[LOGO] PREFERRED
EMPLOYERS GROUP
October 21, 1996
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
The New Hampshire Program Division of
New Hampshire Insurance Company
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇▇▇:
Reference is hereby made to the Reinsurance Agreement (the "Reinsurance
Agreement"), which is to be entered into by and among National Union Fire
Insurance Company of Pittsburgh, PA.; The Insurance Company of the State of
Pennsylvania; AIU Insurance Company and New Hampshire Insurance Company
(collectively, the "AIG Companies") and the proposed reinsurance subsidiary of
Preferred Employers Holdings, Inc. (the "Company") to be formed under the laws
of Bermuda (the "Reinsurer").
As you are aware, in connection with the Company's proposed initial public
offering of common stock, it is necessary that the Company finalize the form and
content of the Reinsurance Agreement which is attached hereto as Annex A.
Please execute this letter where indicated below and initial each of the pages
of the Reinsurance Agreement acknowledging your acquiescence and agreement that
each of the AIG Companies is prepared to and will enter into the Reinsurance
Agreement substantially in the form attached hereto as Annex A upon the
formation and incorporation of the Reinsurer.
Very truly yours,
/s/ ▇▇▇ ▇▇▇▇▇▇
----------------------------
▇▇▇ ▇▇▇▇▇▇, Chairman and CEO
ACKNOWLEDGED AND AGREED TO:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Name:
Title: President - Program Division
Preferred Employers Group, Inc. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇ National: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
REINSURANCE AGREEMENT
(herinafter "this Agreement")
between
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA,
THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA,
AIU INSURANCE COMPANY (a New York corporation), and
NEW HAMPSHIRE INSURANCE COMPANY
(hereinafter collectively called the "Company")
and
a Bermuda corporation
(hereinafter called the "Reinsurer")
In consideration of the mutual covenants hereinafter contained and upon the
terms and conditions hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS:
"Allocated Loss Expenses" shall mean all costs and expenses allocable to a
specific claim that are incurred by the Company in the investigation, appraisal,
adjustment, settlement, litigation, defense or appeal of a specific claim,
including but not limited to court costs and costs of supersedeas and appeal
bonds, and including (a) pre-judgment interest, unless included as part of the
reward or judgment: (b) post-judgment interest; and (c) attorneys' fees and
other legal expenses and costs, including such costs and expenses incurred in
connection with coverage questions with respect to the Policies. Allocated Loss
Adjustment Expense shall not include salaries and expenses of the Company's
employees, or office and other overhead expenses of the Company.
"Business" shall mean Workers Compensation and Employers Liability coverage
provided to companies or entities under the "Fast Food, Burger King, McDonalds,
Pizza Hut and Convenience Store" insurance programs currently underwritten on
behalf of the Company by Preferred Employers Group, Inc. ("PEGI'"), and any
additional such programs as may be agreed by the Company and the Reinsurer.
"Dollars" or $ shall mean United States dollars.
"Gross Premiums Written" shall mean Direct Written Premiums, Additional Premiums
for Policies and audit premiums covered hereunder less return premiums and
cancellations. Direct Premiums written on installment premium payment policies
shall be deemed to be the installment due in the period for which the account is
rendered, in accordance with the Reports and Remittances article contained in
this Agreement.
"IBNR" (Incurred But Not Reported) shall mean liability for future payment on
Losses which have already occurred but have not yet been reported to the Company
and shall also include expected future development of Outstanding Loss Reserves,
[using loss development factors as determined appropriate by [the
Reinsurer's][an] [the] independent actuarial consulting firm [▇▇▇▇▇▇▇▇▇▇▇ and
Company]].
"Incurred Losses" shall mean Losses Paid and Loss Expenses Paid plus current
period Outstanding Loss Reserves.
-1-
"Line(s) of Coverage" shall mean each separate coverage contained in the
policy(ies) reinsured hereunder.
"Loss" or "Losses" Shall mean payments to claimants under Policies reinsured
hereunder.
"Losses Paid" shall mean Losses Paid by or on behalf of the Company less
Recoveries for Salvage and Subrogation.
"Loss Expenses Paid" shall mean Allocated Loss Expenses paid by or on behalf of
the Company.
"Obligations" shall mean:
(a) Losses and Allocated Loss Expenses paid by the Company but not recovered
from the Reinsurer;
(b) Outstanding Loss Reserves;
(c) Reserves for Losses Incurred But Not Reported;
(d) Reserves for Allocated Loss Expenses; and
(e) Reserves for Unearned Premium.
"Outstanding Loss Reserves" shall mean losses reported to the Company which have
been reserved but unpaid at any specified date.
"Policies" shall mean any and all binders, certificates, policies and contracts
of insurance, accepted or held covered provisionally or otherwise.
"Ultimate Net Loss" shall mean the actual loss sustained by the Company, such
loss to include Allocated Loss Expenses (except office expense and salaries of
officials and employees not classified as loss adjusters), but salvages and all
other recoveries,including recoveries under all reinsurance (except reinsurance
of the Company excess of the limits of the Reinsurer's liability hereunder),
shall be deducted from such Loss to arrive at the amount of liability, if any,
attached hereunder.
All salvages, recoveries, or payments recovered or received subsequent to loss
settlement hereunder, shall be applied as if recovered or received prior to the
aforesaid settlement, and all necessary adjustments shall be made by the parties
hereto. Nothing in this clause shall be construed to mean that Losses are not
recoverable hereunder; until the Company's Ultimate Net Loss has been
ascertained.
"Unearned Premiums Reserve" shall mean the reserve for the amount of premium
allocated to the unexpired portion of a policy in force as of any specified
date.
ARTICLE 11
TERM:
This Agreement is effective at 12:01 A.M. Eastern Standard Time, the 1st day of
January 1996, with respect to Line(s) of Coverage written on and after said date
for the Company by Preferred Employers Group Inc. ("PEGI") for Business as
defined hereunder.
The Company shall not issue a policy for a period in excess of twelve (12)
months plus odd time not exceeding eighteen (18) months in all or so deemed.
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ARTICLE III
TERRITORY:
The territorial scope of This Agreement shall be coextensive with the
territorial scope of the Company's Policies reinsured hereunder.
ARTICLE IV
BUSINESS REINSURED:
This Agreement shall cover, for the Business reinsured hereunder:
Workers Compensation and Employers Liability
Coverage A. Workers Compensation-Statutory
Coverage B. Employers Liability
Coverage C. Other States Insurance
written on behalf of the Company by ▇▇▇▇.
ARTICLE V
RE-INSURING CLAUSE:
The Company hereby obligates itself to cede to the Reinsurer and the Reinsurer
hereby obligates itself to accept as reinsurance:
For Coverage A. The first $300,000 (three hundred thousand) Ultimate Net Loss as
herein provided and specified under any and all policies issued or entered into,
by or on behalf of the Company by ▇▇▇▇, under the Business reinsured hereunder.
For Coverage B. The first $300,000 (three hundred thousand) Ultimate Net Loss as
herein provided and specified under any and all policies issued or entered into,
by or on behalf of the Company by ▇▇▇▇, for The Business reinsured hereunder.
For Coverage C. The first $300,000 (three hundred thousand) Ultimate Net Loss as
herein provided and specified under any and all policies issued or entered into,
by or on behalf of the Company by ▇▇▇▇, for the Business reinsured hereunder.
provided, however, that the Reinsurer's liability for Ultimate Net Loss shall be
for a maximum amount of 70% (seventy percent) of the subject Gross Written
Premium with respect to each individual underwriting year covered hereunder for
all such Coverages combined.
The Company shall retain all liabilities for payment of Ultimate Net Loss in
excess of 70% (seventy percent) of Gross Written Premium with respect to each
individual underwriting year covered hereunder; provided, however, that nothing
herein shall preclude the Company from obtaining excess of loss reinsurance or
other reinsurance of such retained limits.
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ARTICLE VI
EXCLUSIONS:
The exclusions under this Agreement shall be co-extensive with the exclusions
set forth in the Policies reinsured hereunder.
ARTICLE VII
REINSURER'S PREMIUM:
The Premium payable to the Reinsurer for the Business ceded to the Reinsurer
hereunder shall be as set forth in Schedule A attached to this Agreement
ARTICLE VIII
CLAIMS:
The Reinsurer agrees to abide by the loss settlements of the Company, it being
understood, however, that when so requested, the Company will afford the
Reinsurer an opportunity to be associated with the Company, at the expense of
the Reinsurer, in the defense of any claim or suit or proceeding involving this
reinsurance, and that the Reinsurer may cooperate in every respect in the
defense or control of such claim, suit or proceeding.
The Company may deduct paid Loss and Allocated Loss Expenses paid as provided
for in the REPORTS AND REMITTANCES ARTICLE, and the Company shall record and
advise the Reinsurer of these deductions as provided in the REPORTS AND
REMITTANCES ARTICLE.
The Company may, as its option, demand prompt payment of any Loss where the
Reinsurer's share exceeds _____ and Reinsurer will promptly pay such amounts.
ARTICLE IX
REPORTS AND REMITTANCES:
Within forty-five (45) days of the end of each month in which premium is due
while this Agreement remains in effect, on behalf of the Company, PEGI shall
remit (a) to the Company, the Company's ceding commission for the Business
reinsured hereunder during such month after deduction of ▇▇▇▇'s commission as
producing agent for such Policies, and (b) to the Reinsurer, the Reinsurer's net
premium due after deduction for the Company's ceding commission.
The Company shall furnish to the Reinsurer, all statistics necessary for the
Reinsurer to prepare monthly and annual statutory reports.
Within thirty (30) days of the end of each month while this Agreement remains in
effect, the Company shall render to the Reinsurer an account current which shall
summarize Gross Written Premiums, investment income, allowances for commissions,
Losses Paid, Obligations and salvage recovered during the applicable month. The
accounting shall also state the net balance due by either party. The balance due
shall be paid by the debtor party to the other within fifteen ( 15) days after
receipt of the account current or as soon as reasonably practicable thereafter.
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ARTICLE X
INDEMIFICATION AND ERRORS AND OMISSIONS:
Any recitals in this Agreement of the terms and provisions of the original
policy or policies are merely descriptive and the Reinsurer is reinsuring, to
the amount herein provided, the obligations of the Company under the original
policy or policies. The Company shall be the sole judge as to what shall
constitute a claim or loss covered under the Company's original policy or
policies and as to the Company's liability thereunder and as to the amount or
amounts which it shall be proper for the Company to pay thereunder and the
Reinsurer shall be bound by the judgment of the Company as to the liability and
obligation of the Company under its policy or policies.
Any inadvertent delay, omission or error shall not be held to relieve either
party hereto from any liability which would attach to it hereunder if such
delay, omission, or error had not been made, provided such delay, omission or
error is rectified as soon as possible.
ARTICLE XI
TAXES:
The Company will be liable for taxes (except Federal Excise Tax) on premiums
reported to the Reinsurer hereunder.
Federal Excise Tax shall apply only to those Reinsurers which are not exempt
from Federal Excise Tax.
ARTICLE XII
SECURITY:
The Reinsurer shall provide to the Company on the date this Agreement is
executed by the Reinsurer, as security for the Obligations of the Reinsurer
hereunder (the "Security"), any combination of cash, United States Government
securities and/or a clean and irrevocable letter of credit in continuously
renewing form. The amount of the Security required as of the date this Agreement
is executed by the Reinsurer shall be equal to 100% (one hundred percent) of the
amount of the Unearned Premium Reserve less the amount of Losses Paid for the
Business reinsured hereunder.
The total amount of Security required shall be adjusted at December 30, 1996 and
at each December 30 thereafter to be an amount equal to 70% (seventy percent) of
the Gross Ceded Premium (as set forth in Schedule A hereto) less the amount of
Losses Paid for the expiring underwriting year, and such shall constitute the
required Security for all underwriting years covered hereunder (computed as
provided in Exhibit l hereto).
ARTICLE XIII
INSPECTION
The Company shall place at the disposal of the Reinsurer, and the Reinsurer
shall have the right to inspect, all reasonable times, through its authorized
representatives, all books records and papers of the Company in connection with
the reinsurance hereunder, or any claims in connection herewith.
-5-
ARTICLE XIV
FOLLOW THE FORTUNES CLAUSE:
The Reinsurer's liability shall attach simultaneously with that of the Company
and all reinsurances for which the Reinsurer shall be liable by virtue of this
Agreement shall be subject in all respects to the same risks, terms, rates,
conditions, interpretations, assessments, waivers, and to the same
modifications, alterations and cancellations, as the respective Policy(ies) of
the Company to which this Reinsurance Agreement relates.
The true intent of this Agreement is that, in every case to which this Agreement
applies and in the proportions specified herein, the Reinsurer shall follow the
fortunes of the Company.
This Article shall not apply insofar as the Company has been tortuous in
handling a claim which is covered by this Agreement.
ARTICLE XV
INSOLVENCY:
In the event of the insolvency of the Company, reinsurance under this Agreement
shall be payable by the Reinsurer (on the basis of the liability of the Company
under contract or contracts reinsured without diminution because of the
insolvency of the Company) to the Company or its liquidator, receiver, or
statutory successor, except as provided by Section 4118 of the New York
Insurance Law or except:
(a) where the Agreement specifically provides another payee of such reinsurance
in the event of the insolvency of the Company, and
(b) where the Reinsurer, with the consent of the direct insured or insureds,
has assumed such policy obligations of the Company as direct obligations,
of the Reinsurer to the payees under such policies and in substitution for
the obligations of the Company to such payees.
It is agreed, however, that the liquidator or receiver or statutory successor of
the insolvent Company shall give written notice to the Reinsurer of the pendency
of a claim against the insolvent Company on the contract or contracts reinsured
within a reasonable time after such claim is filed in the insolvency proceeding
and that, during the pendency of such claim the Reinsurer may investigate such
claim and interpose at their own expense in the proceeding where such claim is
to be adjudicated, any defense or defenses which they may deem available to the
company or its liquidator or receiver or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to court approval against
the insolvent Company as part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to the Company solely as a
result of the defense undertaken by the Reinsurer.
ARTICLE XVI
ARBITRATION:
All disputes or differences arising out of the interpretation of this Agreement
except as covered by Article XIX--Service of Suit, shall be submitted to the
decision of two (2) Arbitrator, one to be chosen by each party, and in the event
the Arbitrator fail to agree, to the decision of an Umpire to be chosen by the
Arbitrators. The Arbitrators and Umpire shall be executive officials of Fire or
Casualty Insurance or Reinsurance Companies. If either of the parties fails to
appoint an Arbitrator within one (1) month after being required by the other
party in writing to do so, or if the Arbitrators fail to appoint an Umpire,
within one ( 1) month of a request in writing by either of them to do so, such
Arbitrator or Umpire, as the case may be, shall at the request of either party
be appointed by a Justice of the Supreme Court of the State of New York.
-6-
The Arbitration proceedings shall take place in New York, New York. The
applicant shall submit its case within one (1) month after the appointment of
the Court of Arbitration, and the respondent shall submit his reply within one
(1) month after receipt of a claim. The Arbitrators and Umpire are relieved from
all Judicial formality and may abstain from following the strict rules of law.
They shall settle any dispute under this Agreement according to an equitable
rather than a strictly legal interpretation of its terms and their decision
shall be final and not subject to appeal.
Each party shall bear the expense of its Arbitrator and shall jointly and
equally share with the other the expenses of the Umpire and the of the
Arbitration.
This Article shall survive the termination of this Agreement.
ARTICLE XVII
RESERVES:
The Reinsurer will maintain legal reserves with respect to Outstanding Losses
and Loss Expenses, reduced to net present value, and Unearned Premium Reserves.
ARTICLE XVIII
TERMINATION:
(1) Either the Company or the Reinsurer may terminate this Agreement as of
12:01 A.M. Eastern Standard Time the first day of any calendar quarter by
giving the other not less than one hundred-eighty (180) days' prior notice
in writing by Certified Mail.
(2) Either party shall have the right to terminate this Agreement immediately
by giving the other party notice:
(a) If the performance of the whole or any part of this Agreement be
prohibited or rendered impossible de jure or de facto in particular
and without prejudice to the generality of the preceding words in
consequence of any law or regulation which is or shall be in force in
any country or territory or if any law or regulation shall prevent
directly or indirectly the remittance of any or all or any part of the
balance or payments due to or from either party.
(b) If the other party at any time shall:
(i) Become insolvent, or
(ii) Suffer any impairment of capital, or
(iii) File a petition in bankruptcy, or
(iv) Go into liquidation or rehabilitation, or
(v) Have a receiver appointed, or
(vi) Be acquired or controlled by any other insurance company or
organization.
(c) In the event of the severance or obstruction of free and unfettered
communication and/or normal commercial and/or financial intercourse between
the United States of America and the country in which the Reinsurer is
incorporated or as its principal office as a result of war, currency
regulations, or any circumstances arising out of political, financial or
economic emergency.
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All notices of termination in accordance with any of the provisions of this
paragraph may be by Telex or Telegram and shall be deemed to be served upon
dispatch, or where communications between the parties and interrupted, upon
attempted dispatch.
(3) All notices of termination served in accordance with any of the provisions
of this Article shall be addressed to the party concerned at its head
office or at any other address previously designated by that party herein.
(4) In the event of this Agreement being terminated at any date other than at
an annual anniversary date then the premium due to the Reinsurer shall be
calculated pro rata of the net premiums written for the year concerned up
to date of termination. The Reinsurer shall not be liable for any Losses
arising from occurrences after the date of such Termination. The rights and
obligations of both parties of this Agreement shall remain in full force
until the effective date of termination.
(5) As respects coverage hereunder, it is understood and agreed that upon
termination of this Agreement, coverage will continue hereunder beyond such
termination date for all Losses occurring under Business in force at the
termination of this Agreement until the natural expiration date, the
cancellation date, or the date which the Company, as a matter of law, may
terminate such Business.
(6) Should this Agreement terminate while a loss occurrence is in progress, the
Reinsurer shall be liable to the extent of their interest, subject to the
other conditions of this contract, for all losses resulting from such loss
occurrence whether such losses arise before of after such termination.
ARTICLE XIX
SERVICE OF SUIT:
It is agreed that in the event of the failure of the Reinsurer to pay any amount
claimed to be due hereunder or the breach of any other term or condition of this
Agreement and for which the Company in its sole discretion has chosen not to
file for Arbitration under Article XVII, the Reinsurer, at the request of the
Company, will submit to the jurisdiction of any court of competent jurisdiction
within the United States and will comply with all requirements necessary to give
such court jurisdiction and all matters arising hereunder shall be determined in
accidence with the law and practice of such court.
It is further agreed that service of process in such suit may be made upon ▇▇▇▇
Marks & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Esquire and that in any suit instituted against the Reinsurer upon
this Agreement, the Reinsurer will abide by the final decision of such court or
of any appellate court in the event of an appeal.
The above-mentioned 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 will enter a general
appearance upon ▇▇▇▇▇▇▇▇▇'s behalf In the event such a suit shall be instituted.
Further, pursuant to any statute of any state, territory, or district of the
United States which make provisions therefor, the Reinsurer 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 its 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 designate the above named as the person to whom the said
office is authorized to mail such process or a true copy thereof.
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ARTICLE XX
CURRENCY:
All premium and loss payment hereunder shall be in Dollars.
Premium due hereunder in other than Dollars shall be paid by the Company in
Dollars at the rates of exchange at which the original accounts were settled.
Failing this the rate of exchange applied shall be that used by the Company in
their own books of account or in accordance with any subsequent adjustment
thereto.
The amounts recoverable for losses in other than Dollars shall be converted into
Dollars at the same rates of exchange as were applied in the settlement of the
original losses. Failing this the rate of exchange applied shall be that used by
the Company in their own books either at the time of the settlement or in
accordance with any subsequent adjustment thereto.
ARTICLE XXI
OFFSETS:
The Company and the Reinsurer shall have the right to offset any balance(s) due
from one to the other under this Agreement. The party asserting the right of
offset may exercise such right at any time whether the balance(s) due are on
account of premiums or losses or otherwise. In the event of the insolvency of a
party hereto, offsets shall only be allowed in accordance with the provisions of
Section 7427 of the Insurance Law of the State of New York.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its duly authorized representative.
In New York, New York this In ___________,_______, this
22 day of October, 1996. _______day of _____, 1996.
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA., FOR
itself and on behalf of its affiliated insurance
companies constituting the Company
____[NAME OF REINSURER]___
By: ______________________ By: __________________________
Title:_____________________ Title: ________________________
Division
Address: ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Address: ______________________
New York, NY 10270 ______________________
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** Confidential
Treatment Requested
SCHEDULE A
Effective _______, 1996
to
REINSURANCE AGREEMENT
Effective ________, 1996
(hereinafter "this Areement")
between
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.,
THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA,
AIU INSURANICE COMPANY (a New York corporation),and
NEW HAMPSHIRE INSURANCE COMPANY
(collectively the "Company")
and
--------------------------
a Bermuda corporation
(the "Reinsurer")
The premium of the Company and the ceded premium to the Reinsurer effective as
of the effective date of this Schedule shall be as stated in the Schedule set
forth below:
1. Gross Premiums Written **
LESS
2. Excess and Aggregate Reinsurance **
-----
EQUALS
3. Subject Premium **
LESS
4. State Premium Taxes **
5. Residual Market Loads **
6. Claims Administration Fees **
7. Profit and Administration, Boards and Bureaus **
8. Direct Commission **
9. Company's Service Fee **
-----
10. Subtotal (add lines 4 through 9) **
=====
EQUALS
11. Gross Ceded Premium **
=====
(line 3 less line 10)
-10-
** Confidential
Treatment Requested
Exhibit I REINSURANCE AGREEMENT
between
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.,
THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA,
AIU INSURANCE COMPANY (a New York corporation), and
NEW HAMPSHIRE INSURANCE COMPANY
(collectively the "Company")
and
--------------------------------------
( the "Reinsurer")
Illustration of Cumulative Amounts Due under Reinsurance Agreement and Related
Security
Initial transfer includes Policies with inception dates from January 1, 1996 to
October 11, 1996 (illustration as of date)
Computation Date: 11-Oct-96 30-Dec-96
============= =============
Projected Projected
Initial Initial
Transfer Transfer
------------- -------------
Gross Written Premium ("GWP") ** **
------------- -------------
Ultimate Net Losses @ 55% of GWP ** **
Estimated loss payment
percentage in 1st year @ 50% ** **
------------- -------------
Estimated Losses Paid (a) ** **
Excess and aggregate
reinsurance @5% of GWP ** **
Program expenses @28.83% of GWP ** **
------------- -------------
Total deductions ** **
Net premiums due Reinsurer (cumulative) ** **
============= =============
Computation of Security
=======================
Gross Written Premium ** ** Estimated GWP
Estimated Unearned Premium Reserve Factor ** ** Gross Ceded Premium Rate
------------- -------------
Unearned Premium Reserve ** ** Gross Ceded Premiums
Security percentage ** ** Security percentage
Gross Security required ** ** Total security required
Less: Losses Paid (a) ** ** Estimated Losses Paid
------------- -------------
Net Security required (cumulative) ** ** Net Security required
============= =============
NOTE: All amounts illustrated herein are cumulative.
-11-
