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Exhibit 10.10
MASTER FACULTATIVE REINSURANCE AGREEMENT
BETWEEN
GLOBAL MARKETS GUARANTY LTD.
AND
ACA FINANCIAL GUARANTY CORPORATION
In consideration of the mutual covenants and upon the terms and
conditions set forth in this Master Facultative Reinsurance Agreement, Global
Markets Guaranty Ltd., a Bermuda corporation (the "Reinsured") and ACA Financial
Guaranty Corporation, a Maryland stock insurance corporation (the "Reinsurer"),
hereby agree as follows:
ARTICLE I
BUSINESS REINSURED
The Reinsured shall cede as reinsurance to the Reinsurer and the
Reinsurer shall accept as reinsurance from the Reinsured the share of a risk
insured by the Reinsured as specified and agreed to by the parties in a
reinsurance memorandum in substantially the same form of Exhibit A annexed to
this Agreement (the "Reinsurance Memorandum"). All Policies (defined below) that
are reinsured hereunder are sometimes collectively referred to as the "Business
Reinsured."
The Reinsured shall first offer to the Reinsurer each of the risks of
the Reinsured which incepts or renews after the effective date of this
Agreement, and the Reinsurer shall have the right, in its sole discretion, to
reject or accept any individual risk presented to the Reinsurer by the Reinsured
pursuant to a duly completed Reinsurance Memorandum. The Reinsurer shall not be
bound hereunder on any individual risk unless it first has given its approval by
providing the Reinsured with a copy of the Reinsurance Memorandum for that
particular risk signed by a duly authorized representative of the Reinsurer. The
Reinsurer shall either return the signed Reinsurance Memorandum or notify the
Reinsured of its decision not to assume a particular risk as soon as
practicable. In the event that the Reinsured has not received the signed
Reinsurance Memorandum or other notice of the decision of the Reinsurer as to an
individual risk within 15 days of the date of a Reinsurance Memorandum in
respect thereof, the Reinsured shall be free to offer such risk to third parties
on terms which are not less favorable to the Reinsured.
Once the Reinsurer has provided the Reinsured with such signed
Reinsurance Memorandum, the Reinsurer shall be bound to provide coverage under
this Agreement in accordance with the terms and conditions of the Reinsured's
underlying policy covering the risk (the "Policy" or "Policies"), unless the
terms and conditions of coverage with respect to the particular risk are
modified in the Reinsurance Memorandum pertaining to that risk. The Reinsurer's
liability shall attach as of the effective date of the Policy, unless the
Reinsurance Memorandum provides for a different date. Unless otherwise provided
by the Reinsurance Memorandum, the Reinsurer shall assume the designated portion
or amount of principal or other obligation insured under the Policy, any
interest or premium on such amount assumed and a pro rata share of Loss Expenses
(as defined in Article III hereof).
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The share of the Reinsurer in the interests and liabilities of the
Policies covered by this Agreement shall be separate and apart from the shares
of any other reinsurers assuming such risks. The Reinsurer's obligation pursuant
to this Agreement shall not be joint with any such other reinsurer and in no
event shall the Reinsurer participate in the interests and liabilities of such
other reinsurers.
ARTICLE II
TERM AND CANCELLATION
This Agreement shall be effective as of 12:00 a.m., Eastern Standard
Time, December 15, 1998, and shall be a continuous contract until canceled. This
Agreement shall not become effective if the public offering of the stock of
Reinsured does not close. Either the Reinsured or the Reinsurer has the right to
cancel this Agreement by giving at least ninety (90) days' prior Notice (as
defined below). This Agreement may be canceled by either party effective
immediately upon mutual consent. In the event of cancellation either by 90 days'
notice or mutual consent, the Reinsurer shall continue to be liable for claims
whenever made under all Policies ceded pursuant to this Agreement until the
natural expiration of such Policies, except to the extent that the Reinsured and
the Reinsurer agree to a withdrawal of the reinsured risks from the Reinsurer
and return or payment by the Reinsurer of an amount equal to the Reinsurer's
share of incurred Loss and Loss Expenses (i.e. Loss and Loss Expense payments
and reserves) (as defined in Article III hereof) and unearned premiums (less the
corresponding ceding commission).
Upon the occurrence of any of following events and in the time periods
set forth, the Reinsured shall have the right to terminate the Reinsurer's
participation in Policies covered by this Agreement by giving Notice of
termination to the Reinsurer:
(1) (a) The performance of the Agreement is prohibited or rendered
impossible by any applicable law or regulation, (b) the Reinsured fails
to receive all or substantially all financial credit for the
reinsurance in all applicable jurisdictions, or (c) the insurance
regulator in the applicable jurisdiction directs the Reinsured to
cancel the Reinsurer's participation in this Agreement. The Reinsurer
shall have the time allowed by the insurance regulator in the
applicable jurisdiction to comply with such applicable law or
regulation. Termination of the Reinsurer's participation in this
Agreement pursuant to this paragraph shall be effective upon the
Reinsurer's receipt of Notice of termination
(2) In the event that the Reinsurer: (a) becomes insolvent, (b) fails to
maintain the minimum capital and surplus requirements required by the
laws of the Reinsurer's domicile, (c) is the subject of a voluntary or
involuntary filing of a petition in bankruptcy, (d) goes into
liquidation or rehabilitation, (e) has a receiver appointed, (f) allows
its surplus to policyholders to decline by twenty-five percent (25%) or
more during any twelve month period as reported in any financial
statement, or (g) fails, within a reasonable time following the
Reinsurer's receipt of a written request by the Reinsured, to receive
and maintain any required approval of the Minister of Finance of
Bermuda. Termination
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pursuant to this paragraph shall be effective upon the Reinsurer's
receipt of Notice of termination.
(3) The Reinsurer (i) is acquired or undergoes a change of control,
provided that the Reinsured gives Notice of its intention to terminate
within fifteen (15) days of its receipt of Notice of such occurrence
from the Reinsurer which the Reinsurer shall be required to provide
within a reasonable time or (ii) breaches any of its covenants set
forth herein. Termination pursuant to this paragraph shall be effective
sixty (60) days after the Reinsurer's receipt of the Notice of
termination, if cure is not previously effected. "Change of Control"
means the acquisition of beneficial ownership of 30% or more of the
issued and outstanding voting securities (including, without
limitation, securities convertible into voting securities) of the
Reinsurer or of American Capital Access Holdings, Inc., its parent
("Holdings"), by one or more purchasers acting in concert in a single
transaction or in a series of related transactions; provided, however,
that "Change of Control" shall not include an initial public offering
of the capital stock of the Reinsured or of Holdings.
(4) In the event that the Reinsurer ceases to have a financial strength
rating or claims-paying ability rating from any of Standard & Poor's
Ratings Services, Fitch IBCA, Inc. or Duff & Xxxxxx Credit Rating Co.
of "A-" or higher, the Reinsurer will have ninety (90) days from the
date of downgrading to restore such rating to at least "A-". If the
Reinsurer is unsuccessful within the aforesaid 90-day period,
termination pursuant to this paragraph shall be effective upon the
Reinsurer's receipt of Notice of termination.
Upon termination pursuant to paragraphs (1), (2), (3) or (4) above, the
Reinsurer shall continue to cover all Policies written by the Reinsured prior to
such termination and coming within the scope of this Agreement until the natural
expiration of such Policies.
This Agreement may be canceled with respect to the Reinsurer at the
discretion of the Minister of Finance of Bermuda, acting as rehabilitator,
liquidator or receiver of the Reinsured.
As used in this Agreement, "Notice" shall mean written notice (i) sent
by facsimile to the party concerned to the facsimile number set forth in this
Agreement or previously designated in writing by the party, provided that a copy
is also promptly mailed or delivered or (ii) addressed to the party concerned at
its address set forth in this Agreement or previously designated by that party
in writing and sent by certified or express mail return receipt requested, or by
courier or hand delivery. Notice shall be deemed effective (i) if sent by
facsimile, the date sent, (ii) if sent by mail, the date received or (iii) if
delivered by courier or by hand, the date delivered.
ARTICLE III
LOSS AND LOSS EXPENSES
The Reinsurer shall pay its share up to any applicable limit of
liability of Losses under Policies covered by this Agreement. Except as provided
in Articles V and XIV, "Loss" and "Losses" shall mean only such amounts that are
actually paid by the Reinsured in settlement of
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claims under Policies or in satisfaction of judgments involving Policies. If
such settlement involves the refinancing of the obligations insured under a new
Policy (the "Refinanced Obligations") by the issuance of new obligations that
are insured by the Reinsured (the "Refinancing Obligations"), each reinsurer
shall assume under this Agreement the same proportionate share of the
Refinancing Obligations as the Reinsurer assumed of the Refinanced Obligations.
The Reinsurer shall be liable for its proportionate share of "Loss
Expenses" unless the Reinsurance Memorandum provides otherwise. "Loss Expenses"
shall mean court costs, interest upon judgments, and allocated investigation,
adjustment and legal expenses, including expenses related to the workout of a
potential loss or the protection and perfection of any subrogation or salvage
rights or security interest under a Policy. Losses and Loss Expenses
(collectively "Policy Payments") shall not include (a) salaries paid to
employees of the Reinsured, (b) awards or judgments against the Reinsured
occasioned by failure of the Reinsured to settle a claim or make payment under
its policy, when such failure arises from bad faith, negligence or misconduct on
the part of the Reinsured or any agent or employee of the Reinsured or (c)
liability of the Reinsured, arising by contract, operation of law or otherwise,
from its participation or membership, whether voluntary or involuntary, in any
insolvency fund, including any guaranty fund, association, pool, plan or other
facility that provides for the assessment of, payment by or assumption by the
Reinsured of a part or the whole of any claim, debt, charge, fee or other
obligation of any insurer, or its successor or assigns, that has been declared
insolvent by any authority having jurisdiction, or which is otherwise unable to
meet any claim, debt, charge, fee or other obligation in whole or in part. Loss
Expenses shall not be included in calculating the Reinsurer's limit of
liability, except to the extent that the respective Reinsurance Memorandum
otherwise provides.
The Reinsured agrees to keep the Reinsurer informed as to any default
or potential default of any non-payment(s) of amounts due under obligations
covered by Policies reinsured by this Agreement. In any event, Notice (as
defined in Article II) of a default shall be given to the Reinsurer within
fifteen (15) days of notification to the Reinsured of such default. Failure to
provide such Notice shall not relieve the Reinsurer of its obligation for any
Loss resulting from such claim except to the extent that it has suffered undue
prejudice.
The Reinsurer agrees to abide by the Loss settlements of the Reinsured.
The Reinsured shall determine in its sole discretion (i) what shall constitute a
claim or Loss covered under the Reinsured's insurance policies, (ii) the
Reinsured's liability thereunder and (iii) the correct amount or amounts, if
any, that the Reinsured shall pay thereunder. The Reinsurer shall be bound by
the determination of the Reinsured concerning the salvage and subrogation rights
and remedies of the Reinsured under the Policies, and the Reinsured shall have
complete and sole control of the direction of all claims and salvage and
subrogation remedies.
Salvage and subrogation recoveries (after the Reinsured and the
Reinsurer have recovered their expenses) (the "Recoveries") will be credited to
Reinsurer in accordance with the Reinsurance Memorandum. In the event that such
Recoveries exceeds all Policy Payments during the term of a Policy, such excess
shall be treated as additional premium and apportioned
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between the Reinsured and the Reinsurer in the same proportion that premiums for
the Policy were apportioned.
ARTICLE IV
PREMIUMS AND COMMISSIONS
The Reinsured shall pay to the Reinsurer its share of the premium after
first deducting a ceding commission and other costs allowed by the Reinsurer
(the commission and other costs collectively, the "ceding commission"), as such
premium and commission are set forth in the Reinsurance Memorandum for each
particular risk reinsured under this Agreement.
If obligations covered by a Policy are refunded in advance of maturity
and a credit is allowed to the premium charged for insuring the refunding
obligations, the Reinsurer shall receive its pro rata share of such credit and
shall refund its pro rata share of any unearned premium debited to the refunded
obligations net of the ceding commission applicable thereto, provided that the
Reinsurer is offered the same pro rata share of the refunding transaction.
ARTICLE V
REPORTS AND REMITTANCES
Within fifteen (15) days following the end of each month, the
Reinsured shall provide to the Reinsurer the following:
(1) An account current setting forth in the aggregate for the month:
(a) Gross Net Written Premium Income;
(b) Facultative Premium Ceded;
(c) Reinsurer's share of Recoveries;
(d) Ceding Commission;
(e) Any excise tax due by Reinsurer pursuant to Article XII;
(f) Net amount due Reinsurer (the sum of (c) and (d), less (e)
and (f));
(g) Reinsurer's share of subject deferred premium revenue;
(h) Reinsurer's share of subject case basis reserves
established by the Reinsured; and
(i) Reinsurer's share of subject contingency reserves
established by the Reinsured.
(2) A premium bordereau report setting forth for each Policy the name
and location of each issuer, a description of the issue insured including par
amount insured, maturity dates, underlying rating (if available), the effective
date of coverage, sector, total premium, premium rate, premium and par amounts
subject to this Agreement and such other information as the Reinsurer and
Reinsured may agree with respect to the bordereau report;
(3) A Recoveries bordereau setting forth for each Policy paid claims,
amount of Recoveries, and such other information as Reinsurer may reasonably
require;
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(4) Payment of the net amount due the Reinsurer as set forth in (1)(f)
above. In the event that a net balance is due the Reinsured by the Reinsurer,
such amount will be paid by the Reinsurer within fifteen (15)days after the
reports are furnished to the Reinsurer; provided, however, that if the Reinsurer
objects to all or any portion of the amount due by the Reinsurer based on its
good faith belief that such amount is incorrect, then the Reinsurer shall not be
obligated to pay the disputed amount until the parties have resolved the dispute
to their mutual satisfaction.
(5) Within thirty (30) days after the end of each calendar quarter, the
Reinsured will provide to the Reinsurer any other information regarding the
Policies that the Reinsurer may require that is reasonably available to the
Reinsured.
(6) As used herein, the term "Gross Net Written Premium Income" shall
mean all premium actually received or due in respect of Policies (whether direct
or assumed) written during the Term.
Notwithstanding the foregoing, at the option and upon the demand of
the Reinsured, the Reinsured shall be paid by special remittance within three
(3) Business Days (as defined below) upon receipt of a special account, which
shall be prepared by the Reinsured and shall contain all relevant details in
connection with the Loss or Loss Expense. When the Reinsured has determined with
a reasonable degree of certainty that a Policy Payment will occur, the
Reinsured, at its option, may present such special account to the Reinsurer
prior to the date of the Policy Payment by the Reinsured. Provided that the
Reinsurer receives such special account at least three Business Days prior to
the date of Policy Payment by the Reinsured, the Reinsurer shall make payment to
the Reinsured by 12:00 p.m., Eastern Standard time, on the Business Day prior to
such scheduled date of Policy Payment by wire transfer in immediately available
funds. If for any reason the Reinsured shall not make such Policy Payment on the
scheduled date and no such Policy Payment is anticipated within two (2) Business
Days, or if such Policy Payment was anticipated but two (2) Business Days have
expired without making such policy payment, the Reinsured shall return to the
Reinsurer within two (2) Business Days the amount paid to the Reinsured by the
Reinsurer for such Policy Payment to the extent not used therefor, plus interest
payable at the same rate as the first six-month U.S. Treasury Xxxx issued during
that quarter. As used herein, "Business Day" shall mean any day other than a
Saturday, Sunday or holiday on which the Reinsured is not open for business.
The Reinsurer shall provide the Reinsured with its annual financial
statement and, to the extent available, quarterly or semi-annual financial
statements, in English, promptly after such statements become available for
distribution.
ARTICLE VI
RESERVES
The Reinsurer shall maintain reserves with respect to its proportionate
share of outstanding and incurred but not reported loss, unearned premium and
contingency reserves as
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appropriate and required based on statutory accounting and actuarial principles
consistently applied, and comply with all other requirements, as required by
applicable law.
ARTICLE VII
STATUTORY FINANCIAL CREDIT
The Reinsurer shall take all steps necessary to enable the
Reinsured to obtain full credit for the reinsurance provided by this Agreement
in all applicable jurisdictions, including compliance with the Insurance Xxx
0000 of Bermuda and regulations promulgated thereunder. The obligations of the
Reinsurer under this Article VII shall include providing security or entering
into appropriate security devices in the amount required by law (collectively,
the "Security") to permit the Reinsured to obtain full reinsurance credit. When
two or more types of Security are permitted under applicable law, the Reinsurer
may, in its sole discretion, select the Security it will establish or provide
and substitute other Security after initial Security has been established or
provided. The Reinsured and Reinsurer agree that, if possible, any Security
provided to Reinsured will be held in a manner so as to allow the Reinsured to
take financial credit for the reinsurance provided by this Agreement and also
allow, if possible, the Reinsurer to treat such Security as an admitted asset in
accordance with applicable law.
When required by applicable law in order for the Reinsured to take
financial credit for the reinsurance provided by this Agreement, the Reinsured
shall be entitled to withhold from the Reinsurer as security for the payment of
the latter's obligations, an amount herein called the "Deposit." The Deposit
shall equal the Reinsurer's share of Losses and Loss Expenses paid by the
Reinsured but not recovered from the Reinsurer and outstanding, and incurred but
not reported loss, unearned premium and contingency reserves. The Reinsured
shall hold the deposit in a segregated account for the sole and exclusive
benefit of Reinsurer and only use such funds as provided hereunder. In the event
the Reinsured becomes insolvent, any assets of the Reinsurer held by the
Reinsured, including but not limited to the deposit, shall be deemed to be held
in trust for the sole and exclusive benefit of the Reinsurer.
The Deposit shall be adjusted quarterly to equal Losses and Loss
Expenses paid by the Reinsured but not recovered from the Reinsurer and the
unearned premium, contingency and outstanding and incurred but not reported loss
reserves, calculated on the basis of the requirements of applicable law,
corresponding to the Reinsurer's proportionate share of risks reinsured
hereunder.
At any time after default by the Reinsurer of payments owing to
the Reinsured under this Agreement, the Reinsured may use so much of the Deposit
as may be required to eliminate the default. Until the Deposit has been utilized
in such manner, interest thereon shall be credited to the Reinsurer quarterly at
the lesser of the prime rate or the same interest rate payable on the first
six-month U.S. Treasury Xxxx issued during each quarter.
Upon termination of this Agreement, if the Reinsured and the
Reinsurer agree that the Reinsured will withdraw the Business Reinsured from the
Reinsurer, the Reinsured shall credit and pay to the Reinsurer the balance of
any funds of the Reinsurer in the possession of the
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Reinsured, including, without limitation, any funds withheld by the Reinsured as
Security, and return any Security in the possession of the Reinsured. If the
cessions in force are allowed to run to their normal expiry, then any funds
withheld by or other Security in the possession of the Reinsured shall be
adjusted quarterly.
If the Reinsurer elects to use a Letter of Credit as Security, the
following provisions shall apply to the Reinsurer:
(1) The Reinsurer shall provide to the Reinsured a letter of credit in
form and amount required by applicable law. If the issuing or confirming bank
shall cease to meet applicable legal requirements during the term of the letter
of credit, the Reinsurer shall replace such letter of credit with a complying
one upon the earlier of the stated expiration, next extension or renewal date,
or modification or amendment of the letter of credit. Within thirty (30) day of
the Reinsurer's receipt of the quarterly report required by Article V of this
Agreement:
(a) if the Reinsurer's share of the obligations under this
Agreement shall exceed the then existing balance of the letter of credit made
available, the Reinsurer shall, if required by applicable law, secure delivery
to the Reinsured of an amendment to the letter of credit increasing the amount
of the letter of credit available by the amount required under applicable law;
or
(b) if the Reinsurer's share of the obligations under this
Agreement shall be less than the balance of the letter of credit available on
the accounting date, the Reinsured shall release such excess credit by agreeing
to an amendment to the letter of credit reducing the amount of the letter of
credit available by the amount of such excess credit.
(2) Except as may otherwise be required under applicable law, the
Reinsurer and the Reinsured agree that a letter of credit provided by the
Reinsurer pursuant to this Agreement may be drawn upon at any time by the
Reinsured or its successors in interest only for one or more of the following:
(a) to reimburse the Reinsured for the Reinsurer's share of
premiums (adjusted for return to the Reinsurer of the pro rata portion of the
Ceding Commission paid to the Reinsured) returned to the owners of Policies
reinsured under this Agreement on account of cancellations of such Policies; and
(b) to reimburse the Reinsured for the Reinsurer's share of
Losses and Loss Expenses paid by the Reinsured pursuant to the provisions of the
Policies reinsured by this Agreement.
When the Reinsured has received notification of the non-renewal of
the letter of credit and when the Reinsurer's obligations under this Agreement
with respect to risks and obligations covered by letter of credit remain
unliquidated and undischarged ten (10) days prior to such expiration date, the
Reinsurer shall supply to the Reinsured substitute Security meeting the
requirements of this Article.
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All of the foregoing shall be applicable without diminution
because of insolvency on the part of the Reinsured or the Reinsurer.
ARTICLE VIII
DUE DILIGENCE RESPONSIBILITIES OF THE REINSURED
In accordance with customary practice in the financial guaranty
insurance industry, the Reinsured will be responsible for performing due
diligence with respect to all obligations to be ceded to and reinsured by the
Reinsurer pursuant to this Agreement, as may be necessary to identify and
evaluate the credit risks attendant thereto. Such evaluation and analysis shall
comport with the written underwriting criteria, standards and guidelines of the
Reinsured. The Reinsured will provide copies of credit reports, financial
statements, environmental impact reports, market research and feasibility
studies, appraisals and other related documentation to the Reinsurer at the time
that the Reinsurance Memorandum described in Article I is presented to the
Reinsurer. In addition, the Reinsured will perform surveillance with respect to
the obligations reinsured hereunder, in order to avoid or mitigate claims
through early warning and remedial management. The surveillance function shall
include the responsibility: (i) to monitor compliance with covenants, changes in
the status, credit ratings or credit profile of reinsured obligations, (ii) to
maintain a watch list and, (iii) where necessary, to engage in the
re-structuring and re-financing of troubled credits.
ARTICLE IX
ACCESS TO RECORDS
The Reinsurer or its authorized representative shall have access to the
books and records of the Reinsured at all reasonable times for the purpose of
obtaining information concerning this Agreement or its subject matter. This
access shall include all papers in possession of the Reinsured in connection
with claims and the adjustment of claims. The Reinsured or its authorized
representatives shall have access to the books and records of the Reinsurer,
where required by a governmental or regulatory authority.
ARTICLE X
REINSURANCE FOLLOWS ORIGINAL POLICIES
All reinsurance for which the Reinsurer shall be liable by subscribing
to this Agreement shall be subject in all respects to the same rates, terms,
conditions, interpretations, waivers, the exact proportion of premiums paid to
the Reinsured and to the same modification, alterations and cancellations as the
respective Policies of the Reinsured to which such reinsurance relate, the true
intent of this Agreement being that the Reinsurer shall, in every case to which
this Agreement applies and in the proportion specified in the Reinsurance
Memoranda, follow the fortunes of the Reinsured. This Agreement shall be
construed as an honorable undertaking between the parties hereto and shall not
be defeated by technical legal constructions. However, except as provided in
Article XV, nothing in this Agreement shall be construed to expand the liability
of the Reinsurer beyond what is specifically assumed under this Agreement by
creating rights of any third party,
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including any insured of the Reinsured, in any rights under this Agreement.
ARTICLE XI
TAXES
The Reinsured shall be liable for premium and excise taxes on premiums
reported to the Reinsurer hereunder. The Reinsured may deduct any excise tax
from the premium to be paid to the Reinsurer.
ARTICLE XII
SERVICE OF PROCESS, JURISDICTION AND VENUE
Subject to the parties hereto first complying with the provisions
of Article XVI hereof, the Reinsurer hereby irrevocably submits to the
non-exclusive jurisdiction of any court sitting in Xxxxxxxx, Bermuda over any
suit, action or proceeding arising out of or relating to this Agreement. The
Reinsurer irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in such court and any claim that any
such suit, action or proceeding brought in such a court was brought in an
inconvenient forum. The Reinsurer agrees that a final judgment, not subject to
any further appeal, in any such suit, action or proceeding brought in such a
court shall be conclusive and binding upon it and will be given effect in the
country of domicile of the Reinsurer to the fullest extent permitted by
applicable law and may be enforced in any court sitting in Xxxxxxxx, Bermuda (or
any other courts to the jurisdiction of which the Reinsurer is or may be
subject) by a suit upon such judgment, provided that service of process is
effected upon it as specified in this Article or as otherwise permitted by law.
Nothing herein shall be deemed to limit or waive the Reinsurer's right to remove
a suit, action or proceeding to a federal court of the United States.
Pursuant to any statute or regulation of Bermuda that makes
provisions therefor, the Reinsurer hereby designates the Minister of Finance or
other officer specified for the purpose in the statute, or his successor or
successors in office, as its true and lawful attorney, upon whom may be served
any lawful process in any action, suit or proceeding arising hereunder that may
be instituted by or on behalf of the Reinsured or any beneficiary under this
Agreement, and hereby designates the person named in Article XX hereof as the
person to whom such officer is authorized to mail such process or a true copy
thereof.
The Reinsurer hereby consents to process being served in any suit,
action or proceeding of the nature referred to above in any court sitting in
Xxxxxxxx, Bermuda by service of process as set forth above, provided that, to
the extent lawful and possible, written notice of said service upon such agent
shall be mailed by registered or certified air mail, postage prepaid, return
receipt requested, to the Reinsurer at its address specified Article XX hereof
or to any other address which the Reinsurer shall have designated in accordance
with Article XX. The Reinsurer irrevocably waives, to the fullest extent
permitted by law, all claim of error by reason of any such service (although the
Reinsurer does not waives claims that service of process was not actually
received by the Reinsurer) and agrees that such service shall be deemed to be
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effective service of process upon the Reinsurer in any such suit, action or
proceeding and shall, to the fullest extent permitted by law, be held to be
valid and personal service upon the Reinsurer, unless the service of process was
not actually received by the Reinsurer.
Nothing in this Article shall affect the right of the Reinsurer to
receive service of process in any other manner permitted by law or limit the
right of the Reinsurer to bring proceedings against the Reinsured in any court
having jurisdiction over the Reinsured and such proceedings. Nothing in this
Article shall limit the provisions of Article XV of this Agreement.
ARTICLE XIII
CURRENCY
All premium and losses arising with respect to the Business
Reinsured, accounts, reports, deposits, arbitration awards and/or court
judgments arising out of this Agreement shall be in United States currency.
Premiums paid to the Reinsured for Policies covered by this
Agreement in other than United States currency shall be paid by the Reinsured to
the Reinsurer in United States currency at the rate of exchange on which the
original accounts were settled or, if not converted at such time, at the rate of
exchange used by the Reinsured in its own books of account at the time of the
settlement or in accordance with any subsequent adjustment to such account.
The amounts recoverable by the Reinsured from the Reinsurer for
its proportional share of losses under the Business Reinsured in other than
United States currency shall be converted into United States currency at the
same rate of exchange as were applied in the settlement of the original losses
or, if not converted at such time, at the rate of exchange used by the Reinsured
in its own books of account at the time of the settlement or in accordance with
any subsequent adjustment to such account.
The Reinsurer shall bear the currency risk for its proportionate
share in the event that (i) an insured obligation is denominated in a foreign
currency, (ii) the Reinsurer's limit of liability is denominated in United
States currency and (iii) the amount insured is such that the Reinsurer's
applicable limit of liability for the cession is applicable using the currency
exchange rate in effect on the Policy effective date. The Reinsurer's percentage
participation shall be calculated by converting the Reinsurer's limit of
liability using the currency exchange rate in effect on the Policy effective
date, and the Reinsurer shall be entitled to its proportionate share of premiums
and liable for its proportionate share of Policy Payments based on such
percentage, notwithstanding any later change in currency exchange rates which
result in the Reinsurer's limit of liability being exceeded.
ARTICLE XIV
INSOLVENCY
In the event of the insolvency of the Reinsured, the amounts owing
by the Reinsurer under this Agreement shall be immediately payable directly to
the Reinsured, or to its liquidator, receiver, conservator or statutory
successor on the basis of the liability of the Reinsured without
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diminution because of the insolvency of the Reinsured or because the liquidator,
receiver, conservator or statutory successor of the Reinsured 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 Reinsured shall give written
notice to the Reinsurer of the pendency of a claim against the Reinsured
indicating the policy or bond reinsured which claim would involve a possible
liability on the part of the Reinsurer, 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, 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 it may deem
available to the Reinsured 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 Reinsured 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 Reinsured solely as a result of the defense
undertaken by the Reinsurer.
The reinsurance shall be payable by the Reinsurer to the Reinsured or
to its liquidator, receiver, conservator or statutory successor, except (a)
where the Agreement specifically provides another payee of such reinsurance in
the event of insolvency of the Reinsured and (b) where the Reinsurer with the
consent of the direct insured or insureds has assumed such Policy obligations of
the Reinsured as direct obligations of the Reinsurer to the payees under such
policies and in substitution for the obligations of the Reinsured to such
payees, provided that any such assumption shall be subject to the approval of
the Minister of Finance of Bermuda of a certificate of assumption.
ARTICLE XV
ARBITRATION
All disputes arising from this Agreement shall first be
adjudicated by a Board of Arbitration (the "Board") consisting of three
arbitrators, all of whom shall be active or retired executive officers of
insurance or reinsurance companies having no direct or indirect financial
interest in either party or its affiliates. Each of the parties hereto shall
select one arbitrator. A third arbitrator will be chosen by the two arbitrators
selected by the parties. A party shall initiate arbitration ("Petitioner") by
providing the other party with Notice, demanding arbitration and identifying its
selected arbitrator. The other party ("Respondent") will have thirty (30) days
from its receipt of a demand for arbitration within which to identify an
arbitrator. In the event that Respondent fails to identify an arbitrator within
such thirty (30) day period, Petitioner shall have the right to identify a
second arbitrator, and Respondent will not be deemed aggrieved thereby. The
arbitrators will jointly select a third arbitrator within thirty (30) days after
both arbitrators have been selected. If the two arbitrators do not agree on the
selection of a third arbitrator within such thirty (30) day period, the third
arbitrator shall be designated by the American Arbitration Association.
The Board shall interpret this Agreement as an honorable
engagement and will make its award with a view to effecting the purpose and
intent of this Agreement in a reasonable manner, rather than in accordance with
the technical interpretation of this Agreement. The Board
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will be relieved from judicial formalities. The decision of a majority of the
Board will be final and binding upon the parties.
The parties shall equally bear the fees and costs of the Board of
Arbitrators. The remaining costs of the arbitration shall be paid as the Board
shall direct.
The arbitration shall take place in Xxxxxxxx, Bermuda, unless the
Board designates another location with the mutual consent of the parties. The
rules and procedures for pre-hearing investigations shall be established by the
Board and the investigation shall be completed within ninety (90) days of the
appointment of the third arbitrator. Petitioner shall deliver a written
arbitration brief to the Board and to the Respondent within thirty (30) days of
completion of the pre-hearing investigations. Respondent shall deliver a written
response to the Board and the Petitioner within thirty (30) days of its receipt
of Petitioner's brief. A hearing shall be held within thirty (30) days of
submission of Respondent's response. The Board shall render its decision within
sixty (60) days after completion of the hearing unless the Board requests and
the parties consent to an extension of time.
The Board may alter the time periods set forth in this Article for
good cause shown.
This Article shall survive the termination of this Agreement.
ARTICLE XVI
APPLICABLE LAW
This Agreement shall be interpreted in accordance with the laws of
Bermuda, without giving effect to the conflict of law rules thereof.
ARTICLE XVII
SET-OFF
The Reinsured and the Reinsurer have the right to set-off amounts due
from one to the other. The party asserting the right of set-off may exercise
such right at any time whether the amount(s) due constitute payment of premiums,
losses or otherwise. In the event of the insolvency of a party hereto, set off
shall only be allowed in accordance with applicable law.
ARTICLE XVIII
CONFIDENTIALITY
The Reinsurer agrees to maintain the confidentiality of the Policies,
the reinsurance of the Policies and the underlying transactions and documents
(the "Information"), except
(i) to employees, officers, directors and legal counsel
with a need to know the Information,
(ii) to reinsurers, bankers, governmental agencies that
regulate the Reinsurer
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and the rating agencies that rate the Reinsurer with
a need to know the Information,
(iii) in response to a subpoena calling for production of
the Information, or
(iv) to any other person as to whom the Reinsured has
given its prior written consent to each such
disclosure, which consent shall not be unreasonably
withheld or delayed.
In the case of subparagraphs (i) and (ii) above, no disclosure of the
Information shall be permitted if any such entity or individual is affiliated
with a financial guaranty insurer in competition with the Reinsured. In the case
of subparagraph (iii) above, the Reinsurer shall promptly notify the Reinsured
of such subpoena and shall at the Reinsured's direction and expense contest
production of the Information thereunder.
The foregoing requirements of confidentiality shall not apply to those
portions of the Information that (a) are generally available to the public other
than as a result of a disclosure by the Reinsurer or its representatives or (b)
become available to the Reinsurer from a source that is not bound by an
obligation of confidentiality to the Reinsured. If required by a participant in
a transaction insured or to be insured by a Policy, the Reinsurer shall execute
a separate confidentiality agreement containing the foregoing obligations of
confidentiality with respect to such transaction.
ARTICLE XIX
ADDRESSES FOR NOTICES
All notices and other communications required by this Agreement
(each a "Notice") shall be sent to the parties at the following addresses,
respectively, unless a party designates another address in writing:
Global Markets Guaranty Ltd. ACA Financial Guaranty Corporation
Xxxxxxxx Xxxx, Victoria St. Xxx Xxxxxxx Xxxxx 00xx Xxxxx
X.X. Xxx XX0000 Xxx Xxxx, New York 10006 U.S.A.
Xxxxxxxx, XX FX Bermuda
Fax No.: 441- Fax No.: 000-000-0000
Attn: Chief Exec. Officer Attn: Reinsurance Officer
IN WITNESS WHEREOF, the parties, by their duly authorized
representatives, have executed this Master Facultative Reinsurance Agreement as
of the 25th day of November, 1998.
REINSURED: REINSURER:
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GLOBAL MARKETS GUARANTY LTD. ACA FINANCIAL GUARANTY CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ H. Xxxxxxx Xxxxxx
____________________________ _______________________________________
Xxxxxx X. Xxxxxxxx H. Xxxxxxx Xxxxxx
President and C.E.O. Chairman and C.E.O.
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EXHIBIT A
TO
MASTER FACULTATIVE REINSURANCE AGREEMENT
BETWEEN
GLOBAL MARKETS GUARANTY LTD.
AND
ACA FINANCIAL GUARANTY CORPORATION
REINSURANCE MEMORANDUM
INDIVIDUAL RISK UNDER
MASTER FACULTATIVE REINSURANCE AGREEMENT
REINSURANCE MEMORANDUM NO. _____________________________________________________
ISSUER: ________________________________________________________________________
ISSUE: _________________________________________________________________________
ACA POLICY NUMBER: _____________________________________________________________
POLICY EFFECTIVE DATE: _________________________________________________________
TOTAL PRINCIPAL INSURED BY COMPANY: ____________________________________________
TOTAL PRINCIPAL CEDED TO REINSURER: ____________________________________________
FORM OF REINSURANCE:
________________________________________________________________________________
________________________________________________________________________________
METHOD FOR ALLOCATING SUBROGATION RECOVERIES:
________________________________________________________________________________
________________________________________________________________________________
SPECIFIC MATURITIES CEDED TO REINSURER (IF OTHER THAN PROPORTIONATE SHARE OF
ENTIRE ISSUE IS CEDED):
________________________________________________________________________________
________________________________________________________________________________
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REINSURANCE MEMORANDUM NO.
EFFECTIVE DATE OF REINSURANCE (IF DIFFERENT FROM POLICY EFFECTIVE DATE):
________________________________________________________________________________
________________________________________________________________________________
DEVIATIONS FROM COVER PROVIDED BY COMPANY'S ORIGINAL POLICY:
________________________________________________________________________________
________________________________________________________________________________
GROSS FACULTATIVE PREMIUM CEDED
RATE: ________________________________________________________
AMOUNT: _____________________________________________________
CEDING COMMISSION AND OTHER COSTS
RATE: ________________________________________________________________
AMOUNT: ______________________________________________________________
OTHER COSTS: _________________________________________________________
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NET FACULTATIVE PREMIUM CEDED: ________________________________________________
The cession evidenced by this Reinsurance Memorandum shall be subject
to all the terms and conditions contained in that certain Master Facultative
Reinsurance Agreement between the undersigned, dated as of , 1998.
SUBMITTED BY: ACCEPTED BY:
ACA FINANCIAL GUARANTY GLOBAL MARKETS GUARANTY LTD.
CORPORATION
BY: _________________________________ BY: ___________________________________
NAME: _______________________________ NAME: __________________________________
TITLE: ______________________________ TITLE: _________________________________
DATE: _______________________________ DATE: __________________________________
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