ARTICLE IV,WARRANTIES, Paragraph 1 is revised to read as follows:
ARTICLE VII, CEDING COMMISSION is revised to read as follows:
The Reinsurer shall allow the Company a provisional ceding commission of 32.0% of all Net Earned Premium ceded to the Reinsurer hereunder. The Company shall allow the Reinsurer return commission on return premiums at the same rate.
The provisional commission allowed to the Company shall be adjusted periodically in accordance with the provisions set forth herein.
The first adjustment period shall be from the inception date of this Agreement through December 31, 2010 and each subsequent 12 month period shall be a separate adjustment period, with the final separate adjustment period being a 14 month period (each an “Adjustment Period” and, collectively, “Adjustment Periods”). However, if this Agreement is terminated, the final adjustment period shall be from the beginning of the then current Adjustment Period through the date of termination if this Agreement is terminated on a “cutoff” basis or the end of the runoff period if this Agreement is terminated on a “runoff” basis. The first calculation of adjusted commission for an Adjustment Period shall be made as of the date that is 12 months after the end of such Adjustment Period (the “Initial Calculation Date”).
The adjusted commission rate shall be calculated as follows and be applied to Net Earned Premium for the Adjustment Period under consideration:
If the Actual Loss Ratio for the Adjustment Period is 64.5% or greater, the adjusted commission rate for the Adjustment Period under consideration shall be a minimum commission of 30.0%;
If the Actual Loss Ratio for the Adjustment Period is less than 64.5%, but equal to or greater than 62.0%, the adjusted commission rate for such Adjustment Period under consideration shall be 32.5%, minus the difference in percentage points between 62.0% and the Actual Loss Ratio for such Adjustment Period;
If the Actual Loss Ratio for the Adjustment Period is less than 62.0%, but greater than 60.0% the adjusted commission rate for such Adjustment Period under consideration shall be 32.5% plus the difference in percentage points between 62.0% and the Actual Loss Ratio for such Adjustment Period;
If the Actual Loss Ratio for the Adjustment Period is 60.0% or less, the adjusted commission rate for such Adjustment Period shall be 34.5%.
The Reinsurer shall calculate and report the adjusted commission on Net Earned Premium within 30 days after the Initial Calculation Date, and within 30 days after the end of each subsequent calendar year thereafter with respect to each Adjustment Period until all losses subject hereto have been finally settled. Each such calculation shall be based on cumulative transactions hereunder from the beginning of each Adjustment Period under consideration through the date of adjustment. With respect to the first Adjustment Period, remittance of adjusted commission on Net Earned Premium, if any, shall commence 24 months after the end of the first Adjustment Period. With respect to all Adjustment Periods other than the first Adjustment Period, remittance of adjusted commission on Net Earned Premium, if any, shall be made
It is expressly agreed that the ceding commission allowed the Company includes provision for all unallocated loss expenses, dividends, commissions, taxes (exclusive of Federal Excise Taxes), assessments and all other expenses of whatever nature, except allocated Loss Adjustment Expense.
Item G. of Article XII, Definitions is revised to read as follows:
“Losses Incurred” as used herein shall mean Net Losses and Loss Adjustment Expense paid as of the effective date of calculation, plus the ceded reserves for losses and Loss Adjustment Expense (including reserves for incurred but not reported losses) outstanding as of the same date, all as respects losses occurring during the Adjustment Period under consideration plus the change in Losses Incurred from the preceding Adjustment Period.
The following sentence shall be added to the end of Item I. of Article XII:
Item B. of Article XVI. Special Termination is revised to read as follows:
All references to MK Re, Ltd in the Agreement shall be deemed to be references to ACP Re, Ltd.
Sliding Scale and Ceding Commission Matrix
64.5% or greater
60.0% or less
Timing of Annual Calculations and Payments
2017 and thereafter
Ultimate until losses are finally settled
C = Calculation
P = Cash Payment