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EXHIBIT 10.3
Insurance Management Agreement
INSURANCE MANAGEMENT AGREEMENT
THIS AGREEMENT, dated as of the 22nd day of December, 1997, by and between
XXXXX & XxXXXXXX MANAGEMENT SERVICES (BERMUDA) LIMITED, a Bermuda corporation
("MMB"), and Annuity and Life Reassurance, Ltd., a Bermuda corporation
("INSURANCE CO.").
WITNESSETH:
WHEREAS, INSURANCE CO. has received authority from the Registrar of
Companies in Bermuda (the "Registrar") under the provisions of the Insurance Act
(Bermuda), 1978 and the Regulations made thereunder (the "Insurance Act") to
engage in the underwriting of insurance or reinsurance as an insurance company;
and
WHEREAS, in conjunction with such underwriting INSURANCE CO. will require
management, administrative and consulting services and MMB is willing to furnish
such services; and
WHEREAS, the parties desire to enter into an agreement whereby MMB will
render, itself or through others retained by MMB, management, administrative and
consulting services with regard to the operation of INSURANCE CO.;
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NOW, THEREFORE, it is hereby mutually agreed by the parties as follows:
1. MMB'S SERVICES. MMB will render the following services with regard to the
business of INSURANCE CO., subject to the limitations and exceptions set forth
herein:
(a) Underwriting of Insurance by INSURANCE CO. Upon the prior written
instructions of INSURANCE CO. MMB shall use its best efforts to cause INSURANCE
CO. to underwrite specific insurance risks within a given class of insurance
business: provided, however, that MMB shall act within any restrictions set
forth by INSURANCE CO. and/or the Registrar for that class of business.
(b) Policyholder Service. Subject to the risks being accepted by the
INSURANCE CO. or the underwriters retained by INSURANCE CO., MMB shall issue and
endorse policies, and, if so instructed in writing by INSURANCE CO., terminate
or cancel policies and issue notices of cancellation. MMB shall xxxx, receive
and render receipts for premiums due to INSURANCE CO. in accordance with the
terms and conditions of each policy of insurance issued and in accordance with
the written instructions of INSURANCE CO. MMB shall have full authority
hereunder to take whatever action it deems necessary or appropriate to attempt
to collect premiums, including, if so instructed by INSURANCE CO., the
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cancellation of policies. MMB shall have no liability for uncollected premiums.
(c) Claims. MMB shall, in accordance with written instructions from
INSURANCE CO., accept or reject claims, settle claims and arrange for the
adjustment of losses and defense of actions, as necessary or appropriate,
arising out of contracts of insurance and reinsurance.
(d) Ceding Reinsurance. If INSURANCE CO. desires to cede reinsurance, MMB
shall administer the cessions to the reinsurers in accordance with instructions
provided by INSURANCE CO. Any such reinsurance arranged shall be on a "gross
premiums" basis and any brokerage normal to such transactions shall be retained
by any insurance broker, including any MMB affiliate, appointed by INSURANCE CO.
to place such reinsurance.
(e) Assuming Reinsurance. If INSURANCE CO. desires to underwrite
reinsurance, MMB shall administer the cessions received from the ceding
companies in accordance with instructions received from INSURANCE CO. INSURANCE
CO. acknowledges that the Registrar may restrict or impose conditions on
INSURANCE CO.'s assumption of reinsurance.
(f) Advice on Insurance Programs. Upon the request of INSURANCE CO. and to
the extent authorized by applicable law, MMB shall assist INSURANCE CO. in the
analysis of insurance and reinsurance programs for
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which INSURANCE CO. is contemplating or has issued insurance or reinsurance
policies.
(g) Other Services. MMB shall perform such other services as may from time
to time be agreed upon between MMB and INSURANCE CO. Initially this will involve
administration of payroll and employee benefits. If an employee of MMB acts as a
director or officer of Insurance Co., such person shall be included as an
additional insured under INSURANCE CO.'s directors and officers liability
policy.
2. OFFICE RECORDS; REPORTS; EXAMINATIONS; INVESTMENTS AND ACCOUNTS.
(a) Office, Books and Records. MMB shall maintain an office in Bermuda,
which shall be appropriately identified as an office of INSURANCE CO. MMB shall
keep at such office, in a manner and form approved by or acceptable to INSURANCE
CO., true and complete books of account and records of all business conducted
under and pursuant to this Agreement and shall, at all reasonable times, make
available for examination and inspection to a duly authorized representative of
INSURANCE CO. or the Registrar, all such books and records. Such books and
records shall remain the property of INSURANCE CO. and shall be delivered
promptly to INSURANCE CO. or its designee following any termination hereof, but
MMB shall have the right at any time within six
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years after any termination of this Agreement to inspect such books and records
and to make copies thereof or extracts therefrom.
(b) Reports to INSURANCE CO. INSURANCE CO.'s fiscal year shall commence on
January 1st and shall end on December 31st of each year. Based on information
made available to MMB, and if requested by INSURANCE CO., MMB shall
periodically prepare such reports as shall be agreed to by MMB and INSURANCE
CO. Financial Statements of INSURANCE CO. for each fiscal year shall be audited
at INSURANCE CO.'s expense by a firm of independent chartered accountants which
shall be selected by INSURANCE CO.
(c) Reports and Examinations. All Bermudian governmental reports,
including tax reports, and all other applications and reports as shall be
required by the Insurance Act shall be prepared and filed by MMB after review
by INSURANCE CO. INSURANCE CO. shall be responsible for any fees or taxes.
INSURANCE CO. shall cooperate with MMB in connection with the preparation of
such reports by furnishing to MMB any information in its possession necessary
for such reports.
MMB shall notify INSURANCE CO. to the extent it obtains knowledge of any
proposed or actual examination or investigation by the Registrar or other
authorized parties of the business and affairs of INSURANCE CO. and MMB shall
cooperate with any such examination or investigation.
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(d) Investments. INSURANCE CO. shall provide MMB with written Investment
Guidelines and MMB shall invest the funds of INSURANCE CO., or liquidate or
change such investments only in accordance with such Guidelines. Such
Investment Guidelines may be changed by INSURANCE CO. from time to time but MMB
shall not be required to recognize such change until MMB has received written
notice thereof. In the event and so long as INSURANCE CO. has not provided MMB
with Investment Guidelines, MMB will invest the funds of INSURANCE CO. solely in
overnight deposits in a Bank chosen by INSURANCE CO.
MMB shall have no liability whatsoever for the soundness of any
investments made hereunder, the amount of return from such investments, the
solvency of the institution in which they may be deposited or invested or any
other liability based upon MMB's actions or failures to act unless MMB's acts
or failures to act are proven to be wilful misconduct or gross negligence.
(e) Bank Accounts. Upon the request of INSURANCE CO., MMB shall open,
maintain and operate bank accounts in Bermuda or elsewhere in the name of
INSURANCE CO., and shall made deposits therein and disbursements therefrom in
accordance with such limitations and restrictions as may be set forth in
written instructions from, or in resolutions passed by the board of directors,
of INSURANCE CO.
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(f) Information Provided to MMB. INSURANCE CO. shall keep MMB informed
during the term of this Agreement of all material developments relating to the
business of INSURANCE CO. and shall promptly furnish to MMB executed sets of
all minutes of the meetings of and the resolutions adopted by the stockholders
and the board of directors of INSURANCE CO.
(g) Authority of MMB. MMB shall have all the power and authority necessary
or desirable to carry out its duties and obligations under this Agreement,
which shall include the right to engage, as an independent contractor, any
person, corporation or other organization to perform any functions to be
performed hereunder by MMB. The authority granted hereunder shall specifically
include the right to engage other operating units within J&H Xxxxx & XxXxxxxx,
Incorporated, or any subsidiary or affiliated company thereof, to perform any
such functions.
3. RELATIONSHIP BETWEEN PARTIES; LIMITATION OF RESPONSIBILITY.
(a) Independent Contractors. The relationship between the parties
established by this Agreement is that of independent contracting parties. As
such, subject to the terms of this Agreement, each shall conduct its business
at its own initiative, responsibility and expense, and shall have no authority
to incur any obligation on
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behalf of the other party. No third party shall have or be deemed to acquire
any rights under this Agreement. Neither party shall use the name of the other
party or any affiliate of such other party in any public document, advertising,
public relations release or any other publicity without the prior written
consent of such other party.
(b) Compliance with Laws. MMB shall use its best efforts to advise
INSURANCE CO. regarding compliance with the insurance Laws of Bermuda. MMB
shall not be responsible for advice on compliance with the laws in any other
jurisdiction in which INSURANCE CO. does business.
(c) Scope of Services. The obligations of MMB hereunder are limited to the
good faith performance of the services to INSURANCE CO. set forth herein and
MMB shall have no liability to INSURANCE CO. or any other person for any action
taken pursuant hereto other than as a result of its wilful misconduct or gross
negligence. MMB is entitled to rely on information or instructions (oral or
written) provided by INSURANCE CO. and MMB shall have no responsibility for the
accuracy or completeness of such information or instructions. MMB shall not
have any other or further obligations or responsibilities to INSURANCE CO.,
including, but not limited to, any obligation or responsibility for the payment
of any insurance or reinsurance premiums, the profitability of the business of
INSURANCE CO., the solvency of any person (including INSURANCE CO.) or the
failure of third parties
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(including insurers and reinsurers) to fulfill their obligations.
(d) Indemnification. INSURANCE CO. shall indemnify and hold harmless
MMB, its officers, directors, employees, agents and affiliates from and against
any losses, claims, damages, liabilities, cost or expenses, including reasonable
attorneys fees and expenses of investigation (collectively, "Losses"), to which
MMB may become subject in connection with the services it provides hereunder;
provided, however, that INSURANCE CO. shall not be liable under the
foregoing indemnity in respect of any Losses to the extent that a court having
jurisdiction shall have determined by a final judgment that such Loss resulted
from MMB's wilful misconduct or gross negligence. The provisions of this section
shall survive the expiration or termination of this Agreement, including any
extensions thereof.
4. COMPENSATION AND EXPENSES.
Fees and expenses for MMB's services hereunder shall be determined and
paid in accordance with Schedule 1, which is attached hereto and made a part
hereof.
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5. EFFECTIVE DATE AND TERMINATION.
(a) Effective Date and Normal Termination. This Agreement shall become
effective on the date set forth on page one hereof (the "Effective Date") and
shall continue until the 31st day of December 1998 and shall be renewable
annually thereafter by the agreement of the parties; provided, however, that
either party may terminate this Agreement at any time by giving not less than
ninety (90) days' written notice to the other party of its intention to do so.
Upon the expiration or termination hereof, MMB shall have no further duties or
obligations hereunder unless specifically set forth herein or otherwise agreed
to by the parties.
(b) Termination for Breach or Bankruptcy. This Agreement may also be
terminated forthwith by written notice of termination to the other party upon
the occurrence of either of the following:
(i) If such other party fails to perform or observe, or commits a
breach of, any provision of this Agreement, and fails to cure, remedy or
satisfactorily explain such failure or breach within thirty (30) days following
delivery to such other party of a written notice of the alleged failure or
breach, or
(ii) If such other party become insolvent (in the legal sense) or
files a voluntary petition in bankruptcy, or makes an assignment for
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the benefit of creditors; or if a committee of creditors or other
representative is appointed to represent its business or an involuntary
petition in bankruptcy is filed against it, and the party fails within thirty
(30) days following the appointment of such committee or representative or the
filing of such involuntary petition to cause the discharge of such committee or
representative or the dismissal of such petition; or if the other party commits
any other act indicating insolvency.
6. MISCELLANEOUS.
(a) Non-Exclusivity. This Agreement shall not in any way prevent MMB
from performing similar services for others.
(b) Foreign Exchange. All expenses and costs paid by MMB on behalf of
INSURANCE CO. in any currency other than United States dollars shall be
converted to United States dollars at the conversion rate in effect on the date
that the expenses or costs were paid by MMB, so that all exchange gain or loss
incident thereto shall be incurred by or inure to the benefit of INSURANCE CO.;
provided, however, that MMB will obtain the written consent of INSURANCE CO.
before making such disbursement.
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(c) Assignments. Neither this Agreement nor any right, benefit or
obligation conferred or imposed hereunder is assignable in whole or in part,
whether by operation of law or otherwise, by either party hereto without the
prior written consent of the other party; provided, however, that either party
may make such an assignment to a corporation which controls, is controlled by,
or is under common control with the assignor.
(d) Successors and Assigns. This Agreement shall be binding upon the
successors, legal representatives or permitted assigns of the parties hereto.
(e) Notices. Any notice or other communication required or permitted
hereunder shall be deemed given upon delivery if delivered personally, or three
days after mailing if mailed by an international overnight courier if such
courier provides evidence of receipt, or the next business day if sent by
facsimile and confirmed by mail, as follows:
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To MMB: Xxxxx & XxXxxxxx Management
(Bermuda) Limited
P.O. Box HM 1262
Xxxxxxxx XX FX, Bermuda
To INSURANCE CO.: Annuity and Life Reassurance, Ltd.
P.O. Box HM 1262
Xxxxxxxx XX FX, Bermuda
or to such other addresses as such parties shall have last designated by notice
to the other parties.
(f) Entire Agreement. All prior negotiations and agreement between the
parties hereto relating to the subject matter hereof are superseded by this
Agreement, and there are no representations, warranties, understandings or
agreements other than those expressly set forth herein, except as modified by
an instrument signed by the parties hereto.
(g) Waivers. The failure of either party at any time to require the other
party's performance of any obligation under this Agreement shall not affect the
right to require performance of that obligation in the future. Any waiver by
either party of any breach of any provision hereof shall not be construed as a
waiver of any continuing or succeeding breach of such provision, a waiver or
modification of the provision itself, or a waiver or modification of any other
right under this Agreement.
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(h) Captions. The captions of the several sections of this Agreement are
inserted solely for convenience of reference, and are neither a part of nor
intended to govern, limit or aid in the construction of any term or provision
hereof.
(i) Governing Law. The validity, construction and enforceability of this
Agreement shall be governed in all respects by the Laws of Bermuda.
(j) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(k) Survival. The representations, warranties and agreements contained or
referred to herein, shall survive the termination hereof, provided that no
claims may be initiated by or on behalf of any party against any other party on
the basis of such representations, warranties and agreements after three years
from the termination hereof, unless based upon a breach or failure to comply
with an agreement which is to be performed or complied with in whole or in part
after three years from the termination hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first-above written.
XXXXX & McLENNAN MANAGEMENT (BERMUDA) LIMITED
("MMB")
By: /s/ Xxxxx Xxxxx
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Title: Senior Vice President
Annuity and Life Reassurance, Ltd.
("INSURANCE CO.")
By: /s/ Xxxxxxxx X. Xxxxx
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Title: CEO
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SCHEDULE 1
COMPENSATION PROVISION
Fees and Expenses with Minimum Fees
(a) Fees
(i) MMB's fees are based on a number of factors including time charges,
complexity, and the value of its services. Individual hourly rates vary
according to the degree of responsibility involved and the experience and skill
required and are reviewed and adjusted annually.
(ii) In consideration for the services to be performed hereunder by MMB,
INSURANCE CO. shall pay to MMB the greater of an amount equal to MMB's fees as
calculated in accordance with (i) above, or fifteen thousand dollars ($15,000;
fee per contract year commencing February 1, 1998 (the "Minimum Fee"). For
purposes of this Agreement a contract year shall mean a twelve (12) month period
commencing on February 1st of each year. If a notice of termination is delivered
prior to February 1, 1998 no fee shall be payable under this paragraph (a)(ii)
only. Costs incurred up to that point under paragraph (iv) shall be reimbursed
to MMB by INSURANCE CO.
(iii) If this Agreement is in effect for only a portion of any contract
year, MMB shall be entitled to fees commensurate with the
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services rendered during such shorter period.
(iv) In addition to the aforementioned services MMB will provide certain
facilities where INSURANCE CO. may maintain its principal office as required,
including but not limited to office space and computer equipment and office
furniture at a fee to be agreed between the parties. All such facilities will be
regarded as ancillary to the provision of services as described or to be added.
(b) Increases. MMB shall notify INSURANCE CO. not less than fifteen (15)
days prior to any increase in MMB's schedule of hourly rates over those in
effect at the time this Agreement is executed.
(c) Expenses. All salaries and fringe benefits of MMB personnel rendering
services under this Agreement shall be at the expense of MMB without
reimbursement by INSURANCE CO. INSURANCE CO. shall be responsible for all costs,
expenses and charges incurred in, or incidental to, its business, including but
not limited to printing costs (e.g. policies and endorsement forms); office
supplies (e.g. stationery, office forms and invoices); photocopy and other
reproduction charges; telephone and facsimile charges; filing and examination
fees; lawyers' and accountants' fees, and any other services contracted for or
on behalf of INSURANCE CO. under the
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provisions of Section 2(g) hereof; premium and other taxes; and all costs,
charges and expenses relative to the processing, handling and adjustment of
claims and losses under coverages authorized and/or written by INSURANCE CO. If
any such expenses are advanced and paid by MMB on behalf of INSURANCE CO.
INSURANCE CO. shall reimburse MMB therefor upon receipt of the statement noted
below.
(d) Billing and Payments. MMB shall render, within thirty (30) days after
the end of each month, a statement to INSURANCE CO. setting forth its fees and
expenses incurred during the immediately preceding month. Payment of the amount
set forth in the statement rendered shall be due ten (10) days subsequent to the
date of the statement.
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MANAGEMENT FEE SCHEDULE
Time charges incurred on behalf of MMB's clients are recorded by each employee
on an hourly rate basis, and are administered through its computerized Time
Recording System.
MMB's hourly charge out rates are as follows:
Management $185
Supervisor $170
Technical $140
Support $110
Junior $ 65
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ADDENDUM
TO
INSURANCE MANAGEMENT AGREEMENT
(1) Facilities
It is hereby understood and agreed with respect to Schedule I article
(iv) that the "facilities" to be provided shall be defined as follows:
Rental of office space, electricity (heat and light), air-
conditioning, janitorial services, rental of fixtures, fittings,
furniture, telephone equipment and infrastructure e.g. lights, walls,
doors, carpeting, etc. inclusive of general wear and tear. Rental
of filing cabinets, computer infrastructure, computer operations
including backup and server access. Maintenance including security,
landscaping and other items of a maintenance nature.
Such facilities re fully described in Appendix One.
In consequence of the provision of stated facilities a fee of $5,000
per month shall be payable by Insurance Co. to MMB, commencing
February 1st, 1998.
(2) Other Services
It is hereby understood and agreed with respect to clause 1 (g) of the
Agreement that "other services'' shall be defined as follows, with
accompanying time charges:
* Personnel, Immigration, Payroll, Health and Dental Insurance
Administration
Personnel Consulting:
$250 per hour (15 minute minimum).
Immigration negotiation:
New Work Permit - $2,500 per permit.
Work Permit Renewal - $500 per permit.
Advertising and Permit Fees as incurred.
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Payroll, Health and Dental Insurance Administration:
$175 per hour.
* Computer Consulting, Computer setup, Configuration and Trouble
Shooting.
$175 per hour
Consumables at cost as incurred.
* Building and Space Management
$200 per hour
* Telephone, Courier
Billed through "out of pocket" expenses along with all other
similar expenses as part of general management service.
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APPENDIX ONE
FACILITIES
- Three (3) adjacent private offices, all 14' x 6" by 10' 6" with windows the
full length of the north side (14' 6") and glass on the internal wall on
the south side. Each office to be furnished with a desk, side return and
chair.
- Four (4) open plan workstations adjacent to the private offices, all fitted
with 80" worktops and office chair. Sizes as follows:
- a. 80" by 6' Back to back with b.
- b. 80" by 6' Back to back with a.
- c. 80" by 6' 8"
- d. 80" by 6' Open sided - suitable as secretarial
workstation.
- All offices and workstations to be fitted with Mitel Superset 420 telephone
handsets. Each handset capable of answering the incoming line and engaging
in conference calling.
- Limited number of income / outgoing trunk lines, one line dedicated to
facsimile traffic.
- Housing for one fax machine, machine to be purchased and the asset of
Annuity Re. (Purchasing can be facilitated by J&H Xxxxx & XxXxxxxx if
required).
- Housing for one photocopy machine, machine to be purchased and the asset of
Annuity Re. (Purchasing can be facilitated by J&H Xxxxx & McLennan if
required).
- Three (3) 5 drawer filing cabinets.
- Five (5) IBM-compatible personal computers of a specification yet to be
determined. Machines to be purchased and the asset of Annuity Re.
(Purchasing can be facilitated by J&H Xxxxx & XxXxxxxx if required).
- One (1) HP laser printer of a specification yet to be determined. Machine
to be purchased and the asset of Annuity Re. (Purchasing can be facilitated
by J&H Xxxxx & McLennan if required).
- Computer networking and cabling for five PCs and one laser printer.
- Print and File Server hosting services for standard PC files. Backup
performed daily and off site storage of data provided.
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- One company name displayed in lobby directory.
- Access to J&H Xxxxx & XxXxxxxx commissioned courier services for overseas
mail delivery on a time and materials basis.
- Supply of hot beverages and use of staff pantry on 6th floor.
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IN WITNESS WHEREOF, the parties have executed this Addendum as of the effective
date of the Agreement, of which it shall form an integral part.
XXXXX & McLENNAN MANAGEMENT (BERMUDA) LIMITED
("MMB")
By: /s/ Xxxxx Xxxxx
----------------------------
Title: Senior Vice President
Annuity and Life Reassurance, Ltd.
("INSURANCE CO.")
By: /s/ Xxxxxxxx X. Xxxxx
-----------------------------
Title: Chief Executive Officer
