EXHIBIT 10 (b)
ADDENDUM NO. 2
to the
QUOTA SHARE RETROCESSION AGREEMENT
Effective: July 1, 2000
entered into by and between
AMERICAN HALLMARK INSURANCE COMPANY OF TEXAS
Dallas, Texas
and
DORINCO REINSURANCE COMPANY
Midland, Michigan
IT IS HEREBY AGREED, effective retroactively to July 1, 2000, that the
third paragraph of ARTICLE 2 - COVER shall be deleted and the following
substituted therefor:
"In no event shall the net written premium ceded hereunder for any
Underwriting Year exceed $37,000,000. For the period from July 1,
2001 to September 30, 2001, the net written premium ceded hereunder
shall not exceed $10,000,000."
IT IS FURTHER AGREED, effective April 1, 2001, with respect to policies
attaching to Underwriting Periods commencing on or after that date, that
the following paragraph shall be added to ARTICLE 2 - COVER:
"Notwithstanding the above, the Reinsurer shall have no liability for
the amount by which incurred losses and loss adjustment expenses for
the period effective April 1, 2001 to June 30, 2001 is between 65% and
77% of ceded premium for the same period. This 'loss ratio corridor'
between 65% and 77% shall be held net and unreinsured by the Company,
and in addition to its quota share retention set forth above.
In addition, in the event such loss corridor is utilized, then
effective for Underwriting Years commencing on or after July 1, 2001,
the Reinsurer shall have no liability for the amount by which incurred
losses and loss adjustment expenses for the Underwriting Year is
between 65% and 80% of ceded premium for the same period. This 'loss
ratio corridor' between 65% and 80% shall be held net and unreinsured
by the Company, and in addition to its quota share retention set forth
above."
IT IS ALSO AGREED, effective April 1, 2001, that subparagraph 1 of paragraph
A of ARTICLE 7 - ACCOUNTS AND REMITTANCES shall be deleted and the following
substituted therefor:
"1. Ceded net written premium (i.e., ceded gross written premium,
including the Reinsurer's share of 100% of the collected Policy
fees, less returns and cancellations), under Policies attaching
to each Underwriting Period; less"
IT IS ALSO AGREED, effective April 1, 2001, that ARTICLE 8 - CEDING
COMMISSION shall be deleted and the following substituted therefor:
"ARTICLE 8
CEDING COMMISSION
The Reinsurer will allow the Company a provisional ceding commission on
ceded net written premiums as follows:
A. For the period from July 1, 2000 to March 31, 2001, 41.0%;
B. For the period from April 1, 2001 to June 30, 2001, 34.0%;
C. As respects the second and subsequent Underwriting Years
hereunder, 31.0%.
Return commission shall be allowed on return premiums at the same rate
for the same period."
IT IS ALSO AGREED, effective April 1, 2001, that subparagraph 2 of paragraph
A of ARTICLE 9 - COMMISSION ADJUSTMENT shall be deleted and the following
substituted therefor:
"2. Within 18 months from the beginning of each Underwriting Year,
the Company will calculate an adjusted ceding commission for
the Underwriting Year then expired based on premiums earned and
losses incurred. The ceding commission paid to that date, whether
provisional or prior adjustment, shall be adjusted between the
parties as appropriate. At the end of each Underwriting Year,
adjustments will continue to be made annually until all losses
have been paid or closed, at which time the ceding commission
will become final."
IT IS ALSO AGREED, effective April 1, 2001, that paragraph B of ARTICLE 9 -
COMMISSION ADJUSTMENT (as amended by Addendum No. 1) shall be deleted and
the following substituted therefor:
"B. The adjusted ceding commission shall be calculated as follows:
1. As respects the first Underwriting Year calculation, the following
shall apply:
a. For the period from July 1, 2000 to December 31, 2000, if
the ratio of losses incurred to premium earned is 64.5% or
higher, then the adjusted ceding commission shall be 31.0%.
If the ratio of losses incurred to premium earned is less
than 64.5%, then the adjusted commission shall be determined
by adding one percentage point to the ceding commission for
each percentage point reduction loss ratio subject to a
ceding commission of 41.0% at a loss ratio of 54.5% or less.
If the ratio of losses incurred to premium earned is greater
than 64.5% or less than 54.5%, the difference between the
actual loss ratio and 64.5% or 54.5%, as the case may be,
will be multiplied by the earned premium for the Underwriting
Year and carried forward as a debit or credit to the ensuing
Underwriting Year calculation.
b. For the period from January 1, 2001 to February 28, 2001, if
the ratio of losses incurred to premium earned is 64.0% or
higher, then the adjusted ceding commission shall be 31.0%.
If the ratio of losses incurred to premium earned is less
than 64.0%, then the adjusted commission shall be determined
by adding one percentage point to the ceding commission for
each percentage point reduction loss ratio subject to a
ceding commission of 41.0% at a loss ratio of 54.0% or less.
If the ratio of losses incurred to premium earned is greater
than 64.0% or less than 54.0%, the difference between the
actual loss ratio and 64.0% or 54.0%, as the case may be,
will be multiplied by the earned premium for the Underwriting
Year and carried forward as a debit or credit to the ensuing
Underwriting Year calculation.
c. For the period from March 1, 2001 to March 31, 2001, if
the ratio of losses incurred to premium earned is 69.0% or
higher, then the adjusted ceding commission shall be 26.0%.
If the ratio of losses incurred to premium earned is less
than 69.0%, then the adjusted commission shall be determined
by adding one percentage point to the ceding commission for
each percentage point reduction loss ratio subject to a
ceding commission of 41.0% at a loss ratio of 54.0% or less.
If the ratio of losses incurred to premium earned is greater
than 69.0% or less than 54.0%, the difference between the
actual loss ratio and 69.0% or 54.0%, as the case may be,
will be multiplied by the earned premium for the Underwriting
Year and carried forward as a debit or credit to the ensuing
Underwriting Year calculation.
d. For the period from April 1, 2001 to June 30, 2001, if the
ratio of losses incurred to premium earned is 65.0% or
higher, then the adjusted ceding commission shall be 26.0%.
If the ratio of losses incurred to premium earned is less
than 65.0%, then the adjusted commission shall be determined
by adding one percentage point to the ceding commission for
each percentage point reduction loss ratio subject to a
ceding commission of 34.0% at a loss ratio of 50.0% or less.
If the ratio of losses incurred to premium earned is greater
than 65.0% or less than 50.0%, the difference between the
actual loss ratio and 65.0% or 50.0%, as the case may be,
will be multiplied by the earned premium for the Underwriting
Year and carried forward as a debit or credit to the ensuing
Underwriting Year calculation.
2. As respects the second and subsequent Underwriting Years
hereunder, if the ratio of losses incurred to premium earned
is 65.0% or higher, then the adjusted ceding commission shall
be 26.0%. If the ratio of losses incurred to premium earned is
less than 65.0%, then the adjusted commission shall be determined
by adding one percentage point to the ceding commission for
each percentage point reduction loss ratio subject to a ceding
commission of 31.0% at a loss ratio of 50.0% or less. If the
ratio of losses incurred to premium earned is greater than 65.0%
or less than 50.0%, the difference between the actual loss ratio
and 65.0% or 50.0%, as the case may be, will be multiplied by the
earned premium for the Underwriting Year and carried forward as a
debit or credit to the ensuing Underwriting Year calculation.
Following termination of this Agreement any debit or credit
carryforward remaining after the final adjustment of the concluding
Underwriting Year will be null and void."
IT IS ALSO AGREED, effective July 1, 2001, with respect to policies
attaching to Underwriting Years commencing on or after that date, that
the first paragraph of ARTICLE 1 - BUSINESS REINSURED shall be deleted
and the following substituted therefor:
"This Agreement is to share with the Reinsurer the interests and
liabilities of the Company under all Policies classified by the Company
as Private Passenger Automobile Business (including Motorist Bodily
Injury and Property Damage, Physical Damage, Uninsured/Underinsured
Motorist Bodily Injury and Property Damage, Personal Injury Protection,
and Towing and Rental insurance) written or renewed by or through
American Hallmark General Agency, Inc., Dallas, Texas for and on
behalf of State and County Mutual Insurance Company, Ft. Worth, Texas
(hereinafter called the 'Issuing Carrier') and assumed by the Company
as reinsurance from the Issuing Carrier, during the term of this
Agreement, subject to the terms and conditions herein contained."
IT IS ALSO AGREED, effective July 1, 2001, with respect to policies
attaching to Underwriting Years commencing on or after that date, that
ARTICLE 5 - WARRANTY shall be deleted and the following substituted
therefor:
"ARTICLE 5
WARRANTY
It is warranted for purposes of this Agreement that the maximum Policy
limits for which American Hallmark General Agency, Inc. shall have the
authorization to bind the Issuing Carrier for business ceded hereunder
shall be as follows or so deemed:
A. Bodily Injury, per person/per accident $25,020/$50,020
B. Property Damage, per accident $25,020
C. Physical Damage Actual Cash Value
(ACV) not to exceed
$50,020
per vehicle
D. Personal Injury Protection,
per person/per accident $2,520
E. Uninsured/Underinsured Motorist Bodily
Injury, per person/per accident $25,020/$50,020
F. Uninsured/Underinsured Motorist Property
Damage, per accident $25,020
In the event of a statutory increase in limits by the State of Texas,
or travel by an insured to a state with greater statutory requirements,
the maximum Policy limits shall be increased to statutory limits in
effect."
IT IS ALSO AGREED, effective July 1, 2001, that the fifth paragraph of
ARTICLE 16 - EXTRA CONTRACTUAL OBLIGATIONS AND EXCESS OF POLICY LIMITS
shall be deleted and the following substituted therefor:
"Notwithstanding the above, as respects any loss under policies
attaching prior to July 1, 2001 which includes either Extra Contractual
Obligations or Excess of Policy Limits or both, the Reinsurer's limit
of liability for Extra Contractual Obligations and/or Excess of Policy
Limits shall be limited to $2,000,000 each loss in addition to the
indemnity loss. As respects any loss under policies attaching to
Underwriting Years commencing on or after July 1, 2001 which includes
Extra Contractual Obligations and/or Excess of Policy Limits, the
Reinsurer's limit of liability for Extra Contractual Obligations and/or
Excess of Policy Limits shall be limited to $700,000 (i.e., 70% of
$1,000,000) each loss in addition to the indemnity loss."
The provisions of this Agreement shall remain otherwise unchanged.
IN WITNESS WHEREOF the parties hereto have caused this Addendum to be
executed by their duly authorized representatives at:
Dallas, Texas, this ___________ day of_________________________, 20__.
_______________________________________________________
AMERICAN HALLMARK INSURANCE COMPANY OF TEXAS
Midland, Michigan, this __________ day of______________________, 20__.
_______________________________________________________
DORINCO REINSURANCE COMPANY