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EXHIBIT 10.79
[INTERE RFC LETTERHEAD]
COVER NOTE NO.: SF961000 DATE: March 13, 1996
MEMORANDUM OF REINSURANCE EFFECTED ON BEHALF OF:
ALPINE INSURANCE COMPANY
TRANSCO SYNDICATE #1
FIRST CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
EFFECTIVE: JANUARY 1, 1996
PERIOD: Continuous Agreement effective from 12:01 a.m., Central
Time, January 1,1996, (warranting no known or reported
losses through January 29, 1996) covering subject
policies written or renewed at or after that time. This
Agreement is subject to cancellation at any January 1,
by any party by giving to the others ninety (90) days
prior written notice of cancellation by certified or
registered mail.
Any such cancellation will be on a "run off" basis or
"cut off" basis, at the REINSURED's option. On a "run
off" basis the REINSURER will remain liable for losses
and allocated loss adjustment expenses on all subject
policies that have expired at the time and date of
cancellation, and all subject policies that are
unexpired at the time and date of cancellation
(including the unexpired portions of such subject
policies) until natural expiration, cancellation or
first anniversary of such policies, whichever occurs
first, but not to exceed twelve (12) months, plus odd
time, to a maximum of eighteen (18) months in all from
the date of cancellation.
On a "cut off" basis the REINSURED will reassume the
net ceded unearned subject premium relating to
unexpired subject policies, and all liability for
losses and allocated loss adjustment expenses relating
thereto (determined as pro rata portions of the total
liability for losses and allocated loss adjustment
expenses relating to such unexpired subject policies,
calculated on the basis of the number of days remaining
in the policy periods divided by the total number of
days in the policy periods), but the REINSURER will
remain liable for losses and allocated loss adjustment
expenses on all expired subject policies and the
balance of the total liability relating to unexpired
subject policies.
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[INTERE RFC LETTERHEAD]
COVER NOTE NO.: SF961000
DATE: March 13, 1996
PERIOD:
(Cont'd.) This Agreement is on a Underwriting Year of Account
basis. The first Underwriting Year of Account is the
period beginning January 1, 1996, through and including
December 31, 1996. Each Underwriting Year of Account
consists of twelve (12) consecutive months beginning
January 1 and ending December 31.
SPECIAL
TERMINATION: Any party may terminate this Agreement at any time with
respect to the affected party or parties by giving it
or them fifteen (15) days prior written notice of
termination by certified or registered mail upon the
happening of any one of the following events of special
termination:
1. The state of domicile of the affected party, or
the Illinois Insurance Exchange in the case of
Transco Syndicate, has ordered the affected party
to cease writing new or renewal business;
2. The affected party has become insolvent or has
been placed into liquidation or receivership
(whether voluntary or involuntary), or there have
been instituted against it proceedings for the
appointment of a receiver, liquidator,
rehabilitator, conservator, trustee in bankruptcy
or other agent known by whatever name, to take
possession of its assets or control of the
affected party's operations;
3. The policyholders' surplus of the affected party
has been reduced by the greater of (i) 35% of the
affected party's policyholders' surplus as of
December 31, 1995, or (ii) 35% of the affected
party's policyholders, surplus as of the most
recent anniversary of this Agreement, provided
that the affected party receives such notice
within fifteen (15) days following the terminating
party's gaining knowledge of such happening;
4. The affected party has become merged with,
acquired or controlled by any entity or individual
not controlling the party's operations previously,
provided that the affected party receives such
notice within fifteen (15) days following the
terminating party's gaining knowledge of such
happening;
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[INTERE RFC LETTERHEAD]
COVER NOTE NO.: SF961000
DATE: March 13, 1996
SPECIAL
TERMINATION: 5. If the affected party is Alpine Insurance Company,
its Best rating has dropped below B, if the
affected party is Transco Syndicate, its Best
rating has dropped below B or if the affected
party is the REINSURER, its Best rating has
dropped below A, provided that the affected party
receives such notice within fifteen (15) days
following the terminating party's gaining
knowledge of such happening;
6. The affected party (i) has failed to make any
payment when due under this Agreement and (ii)
also has failed to make such payment within five
(5) days of written demand therefor by certified
or registered mail after the payment has become
overdue.
Any such special termination will be on a run off or
cut off basis, upon mutual consent of both parties.
TYPE: FIRST CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
CLASS: All business underwritten or managed by TCO Insurance
Services, Inc. of Chicago, IL, and any successor and/or
their subsidiary, affiliated and associated entities,
and classified by the REINSURED as Primary General
Liability, Primary Products Liability/Completed
Operations, Architects and Engineers Professional
Liability and Following Form Excess Liability.
"Subject Policies" are defined as all policies,
contracts and binders (including endorsements and
modifications thereto) on such business attaching
during the term of this Agreement with limits up to
$1,000,000, including "Subject Policy Premiums" for
the first $1,000,000 from policy limits excess
$1,000,000.
EXCLUSIONS: Per attached list.
TERRITORIAL
SCOPE: Per subject policies.
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[INTERE RFC LETTERHEAD]
COVER NOTE NO.: SF961000
DATE: March 13, 1996
LIMIT: $500,000 each and every loss occurrence or claim made,
each and every subject policy, in excess of $500,000
each and every loss occurrence or claim made, each and
every subject policy. Allocated loss adjustment
expenses pro rata in addition to the limit, unless such
expenses are inclusive in the subject policy limit.
The REINSURER's aggregate limit of liability (including
liability for losses, allocated loss adjustment
expenses and ECO and XPL) for each Underwriting Year of
Account is 175% of the net ceded premium actually
received by the REINSURER with respect to that
Underwriting Year of Account.
PREMIUM
& CEDING
COMMISSION: Net provisional deposit premium will be 12.0% of the
subject premium payable in quarterly installments in
arrears, payable as follows: One-half of 12.0% applied
to one-quarter of the then estimated subject premium
for the year ($300,000 for the first calendar quarter
of 1996) will be paid to the REINSURER by the REINSURED
by the last day of each quarter (03/31, 06/30, 09/30
and 12/31), and the balance of the net provisional
premium (calculated as 12.0% applied to the actual
subject premium for the quarter) will be paid within
forty-five (45) days following the end of each such
quarter.
The net provisional premium for each Underwriting Year
of Account will be adjusted within 60 days following
each December 31 beginning with the December 31 which
is the first anniversary of the last day of such
Underwriting Year of Account.
Subject to a minimum net rate of 4.0%, and a maximum
net rate of 20.%, the net ultimate premium for this
agreement shall be determined in accordance with the
following formula:
MINIMUM NET RATE (4.0%) + 110% (LOSSES AND LOSS
ADJUSTMENT EXPENSES INCURRED EXCLUDING IBNR)
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[INTERE RFC LETTERHEAD]
COVER NOTE NO.: SF961000
DATE: March 13, 1996
PREMIUM
& CEDING
COMMISSION: Subject premium is defined as the gross original
(Cont'd.) premium from subject policies plus or minus premium
actually collected for audits, extensions, extended
reporting periods, cancellations, reductions and
endorsements, less gross cost of inuring reinsurance.
The net ultimate premium with respect to each
underwriting year of account shall first be adjusted
within 60 days following the end of such Underwriting
Year of Account and annually thereafter within 60 days
of the end of each succeeding Underwriting Year of
Account, with balances to follow immediately.
Downward adjustments shall not be permitted until 24
months after all subject policies within an
Underwriting Year of Account have expired.
The REINSURED will gross up the net provisional
premium, and the net ultimate premium, for acquisition
cost, to reflect a 30% ceding commission.
REPORTS: 1. Premium reports will be provided by the REINSURED
to the REINSURER quarterly within forty-five (45)
days following the end of each calendar quarter.
The format is to be agreed.
2. Loss reports will be provided by the REINSURED to
the REINSURER quarterly within forty-five (45)
days following the end of each calendar quarter.
The format is to be agreed. Individual reported
losses will be reported by the REINSURED to the
REINSURER promptly once total case loss reserves
(excluding IBNR) per policy, net of deductibles
and self-insured retentions, exceed $250,000 from
the ground up, and in all cases of serious injury
which, regardless of liability or coverage, are
likely to involve this reinsurance, including, but
not limited to, the following:
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[INTERE RFC LETTERHEAD]
COVER NOTE NO.: SF961000
DATE: March 13, 1996
REPORTS:
(Cont'd.) a. Fatalities,
b. Paraplegia,
c. Quadriplegia,
d. Severe xxxxx resulting in disfigurement or
scarring,
e. Serious brain injuries (seizure, coma or
physical/mental impairment),
f. Amputation of any extremity or multiple
fractures,
g. Total or partial blindness in one or both
eyes, or
h. Severe injury to a major organ (e.g., heart,
lung).
3. Each party will provide the other parties annually
any information required and reasonably requested
by the other parties for annual statement
purposes.
ESTIMATED
SUBJECT
PREMIUM: The subject premium initially is estimated to be
$20,000,000 per year. The REINSURED may revise the
estimated subject premium in good faith at the
beginning of any calendar quarter, subject to agreement
by the REINSURER, which agreement shall not be
unreasonably withheld.
ORIGINAL
CONDITIONS: All reinsurance under this Agreement will be subject to
the same rates, terms, conditions, waivers and
interpretations, and to the same modifications,
alterations and cancellations, as the respective
subject policies of the REINSURED. This Agreement will
not in any manner create any obligations or establish
any rights against the REINSURER or the REINSURED in
favor of any third parties or any persons not parties
to this Agreement.
OFFSET: The parties (and their subsidiaries, affiliates
and associated entities) will be entitled to offset any
balances for amounts due one party or another under
this Agreement. In the event of the insolvency of any
party, offset is to be allowed only in accordance with
applicable law.
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[INTERE RFC LETTERHEAD]
COVER NOTE NO.: SF961000
DATE: March 13, 1996
RISK TRANSFER: If the REINSURED's auditors in good faith determine and
advise the parties in writing by certified or
registered mail that this Agreement does not accomplish
"risk transfer" pursuant to FASB 113 and NAIC
Accounting Practices and Procedures Manual Chapter 22,
the REINSURER will amend the terms of this Agreement
effective from inception, such amended terms to be
reasonably acceptable to the REINSURED, to accomplish
such "risk transfer."
GENERAL
CONDITIONS: Loss Adjustment Expenses Pro Rata in addition to Loss
(unless part of the subject policy).
Excess of Original Policy Limits Clause (80% basis).
Extra Contractual Obligations Clause (80% basis).
ECO/XPL - One Additional Limit Clause
Ultimate Net Loss Clause.
Net Retained Lines Clause.
Definition of Loss Occurrence Clause.
Notice of Loss Clause.
Loss Funding Clause.
Federal Excise Tax Clause.
Errors and Omissions Clause.
Insolvency Clause.
Service of Suit Clause.
Offset Clause.
Currency Clause.
Access to Records Clause.
Arbitration Clause.
Intere Intermediary Clause.
WORDING: To be agreed.
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[INTERE RFC LETTERHEAD]
COVER NOTE NO.: SF961000
DATE: March 13, 1996
REINSURERS: THROUGH INTERE - SAN FRANCISCO
Underwriters Reinsurance Company 100.00%
------
TOTAL PLACEMENT: 100.00%
We will periodically provide a list of those companies with which Intere
Intermediaries is affiliated, which may be parties to this placement. This list
is available on request.
For and on behalf of:
INTERE INTERMEDIARIES
[sig]
-----------------------------
Chairman
AGREED TO:
ALPINE INSURANCE COMPANY
TRANSCO SYNDICATE #1
[sig] May 31, 1996
--------------------------------------- -------------------------
Authorized Signature Date
Please examine this document carefully and advise us immediately if any of the
Terms and Conditions or the security are not in accordance with your order or
requirements.
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[INTERE RFC LETTERHEAD]
ALPINE INSURANCE COMPANY
TRANSCO SYNDICATE #1
FIRST CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
EFFECTIVE: JANUARY 1, 1996
EXCLUSIONS: This Agreement does not cover:
1. Assumed treaty reinsurance;
2. Pollution Liability;
3. Aircraft or airports as respects coverage for all
liability arising out of ownership, maintenance or
use of any aircraft or flight operations except
for industrial aid, pleasure or business craft
when written as incidental to the subject policy;
4. Products Liability as -respects:
a. Manufacture, sale or distribution of aircraft
or aircraft parts pertaining to essential
instrumentation, mechanical or structural
components relating thereto;
b. Manufacture or wholesale distribution of
pharmaceuticals pertaining to ethical drugs;
and
c. Manufacture of automobiles and motorcycles with
projected receipts in excess of $5,000,000, but
not excluding manufacture of kit cars, whether
assembled or not, component parts or
subassemblies.
5. Products Recall and Products Integrity business;
6. General Operations of railroads, but not excluding
spurs and side tracks;
7. Oil refinery's operations;
8. Asbestos liability;
9. Financial guarantee and insolvency;
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[INTERE RFC LETTERHEAD]
ALPINE INSURANCE COMPANY
TRANSCO SYNDICATE #1
FIRST CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
EFFECTIVE: JANUARY 1, 1996
EXCLUSIONS: 10. Loss or liability excluded by the provisions of
(Cont'd.) the "Nuclear Incident Exclusion Clause - Liability
- Reinsurance (USA)" and the Nuclear Incident
Exclusion Clause - Liability - (Canada)";
11. Disposal of hazardous chemicals or hazardous waste
including transporters, contractors or waste site
operators, but not excluding residential waste
haulers;
12. Manufacturing, handling, storing or transporting
of any explosive substance intended for use as an
explosive (explosive substance being defined as
any substance manufactured for the express purpose
of exploding as differentiated from other
commodities used industrially and which are only
fortuitously explosive such as gasoline,
fertilizers, fuel gases and dyestuffs);
13. Any risk engaged in the production, packaging,
distribution, promotion or sale (except retail
sale) of tobacco or tobacco products, insofar as
injury arises out of the alleged hazardous
properties of tobacco;
14. Motor vehicle racing, when written as such;
15. Fidelity or crime coverage for financial
institutions;
16. Medical Malpractice, unless the professional
exposure is considered to be incidental (it being
understood that this exclusion does not apply to
druggists, pharmacists, morticians, cemeteries,
health studios and reducing salons liability);
17. Professional Liability for accountants, insurance
agents and brokers, security guards and real
estate agents;
18. Political risk or credit insurance;
19. Underground mining operations;
20. SEC liability;
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[INTERE RFC LETTERHEAD]
ALPINE INSURANCE COMPANY
TRANSCO SYNDICATE #1
FIRST CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
EFFECTIVE: JANUARY 1, 1996
EXCLUSIONS: 21. All liability of a REINSURED arising by contract,
(Cont'd.) operation of law, or otherwise from its
participation or memberships, whether voluntary or
involuntary, in any insolvency fund ("insolvency
fund" being defined to include any guaranty fund,
insolvency fund, plan, pool, association, fund, or
other arrangement, however denominated,
established or governed, which provides for any
claim, debt, charge, fee or other obligation of an
insurer, or its successor 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);
22. Any loss or liability accruing to a REINSURED
directly or indirectly from any insurance written
by or through any pools and associations in which
membership by the REINSURED is required by law,
but not excluding liability assumed by a REINSURED
directly as a syndicate member of the Illinois
Insurance Exchange as a participant on a line slip
policy;
23. Workers' compensation (including occupational
disease) and employers' liability insurances, but
not excluding contingent Employers' Liability
("stop gap") coverage that may be attached to
Comprehensive General Liability policies in the
states of Washington, Wyoming, North Dakota or
Ohio;
24. Circuses and power driven amusement devices;
25. Fire, police or salvage equipment, unless written
as a minor part of a fleet of other vehicles which
are not otherwise excluded (it being understood
that the term "salvage equipment" applies to
equipment working in conjunction with fire
departments and assigned to answer emergency
alarms);
26. Long-haul trucking (generally being understood as
regular operations to locations more than 200
miles from the insured's base or bases of
operations), when the principal operation of the
insured;
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[INTERE RFC LETTERHEAD]
ALPINE INSURANCE COMPANY
TRANSCO SYNDICATE #1
FIRST CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
EFFECTIVE: JANUARY 1, 1996
EXCLUSIONS: 27. Ocean Marine business and all forms of legal
(Cont'd.) liability arising out of the operation or
navigation of ships or vessels;
28. Agricultural spraying;
29. Exterminators;
30. Retroactive liability and all back dates in excess
of 30 days, but not excluding retroactive
liability on claims made policies;
31. Primary automobile liability to include non-owned
and hired;
32. Municipalities and governmental agencies;
33. Liquor liability, except when written in the
states of California and Nevada;
34. Construction of tunnels, dams, subways, and
nuclear power plants;
35. Ship builders and ship repair (a ship being
defined as over 100 feet in length);
36. Environmental impairment liability;
37. Boiler and Machinery liability;
38. Kidnap and xxxxxx;
39. Ocean Marine, Admiralty Xxxxx Act, and FELA,
except incidental Xxxxx Act as related to the use
of watercraft 50 feet or less in length, and FELA
as related to the existence and use of railroad
side tracks;
40. Electric utilities, but not excluding course of
construction risks;
41. Umbrella Liability;
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[INTERE RFC LETTERHEAD]
ALPINE INSURANCE COMPANY
TRANSCO SYNDICATE #1
FIRST CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
EFFECTIVE: JANUARY 1, 1996
EXCLUSIONS: 42. Any loss of damage occasioned by war, Hostilities, acts
(cont'd.) of foreign enemies, civil war, rebellion, insurrection,
military or usurped power, martial law or confiscation of
any government or public authority;
43. Manufacture or storage of liquefied petroleum gas ("LPG"),
but not excluding storage of petroleum or LPG on a local
basis;
44. Punitive damages;
45. Subsidence and movement; or
46. Manufacturing or distribution of animal feed.
The exclusions enumerated above (other than the exclusions
enumerated in paragraphs 1, 2, 9, 10, 21 and 27) do not apply
when the items or activities enumerated are merely incidental
to the main operations of the insured or when the insured's
services are subcontracted for a limited-time basis to perform
services for an excluded entity, provided such main operations
are covered by the subject policies and are not themselves
excluded from the scope of the Agreement. The REINSURED will be
the sole judge of what is "incidental" for purposes of this
Agreement.
Should a REINSURED, by reason of an inadvertent act, error or
omission, be bound to afford coverage excluded hereunder, the
REINSURER will waive the exclusions with the exception of the
exclusions enumerated in paragraphs 1, 2, 9, 10, 21 and 27. The
duration of such waiver will not extend beyond the time that
notice of such coverage has been received by the responsible
underwriting authorities of the REINSURED (being defined as the
Senior Vice President of Underwriting or their equivalents)
plus the minimum time period required thereafter for the
REINSURED to terminate such coverage.
With respects to any exclusion included on a REINSURED's
subject policy, the liability for which is intended to be
excluded hereby, the REINSURER will follow the REINSURED's
fortunes.
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[INTERE RFC LETTERHEAD]
ALPINE INSURANCE COMPANY
TRANSCO SYNDICATE #1
FIRST CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT
EFFECTIVE: JANUARY 1, 1996
EXCLUSIONS: The REINSURED may submit to the REINSURER, for special
(Cont'd.) acceptance hereunder, business not covered by the Agreement. If
such business is specially accepted by the REINSURER, it will
be subject to the terms of the Agreement, except as this
Agreement's terms are modified by the special acceptance.
Should any reinsurer become a party to this Agreement
subsequent to the acceptance of any business not normally
covered hereunder, such reinsurer automatically will accept
such business as being a part of this Agreement.
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