EXHIBIT 10.32
FORM OF 100% QUOTA SHARE RETROCESSION AGREEMENT
(NON-TRADITIONAL - B-1)
BY AND BETWEEN
ST. XXXX REINSURANCE COMPANY LIMITED
(RETROCEDANT)
and
PLATINUM UNDERWRITERS REINSURANCE INC.
(RETROCESSIONAIRE)
DATED AS OF ________, 2002
THIS QUOTA SHARE RETROCESSION AGREEMENT (this "AGREEMENT"), effective as of
12:01 a.m. London time on the later of the Business Day (such term and all other
capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in the Formation and Separation Agreement) following the Closing
or July 1, 2002 (the "EFFECTIVE TIME", and such date the "EFFECTIVE DATE"), is
made by and between ST. XXXX REINSURANCE COMPANY LIMITED, a United Kingdom
domiciled insurance company ("RETROCEDANT"), and PLATINUM UNDERWRITERS
REINSURANCE INC. (formerly known as USF&G Family Insurance Company), a Maryland
domiciled stock insurance company ("RETROCESSIONAIRE").
WHEREAS, pursuant to a Formation and Separation Agreement dated as of [ ], 2002
(the "FORMATION AND SEPARATION AGREEMENT") between Platinum Underwriters
Holdings, Ltd. ("PLATINUM HOLDINGS"), the ultimate parent of Retrocessionaire,
and The St. Xxxx Companies, Inc. ("THE ST. XXXX"), the ultimate parent of
Retrocedant, The St. Xxxx agreed to cause its insurance subsidiaries to cede
specified liabilities under certain reinsured contracts of The St. Paul's
insurance subsidiaries; and Platinum Holdings agreed to cause its insurance
subsidiaries to reinsure such liabilities;
WHEREAS, Retrocedant has agreed to retrocede to Retrocessionaire, and
Retrocessionaire has agreed to assume by indemnity reinsurance, as of the
Effective Time, a one hundred percent (100%) quota share of the liabilities
arising pursuant to the Reinsurance Contracts (as defined hereunder), subject to
the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises and upon
the terms and conditions set forth herein, the parties hereto agree as follows:
1. BUSINESS COVERED
Retrocedant hereby obligates itself to retrocede to the Retrocessionaire
and the Retrocessionaire hereby obligates itself to accept, pursuant to
the terms of this Agreement, a one hundred percent (100%) quota share of
any and all liabilities incurred by Retrocedant on or after January 1,
2002 but not yet paid as of the Effective Time, under all reinsurance and
retrocession contracts listed in Exhibit A hereto (the "REINSURANCE
CONTRACTS"), provided that (for the avoidance of doubt) Retrocedant shall
not retrocede, and Retrocessionaire shall not accept, any liability
incurred by the Retrocedant under reinsurance and retrocession contracts
with United Kingdom cedants entered into after the authorisation of
Platinum Re UK Limited under Part IV of the Financial Services and Markets
Xxx 0000 of the United Kingdom to carry on insurance business in the
United Kingdom.
2. TERM
This Agreement shall be continuous as to the Reinsurance Contracts. Except
as mutually agreed in writing by the Retrocedant and the Retrocessionaire
or in accordance with the terms of this Agreement, this Agreement shall
remain continuously in force until all Reinsurance Contracts are
terminated, expired, cancelled or commuted.
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3. COVERAGE
3.1 SECTION A (RETROSPECTIVE) COVERAGE PERIOD
The Section A (Retrospective) Coverage Period will be the period from and
including January 1, 2002 to but not including the Effective Time.
3.2 SECTION B (PROSPECTIVE) COVERAGE PERIOD
The Section B (Prospective) Coverage Period will be the period from and
including the Effective Time through the commutation, expiration or final
settlement of all liabilities under any of the Reinsurance Contracts.
3.3 COVERAGE LIMITS
Coverage under this Agreement for a specific Reinsurance Contract shall be
subject to the aggregate limit specified in the Reinsurance Contract
reduced by all payments made by either Retrocedant or Retrocessionaire
pursuant to such Reinsurance Contract.
4. PREMIUMS AND ADDITIONAL CONSIDERATION
4.1 SECTION A (RETROSPECTIVE) COVERAGE PERIOD -- PREMIUMS
(A) On the Effective Date, in respect of the Section A (Retrospective)
Coverage Period, Retrocedant shall pay to the account of
Retrocessionaire an amount (the "INITIAL SECTION A PREMIUM") equal to
one hundred percent (100%) of the carrying value on the books of the
Retrocedant as of June 30, 2002, of the aggregate of all loss and loss
adjustment expense and ceding commission reserves relating to the
Reinsurance Contracts with respect to the Section A (Retrospective)
Coverage Period under this Agreement, determined in accordance with
statutory accounting principles on a basis consistent in all material
respects with the methods, principles, practices and policies employed
in the preparation and presentation of Retrocedant's annual statutory
financial statement as of [December 31, 2001] as filed with the
Financial Services Authority and as submitted to The St. Xxxx, and
subject to the adjustments as set forth on Exhibit B hereto (the "LOSS
RESERVE ADJUSTMENTS"), as applicable.
(B) As soon as reasonably practicable, but in no event later than [75]
days following the Effective Date, Retrocedant shall prepare and
deliver to Retrocessionaire an accounting, including the calculation
of all Loss Reserve Adjustments as provided for herein (the "PROPOSED
LOSS RESERVE ACCOUNTING") of all loss and loss adjustment expense
reserves and ceding commission reserves relating to the Reinsurance
Contracts with respect to the Section A (Retrospective) Coverage
Period under this Agreement, as of the Effective Date, determined in
accordance with statutory accounting principles on
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a basis consistent in all material respects with the methods,
principles, practices and policies employed in the preparation and
presentation of Retrocedant's annual statutory financial statement as
of [December 31, 2001] as filed with the Financial Services Authority
and as submitted to The St. Xxxx, adjusted to reflect the Loss Reserve
Adjustments, as applicable (the "FINAL SECTION A PREMIUM"). In the
event the Final Section A Premium is greater than the Initial Section
A Premium, Retrocedant shall promptly pay to the account of
Retrocessionaire the difference plus interest on such amount of the
Applicable Rate (as defined below) from and including the Effective
Date to and including the date of such payment. In the event the
Initial Section A Premium is greater than the Final Section A Premium,
Retrocessionaire shall promptly repay to the account of Retrocedant
the difference (as an adjustment to the amount payable pursuant to
Section 4.1(A) above) plus interest on such amount at the Applicable
Rate from and including the Effective Date to and including the date
of such payment.
4.2 SECTION B (PROSPECTIVE) COVERAGE PERIOD -- PREMIUMS
(A) On the Effective Date, in respect of the Section B (Prospective)
Coverage Period, Retrocedant shall transfer to Retrocessionaire an
amount (the "INITIAL SECTION B PREMIUM") equal to the carrying value
on the books of Retrocedant as of June 30, 2002 of one hundred percent
(100%) of the unearned premium reserves relating to the Reinsurance
Contracts for the Section B (Prospective) Coverage Period under this
Agreement, determined in accordance with statutory accounting
principles on a basis consistent in all material respects with the
methods, principles, practices and policies employed in the
preparation and presentation of Retrocedant's annual statutory
financial statement as of [December 31, 2001] as filed with the
Financial Services Authority and as submitted to The St. Xxxx, less
the applicable Ceding Commission, as defined below, and with respect
to all Reinsurance Contracts, one hundred percent (100%) of all gross
premiums written on or after the Effective Time, net of premium
returns, allowances and cancellations and less any applicable Ceding
Commission, provided, however, that all premiums written arising in
respect of a Loss Occurrence (as such term is defined in the
Reinsurance Contract), including reinstatement premiums, loss share
premiums and penalty premiums [other], shall be for the account of
Retrocedant.
(B) As soon as reasonably practicable, but in no event later than [75]
days following the Effective Date, Retrocedant shall prepare and
deliver to Retrocessionaire an accounting (the "PROPOSED PREMIUM
RESERVE ACCOUNTING", together with the Proposed Loss Reserve
Accounting, the "PROPOSED ACCOUNTING") of all unearned premium
reserves relating to the Reinsurance Contracts for the Section B
(Prospective) Coverage Period under this Agreement, as of the
Effective Date, determined in accordance with statutory accounting
principles on a basis consistent in all material respects with the
methods, principles, practices and policies employed in the
preparation and presentation of Retrocedant's
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annual statutory financial statement as of [December 31, 2001] as
filed with the Financial Services Authority and as submitted to The
St. Xxxx, relating to the Reinsurance Contracts, net of the applicable
Ceding Commission, all as of the Effective Date (the "FINAL SECTION B
PREMIUM"). In the event the Final Section B Premium is greater than
the Initial Section B Premium, Retrocedant shall promptly pay to the
account of Retrocessionaire the difference plus interest on such
amount at the Applicable Rate from and including the Effective Date to
and including the date of such payment. In the event the Initial
Section B Premium is greater than the Final Section B Premium,
Retrocessionaire shall promptly repay to the account of Retrocedant
the difference (as an adjustment to the amount payable pursuant to
Section 4.2(A) above) plus interest on such amount at the Applicable
Rate from and including the Effective Date to and including the date
of such payment.
(C) Notwithstanding the foregoing, the parties agree that all gross
estimated premiums written prior to the Effective Date and earned but
not yet billed ("EBUB", and also referred to as "estimated premiums
receivable" or "EBNR") as of the Effective Time and relating to the
Reinsurance Contracts, as determined, on or before ______, 2002, in
accordance with Retrocedant's customary practices and procedures and
as submitted to The St. Xxxx, shall be allocated to Retrocedant. All
payments received after the Effective Time by Retrocedant or
Retrocessionaire in respect of EBUB as of the Effective Time shall be
retained by Retrocedant or held on trust for and paid by
Retrocessionaire to or to the order of Retrocedant, and all rights to
collect such amounts shall be retained by or transferred to
Retrocedant. Any changes made on or after the Effective Time as to the
amount of EBUB as of the Effective Time shall be for the account of
Retrocessionaire and shall not affect the amount retained by
Retrocedant. The parties agree that as of the first anniversary of the
date hereof, Retrocessionaire shall pay to Retrocedant the difference,
if any, between the amount of EBUB as of the Effective Time and the
aggregate amount paid to and/or retained by Retrocedant prior to that
date with respect to EBUB as of the Effective Time. All amounts, if
any, in respect of EBUB which are in excess of EBUB as of the
Effective Time, calculated pursuant to the first sentence of this
Section 4.2(C), shall be for the account of Retrocessionaire and all
such amounts shall be retained by or payable to Retrocedant.
4.3 DISPUTE RESOLUTION.
(A) After receipt of the Proposed Accounting, together with the work
papers used in preparation thereof, Retrocessionaire shall have 30
days (the "REVIEW PERIOD") to review such Proposed Accounting. Unless
Retrocessionaire delivers written notice to Retrocedant on or prior to
the 30th day of the Review Period stating that it has material
objections thereto, Retrocessionaire shall be deemed to have accepted
and agreed to the Proposed Accounting. Retrocessionaire shall not
object to any method, principle, practice or policy employed in the
preparation of the Proposed Accounting if such method, principle,
practice or
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policy is consistent in all material respects with that employed in
the preparation and presentation of Retrocedant's annual statutory
financial statement as of [December 31, 2001] as filed with the
Financial Services Authority and as submitted to The St. Xxxx. If
Retrocessionaire so notifies Retrocedant of its material objections to
the Proposed Accounting, the parties shall in good faith attempt to
resolve, within 30 days (or such longer period as the parties may
agree) following such notice (the "RESOLUTION PERIOD") their
differences with respect to such material objections and any
resolution by them as to any disputed amounts shall be final, binding
and conclusive.
(B) Any amount remaining in dispute at the conclusion of the Resolution
Period ("UNRESOLVED CHANGES") shall be submitted to arbitration. One
arbiter (each arbiter, an "ARBITER") shall be chosen by Retrocedant,
the other by Retrocessionaire, and an umpire (the "UMPIRE") shall be
chosen by the two Arbiters before they enter upon arbitration. In the
event that either party should fail to choose an Arbiter within 30
days following a written request by the other party to do so, the
requesting party may choose two Arbiters, but only after providing 10
days' written notice of its intention to do so and only if such other
party has failed to appoint an Arbiter within such 10 day period. The
two Arbiters shall in turn choose an Umpire who shall act as the
umpire and preside over the hearing. If the two Arbiters fail to agree
upon the selection of an Umpire within 30 days after notification of
the appointment of the second Arbiter, the selection of the Umpire
shall be made by the American Arbitration Association. All Arbiters
and Umpires shall be active or retired disinterested property/casualty
actuaries of insurance or reinsurance companies or Lloyd's of London
Underwriters.
(C) Each party shall present its case to the Arbiters within 30 days
following the date of appointment of the Umpire, unless the parties
mutually agree to an extension of time. The decision of the Arbiters
shall be final and binding on both parties; but failing to agree, they
shall call in the Umpire and the decision of the majority shall be
final and binding upon both parties. Judgment upon the final decision
of the Arbiters may be entered in any court of competent jurisdiction.
(D) Each party shall bear the expense of its own Arbiter, and shall
jointly and equally bear with the other the expense of the Umpire and
of the arbitration unless otherwise directed by the Arbiters.
(E) Any arbitration proceedings shall take place in London, England unless
the parties agree otherwise.
(F) Arbitration shall not be a condition precedent to any right of action
hereunder.
(G) Once the Proposed Accounting has been finalised in accordance with the
above process, the Final Section A Premium and the Final Section B
Premium amounts shall be as set forth in the Proposed Accounting, as
determined by the
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Arbiters, if applicable. In the event the sum of such amounts is
greater than the amount paid by Retrocedant to Retrocessionaire on the
Closing Date, Retrocedant shall promptly pay to the account of
Retrocessionaire the difference plus interest on such amount at the
Applicable Rate from and including the Closing Date to and including
the date of such payment. In the event the aggregate of such amounts
is lower than the amount paid by Retrocedant to Retrocessionaire on
the Closing Date, Retrocessionaire shall promptly repay for the
account of Retrocedant the difference (as an adjustment to the amount
payable pursuant to Section 4.1(A) and/or 4.2(A) above, as applicable)
plus interest on such amount at the Applicable Rate from the Effective
Date to the date of such payment.
5. CEDING COMMISSION
With respect to the Reinsurance Contracts, Retrocessionaire shall pay the
Retrocedant a ceding commission (the "CEDING COMMISSION") with respect to
the Section B (Prospective) Coverage Period, and such Ceding Commission
shall equal one hundred percent (100%) of the actual expenses incurred in
writing each Reinsurance Contract, including actual ceding commissions and
brokerage paid, as determined in accordance with Retrocedant's customary
practices and procedures and as submitted to The St. Xxxx, all as
allocable pro rata to periods from and after the Effective Time.
6. ORIGINAL CONDITIONS
This Agreement shall be subject to the same rates, terms, conditions,
waivers and interpretations, and to the same modifications and
alterations, as the respective Reinsurance Contracts.
7. INURING RETROCESSIONS
7.1 ALLOCATION TO RETROCESSIONAIRE
Retrocedant agrees that the retrocession contracts purchased from third
party retrocessionaires ("THIRD PARTY RETROCESSIONAIRES") by or on behalf
of Retrocedant prior to the Effective Time that are listed on Exhibit C
hereto shall inure to the benefit of Retrocessionaire to the extent of
liabilities covered under this Agreement ("INURING RETROCESSIONS"),
subject to the allocations in Exhibits D, E and F.
7.2 TRANSFER
Retrocedant and Retrocessionaire shall use their respective commercially
reasonable efforts to obtain the consent of Third Party Retrocessionaires
under the Inuring Retrocessions to include Retrocessionaire as a direct
reinsured with respect to the Reinsurance Contracts or, in the
alternative, to make all payments, directly to the Retrocessionaire, to
the extent allocable to the Reinsurance Contracts, in the manner set forth
in Exhibit D hereto, and to seek all payments, to the extent allocable to
the
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Reinsurance Contracts, in the manner set forth in Exhibit E hereto,
directly from Retrocessionaire, it being understood that Retrocessionaire
shall bear all risk of non-payment or non-collectibility under the Inuring
Retrocessions.
7.3 INURING RETROCESSIONS CLAIMS
(A) Each of the parties agrees to transfer to the other party all
recoveries or any portion thereof that such party receives on or after
the Effective Time pursuant to the Inuring Retrocessions and allocable
to the other party, in the manner set forth in Exhibit F hereto.
Retrocedant shall use its commercially reasonable efforts to collect
any recoveries due to Retrocessionaire under the Inuring Retrocessions
that indemnify the Retrocedant for losses or expenses payable or
return of premium allocable to the Retrocessionaire and hold them on
trust for, and pay them to or to the order of, Retrocessionaire. The
parties agree that Retrocessionaire's obligations to make payments
pursuant to the Inuring Retrocessions or to reimburse Retrocedant
pursuant to this Agreement shall not be waived by non-receipt of any
such amounts. Retrocessionaire shall reimburse Retrocedant for one
hundred percent (100%) of any expenses reasonably incurred by
Retrocedant in attempting to make such collection, including all
allocated expenses, as determined in accordance with St. Xxxx Re's
customary practices and procedures. Retrocessionaire shall have the
right to associate with Retrocedant, at Retrocessionaire's own
expense, in any actions brought by Retrocedant to make such
collections.
(B) In the event claims of Retrocedant and Retrocessionaire aggregate in
excess of the applicable limit under an Inuring Retrocession, all
limits applicable to either Retrocedant or Retrocessionaire shall be
allocated between Retrocedant and Retrocessionaire in the manner set
forth in Exhibit F hereto.
7.4 INITIAL CONSIDERATION
On the Effective Date, Retrocessionaire shall reimburse Retrocedant for
one hundred percent (100%) of any and all unearned premiums paid by
Retrocedant under such Inuring Retrocessions net of any applicable
unearned ceding commissions paid to Retrocedant thereunder.
7.5 ADDITIONAL CONSIDERATION
Retrocessionaire agrees to pay directly to Third Party Retrocessionaires
under the Inuring Retrocessions all future premiums Retrocedant is
obligated to pay pursuant to the terms of the Inuring Retrocessions to the
extent that such premiums are allocable to the Retrocessionaire in the
manner set forth in Exhibit E and to indemnify Retrocedant for all such
premiums paid directly by Retrocedant, net of any ceding commissions and
similar amounts paid by Third Party Retrocessionaires to Retrocedant.
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7.6 CANCELLATION AND COMMUTATION OF INURING RETROCESSIONS
(A) With respect to any Inuring Retrocessions providing coverage solely
with respect to the Reinsurance Contracts, Retrocedant agrees, on
behalf of itself and its affiliates, not to terminate or commute any
such Inuring Retrocession without the written consent of
Retrocessionaire.
(B) With respect to any Inuring Retrocessions providing coverage for both
Reinsurance Contracts and to business not being transferred, neither
party shall take any action or fail to take any action that would
reasonably result in the termination or commutation of any Inuring
Retrocession, without the prior written consent of the other party,
such consent not to be unreasonably withheld.
8. LOSS AND LOSS EXPENSE; SALVAGE AND SUBROGATION; FOLLOW THE FORTUNES
8.1 Retrocessionaire shall be liable for one hundred percent (100%) of all
future loss, loss adjustment expenses, incurred but not reported losses
and other payment obligations that arise under the Reinsurance Contracts
on and after January 1, 2002 and are payable as of or after the Effective
Time and shall reimburse Retrocedant for any losses, loss adjustment
expenses and other payment obligations paid by Retrocedant following the
Effective Time in respect of the Reinsurance Contracts, net of any
recoveries received by Retrocedant with respect thereto, including
recoveries under Inuring Retrocessions. Retrocessionaire shall have the
right to all salvage and subrogation on the account of claims and
settlements with respect to the Reinsurance Contracts.
8.2 In the event of a claim under a Reinsurance Contract, the Retrocedant will
assess the validity of the claim and make a determination as to payment,
consistent with the claims handling guidelines previously provided to
Retrocedant in writing by Retrocessionaire and Retrocessionaire may
exercise its rights under Section 10.1 in respect thereof. Retrocedant
shall provide prompt notice of any claim in excess of $500,000 to
Retrocessionaire. All payments made by Retrocedant, whether under strict
contract terms or by way of compromise, shall be binding on
Retrocessionaire. In addition, if Retrocedant refuses to pay a claim in
full and a legal proceeding results, Retrocessionaire will be
unconditionally bound by any settlement agreed to by Retrocedant or the
adverse judgment of any court or arbitrator (which could include any
judgment for bad faith, punitive damages, excess policy limit losses or
extra contractual obligations) and Retrocedant may recover with respect to
such settlements and judgments under this Agreement. Though Retrocedant
will settle such claims and litigation in good faith, Retrocessionaire is
bound to accept the settlements paid by Retrocedant and such settlements
may be for amounts that could be greater than the amounts that would be
agreed to by Retrocessionaire if Retrocessionaire were to settle such
claims or litigation directly. It is the intent of this Agreement that
Retrocessionaire shall in every case in which this Agreement applies and
in the proportions specified
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herein, "follow the fortunes" of Retrocedant in respect of risks
Retrocessionaire has accepted under this Agreement.
9. EXTRA CONTRACTUAL OBLIGATIONS
In the event Retrocedant or Retrocessionaire is held liable to pay any
punitive, exemplary, compensatory or consequential damages because of
alleged or actual bad faith or negligence related to the handling of any
claim under any Reinsurance Contract or otherwise in respect of such
Reinsurance Contract, the parties shall be liable for such damages in
proportion to their responsibility for the conduct giving rise to the
damages. Such determination shall be made by Retrocedant and
Retrocessionaire, acting jointly and in good faith, and in the event the
parties are unable to reach agreement as to such determination, recourse
shall be had to Article 15 hereof.
10. ADMINISTRATION OF REINSURANCE CONTRACTS
10.1 ADMINISTRATION
(A) The parties agree that, as of the Effective Time, Retrocedant shall
have the sole authority to administer the Reinsurance Contract in all
respects, which authority shall include, but not be limited to,
authority to xxxx for and collect premiums, adjust all claims and
handle all disputes thereunder and to effect any and all amendments,
commutations and cancellations of the Reinsurance Contract, subject,
however, in the case of administration of claims, to all claims
handling guidelines provided in advance in writing by Retrocessionaire
to Retrocedant. Retrocedant shall not, on its own, settle any claim,
waive any right, defense, setoff or counterclaim relating to the
Reinsurance Contracts with respect to amounts in excess of $500,000,
and shall not amend, commute or terminate any of the Reinsurance
Contracts without the prior written consent of Retrocessionaire.
(B) Notwithstanding the foregoing, Retrocessionaire may, at its discretion
and at its own expense, assume the settlement of any claim upon prior
written notice to Retrocedant. Upon receipt of such notice,
Retrocedant shall not compromise, discharge or settle such claim
except with the prior written consent of Retrocessionaire.
Retrocessionaire shall not take any action in the administration of
such claim that would reasonably be expected to adversely affect
Retrocedant, its business or its reputation, without the prior written
consent of Retrocedant. Retrocessionaire shall indemnify Retrocedant
for all Losses, including punitive, exemplary, compensatory or
consequential damages arising from such assumption of the conduct of
such settlement pursuant to Article 14 herein.
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10.2 REPORTING AND REGULATORY MATTERS
Each party shall provide the notices and filings required to be made by it
to relevant regulatory authorities as a result of this Agreement.
Notwithstanding the foregoing, each party shall provide to the other party
any information in its possession regarding the Reinsurance Contracts as
reasonably required by the other party to make such filings and in a form
as agreed to by the parties.
10.3 DUTY TO COOPERATE
Upon the terms and subject to the conditions and other agreements set
forth herein, each party agrees to use its commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other party in doing, all
things necessary or advisable to perform the transactions contemplated by
this Agreement.
10.4 COMMUNICATIONS RELATING TO THE REINSURANCE CONTRACTS
Following the Effective Time, Retrocedant and Retrocessionaire shall each
promptly forward to the other copies of all material notices and other
written communications it receives relating to the Reinsurance Contracts
(including, without limitation, all inquiries and complaints from relevant
insurance regulators, brokers and other service providers and reinsureds
and all notices of claims, suits and actions for which it receives service
of process.)
11. REPORTS AND REMITTANCES
11.1 REPORT FROM RETROCEDANT
Within thirty days following the end of each month, Retrocedant shall
provide Retrocessionaire with a summary statement of account for the
previous month showing all activity relating to each of the Reinsurance
Contracts, including related administration costs and expenses incurred by
Retrocedant in the form set forth as Exhibit I. The monthly statement of
account shall also provide a breakdown of any amounts due to the
Retrocedant or Retrocessionaire, as the case may be, as reimbursement for
paid claims, premiums or other amounts due pursuant to the terms of this
Agreement.
11.2 REMITTANCES
Within five Business Days after delivery of each monthly report pursuant
to Section 11.1, Retrocedant and Retrocessionaire shall settle all amounts
then due under this Agreement for that month.
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11.3 LATE PAYMENTS
Should any payment due any party to this Agreement be received by such
party after the due date for such payment under this Agreement, interest
shall accrue from the date on which such payment was due until payment is
received by the party entitled thereto, at an annual rate equal to the
London Interbank Offered Rate quoted for six month periods as reported in
The Wall Street Journal on the first Business Day of the month in which
such payment first becomes due plus one hundred basis points (the
"APPLICABLE RATE").
11.4 COST REIMBURSEMENT
Retrocessionaire shall reimburse for its allocated share of all costs and
expenses incurred by Retrocedant in administering the Reinsurance
Contracts as set forth in Exhibit J hereto.
12. MAINTENANCE OF LICENSES
Each of Retrocedant and Retrocessionaire hereby covenants to maintain at
all times all licences and authorisations required to undertake the
actions contemplated hereby.
13. ACCESS TO RECORDS
From and after the Closing Date, Retrocedant shall afford to
Retrocessionaire and its respective authorized accountants, counsel and
other designated representatives (collectively, "REPRESENTATIVES")
reasonable access (including using commercially reasonable best efforts to
give access to Persons possessing information) during normal business
hours to all data and information that is specifically described in
writing (collectively, "INFORMATION") within the possession of Retrocedant
relating to the liabilities transferred hereunder, insofar as such
information is reasonably required by Retrocessionaire. Similarly, from
and after the Closing Date, Retrocessionaire shall afford to Retrocedant,
any Post-closing Subsidiary of Retrocedant and their respective
Representatives reasonable access (including using commercially reasonable
best efforts to give access to Persons possessing information) during
normal business hours to Information within Retrocessionaire's possession
relating to Retrocedant, insofar as such information is reasonably
required by Retrocedant. Information may be requested under this Article
13 for, without limitation, audit, accounting, claims, litigation (other
than any claims or litigation between the parties hereto) and tax
purposes, as well as for purposes of fulfilling disclosure and reporting
obligations and for performing this Agreement and the transactions
contemplated hereby.
From and after the Closing Date, Retrocessionaire and Retrocedant or their
designated representatives may inspect, at the place where such records
are located, any and all data and information that is specifically
described in writing within the possession of the other party hereto
reasonably relating to this Agreement, on reasonable prior notice and
during normal business hours. The rights of the parties under this Article
13 shall
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survive termination of this Agreement and shall continue for as long as
there may be liabilities under the Reinsurance Contracts or reporting or
retention requirements under applicable law. In addition, each party shall
have the right to take copies (including electronic copies) of any
information held by the other party that reasonably relates to this
Agreement or the Reinsurance Contracts. Each party shall, and shall cause
its designated representative to, treat and hold as confidential
information any information it receives or obtains pursuant to this
Article 13, except (i) to the extent required to be disclosed by law or
any securities exchange or regulatory or governmental body to which that
party is subject (whether or not the requirement for information has the
force of law); or (ii) to the extent that the information has come into
the public domain through no fault of that party.
14. INDEMNIFICATION
14.1 INDEMNIFICATION BY RETROCEDANT
Retrocedant agrees to indemnify, defend and hold harmless
Retrocessionaire, and its officers, directors and employees with respect
to any and all Losses arising from any breach by Retrocedant of any
representation, warranty or covenant herein. Retrocedant further agrees to
indemnify, defend and hold harmless Retrocessionaire and its officers,
directors and employees against any and all Losses arising out of
Retrocedant's administration of the Reinsurance Contracts, including but
not limited to extracontractual obligations, payments in excess of policy
limits and settlements made in respect of any such claims to the extent
arising from the negligence or wilful misconduct of Retrocedant except to
the extent such actions are taken with the prior consent or direction of
Retrocessionaire. Such indemnification obligations shall be limited to the
aggregate of all fees paid to Retrocedant pursuant to Section 11.4 hereof.
14.2 INDEMNIFICATION BY RETROCESSIONAIRE
Retrocessionaire agrees to indemnify, defend and hold harmless
Retrocedant, and its officers, directors and employees with respect to any
and all Losses arising from any breach by Retrocessionaire of any
representation, warranty or covenant herein. Retrocessionaire further
agrees to indemnify, defend and hold harmless Retrocedant and its
officers, directors and employees against any and all Losses arising out
of Retrocessionaire's administration of the Reinsurance Contracts,
including but not limited to extracontractual obligations, payments in
excess of policy limits and settlements made in respect of any such
claims.
14.3 INDEMNIFICATION PROCEDURES
(A) If a party seeking indemnification pursuant to this Article 14 (each,
an "INDEMNITEE") receives notice or otherwise learns of the assertion
by a Person (including, without limitation, any governmental entity)
who is not a party to this Agreement or an Affiliate thereof, of any
claim or of the commencement by any such Person of any Action (a
"THIRD PARTY CLAIM") with respect to which the
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party from whom indemnification is sought (each, an "INDEMNIFYING
PARTY") may be obligated to provide indemnification pursuant to this
Section 14.1 or 14.2, such Indemnitee shall give such Indemnifying
Party written notice thereof promptly after becoming aware of such
Third Party Claim; PROVIDED that the failure of any Indemnitee to give
notice as provided in this Section 14.3 shall not relieve the
Indemnifying Party of its obligations under this Article 14, except to
the extent that such Indemnifying Party is prejudiced by such failure
to give notice. Such notice shall describe the Third Party Claim in as
much detail as is reasonably possible and, if ascertainable, shall
indicate the amount (estimated if necessary) of the Loss that has been
or may be sustained by such Indemnitee.
(B) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within [30]
days of the receipt of notice from an Indemnitee in accordance with
Section 14.3(A) (or sooner, if the nature of such Third Party Claim so
requires), the Indemnifying Party shall notify the Indemnitee of its
election whether the Indemnifying Party will assume responsibility for
defending such Third Party Claim, which election shall specify any
reservations or exceptions. After notice from an Indemnifying Party to
an Indemnitee of its election to assume the defense of a Third Party
Claim, such Indemnifying Party shall not be liable to such Indemnitee
under this Article 14 for any legal or other expenses (except expenses
approved in writing in advance by the Indemnifying Party) subsequently
incurred by such Indemnitee in connection with the defense thereof;
PROVIDED that, if the defendants in any such claim include both the
Indemnifying Party and one or more Indemnitees and in any Indemnitee's
reasonable judgment a conflict of interest between one or more of such
Indemnitees and such Indemnifying Party exists in respect of such
claim or if the Indemnifying Party shall have assumed responsibility
for such claim with reservations or exceptions that would materially
prejudice such Indemnitees, such Indemnitees shall have the right to
employ separate counsel to represent such Indemnitees and in that
event the reasonable fees and expenses of such separate counsel (but
not more than one separate counsel for all such Indemnitees reasonably
satisfactory to the Indemnifying Party) shall be paid by such
Indemnifying Party. If an Indemnifying Party elects not to assume
responsibility for defending a Third Party Claim, or fails to notify
an Indemnitee of its election as provided in this Article 14, such
Indemnitee may defend or (subject to the remainder of this Article 14)
seek to compromise or settle such Third Party Claim at the expense of
the Indemnifying Party.
(C) Neither an Indemnifying Party nor an Indemnitee shall consent to entry
of any judgment or enter into any settlement of any Third Party Claim
which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnitee, in the case of a consent
or settlement by an Indemnifying Party, or the Indemnifying Party, in
the case of a consent or settlement by the Indemnitee, of a written
release from all liability in respect to such Third Party Claim.
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(D) If an Indemnifying Party chooses to defend or to seek to compromise or
settle any Third Party Claim, the Indemnitee shall make available at
reasonable times to such Indemnifying Party any personnel or any
books, records or other documents within its control or which it
otherwise has the ability to make available that are necessary or
appropriate for such defense, settlement or compromise, and shall
otherwise cooperate in a reasonable manner in the defense, settlement
or compromise of such Third Party Claim.
(E) Notwithstanding anything in this Article 14 to the contrary, neither
an Indemnifying Party nor an Indemnitee may settle or compromise any
claim over the objection of the other; PROVIDED that consent to
settlement or compromise shall not be unreasonably withheld or
delayed. If an Indemnifying Party notifies the Indemnitee in writing
of such Indemnifying Party's desire to settle or compromise a Third
Party Claim on the basis set forth in such notice (provided that such
settlement or compromise includes as an unconditional term thereof the
giving by the claimant or plaintiff of a written release of the
Indemnitee from all liability in respect thereof) and the Indemnitee
shall notify the Indemnifying Party in writing that such Indemnitee
declines to accept any such settlement or compromise, such Indemnitee
may continue to contest such Third Party Claim, free of any
participation by such Indemnifying Party, at such Indemnitee's sole
expense. In such event, the obligation of such Indemnifying Party to
such Indemnitee with respect to such Third Party Claim shall be equal
to (i) the costs and expenses of such Indemnitee prior to the date
such Indemnifying Party notifies such Indemnitee of the offer to
settle or compromise (to the extent such costs and expenses are
otherwise indemnifiable hereunder) PLUS (ii) the lesser of (A) the
amount of any offer of settlement or compromise which such Indemnitee
declined to accept and (B) the actual out-of-pocket amount such
Indemnitee is obligated to pay subsequent to such date as a result of
such Indemnitee's continuing to pursue such Third Party Claim.
(F) In the event of payment by an Indemnifying Party to any Indemnitee in
connection with any Third Party Claim, such Indemnifying Party shall
be subrogated to and shall stand in the place of such Indemnitee as to
any events or circumstances in respect of which such Indemnitee may
have any right or claim relating to such Third Party Claim against any
claimant or plaintiff asserting such Third Party Claim or against any
other Person. Such Indemnitee shall cooperate with such Indemnifying
Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
(G) Except with respect to claims relating to actual fraud, the
indemnification provisions set forth in this section are the sole and
exclusive remedy of the parties hereto for any and all claims for
indemnification under this Agreement.
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14.4 SURVIVAL
This Article 14 shall survive termination of this Agreement.
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15. ARBITRATION
15.1 All disputes and differences arising under or in connection with this
Agreement shall be referred to arbitration under XXXXX Arbitration Rules.
15.2 The Arbitration Tribunal shall consist of three arbitrators, one to be
appointed by the claimant party, one to be appointed by the respondent
party and the third to be appointed by the two appointed arbitrators.
15.3 The third member of the Tribunal shall be appointed as soon as practicable
(and no later than 28 days) after the appointment of the two
party-appointed arbitrators. The Tribunal shall be constituted upon the
appointment of the third arbitrator.
15.4 The Arbitrators shall be persons (including those who have retired) with
not less than ten years' experience of insurance or reinsurance within the
industry or as lawyers or other professional advisers serving the
industry.
15.5 Where a party fails to appoint an arbitrator within 14 days of being
called upon to do so or where the two party-appointed arbitrators fail to
appoint a third within 28 days of their appointment, then upon application
XXXXX (UK) will appoint an arbitrator to fill the vacancy. At any time
prior to the appointment by XXXXX (UK) the party or arbitrators in default
may make such appointment.
15.6 The Tribunal may in its sole discretion make such orders and directions as
it considers to be necessary for the final determination of the matters in
dispute. The Tribunal shall have the widest discretion permitted under the
law governing the arbitral procedure when making such orders or
directions.
15.7 The seat of arbitration shall be London.
15.8 If any matter in difference between the parties is related to a matter of
difference in the United States of America, such matter will be subject to
the arbitration procedure set out in Article 14 of the 100 per cent. Quota
Share Retrocession Agreement [of even date] between St. Xxxx Fire and
Marine Insurance Company and Platinum Underwriters Reinsurance, Inc.,
provided that the panel of arbitrators shall apply English law in respect
of those aspects of the matter which relate to the United Kingdom.
15.9 This Article 15 shall survive termination of this Agreement.
16. INSOLVENCY
16.1 On the occurrence of an Insolvency Event affecting Retrocedant, this
reinsurance shall be payable directly to Retrocedant, or to its
liquidator, receiver, conservator or statutory successor on the basis of
the liability of Retrocedant without diminution because of the insolvency
of Retrocedant or because the liquidator, receiver, conservator or
statutory successor of Retrocedant has failed to pay all or a portion of
any claim.
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16.2 It is agreed, however, that the liquidator, receiver, conservator or
statutory successor of Retrocedant shall give written notice to
Retrocessionaire of the pendency of a claim against Retrocedant indicating
the Reinsurance Contract, which claim would involve a possible liability
on the part of Retrocessionaire within a reasonable time after such claim
is filed in the conservation or liquidation proceeding or in the
receivership, and that during the pendency of such claim, Retrocessionaire
may investigate such claim and interpose, at its own expense, in the
proceeding where such claim is to be adjudicated any defense or defenses
that it may deem available to Retrocedant or its liquidator, receiver,
conservator or statutory successor. The expense thus incurred by
Retrocessionaire shall be chargeable, subject to the approval of the
court, against Retrocedant as part of the expense of conservation or
liquidation to the extent of a pro rata share of the benefit which may
accrue to Retrocedant solely as a result of the defense undertaken by
Retrocessionaire.
16.3 As to all reinsurance made, ceded, renewed or otherwise becoming effective
under this Agreement, the reinsurance shall be payable as set forth above
by Retrocessionaire to Retrocedant or to its liquidator, receiver,
conservator or statutory successor, except (i) where the Reinsurance
Contracts specifically provide another payee on the occurrence of an
Insolvency Event affecting Retrocedant, and (ii) where Retrocessionaire,
with the consent of the reinsured or reinsureds under the Reinsurance
Contracts, has assumed such Reinsurance Contract obligations of
Retrocedant as direct obligations of Retrocessionaire to the payees under
such Reinsurance Contracts and in substitution for the obligations of the
Retrocedant to such payees.
16.4 For the purposes of this Article 16, an Insolvency Event shall occur if:
(A) (i) a winding up petition is presented in respect of Retrocedant or a
provisional liquidator is appointed over it or if Retrocedant
goes into administration, administrative receivership or
receivership or if Retrocedant has a scheme of arrangement or
voluntary arrangement proposed in relation to all or any part of
its affairs; or
(ii) Retrocedant goes into compulsory or voluntary liquidation;
or, in each case, if Retrocedant becomes subject to any other similar
insolvency process (whether under the laws of England and Wales or
elsewhere); and
(B) Retrocedant is unable to pay its debts as and when they fall due
within the meaning of section 123 of the Insolvency Xxx 0000 (or any
statutory amendment or re-enactment of that section).
17. OFFSET
Retrocedant and Retrocessionaire shall have the right to offset any
balance or amounts due form one party to the other under the terms of this
Agreement. The party asserting
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the right of offset may exercise such right at any time whether the
balances due are on account of premiums, losses or otherwise.
18. ERRORS AND OMISSIONS
Any inadvertent delay, omission, error or failure shall not relieve either
party hereto from any liability which would attach hereunder if such
delay, omission, error or failure had not been made provided such delay,
omission, error or failure is rectified as soon as reasonably practicable
upon discovery.
19. CREDIT FOR REINSURANCE; SECURITY
19.1 CREDIT FOR REINSURANCE
Retrocessionaire shall take all actions reasonably necessary, if any, to
permit Retrocedant to obtain full financial statement credit in all
applicable jurisdictions for all liabilities assumed by the
Retrocessionaire pursuant to this Agreement, including but not limited to
loss and loss adjustment expense reserves, unearned premium reserves,
reserves for incurred but not reported losses, allocated loss adjustment
expenses and ceding commissions, and to provide the security required for
such purpose, in a form acceptable to Retrocedant. Any reserves required
by the foregoing in no event shall be less than the amounts required under
the law of the jurisdiction having regulatory authority with respect to
the establishment of reserves relating to the relevant Reinsurance
Contracts. For purposes of this Article 19, such "actions reasonably
necessary" may include, without limitation, the furnishing of a letter of
credit or the establishment of a custodial or trust account, as permitted
under applicable law, to secure the payment of the amounts due the
Retrocedant under this Agreement.
19.2 EXPENSES
All expenses of establishing and maintaining any letter of credit or other
security arrangement shall be paid by Retrocessionaire.
19.3 SECURITY
(A) Retrocessionaire shall establish a trust fund for the benefit of
Retrocedant as security for the obligations of Retrocessionaire under
this Agreement. The trust fund shall be in a form reasonably
satisfactory to Retrocedant and shall comply in all material respects
with the requirements under Maryland Insurance Law applicable to trust
funds established for credit for reinsurance purposes.
(B) At the Closing Date, Retrocessionaire shall deposit qualifying assets
into the trust account equal to all payments and proceeds received by
Retrocessionaire in respect of the Reinsurance Contracts, including
but not limited to assets related to transferred reserves, premium
payments, reinsurance recoverables and other payments. As of the end
of each calendar quarter, Retrocessionaire
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shall calculate the balance of the trust fund and the aggregate loss,
loss adjustment expense reserves, unearned premium reserves, ceding
commission and other reserves related to the Reinsurance Contracts as
reported in the statutory financial statements filed by
Retrocessionaire with the Maryland Insurance Commission for such
quarter and shall provide such calculation to Retrocedant within five
days of the filing of such statutory financial statements with the
Maryland Insurance Commission. If the balance of the trust fund is
less than the aggregate of the related reserves, Retrocessionaire
promptly shall deposit sufficient qualifying assets to cause the
balance of the trust fund to equal at least one hundred percent of
such aggregate reserves.
(C) Upon receipt of the quarterly calculation from Retrocessionaire,
Retrocedant shall have the right to reasonably object to such
calculation and to offer a reasonable proposal for reserve amounts. If
the parties in good faith are not able to resolve the disagreement
within [two weeks] of Retrocedant's indication of disagreement, the
parties shall mutually agree upon an independent actuarial firm to
determine an appropriate level of aggregate reserves with respect to
the Reinsurance Contracts, such level to be no more than the amount
proposed by Retrocedant and no less than the amount reported by
Retrocessionaire, and both parties agree to be bound by such
determination.
(D) Retrocessionaire shall retain the investment discretion with respect
to the assets in the trust, provided, however, that all assets held in
the trust shall qualify as admitted assets under Maryland Insurance
Law.
(E) Retrocessionaire shall be permitted to liquidate the trust at the
earlier of (i) such time as Retrocessionaire's obligations under this
Agreement have been met or are terminated or waived or (ii) the
reserves so reported by Retrocessionaire do not exceed $- as of two
successive calendar year ends.
(F) Retrocedant shall bear the reasonable costs and expenses of the
trustee relating to the trust.
20. MISCELLANEOUS PROVISIONS
20.1 SEVERABILITY
If any term or provision of this Agreement shall be held void, illegal, or
unenforceable, the validity of the remaining portions or provisions shall
not be affected thereby.
20.2 SUCCESSORS AND ASSIGNS
This Agreement may not be assigned by either party without the prior
written consent of the other. The provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns as permitted herein.
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20.3 NO THIRD PARTY BENEFICIARIES
Except as otherwise specifically provided for in Article 14 of this
Agreement, nothing in this Agreement is intended or shall be construed to
give any Person, other than the parties hereto, their successors and
permitted assigns, any legal or equitable right, remedy or claim under or
in respect of this Agreement or any provision contained herein, and
Retrocessionaire shall not be directly liable hereunder to any reinsured
under any Reinsurance Contract.
20.4 EQUITABLE RELIEF
Each party hereto acknowledges that if it or its employees or agents
violate the terms of this Agreement, the other party will not have an
adequate remedy at law. In the event of such a violation, the other party
shall have the right, in addition to any other rights that may be
available to it, to obtain in any court of competent jurisdiction
injunctive relief to restrain any such violation and to compel specific
performance of the provisions of this Agreement. The seeking or obtaining
of such injunctive relief shall not foreclose or limit in any way relief
against either party hereto for any monetary damage arising out of such
violation.
20.5 EXECUTION IN COUNTERPARTS
This Agreement may be executed by the parties hereto in any number of
counterparts and by each of the parties hereto in separate counterparts,
each of which counterparts, when so executed and delivered, shall be
deemed to be an original, but all such counterparts shall together
constitute but one and the same instrument.
20.6 NOTICES
All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if
delivered by hand (with receipt confirmed), or by facsimile (with
transmission confirmed), or by certified mail, postage prepaid and return
receipt requested, addressed as follows (or to such other address as a
party may designate by written notice to the others) and shall be deemed
given on the date on which such notice is received:
If to Retrocedant:
[ ]
Facsimile: [No. ]
Attention: [TITLE]
If to Retrocessionaire:
[ ]
Facsimile: [No. ]
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Attention: Secretary
20.7 WIRE TRANSFER
All settlements in accordance with this Agreement shall be made by wire
transfer of immediately available funds on the due date, or if such day is
not a Business Day, on the next day which is a Business Day, pursuant to
the following wire transfer instructions: [ ]. Payment may be made by
cheque payable in immediately available funds in the event the party
entitled to receive payment has failed to provide wire transfer
instructions.
20.8 HEADINGS
Headings used herein are not a part of this Agreement and shall not affect
the terms hereof.
20.9 FURTHER ASSURANCES
Each of the parties shall from time to time, on being reasonably requested
to do so by the other party to this Agreement, shall do such acts and/or
execute such documents in a form reasonably satisfactory to the party
concerned as may be necessary to give full effect to this Agreement and
securing to that party the full benefit of the rights, powers and remedies
conferred upon it by this Agreement.
20.10 THIRD PARTY RIGHTS
(A) Article 14 confers a benefit on the officers, directors and employees
of Retrocedant and of Retrocessionaire (the "Third Parties") and,
subject to the remaining provisions of this sub-section 20.10, is
intended to be enforceable by the Third Parties by virtue of the
Contracts (Rights of Third Parties) Xxx 0000.
(B) The parties to this agreement do not intend that any term of this
agreement, apart from Article 14, should be enforceable, by virtue of
the Contracts (Rights of Third Parties) Xxx 0000, by any person who is
not a party to this agreement.
(C) Notwithstanding the provisions of sub-section 20.10(A) above, this
agreement may be rescinded or varied in any way and at any time by the
parties to this agreement without the consent of any or all of the
Third Parties.
20.11 AMENDMENTS; ENTIRE AGREEMENT
This Agreement may be amended only by written agreement of the parties.
This Agreement, together with the Formation and Separation Agreement,
supersedes all prior discussions and written and oral agreements and
constitutes the sole and entire agreement between the parties with respect
to the subject matter hereof.
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20.12 GOVERNING LAW
This Agreement shall be governed by English law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorised representatives as of the date first above
written.
ST. XXXX REINSURANCE COMPANY LIMITED
By
-------------------------------------
Name:
Title:
PLATINUM UNDERWRITERS REINSURANCE, INC.
By
-------------------------------------
Name:
Title:
