Exhibit 10.27
AGGREGATE EXCESS OF LOSS
RETROCESSION AGREEMENT
Effective January 1, 2004
ARTICLE PAGE
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1 BUSINESS COVERED 2
2 TERM 3
3 TERRITORY 3
4 EXCLUSIONS 3
5 COVERAGE 4
6 NET RETAINED LINES 5
7 REINSURANCE PREMIUM 5
8 ACCOUNTS AND LOSS SETTLEMENTS 5
9 CURRENCY 6
10 TAXES 6
11 RESERVES 7
12 SPECIAL TERMINATION 8
13 OFFSET 9
14 ERRORS AND OMISSIONS 9
15 ACCESS TO RECORDS 9
16 INSOLVENCY 10
17 CONFIDENTIALITY 10
18 ARBITRATION 11
19 SERVICE OF SUIT 12
20 INTERMEDIARY 12
21 CHOICE OF LAW 13
22 PROPORTION 14
EXHIBIT A 15
EXCLUSIONS 6-25
1
AGGREGATE EXCESS OF LOSS
RETROCESSION AGREEMENT
(hereinafter referred to as the "Agreement")
between
CONVERIUM REINSURANCE (NORTH AMERICA) INC.
for their respective Quota Share Interest and Liabilities
(hereinafter referred to as the "Company")
and
TOWER INSURANCE COMPANY OF NEW YORK
New York, New York
(hereinafter referred to as the "Reinsurer")
ARTICLE 1
BUSINESS COVERED
A. Pursuant to this Agreement, the Reinsurer shall indemnify the Company,
subject to the terms, conditions and exclusions set forth in this
Agreement, for the net liability in respect of Middle Market Business
and Large Lines Real Estate General Liability Business which may accrue
to the Company from Ultimate Net Loss and Loss Adjustment Expenses
arising out of reinsurance assumed by the Company pursuant to its
participation in that certain 2004 Quota Share Reinsurance Agreement
between State National Insurance Company, Inc. ("State National") and
the Company, effective January 1, 2004 (the "State National Quota Share
Reinsurance Agreement"), a copy of which is attached hereto as Exhibit
A and incorporated herein by reference. All capitalized terms used in
this Agreement are as defined in the State National Quota Share
Reinsurance Agreement unless such capitalized terms are expressly
defined herein.
B. In addition to the reinsurance coverage provided pursuant to Article
1(A) of this Agreement, the Reinsurer shall indemnify and make whole
the Company for any and all amounts of Net Written Premium on policies
reinsured under the State National Quota Share Reinsurance Agreement,
including but not limited to Net Written Premium for Small Market
Business, that State National fails to collect and to forward to the
Company (the "Delinquent Amount"), as required pursuant to the terms of
the State National Quota Share Reinsurance Agreement, within 10 (ten)
business days of the Company providing the Reinsurer with a written
notice requesting payment of such Delinquent Amount.
C. In addition to the reinsurance coverage provided pursuant to Article
1(A) and 1(B) of this Agreement, the Reinsurer shall indemnify the
Company for 100% of all Loss Adjustment Expenses (as defined in the
State National Quota Share Reinsurance Agreement) incurred by the
Company pursuant to the State National Quota Share Reinsurance
Agreement, including but not limited to Loss Adjustment Expenses
arising out of Small Market Business, should Tower Risk Management
Corp. (hereinafter "TRM") be unable to fulfill its obligations in
servicing the underlying policies underwritten by TRM on behalf of
State National Insurance Company, Inc.
2
Such indemnification shall be made within 10 (ten) business days of
payments by the Company to State National of any such Loss Adjustment
Expenses.
ARTICLE 2
TERM
A. This Agreement shall take effect 12:01 a.m., Eastern Standard Time,
January 1, 2004 as respects losses occurring and or claims made with
respect to the Business Covered under the State National Quota Share
Reinsurance Agreement and shall continue in full force and effect until
such time as the State National Quota Share Reinsurance Agreement
terminates (the "Term"). At the time of termination, the Reinsurer
shall be liable for the in force Subject Business for so long as the
Company remains liable for such in force Subject Business pursuant to
the State National Quota Share Reinsurance Agreement.
B. The Company and the Reinsurer may agree to terminate this Agreement or
some portion of the Subject Business on a cut-off basis. Upon such
termination, the Reinsurer shall incur no liability for losses
occurring or claims made subsequent to the effective date of
termination and the Reinsurer shall return to the Company its unearned
premium reserve.
ARTICLE 3
TERRITORY
This Agreement shall follow the territorial limits set forth in the State
National Quota Share Reinsurance Agreement.
ARTICLE 4
EXCLUSIONS
This Agreement shall not apply to and specifically excludes:
A. Nuclear Incident, in accordance with the following clauses attached
hereto:
1. Nuclear Incident Exclusion Clause - Physical Damage -
Reinsurance - U.S.A. - XXX 0000;
2. Nuclear Incident Exclusion Clause - Liability - Reinsurance -
U.S.A. - XXX 0000;
3
B. War Risks, in accordance with the War Risks Exclusion Clause appearing
in the original Policies;
C. Insolvency, in accordance with the Insolvency Funds Exclusion Clause
attached hereto;
D. Liability assumed by the Company as a member of any pool, association
or syndicate, in accordance with the Pools, Associations and Syndicates
Exclusion Clause attached hereto;
E. Earthquake, when written as such;
F. Liability arising out of ownership, maintenance or use of any aircraft
or flight operations;
G. Professional Liability, when written as such, however not to exclude
when written as part of a package policy or when written in conjunction
with other policies issued by the Company;
H. Insolvency Risks and Financial Guarantee;
I. Any acquisitions of companies or books of business outside of the
normal course of business ("agent rollovers") without the prior written
consent of the Reinsurer in the underlying State National Quota Share
Reinsurance Agreement.
J. Asbestos liabilities of any nature;
K. Pollution liabilities of any nature;
L. Assumed reinsurance with the exception of inter-affiliate reinsurance;
M. Ex gratia payments in excess of $3,000 (three thousand dollars).
ARTICLE 5
COVERAGE
A. Coverage A - The Reinsurer shall indemnify the Company for 25% (twenty
five percent) of the paid portion of all Ultimate Net Loss and Loss
Adjustment Expenses arising out of Middle Market Business in excess of
75% (seventy five percent) to 115% (one hundred and fifteen percent) of
the Net Earned Premium allocable to Middle Market Business up to a
maximum amount equal to 10% (ten percent) of Net Earned Premium for
Middle Market Business.
B. Coverage B - The Reinsurer shall indemnify the Company for 25% (twenty
five percent) of the paid portion of all Ultimate Net Loss and Loss
Adjustment Expenses arising out of Large Lines Real Estate General
Liability Business in excess of 60% (sixty percent) to 125% (one
hundred and twenty-five percent) of the Net Earned Premium allocable to
Large Lines Real Estate General Liability Business up to a maximum
amount equal to 16.25% (sixteen and one-quarter percent) of Net Earned
Premium for Large Lines Real Estate General Liability Business.
4
ARTICLE 6
NET RETAINED LINES
This Agreement applies only to that portion of Business Covered which the
Company retains net for its own account pursuant to the terms of the State
National Quota Share Reinsurance Agreement.
ARTICLE 7
REINSURANCE PREMIUM
The Company shall pay the Reinsurer reinsurance premium consisting of the
following Coverage A Reinsurance Premium and Coverage B Reinsurance Premium
(collectively, the "Reinsurance Premium"):
A. Coverage A Reinsurance Premium - The Company shall pay the Reinsurer a
Coverage A Reinsurance Premium equal to 1.6% (one point six percent) of
Net Written Premium allocable to the Middle Market Business Segment, as
collected under the State National Quota Share Reinsurance Agreement.
Coverage A Reinsurance Premium is payable by the Company to the
Reinsurer at the time the Company receives its Reinsurance Premium from
State National under the State National Quota Share Reinsurance
Agreement.
B. Coverage B Reinsurance Premium - The Company shall pay the Reinsurer a
Coverage B Reinsurance Premium equal to 3.0% (three point zero percent)
of Net Written Premium allocable to Large Lines Real Estate General
Liability Business, as collected under the State National Quota Share
Reinsurance Agreement. Coverage B Reinsurance Premium is payable by the
Company to the Reinsurer at the time the Company receives its
Reinsurance Premium from State National under the State National Quota
Share Reinsurance Agreement.
ARTICLE 8
ACCOUNTS AND LOSS SETTLEMENTS
A. Accounts - Within 30 (thirty) days following the Company's receipt from
State National of the quarterly report due the Company pursuant to
Article 12, Accounts, Remittances and Loss Settlements of the State
National Quota Share Reinsurance Agreement, the Company shall report to
the Reinsurer, for each Business Segment reinsured hereunder, the
amount of:
1. Reinsurance Premium, per Article 7, Reinsurance Premium;
2. Ceded Ultimate Net Loss and Loss Adjustment Expenses paid;
3. Ceded Ultimate Net Loss and Loss Adjustment Expenses
outstanding (including IBNR);
5
Reports shall continue until final settlement of all ceded Ultimate Net
Loss and Loss Adjustment Expenses hereunder.
Notwithstanding the above, the Company shall advise the Reinsurer
promptly of all Ultimate Net Losses, which, in the opinion of the
Company, may result in a claim hereunder and of all subsequent
developments thereto which, in the opinion of the Company, may
materially affect the position of the Reinsurer. Inadvertent omission
or oversight in dispatching such advises shall in no way affect the
liability of the Reinsurer. However, the Company shall notify the
Reinsurer of such omission or oversight promptly upon its discovery.
B. Loss Settlements - The Reinsurer shall pay the Company the amount of
paid Ceded Ultimate Net Loss and Loss Adjustment Expenses set forth in
each quarterly report no later than 15 (fifteen) days following the
Reinsurer's receipt of the quarterly report by direct wire transfer to
the Intermediary. If the Reinsurer fails to pay the full amount of paid
Ceded Ultimate Net Loss and Loss Adjustment Expenses by the date that
such amounts are due under this paragraph (B) the Company has the right
to withdraw the full amount overdue from the trust account (the "Trust
Account") established by the Reinsurer for the benefit of the Company
pursuant to that certain Trust Agreement, effective as of March, 2004
among Tower Insurance Company of New York, Converium Reinsurance (North
America) Inc. and State Street Bank and Trust Company, provided that
such overdue amounts have not been paid in full by the Reinsurer to the
Company within 30 (thirty) days of the date such amounts were due under
this paragraph (B).
C. All Ultimate Net Loss settlements made by the Company on Business
Covered, whether under policy terms and conditions or by way of
compromise, shall be in the sole discretion of the Company and shall be
unconditionally binding on the Reinsurer. Upon satisfactory proof of
loss, the Reinsurer shall pay or allow, as applicable, its proportional
share of each such settlement in accordance with this Agreement.
ARTICLE 9
CURRENCY
A. Whenever the word "dollars" or the "$" appears in this Agreement, they
shall be construed to mean United States Dollars and all transactions
under this Agreement shall be in United States Dollars.
B. Amounts paid or received by the Company in any other currency shall be
converted to United States Dollars at the rate of exchange at the date
such transaction is entered on the books of the Company.
ARTICLE 10
TAXES
In consideration of the terms under which this Agreement is issued, the Company
undertakes not to claim any deduction of the Reinsurance 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 to the District of Columbia.
6
ARTICLE 11
RESERVES
A. If a jurisdiction of the United States shall not permit the Company, in
the statements required to be filed with its regulatory authority(ies),
to receive full credit as admitted reinsurance for any Reinsurer's
share of obligations, the Company shall forward to such Reinsurer a
statement of the Reinsurer's share of such obligations. Upon receipt of
such statement, the Reinsurer shall promptly apply for and provide the
Company with a "clean", unconditional and irrevocable Letter of Credit
in the amount specified in the statement submitted, with terms and bank
acceptable to the regulatory authority(ies) having jurisdiction over
the Company.
B. "Obligations" as used in this Article, shall mean the sum of losses
paid and Loss Adjustment Expenses paid by the Company but not yet
recovered from the Reinsurer, plus reserves for reported losses, Loss
Adjustment Expenses, losses incurred but not reported and premiums
unearned, if any.
C. The Reinsurer hereby agrees that the Letter of Credit shall provide for
automatic extension of the Letter of Credit without amendment for one
year from the date of expiration of said Letter or any future
expiration date unless 30 (thirty) days prior to any expiration the
issuing bank shall notify the Company by registered mail that the
issuing bank elects not to consider the Letter of Credit renewed for
any additional period. An issuing bank, not a "qualified bank" as
defined by Regulation 133 promulgated by the Insurance Department of
the State of New York, shall provide 60 (sixty) days notice to the
Company prior to any expiration.
D. Notwithstanding any other provision of this Agreement, the Company or
any successor by operation of law of the Company including, without
limitation, any liquidator, rehabilitator, receiver or conservator of
the Company may draw upon such credit, without diminution because of
the insolvency of any party hereto, at any time and undertakes to use
and apply such credit for one or more of the following purposes only:
1. to pay the Reinsurer's share or to reimburse the Company for the
Reinsurer's share of any obligations, as stipulated in the statement
submitted by the Company to the Reinsurer, which is due to the Company
and not otherwise paid by the Reinsurer;
2. in the event the Company has received effective notice of
non-renewal of the Letter of Credit and the Reinsurer's
liability remains unliquidated and undischarged 30 (thirty)
days prior to the expiry date of the Letter of Credit to
withdraw the balance of the Letter of Credit and place such
sums in an interest bearing trust account to secure the
continuing liabilities of the Reinsurer under this Agreement
until a renewal Letter of Credit acceptable to the regulatory
authority(ies) having jurisdiction over the Company, or a
substitute in lieu thereof acceptable to the regulatory
authority(ies) having jurisdiction over the Company, has been
received by the Company. The Company shall provide to the
Reinsurer payment of any interest thereon accruing from such
account.
7
3. to make refund of any sum which is in excess of the actual
amount required for Sections 1 and 2 of this paragraph.
E. At annual intervals or more frequently as determined by the Company,
but never more frequently than quarterly, the Company shall prepare a
specific statement, for the sole purpose of amending the Letter of
Credit, of the Reinsurer's share of any obligations. If the statement
shows that the Reinsurer's share of obligations exceeds the balance of
credit as of the statement date, the Reinsurer shall, within 30
(thirty) days after receipt of notice of such excess, secure delivery
to the Company of an amendment of the Letter of Credit increasing the
amount of credit by the amount of such difference. If the statement
shows, however, that the Reinsurer's share of obligations is less than
the balance of credit as of the statement date, the Company shall,
within 30 (thirty) days after receipt of written request from the
Reinsurer, release such excess credit by agreeing to secure an
amendment to the Letter of Credit reducing the amount of credit
available by the amount of such excess credit.
F. The bank shall have no responsibility whatsoever in connection with the
propriety of withdrawals made by the Company or the disposition of
funds withdrawn, except to assure that withdrawals are made only upon
the order of properly authorized representatives of the Company. The
Company shall incur no obligation to the bank in acting upon the
credit, other than as appears in the express terms thereof.
ARTICLE 12
SPECIAL TERMINATION
The Company may terminate this Agreement on a cut-off basis or a run-off basis
(the method of termination to be at the sole option of the Company) at any time,
provided that one or more of the qualifying events set forth below has
transpired, by giving the Reinsurer thirty (30) days prior written notice of its
intent to invoke its rights under this Article 12, Special Termination:
1. Reinsurer's A.M. Best rating drops below a "B+"; or
2. A reduction of more than 20% (twenty percent) of Reinsurer's
statutory surplus from Reinsurer's Statutory Surplus Level at
December 31, 2003; or
3. There is a change in the office of President or CEO of
Reinsurer; or
4. Insolvency, Rehabilitation, or Regulatory Supervision of
Reinsurer; or
5. Reinsurer ceases underwriting new property and casualty
business; or
6. Reinsurer sells 50% or more of its assets or reinsures 50% or
more of its Net Written Premium or net liabilities (all as of
January 1, 2004) to an unaffiliated third party; or
8
7. An insurance regulatory authority or governmental entity in
any United States jurisdiction revokes, suspends or forces
Reinsurer to withdraw its certificate of authority in such
jurisdiction; or
8. If any of the events or circumstances described in Article
6.01 (a) through 6.01(h) of that certain General Agency
Agreement, made and entered into as of January 1, 2004, by and
among State National, Tower Risk Management Corp. and the
Reinsurer, transpire or occur at any time.
9. If Reinsurer fails to maintain the Trust Account, as defined
in Article 8, Accounts and Loss Settlements, Section B, Loss
Settlements, at the minimum balance required by such Trust
Agreement for a period of seventy five (75) days.
If the Company elects to invoke this Article 12, Special Termination on a
cut-off basis, the Reinsurer shall have no liability for losses occurring
subsequent to the effective date of termination and shall return all Reinsurance
Premium that is not earned as of the date of termination to the Company. If the
Company elects to invoke this Article 12, Special Termination on a run-off
basis, the Reinsurer will continue to be liable for the full amount of paid
Ceded Ultimate Net Loss and Loss Adjustment Expenses on the in force Subject
Business for so long as the Company remains liable for such in force Subject
Business pursuant to the State National Quota Share Reinsurance Agreement.
ARTICLE 13
OFFSET
The Company and the Reinsurer shall have the right to offset any balance or
amounts due from one party to the other under the terms of this Agreement or any
other agreement between the Company and the Reinsurer. The party asserting the
right of offset may exercise such right any time whether the balances due are on
account of Reinsurance Premiums, Ultimate Net Losses, Loss Adjustment Expenses
or otherwise. However, in the event of insolvency of any party hereto, offset
shall only be allowed in accordance with applicable law.
ARTICLE 14
ERRORS AND OMISSIONS
Inadvertent delays, errors or omissions made by the Company in connection with
this Agreement shall not relieve the Reinsurer from any liability which would
have attached had such delay, error or omission not occurred, provided always
that such delay, error or omission shall be rectified as soon as possible after
discovery by the Company's home office.
ARTICLE 15
ACCESS TO RECORDS
The Company shall place at the disposal of the Reinsurer at all reasonable
times, and the Reinsurer shall have the right to inspect through their
designated representatives, during the Term of this Agreement and thereafter,
all books, records and papers of the Company in connection with any reinsurance
hereunder, or the subject matter hereof.
9
ARTICLE 16
INSOLVENCY
A. In the event of the insolvency of the Company, this reinsurance shall
be payable directly to the Company, or to its liquidator, receiver,
conservator, or statutory successor on the basis of the liability of
the Company without diminution because of the insolvency of the Company
or because the liquidator, receiver, conservator or statutory successor
of the Company has failed to pay all or a portion of any claim. It is
agreed, however, that the liquidator, receiver, conservator, or
statutory successor of the Company shall give written notice to the
Reinsurer of the pendency of a claim against the Company indicating the
policy insured which claim would involve a possible liability on the
part of the Reinsurer with a reasonable time after such claims is filed
in the conservation or liquidation proceeding or in the receivership,
and that during the pendency of such claim, the Reinsurer may
investigate such claim and interpose, at its own expense, in the
proceeding where such claim is to be adjudicated, any defense or
defenses that they may deem available to the Company or its liquidator,
receiver, conservator or statutory successor. The expense thus incurred
by the Reinsurer shall be chargeable, subject to the approval of the
court, against the Company as part of the expense of conservation or
liquidation to the extent of a pro rata share of the benefit which may
accrue to the Company solely as a result of the defense undertaken by
the Reinsurer.
B. Where two or more reinsurers are involved in the same claim and a
majority in interest elect to interpose defense to such claim, the
expense shall be apportioned in accordance with the terms of this
Agreement as though such expense had been incurred by the insolvent
Company.
ARTICLE 17
CONFIDENTIALITY
The parties acknowledge there may be portions of this Agreement, the Reinsurance
Agreement submission or the marketing package that may contain confidential,
proprietary information of the Company. The Reinsurer shall maintain the
confidentiality of such information concerning the Company and its business and
shall not disclose it to any third person without prior approval; provided,
however, that the Reinsurer may be required and is permitted under this
Agreement to disclose such information in answers to interrogatories, subpoenas
or other legal/arbitration processes as well as to the Company's Intermediaries,
to the Reinsurer's retrocessionaire, and applicable intermediaries, or in
response to requests by governmental and regulatory agencies. In addition, the
Reinsurer may disclose such information to its accountants and to its outside
legal counsel as may be necessary.
10
ARTICLE 18
ARBITRATION
A. Any dispute or other matter in question between the Company and the
Reinsurer arising out of, or relating to, the formation,
interpretation, performance or breach of this Agreement, whether such
dispute arises before or after termination of this Agreement, shall be
settled by arbitration. Arbitration shall be initiated by the delivery
of a written notice of demand for arbitration by one party to the other
within a reasonable time after the dispute has arisen.
B. If more than one reinsurer is involved in the same dispute, all such
reinsurers shall constitute and act as one party for the purposes of
this Article, provided, however, that nothing herein shall impair the
rights of such reinsurers to assert several, rather than joint,
defenses or claims, nor be construed as changing the liability of the
reinsurers under the terms of this Agreement from several to joint.
C. Each party shall appoint an individual as arbitrator and the two so
appointed shall then appoint a third arbitrator. If either party
refuses or neglects to appoint an arbitrator within 60 (sixty) days,
the other party may appoint the second arbitrator. If the two
arbitrators do not agree on a third arbitrator within 60 (sixty) days
of their appointment, either party may petition the American
Arbitration Association to appoint a third arbitrator. The arbitrators
shall be active or former officers of insurance or reinsurance
companies or Lloyd's Underwriters; the arbitrators shall not have a
personal or financial interest in the result of the arbitration.
D. The arbitration hearings shall be held in New York, New York or such
other place as may be mutually agreed. Each party shall submit its case
to the arbitrators within 60 (sixty) days of the selection of the third
arbitrator or within such longer period as may be agreed by the
arbitrators. The arbitrators shall not be obliged to follow judicial
formalities or the rules of evidence except to the extent required by
governing law, that is, the state law of the situs of the arbitration
as herein agreed; they shall make their decisions according to the
practice of the reinsurance business. The decision rendered by a
majority of the arbitrators shall be final and binding on both parties.
Such decision shall be a condition precedent to any right of legal
action arising out of the arbitrated dispute which either party may
have against the other. Judgment upon the award rendered may be entered
in any court having jurisdiction thereof.
E. Each party shall pay the fee and expenses of its own arbitrator and
one-half of the fee and expenses of the third arbitrator. All other
expenses of the arbitration shall be equally divided between the
parties.
F. Except as provided above, arbitration shall be based, insofar as
applicable, upon the procedures of the American Arbitration
Association.
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ARTICLE 19
SERVICE OF SUIT
(This Article only applies to reinsurers domiciled outside the United States
and/or unauthorized in any state, territory or district of the United States
having jurisdiction over the Company.)
A. It is agreed that in the event of the failure of the Reinsurer hereon
to pay any amount claimed to be due hereunder, the Reinsurer hereon, at
the request of the Company, shall 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 right 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 Mendes and Mount, 000 Xxxxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000-0000, and that in any suit instituted, the Reinsurer
shall abide by the final decision of such court or of any Appellate
Court in the event of an appeal.
B. 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 Company to give a written undertaking to the Company
that they shall enter a general appearance upon the Reinsurer's behalf
in the event such a suit shall be instituted.
C. 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 their true and lawful
attorney upon whom may be served any lawful process in any action, suit
or proceeding instituted by or on behalf of the Company or any
beneficiary hereunder arising out of this Agreement 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.
ARTICLE 20
INTERMEDIARY
Pegasus-Towers Xxxxxx Reinsurance is hereby recognized as the Intermediary
negotiating this Agreement for all business hereunder. All communications
(including but not limited to notices, statements, Premium, return premium,
commissions, Taxes, losses, Loss Adjustment Expense, salvages and loss
settlements) relating thereto shall be transmitted to the Company or the
Reinsurer through Pegasus-Towers Xxxxxx Reinsurance, 000 Xxxxxx Xxxxxx Xxxxx,
Xxxxxxxx, XX 00000. Payments by the Company to the Intermediary shall be deemed
to constitute payment to the Reinsurer. Payments by the Reinsurer to the
Intermediary shall be deemed to constitute payment to the Company only to the
extent that such payments are actually received by the Company.
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ARTICLE 21
CHOICE OF LAW
This Agreement shall be governed as to performance, administration and
interpretation by the laws of the State of New York, exclusive of that state's
rules with respect to conflicts of laws, except as to rules with respect to
credit for reinsurance in which case the rules of all applicable states shall
apply.
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ARTICLE 22
PROPORTION
In Witness Whereof, the parties hereto have caused this Agreement to be executed
in triplicate by their duly authorized representatives:
Signed this day of , 2003,
For and on behalf of CONVERIUM REINSURANCE (NORTH AMERICA) INC. in confirmation
of the terms, conditions and Reinsurer hereon
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------------------------------------------
(Signature)
Xxxxxx X. Xxxxxx
-------------------------------------------------------------------------
(Print Name)
Title: VP Underwriting
-------------------------------------------------------------------------
Signed this 8th day of March, 2004,
For and on behalf of TOWER INSURANCE COMPANY OF NEW YORK for a 100% (one hundred
percent) participation of the terms and conditions hereon
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------------------------------------------------
(Signature)
Xxxxxx Xxxxxxxx
(Print Name)
Title: Vice President
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EXHIBIT A
2004 STATE NATIONAL QUOTA SHARE REINSURANCE AGREEMENT
15
NUCLEAR INCIDENT EXCLUSION CLAUSE
PHYSICAL DAMAGE - REINSURANCE - USA
1. This Contract 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 Contract 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 operations of paragraphs (1) and
(2) hereof, this Contract 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 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
subparagraph (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 operations of paragraphs (1), (2)
and (3) hereof, this Contract 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.
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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
NOTE: - Without in any way restricting the operation of paragraph (1) hereof, it
is understood and agreed that
(a) all policies issued by the Reassured on or before
31st December 1957 shall be free from the application
of the other provisions of this Clause until expiry
date or 31st December 1960 whichever first occurs
whereupon all the provisions of this Clause shall
apply.
(c) with respect to any risk located in Canada policies
issued by the Reassured 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 1960 whichever first occurs whereupon all
the provisions of this Clause shall apply.
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NUCLEAR INCIDENT EXCLUSION CLAUSE
LIABILITY - REINSURANCE - U.S.A.
1. This Agreement does not cover any loss or liability accruing to the
Cedent 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
Agreement all the original policies of the Cedent (new, renewal and
replacement) of the classes specified in Clause II of this paragraph
(2) from the time specified in Clause III of 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 limits 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 Cedent on New York risks, until 90 days
following approval of the Limited Exclusion Provision
by the Governmental Authority having jurisdiction
thereof.
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 Agreement the original liability policies of the
Cedent (new, renewal and replacement) affording the following
coverages:
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Owners, Landlords and Tenants Liability, Contractual
Liability, Elevator Liability, Owners or Contractors
(including railroad), Protective Liability, Manufacturers and
Contractors Liability, Product 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.
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
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(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 or by or
on behalf of an insured; or
(c) (the injury, sickness, disease, death or destruction
(the 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 by-product
material; "source material", "special nuclear material" and
"by-product material" have the meanings given to 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 by-product 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,
(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"
("property damage" includes all forms of radioactive
contamination of property. (includes all forms of
radioactive contamination of property.
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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 Cedent
on New York risks, or
(ii) Statutory liability insurance required under Chapter
90, General Laws of Massachusetts, until 90 days
following approval of the Board 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 Cedent in
Canada and that with respect of such policies this Clause shall be
deemed to include the Nuclear Energy Liability Exclusion Provisions
adopted by the Canadian Underwriters' Association or the Independent
Insurance Conference of Canada.
-------------------------------
*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.
21
WAR RISK EXCLUSION CLAUSE (REINSURANCE)
As regards interests 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 interest which
at time of loss or damage are within the territorial limits of the United States
of America (comprising the 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 interests insured are situated.
22
INSOLVENCY FUND EXCLUSION CLAUSE
This Agreement excludes all liability of the Ceding 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
guarantee fund, insolvency fund, plan, pool, association, fund or other
arrangement, howsoever denominated, established or governed, which provides for
any assessment of or payment or assumption by the Ceding 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 any 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.
23
POOLS, ASSOCIATIONS AND SYNDICATES EXCLUSION CLAUSE
Section A:
Excluding:
(a) All business derived directly or indirectly from any Pool,
Association, or Syndicate which maintains its own reinsurance
facilities.
(b) Any Pool or Scheme (whether voluntary or mandatory) formed
after March 1, 1968 for the purpose of insurance property
whether on a country-wide basis or in respect of designated
areas. This exclusion shall not apply to so-called Automobile
Insurance Plans or other Pools formed to provide coverage for
Automobile Physical Damage.
Section B:
It is agreed that business written by the Company for the same perils, which is
known at the time to be insured by, or in excess of underlying amounts placed in
the following Pools, Associations or Syndicates, whether by way of insurance or
reinsurance, is excluded hereunder:
Industrial Risk Insurers,
Associated Factory Mutuals Improved Risk Mutuals Any Pool, Association
or Syndicate formed for the purpose of writing Oil, Gas or
Petro-Chemical Plants and/or Oil or Gas Drilling Rigs, United States
Aircraft Insurance Group, Canadian Aircraft Insurance Group, Associated
Aviation Underwriters, American Aviation Underwriters
Section B does not apply:
(a) Where the Total Insured Value over all interests of the risk
in question is less than $250,000,000.
(b) To interests traditionally underwritten as Inland Marine or
stock and/or contents written on a blanket basis.
(c) To Contingent Business Interruption, except when the Company
is aware that the key location is known at the time to be
insured in any Pool, Association, or Syndicate named above
other than as provided for under Section B(a).
(d) To risks as follows:
Offices, Hotels, Apartments, Hospitals, Educational
Establishments, Public Utilities, (other than railroad
schedules) and builder's risks on the classes of risks
specified in this subsection (d) only. Where this clause
attaches to Catastrophe Excesses, the following Section C is
added:
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Section C:
Nevertheless the Reinsurer specifically agrees that liability accruing to the
Company from its participation in:
(1) The following so-called "Coastal Pools":
Alabama Insurance Underwriting Association Florida Windstorm
Underwriting Association Louisiana Insurance Underwriting
Association Mississippi Windstorm Underwriting Association
North Carolina Insurance Underwriting Association South
Carolina Windstorm and Hail Underwriting Association Texas
Catastrophe Property Insurance Association
AND
(2) All "Fair Plan" and "Rural Risk Plan" business for all perils
otherwise protected hereunder shall not be excluded, except,
however, that this reinsurance does not include any increase
in such liability resulting from:
(i) The inability of any other participant in such
"Coastal Pool" and/or "Fair Plan" and/or "Rural Risk
Plan" to meet its liability.
(ii) Any claim against such "Coastal Pool" and/or "Fair
Plan" and/or "Rural Risk Plan" or any participant
therein, including the Company, whether by way of
subrogation or otherwise, brought by or on behalf of
any insolvency fund (as defined in the Insolvency
Fund Exclusion Clause incorporated in this Contract).
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