Common use of Special Commutation Clause in Contracts

Special Commutation. A. If the Company experiences a 33 l/3% or greater decrease in its Consolidated Statutory Policyholders' Surplus from the amount reported in its Statutory Annual Statement as of December 31, 2002 (the "Triggering Event"), the Reinsurer shall have the sole option to commute this Contract and to commute all outstanding liabilities (the "Special Commutation") at any time by giving the Company 15 days' prior written notice. B. Where applicable, the Company shall notify the Reinsurer no later than five business days from the date of the Triggering Event. When the Reinsurer is on notice of the Triggering Event, the Reinsurer shall notify the Company within a reasonable time thereafter whether or not it will exercise its right of Special Commutation. Failure by the Company to so notify the Reinsurer or failure by the Reinsurer to invoke Special Commutation after the Triggering Event shall not limit the right of the Reinsurer to invoke Special Commutation in the future; such Special Commutation, however, would take effect on the date of Reinsurer invocation, and not be retroactive back to the date of the Triggering Event. C. Upon the Reinsurer's Notice of Special Commutation, this Contract shall be automatically commuted in its entirety as of the date of the Triggering Event ("Commutation Effective Date"). In consideration for the full release and settlement by the Company of all current and future liabilities of the Company hereunder, the Reinsurer shall remit to the Company an amount ("the Settlement Amount") equal to the ceded unearned premium reserve as of the Commutation Effective Date plus, at the Reinsurer's option, either (A) the sum of the Company's ceded reserves for the Reinsurer's proportional share of Loss and Loss Adjustment Expense (including Loss and Loss Adjustment Expense incurred but not Effective: January 1, 2003 DOC: May 6, 2003 8958-00-0016-00 ▇▇▇ ▇▇▇▇▇▇▇▇▇ reported) under this Contract as reflected in the latest report received by the Reinsurer, prior to date of notice of Special Commutation or (B) the amount the Company and the Reinsurer agree is the present value of the Reinsurer's proportional share of such Losses. D. In the event the parties cannot agree on the Settlement Amount, then within 10 business days of the Reinsurer's notice of its election of Special Commutation, the parties shall mutually appoint an independent nationally recognized actuary (F.S.A./F.C.A.S. or A.S.A./A.C.A.S.) (the "Independent Actuary") who shall investigate and determine the Settlement Amount. If the Reinsurer and the Company cannot reach an agreement on the individual to be selected as the Independent Actuary within 10 business days after the Reinsurer's notice to elect Special Commutation, then the Reinsurer and the Company shall each furnish the name of an acceptable actuary and the Independent Actuary shall be selected by drawing lots. The determination of the Commutation Settlement by the Independent Actuary shall be made within 20 business days of its appointment and such determination shall be final and binding between the parties. The costs of the Independent Actuary shall be shared on an equal basis by the Reinsurer and the Company.

Special Commutation. A. If 1. As respects all Losses arising from any Claim, known or unknown, that may cause a claim under this Contract, the Company experiences parties will mutually agree, not later than 31 December 2057 or such other date agreed by the Reinsurer and States Title subject always to any applicable regulatory obligations and/or requirements, the Losses to be commuted. As promptly as possible after such date, States Title on behalf of the Companies shall submit a 33 l/3% statement of valuation of the outstanding claim or greater decrease in its Consolidated Statutory Policyholders' Surplus from claims showing the amount reported in its Statutory Annual Statement as of December 31elements considered reasonable to establish the commutation amount, 2002 (and, if the "Triggering Event")Reinsurer concurs with States Title’s calculation, the Reinsurer shall have promptly pay the sole option to commute this Contract and to commute all outstanding liabilities (the "Special Commutation") at any time by giving the Company 15 days' prior written noticeamount requested. B. Where applicable, the Company shall notify the Reinsurer no later than five business days from the date of the Triggering Event. When the Reinsurer is on notice of the Triggering Event, the Reinsurer shall notify the Company within a reasonable time thereafter whether or not it will exercise its right of Special Commutation. Failure by the Company to so notify the Reinsurer or failure by the Reinsurer to invoke Special Commutation after the Triggering Event shall not limit the right of the Reinsurer to invoke Special Commutation in the future; such Special Commutation, however, would take effect on the date of Reinsurer invocation, and not be retroactive back to the date of the Triggering Event. C. Upon the Reinsurer's Notice of Special Commutation, this Contract shall be automatically commuted in its entirety as of the date of the Triggering Event ("Commutation Effective Date")2. In consideration for the full release and settlement by the Company of all current and future liabilities of the Company hereunder, the Reinsurer shall remit to the Company an amount ("the Settlement Amount") equal to the ceded unearned premium reserve as of the Commutation Effective Date plus, at the Reinsurer's option, either (A) the sum of the Company's ceded reserves for the Reinsurer's proportional share of Loss and Loss Adjustment Expense (including Loss and Loss Adjustment Expense incurred but not Effective: January 1, 2003 DOC: May 6, 2003 8958-00-0016-00 ▇▇▇ ▇▇▇▇▇▇▇▇▇ reported) under this Contract as reflected in the latest report received by the Reinsurer, prior to date of notice of Special Commutation or (B) the amount the Company event States Title and the Reinsurer agree is the present value of the Reinsurer's proportional share of such Losses. D. In the event the parties cannot agree on the Settlement Amount, then within 10 business days of the Reinsurer's notice of its election of Special Commutationcommutation value, the parties Reinsurer and the States Title shall mutually appoint an independent nationally recognized actuary (F.S.A./F.C.A.S. or A.S.A./A.C.A.S.) (the "Independent Actuary") who shall investigate and determine the Settlement Amountcommutation value. If In the event the Reinsurer and the Company States Title cannot reach an agreement on the individual to be selected as the Independent Actuary an independent actuary, each party shall appoint an actuary within 10 business thirty (30) days after receipt of the Reinsurer's notice written request for commutation. Upon such appointment, the two actuaries shall appoint a third actuary. If the two actuaries fail to elect Special Commutationagree on the selection of a third actuary within thirty (30) days of their appointment, then each of them shall name three individuals, of whom the Reinsurer other shall decline two, and the Company shall each furnish the name of an acceptable actuary and the Independent Actuary decision shall be selected made by drawing lots. The determination actuaries shall then investigate and determine the commutation value of such losses. All actuaries shall be fellows of the Commutation Settlement Casualty Actuarial Society or the American Academy of Actuaries, and shall be disinterested in the outcome of the commutation. 3. If the Reinsurer does not agree with the commutation value determined by the Independent Actuary actuaries pursuant to paragraph 2 of this Article, then the Reinsurer shall be made within 20 business days of its appointment and such determination shall be final and binding between have no obligation to commute. 4. Any commutation will follow the parties. The costs of the Independent Actuary shall be shared on an equal basis procedures as agreed upon by the Reinsurer parties to this Contract at such time and will be subject to any statutory reserves or other obligations as may be required. 5. Subject always to this Article 9, the Companyparties agree that they will seek to commute any outstanding liabilities with mutually agreed terms based on reasonable actuarial estimates of remaining liabilities.