issued by the Reassured
effective on or before 31st December, 1958, shall be free from the
application of the other provisions of this Clause until expiry date or
31st December, 1961, whichever first occurs, whereupon all the
provisions of this Clause shall apply.
NOTES: Wherever used herein the terms:
"Reassured" shall be understood to mean "Company", "Reinsured",
"Reassured" or whatever other term is used in the
attached reinsurance document to designate the
reinsured company or companies.
"Agreement" shall be understood to mean "Agreement", "Contract",
"Policy" or whatever other term is used to designate
the attached reinsurance document.
"Reinsurers" shall be understood to mean "Reinsurers",
"Underwriters" or whatever other term is used in the
attached reinsurance document to designate the
reinsurer or reinsurers.
56
NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE
(Wherever the word "Reassured" appears in this Clause, it shall be deemed to
read "Reassured", "Reinsured", "Company", or whatever other word is employed
throughout the text of the reinsurance agreement to which this Clause is
attached to designate the company or companies reinsured.)
(1) This reinsurance does not cover any loss or liability accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer,
from any Pool of Insurers or Reinsurers formed for the purpose of
covering Atomic or Nuclear Energy risks.
(2) Without in any way restricting the operation of paragraph (1) of this
Clause, this reinsurance does not cover any loss or liability accruing
to the Reassured, directly or indirectly, and whether as Insurer or
Reinsurer, from any insurance against Physical Damage (including
business interruption or consequential loss arising out of such
Physical Damage) to:
I. Nuclear reactor power plants including all auxiliary
property on the site, or
II. Any other nuclear reactor installation, including
laboratories handling radioactive materials in connection with reactor
installations, and "critical facilities" as such, or
III. Installations for fabricating complete fuel elements or
for processing substantial quantities of "special nuclear material",
and for reprocessing, salvaging, chemically separating, storing or
disposing of "spent" nuclear fuel or waste materials, or
IV. Installations other than those listed in paragraph (2) III
above using substantial quantities of radioactive isotopes or other
products of nuclear fission.
(3) Without in any way restricting the operation of paragraphs (1) and (2)
hereof, this reinsurance does not cover any loss or liability by
radioactive contamination accruing to the Reassured, directly or
indirectly, and whether as Insurer or Reinsurer, from any insurance on
property which is on the same site as a nuclear reactor power plant or
other nuclear installation and which normally would be insured
therewith, except that this paragraph (3) shall not operate:
(a) where the Reassured does not have knowledge of such
nuclear reactor power plant or nuclear installation, or
(b) where the said insurance contains a provision excluding
coverage for damage to property caused by or resulting from radioactive
contamination, however caused. However, on and after 1st January, 1960,
this sub-paragraph (b) shall only apply provided the said radioactive
contamination exclusion provision has been approved by the Governmental
Authority having jurisdiction thereof.
(4) Without in any way restricting the operation of paragraphs (1), (2) and
(3) hereof, this
57
2
reinsurance does not cover any loss or liability by radioactive
contamination accruing to the Reassured, directly or indirectly, and
whether as Insurer or Reinsurer, when such radioactive contamination is
a named hazard specifically insured against.
(5) It is understood and agreed that this Clause shall not extend to risks
using radioactive isotopes in any form where the nuclear exposure is
not considered by the Reassured to be the primary hazard.
(6) The term "special nuclear material" shall have the meaning given it in
the Atomic Energy Act of 1954 or by any law amendatory thereof.
(7) The Reassured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
58
WAR RISKS EXCLUSION CLAUSE
As regards interest which at time of loss or damage are on shore, no Liability
shall attach hereto in respect of any loss or damage which is occasioned by war,
invasion hostilities, acts of foreign enemies, civil war, rebellion,
insurrection, military or usurped power, or martial law or confiscation by order
of any government or public authority.
This War Exclusion Clause shall not, however, apply to interests which at time
of loss or damage are within the territorial limits of the United States of
America (comprising fifty States of the Union and the District of Columbia, its
territories and possessions, including the Panama Canal Zone and the
Commonwealth of Puerto Rico and including Bridges between the United States of
America and Mexico provided they are under United States ownership), Canada, St.
Pierre and Miquelon, provided such interests are insured under original
policies, endorsements or binders containing a standard war or hostilities or
warlike operations exclusion clause.
Nevertheless, this clause shall not be construed to apply to loss or damage
occasioned by Riots, Strikes, Civil Commotion, Vandalism, Malicious Damage,
including acts committed by agents of any government, party or faction engaged
in war, hostilities or other warlike operation, provided such agents are acting
secretly and not in connection with any operations of military or naval armed
forces in the country where the interest insured is situated.
59
INSOLVENCY FUNDS EXCLUSION CLAUSE
This Contract excludes all liability of the Company arising by contract,
operation of law, or otherwise, from its participation or membership, whether
voluntary or involuntary, in any insolvency fund. "Insolvency fund" includes any
guaranty fund, insolvency find, plan, pool, association, fund or other
arrangement, howsoever denominated, established or governed; which provides for
any assessment of or payment or assumption by the Company of part or all of any
claim, debt, charge, fee, or other obligation of an insurer, or its successors
or assigns, which has been declared by an competent authority to be insolvent,
or which is otherwise deemed unable to meet any claim, debt, charge, fee or
other obligation in whole or in part.
NOTE: Wherever used herein the terms:
"Company" Shall be understood to mean "Company", "Reinsured", "Reassured" or
whatever other term is used in the attached reinsurance document to designate
the reinsured company or companies.
"Contract" Shall be understood to mean "Agreement", "Contract", "Policy" or
whatever other term is used to designate the attached reinsurance document.
"Reinsurers" Shall be understood to mean "Reinsurers", "Underwriters" or
whatever other term is used in the attached reinsurance document to designate
the reinsurer or reinsurers.
