.
.
.
Exhibit 10.26
CASUALTY VARIABLE QUOTA SHARE REINSURANCE AGREEMENT
ARTICLE PAGE
------- ----
COVERAGE ARTICLE 2
FOLLOW THE FORTUNES ARTICLE 6
COMMENCEMENT AND TERMINATION ARTICLE 6
SPECIAL TERMINATION OR SETTLEMENT ARTICLE 7
TERRITORY ARTICLE 10
EXCLUSIONS ARTICLE 11
REINSURANCE PREMIUM AND CEDING COMMISSION ARTICLE 18
OTHER REINSURANCE ARTICLE 18
EXTRA CONTRACTUAL OBLIGATIONS AND EXCESS OF LIMITS LIABILITY
ARTICLE 18
REPORTS AND REMITTANCES ARTICLE 20
LOSS AND LOSS ADJUSTMENT EXPENSE ARTICLE 20
LOSS SETTLEMENTS ARTICLE 21
OFFSET ARTICLE 22
SALVAGE AND SUBROGATION ARTICLE 22
WARRANTIES ARTICLE 23
DELAYS, ERRORS, OR OMISSIONS ARTICLE 24
ENTIRE AGREEMENT, INTERPRETATION ARTICLE 25
ACCESS TO RECORDS ARTICLE 25
CONFIDENTIALITY ARTICLE 25
INSOLVENCY ARTICLE 25
ARBITRATION ARTICLE 27
GOVERNING LAW ARTICLE 29
CURRENCY REVALUATION AND FOREIGN EXCHANGE ARTICLE 29
SERVICE OF SUIT ARTICLE 30
AGENCY ARTICLE 32
INTERMEDIARY ARTICLE 32
RESERVES AND FUNDING ARTICLE 32
FEDERAL EXCISE TAX ARTICLE 34
DEFINITIONS ARTICLE 34
INSOLVENCY FUNDS EXCLUSION CLAUSE
NUCLEAR INCIDENT EXCLUSION CLAUSES AND NUCLEAR ENERGY RISKS
EXCLUSION CLAUSES
AR 16479 -- 3/1/06 1
(04/20/06)
CASUALTY VARIABLE QUOTA SHARE REINSURANCE AGREEMENT
PREAMBLE
Words and phrases that appear in BOLD print have special meanings that are
defined either in the Definitions Article or in the text of this AGREEMENT.
This AGREEMENT is made and entered into by and between:
Allied World Assurance Company, Ltd., a Bermuda corporation;
Allied World Assurance Company (Europe) Limited, an Ireland corporation;
Allied World Assurance Company (Reinsurance) Limited, an Ireland corporation;
Allied World Assurance Company (U.S.) Inc.; and
Newmarket Underwriters Insurance Company;
(Hereinafter collectively referred to as the COMPANY);
Of the one part, and
The various reinsurers as identified by the Interests And Liabilities Agreements
attaching to and forming a part of this AGREEMENT
(Hereinafter referred to individually as the REINSURER and collectively as the
REINSURERS)
Of the other part.
The parties hereto agree as hereinbelow, in consideration of the mutual
covenants contained in the following Articles and upon the terms and conditions
set forth therein:
COVERAGE ARTICLE
The COMPANY will cede to the REINSURER, and the REINSURER will accept a quota
share percentage (as specified for such REINSURER in the Interests And
Liabilities Agreement attaching to and forming a part of this AGREEMENT) of the
interests and liabilities of all POLICIES classified by the COMPANY as:
Excess General Casualty Insurance; and
Underwritten by the COMPANY'S staff.
The quota share cession will be based on the original limits and initial
attachment point of each reinsured POLICY as follows:
SECTION A
(This Section A is not applicable to POLICIES written by Allied World Assurance
Company (U.S.) Inc. or Newmarket Underwriters Insurance Company.)
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I. As respects POLICIES with original limits up to and including $25,000,000,
E25,000,000 or L15,000,000, the COMPANY will cede to the REINSURER, and the
REINSURER will accept, the quota share percentage (as specified for such
REINSURER in the Interests And Liabilities Agreement attaching to and
forming a part of this AGREEMENT). The quota share percentage of the
interests and liabilities of the subject POLICIES that will be ceded to the
REINSURERS under this Section A is 12.00%.
II. The limit of liability to the REINSURERS for ULTIMATE NET LOSS will not
exceed $3,000,000, E3,000,000, or L1,800,000, i.e. 12.00% of the applicable
POLICY limit, each OCCURRENCE under each reinsured POLICY, subject to any
reinstatement or any aggregate provisions (or both) in the reinsured
POLICY.
III. All POLICIES subject to this Section A will be written above a minimum
initial attachment point of $10,000,000, E10,000,000, or L10,000,000.
SECTION B
(This Section B is not applicable to POLICIES written by Allied World Assurance
Company (U.S.) Inc. or Newmarket Underwriters Insurance Company.)
I. As respects POLICIES with original limits in excess of $25,000,000,
E25,000,000 or L15,000,000, the COMPANY will cede to the REINSURER, and the
REINSURER will accept, its percentage (as specified for such REINSURER in
the Interests And Liabilities Agreement attaching to and forming a part of
this AGREEMENT) of a variable quota share cession to the REINSURERS of the
interests and liabilities of the subject POLICIES. The variable quota share
cession to the REINSURERS will be calculated individually with respect to
each reinsured POLICY and will equal one minus the COMPANY'S RETAINED
PERCENTAGE.
The COMPANY'S RETAINED PERCENTAGE as used in this Section B means:
The percentage that results from dividing the sum of the following two
amounts:
1. (a) $25,000,000;
(b) E25,000,000; or
(c) L15,000,000; plus
2. 5.00% of the remaining reinsured POLICY'S original limit after the
amount in 1. (a), 1. (b), or 1. (c) above has been subtracted from
that POLICY'S total original limit;
By the reinsured POLICY'S total original limit.
The currency of the reinsured POLICY'S original limit will determine
whether the amount in 1. (a), 1. (b), or 1. (c) above is used in the
calculation of the COMPANY'S RETAINED PERCENTAGE. If the currency of the
reinsured POLICY'S original limit is in United States of America (U.S.)
dollars, then the amount in 1. (a) above will be used. If the currency of
the reinsured POLICY'S original limit is in euros, then the amount in 1.
(b) above will be used. If the currency of the
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reinsured POLICY'S original limit is in United Kingdom (UK) pounds
sterling, then the amount in 1. (c) above will be used. Where the reinsured
POLICY'S original limit is written in a currency other than one of the
preceding currencies in this paragraph, the reinsured POLICY'S original
limit will be converted into U.S. dollars subject to the provisions of the
Currency Revaluation And Foreign Exchange Article and the amount in 1. (a)
above will be used in the calculation of the COMPANY'S RETAINED PERCENTAGE
for such POLICY.
Example:
(i) For the purpose of this example, it is assumed that L20,000,000 is the
reinsured POLICY'S total original limit;
(ii) The reinsured POLICY'S original limit is in UK pounds sterling;
therefore, the amount in 1. (c) above will be used the calculation of
the COMPANY'S RETAINED PERCENTAGE;
(iii) 5.00% of the amount remaining after L15,000,000 is subtracted from
L20,000,000 equals L250,000 (i.e. 5.00% of L5,000,000);
(iv) L15,000,000 + L250,000 equals L15,250,000;
(v) The COMPANY'S RETAINED PERCENTAGE with respect to the reinsured POLICY
is therefore 76.25000% (L15,250,000 divided by L20,000,000);
(vi) 1.00 minus 76.25000% equals 23.75000%; therefore, 23.75000% is the
quota share cession ceded to the REINSURERS with respect to the
reinsured POLICY.
II. The limit of liability to the REINSURERS for ULTIMATE NET LOSS will not
exceed $25,000,000 (i.e., 50% of $50,000,000) or E25,000,000 (i.e., 50% of
E50,000,000) or L15,000,000 (i.e., 50% of L30,000,000), each OCCURRENCE
under each reinsured POLICY, subject to any reinstatement or any aggregate
provisions (or both) in the reinsured POLICY.
III. All POLICIES subject to this Section B will be written above a minimum
initial attachment point of $25,000,000, E25,000,000, or L15,000,000.
SECTION C
(This Section C is applicable only to POLICIES written by Allied World Assurance
Company (U.S.) Inc. or Newmarket Underwriters Insurance Company.)
I. As respects POLICIES with original limits up to and including $25,000,000,
the COMPANY will cede to the REINSURER, and the REINSURER will accept, the
quota share percentage (as specified for such REINSURER in the Interests
And Liabilities Agreement attaching to and forming a part of this
AGREEMENT). The quota share percentage of the interests and liabilities of
the subject POLICIES that will be ceded to the REINSURERS under this
Section C is 20.00%.
II. The limit of liability to the REINSURERS for ULTIMATE NET LOSS will not
exceed $5,000,000, i.e. 20.00% of the applicable POLICY limit, each
OCCURRENCE under each reinsured POLICY, subject to any reinstatement or any
aggregate provisions (or both) in the reinsured POLICY.
III. All POLICIES that provide coverage for original named insureds that are
principally engaged in the construction of real property and that are
subject to this Section C will be written above a
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minimum initial attachment point of $10,000,000. All other POLICIES subject
to this Section C will be written above a minimum initial attachment point
of $5,000,000.
PROVISIONS APPLICABLE TO SECTIONS A, B, AND C
I. Should any loss involve this AGREEMENT, the obligation of the REINSURERS in
Sections A, B, and C above will be reinstated immediately and automatically
as to any subsequent loss for the full amount of reinsurance as set forth
above, subject to any reinstatement or any aggregate provisions (or both)
in the reinsured POLICIES.
II. If the reinsured POLICY recognizes any:
1. Erosion of its initial attachment point due to payment of claims by
underlying insurance and drops down; or
2. Reduction in its stated attachment point due to any provisions in any
underlying insurance with respect to any JOINT VENTURE;
Then the minimum initial attachment points specified in Sections A, B, and
C above will likewise recognize any such erosion or reduction and be eroded
or reduced to the same extent.
III. In addition to ULTIMATE NET LOSS, the REINSURER will indemnify the COMPANY
for its proportionate share of:
1. Any LOSS ADJUSTMENT EXPENSE that does not erode the applicable limit
of liability of the reinsured POLICY; provided, however, that if an
element of LOSS ADJUSTMENT EXPENSE erodes the applicable limit of
liability of the reinsured POLICY, then it shall be deemed as part of
ULTIMATE NET LOSS hereunder; and
2. Any EXTRA CONTRACTUAL OBLIGATIONS or EXCESS OF LIMITS LIABILITY as set
forth in the EXTRA CONTRACTUAL OBLIGATIONS And EXCESS OF LIMITS
LIABILITY Article.
IV. The sign "$" in this AGREEMENT refers to United States of America (U.S.)
dollars. The sign "E" refers to euros, the currency of the European Union.
The sign "L" refers to United Kingdom pounds sterling.
For purposes of:
1. Determining whether a given POLICY is subject to Section A or B above;
2. Which amount of the applicable limit of liability to the REINSURERS
stated in Section A, B, or C above is to be used for a given POLICY;
or
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3. Which amount of the applicable minimum initial attachment point(s)
stated in Section A, B, or C is to be used for a given POLICY;
The applicable amount stated in Section A, B, or C above that is to be used
for such purposes will be the one that has a currency that is identical to
the currency of:
(i) Such POLICY'S original limit(s) as respects IV. 1. and IV. 2. above;
and
(ii) The initial attachment point(s) of such POLICY as respects IV. 3.
above.
Where the reinsured POLICY'S original limit(s) or initial attachment
point(s) refer(s) to a currency other than one of the preceding currencies
in this paragraph IV., such POLICY'S original limit(s) and its initial
attachment point(s) will be:
a) Converted into their U.S. dollar equivalents; and
b) The limit of liability to the REINSURERS or the minimum initial
attachment point stated in Section A, B, or C above to be used for
such POLICY will be the applicable U.S. dollar amount specified above;
Subject to the provisions of the Currency Revaluation And Foreign Exchange
Article.
FOLLOW THE FORTUNES ARTICLE
A. The REINSURER'S liability will attach simultaneously with that of the
COMPANY and will be subject in all respects to the same terms, conditions,
interpretations, waivers, modifications, alterations, and cancellations as
the respective POLICIES of the COMPANY, the true intent of this AGREEMENT
being that the REINSURER will, subject to the terms, conditions, and limits
of this AGREEMENT, follow the fortunes of the COMPANY.
B. Nothing will in any manner create any obligations or establish any rights
against the REINSURER in favor of any third parties or any persons not
parties to this AGREEMENT.
COMMENCEMENT AND TERMINATION ARTICLE
This AGREEMENT applies to all POLICIES written or RENEWED with effective dates
on or after March 1, 2006, 12:01 a.m. Atlantic Standard Time (AST) and will
remain in full force and effect until terminated as hereinafter provided.
This AGREEMENT may be terminated (or any REINSURER'S percentage participation
terminated or reduced) at any March 1, 12:01 a.m. AST by either party giving at
least ninety (90) calendar days' prior written notice to the other party. During
any such period of notice the parties will remain bound by the terms of this
AGREEMENT.
6
In the event this AGREEMENT is terminated (or any REINSURER'S percentage
participation terminated or reduced) in accordance with the aforementioned
procedure, the REINSURER will remain liable for all losses under POLICIES in
force until their expiration or RENEWAL dates, whichever comes first.
Additionally, the REINSURER will remain liable during any EXTENDED REPORTING
PERIOD or DISCOVERY PERIOD that an original insured may elect to invoke on a
claims-made or OCCURRENCE-reported POLICY that expires or is canceled during, or
at the end of, the period of the REINSURER'S liability hereunder. The date of
loss for claims made or OCCURRENCES reported during said EXTENDED REPORTING
PERIOD or DISCOVERY PERIOD will be deemed to be the last in-force day of the
reinsured POLICY period. In conformance with state regulations, the obligations
of the REINSURER under this AGREEMENT as respects all claims-made POLICIES will
extend to the reinstatement of any aggregate limits as may be afforded by any
EXTENDED REPORTING PERIOD or DISCOVERY PERIOD provision of such POLICIES. The
REINSURER will receive its share of any premium applicable to said EXTENDED
REPORTING PERIOD or DISCOVERY period, which will be considered fully earned by
the REINSURER on the last in-force day of the reinsured POLICY period.
In the event that POLICIES subject to this AGREEMENT are written in a
jurisdiction where cancellation, renewal, or nonrenewal of coverage is regulated
by the insurance authorities, and the COMPANY is bound by statute or regulation
of said jurisdiction or by a judicial decision to continue coverage after the
termination date of this AGREEMENT, then the REINSURER will remain liable on any
POLICIES continuing such coverage (and will receive the premium therefor) until
the first RENEWAL date when the COMPANY can lawfully nonrenew, or the first date
when the COMPANY can lawfully cancel, said POLICIES. If, however, the COMPANY
decides to hold the business net and for its own account, or has other
reinsurance agreements that would apply to such business, the REINSURER will not
be liable for longer than the run-off period set forth above.
Notwithstanding the termination of this AGREEMENT (or any REINSURER'S percentage
participation hereon) as hereinabove provided, the provisions of this AGREEMENT
will continue to apply to all obligations and liabilities of the parties
incurred hereunder to the end that all such obligations and liabilities will be
fully performed and discharged.
SPECIAL TERMINATION OR SETTLEMENT ARTICLE
(Applicable separately as between the COMPANY and each participating REINSURER)
Section I
A. Either party may terminate this AGREEMENT upon forty-five (45) calendar
days' notice in the event that:
1. The other party should at any time (whether voluntarily or otherwise)
become insolvent, or suffer any IMPAIRMENT OF PAID-UP CAPITAL, or
become the subject of any liquidation, rehabilitation, receivership,
supervision, conservation, or bankruptcy action or proceeding (whether
judicial otherwise) or of a proposed Scheme of Arrangement, or be
acquired or controlled (whether directly or indirectly) by any other
company or organization.
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IMPAIRMENT OF PAID-UP CAPITAL does not include a voluntary reduction in
paid-up capital by either party to this AGREEMENT for purposes of buying
back its outstanding shares of stock to increase its earnings per share.
B. The COMPANY may terminate this AGREEMENT forthwith in the event that:
1. The REINSURER ceases writing reinsurance;
2. The REINSURER at any time:
(i) Has a Standard & Poor's (S&P) Insurer Financial Strength Rating
of lower than "A-"; or
(ii) Ceases to have any S&P Insurer Financial Strength Rating
(including a designation of "not rated" or "NR") after having had
an S&P rating at or after the inception of this AGREEMENT;
3. The REINSURER at any time:
(i) Has an A.M. Best Financial Strength Rating of lower than "A-"; or
(ii) Ceases to have any A.M. Best Financial Strength Rating (including
a designation of "not rated" or "NR") after having had an A.M.
Best Financial Strength Rating at or after the inception of this
AGREEMENT;
4. Over any period not exceeding twelve months, the policyholders'
surplus of the REINSURER, as reported in such financial statements of
the REINSURER as designated by the COMPANY, drops by 20% or more; or
5. As respects each REINSURER domiciled in the United States of America
only, upon application of the NAIC Insurance Regulatory Information
System (IRIS) tests to the REINSURER'S most recent statutory Annual
Statement (which the REINSURER hereby agrees to furnish to the COMPANY
upon request), it is found that four or more of the REINSURER'S IRIS
financial ratio values are outside of the usual range established in
the IRIS system.
Notwithstanding the above, paragraphs 4. and 5. will not apply to any
REINSURER having at all times both an S&P Insurer Financial Strength Rating
and an A.M. Best Financial Strength Rating of "A" or higher.
C. Termination under Section I A. or Section I B. above will be effected by
written notice. The COMPANY will elect whether the termination will be on a
run-off basis or a clean-cut basis with an immediate settlement of ALL
PRESENT AND FUTURE OBLIGATIONS under this AGREEMENT. If the COMPANY
initially elects a run-off basis, within fifteen (15) calendar days of
receiving notice of the COMPANY'S election, the REINSURER will secure all
such obligations through a trust account or a clean, unconditional,
irrevocable, and evergreen
8
letter of credit from a financial institution acceptable to the COMPANY.
However, even if such security is requested by the COMPANY or provided by
the REINSURER, it is agreed that the COMPANY will retain the right to
require an immediate settlement of ALL PRESENT AND FUTURE OBLIGATIONS at
any subsequent date.
Section II
A. After the termination of this AGREEMENT for any reason other than a Special
Termination governed by Section I, above, if the REINSURER has any
remaining present or future obligations to the COMPANY and any of the five
events described in Part B. of Section I should occur, the COMPANY may
require:
(i) An immediate settlement of ALL PRESENT AND FUTURE OBLIGATIONS under
this AGREEMENT; or
(ii) The REINSURER to secure all such obligations through a trust account
or a clean, unconditional, irrevocable, and evergreen letter of credit
from a financial institution acceptable to the COMPANY.
B. If the COMPANY initially requires security under Part A. of this Section,
it will notify the REINSURER in writing and the REINSURER will provide such
trust account or letter of credit within fifteen (15) calendar days.
However, even if such security is requested by the COMPANY or provided by
the REINSURER, it is agreed that the COMPANY will retain the right to
require an immediate settlement of ALL PRESENT AND FUTURE OBLIGATIONS at
any subsequent date.
Section III
A. For purposes of this Article, ALL PRESENT AND FUTURE OBLIGATIONS means
outstanding ULTIMATE NET LOSS, EXTRA CONTRACTUAL OBLIGATIONS, EXCESS OF
LIMITS LIABILITY and LOSS ADJUSTMENT EXPENSE [including reserves for
incurred-but-not-reported ULTIMATE NET LOSS and LOSS ADJUSTMENT EXPENSE
(IBNR)], return of unearned premiums, and all other present or future
balances, obligations, or amounts due the COMPANY under this AGREEMENT.
B. In no event will this Article be construed to limit the amount of, or the
rights and obligations of the parties with respect to, any security
withheld or required in accordance with the Reserves And Funding Article
hereof (if applicable).
C. In the event of an immediate settlement of ALL PRESENT AND FUTURE
OBLIGATIONS, upon receipt of final payment, the COMPANY and the REINSURER
will execute a full and final commutation and mutual release of their
respective liabilities under the AGREEMENT.
9
D. When requested by either party an appraisal of IBNR will be made by a panel
of three disinterested Actuaries to be selected as follows:
(i) The COMPANY, or the REINSURER, may request in writing to the other
party that any differences in the estimated amount of IBNR be settled
by a panel of three Actuaries, one to be chosen by each party and the
third by the two so chosen.
(ii) If the other party refuses or neglects to appoint an Actuary within
thirty (30) calendar days after the COMPANY'S or REINSURER'S request
in writing that the differences be settled by a panel of three
Actuaries, the other party may appoint two Actuaries.
(iii) If the two Actuaries fail to agree on the selection of a third
Actuary within thirty (30) calendar days of their appointment, each of
them will name two, of whom the other shall decline one, and the
decision shall be made by drawing lots. All the Actuaries will be
regularly engaged in the valuation of Excess General Casualty
Insurance claims, and each will be a Fellow of the Casualty Actuarial
Society. None of the Actuaries will be under the control of either
party to this AGREEMENT.
(iv) Each party shall submit its case to the Actuary it selected within
thirty (30) calendar days of the appointment of the third Actuary. The
decision in writing of any two Actuaries, when filed with the parties
hereto, will be final and binding on both parties. The expense of the
Actuaries and of the commutation will be equally divided between the
two parties. Said appraisal shall take place in Xxxxxxxx, Bermuda
unless some other place is mutually agreed upon by the COMPANY and the
REINSURER.
E. All demands, requests and notices pursuant to this Article will be given in
writing and given by hand, prepaid express courier, airmail or telecopier
properly addressed to the appropriate party and will be deemed as having
been effected only upon actual receipt.
F. Settlements under this Article will be adjusted for net present value. The
discount rate used for determining net present value will be the current
yield of a United States Treasury 2-year note as quoted in the Wall Street
Journal on the nearest working day prior to the date the commutation is
executed.
G. In the event of any conflict between this Article and any other Article of
this AGREEMENT, the terms of this Article will control.
This Article will survive the expiration or termination of this AGREEMENT.
TERRITORY ARTICLE
The territorial scope of this AGREEMENT will follow that of the COMPANY'S
POLICIES.
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EXCLUSIONS ARTICLE
I. With respect to POLICIES otherwise subject to Sections A, B or C of the
Coverage Article, this AGREEMENT does not apply to and specifically
excludes the following:
A. Liability assumed by the COMPANY under any form of treaty reinsurance;
however, this exclusion does not apply to POLICIES subject to an
inter-company pooling reinsurance agreement among the parties
comprising the COMPANY hereunder.
B. Loss or liability excluded by the Insolvency Funds Exclusion Clause,
as attached to this AGREEMENT.
C. Loss or liability excluded by the:
i) Nuclear Incident Exclusion Clause--Liability--Reinsurance
(U.S.A.);
ii) Nuclear Incident Exclusion Clause--Liability--Reinsurance
(Canada);
iii) Nuclear Energy Risks Exclusion Clause (Reinsurance) (1994),
(Worldwide Excluding U.S.A. and Canada), (Includes Japanese
Amendment);
iv) Nuclear Incident Exclusion Clause--Physical Damage--Reinsurance
(U.S.A.);
v) Nuclear Incident Exclusion Clause--Physical Damage--Reinsurance
(Canada);
vi) Nuclear Incident Exclusion Clause--Physical Damage and Liability
(Boiler and Machinery Policies)--Reinsurance (U.S.A.); and
vii) Nuclear Incident Exclusion Clause--Physical Damage and Liability
(Boiler and Machinery Policies)--Reinsurance (Canada);
Which are attached to this AGREEMENT.
D. Loss caused directly, or indirectly, by war, whether or not declared,
civil war, insurrection, rebellion or revolution or any act or
condition incidental to any of the foregoing. If a POLICY contains, or
follows as in the case of a follow-form POLICY, any war or terrorism
exclusion that includes any provision(s) in conflict with any
provision(s) of this exclusion, then the provision(s) of the POLICY
shall supersede the conflicting provision(s) of this exclusion. This
exclusion will not be more limiting than any war or terrorism
exclusion contained in, or followed by, any POLICY issued by the
COMPANY.
E. Costs incurred for the withdrawal, inspection, repair, recall, return,
replacement or disposal of an original named insured's products or
work; provided that, except with respect to "automobiles" (as such
term is defined in the reinsured POLICY) and CRITICAL AUTO PARTS, this
exclusion will not apply in respect of costs incurred for the
withdrawal, inspection, repair, recall, return, replacement or
disposal of products or work of a party other than an original named
insured of which the original named insured's products or work forms a
part.
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F. Loss or liability arising out of an INTEGRATED OCCURRENCE or BATCH
OCCURRENCE in respect of "automobile" (as such term is defined in the
reinsured POLICY) manufacturers and CRITICAL AUTO PARTS manufacturers.
G. POLICIES with an initial attachment point below:
1. $10,000,000, E10,000,000, or L10,000,000 as respects POLICIES
that would otherwise be subject to Section A of the Coverage
Article;
2. $25,000,000, E25,000,000, or L15,000,000 as respects POLICIES
that would otherwise be subject to Section B of the Coverage
Article;
3. $10,000,000 as respects POLICIES that would otherwise be subject
to Section C of the Coverage Article and that provide coverage
for original named insureds that are principally engaged in the
construction of real property; or
4. $5,000,000 as respects all other POLICIES that would otherwise be
subject to Section C of the Coverage Article;
Provided, however, that if the reinsured POLICY recognizes any:
(i) Erosion of its initial attachment point due to payment of claims
by underlying insurance and drops down; or
(ii) Reduction in its stated attachment point due to any provisions in
any underlying insurance with respect to any JOINT VENTURE;
Then the minimum initial attachment points specified in 1., 2., and 3.
above will likewise recognize any such erosion or reduction and be
eroded or reduced to the same extent.
For purposes of determining which currency and amount of the
applicable minimum initial attachment point thresholds stated in 1.
and 2. above will be used for a given POLICY; the minimum initial
attachment point threshold will be the one that has a currency that is
identical to the currency of the original attachment point(s) of such
POLICY.
Where the POLICY'S original attachment point(s) refers to a currency
other than one of the preceding currencies in this exclusion, such
POLICY'S original attachment point(s) will be:
a) Converted into its(their) U.S. dollar equivalents; and
b) The minimum initial attachment point threshold will be the
applicable U.S. dollar amount specified in 1., 2. or 3. above;
Subject to the provisions of the Currency Revaluation And Foreign
Exchange Article.
H. Directors and Officers Liability.
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I. Errors and Omissions (E&O) or Professional Liability coverage, except
for INCIDENTAL EXPOSURE. INCIDENTAL EXPOSURE only as used in this
paragraph is defined as an original insured's operations for which
there are no identifiable and dedicated third party revenues
associated with the exposure.
This exclusion will not apply to:
1. Any:
(i) "Bodily injury";
(ii) "Property damage";
(iii) "Personal injury";
(iv) "Advertising liability" (or "advertising injury" or
"personal and advertising injury");
As such terms above are defined in the reinsured POLICY; or
(v) Any EXTRA CONTRACTUAL OBLIGATIONS, EXCESS OF LIMITS
LIABILITY, or any LOSS ADJUSTMENT EXPENSE associated with
(i) through (iv) above;
Regardless of whether or not such EXTRA CONTRACTUAL OBLIGATIONS,
EXCESS OF LIMITS LIABILITY, LOSS ADJUSTMENT EXPENSE, liability,
injury or damage results directly, or indirectly, or is caused in
whole, or in part, by any act, misfeasance, malfeasance, breach
of duty, error or omission of the insured that is of a
professional nature;
2. Druggists or Pharmacists Professional Liability; or
3. Employee Benefits Liability.
J. Loss or liability arising out of a MULTI-YEAR POLICY. The term
MULTI-YEAR POLICY as used herein means a POLICY issued for a POLICY
period greater than the MAXIMUM POLICY PERIOD as specified under the
Definitions Article.
K. Business derived directly as a member of any pool, association or
syndicate.
L. Surety / Fidelity / Credit / Financial Guarantee and Insolvency
losses.
M. Loss or liability directly resulting from the rendering, or failure to
render, the following professional services:
Medical, surgical, dental, x-ray, nursing or chiropractic services or
care provided to any person, including the furnishing of drugs, in
connection therewith.
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This exclusion will not apply to:
1. IN-HOUSE MEDICAL PROFESSIONALS (IN-HOUSE MEDICAL PROFESSIONALS
include nurses or physicians who treat fellow employees at an
original insured's premises while in the course of their
employment with that insured);
2. Druggists or Pharmacists Professional Liability; or
3. Emergency first aid provided by an original insured who is not
principally engaged in the provision of emergency medical
services.
If a POLICY contains, or follows as in the case of a follow-form
POLICY, any medical malpractice exclusion that includes any
provision(s) in conflict with any provision(s) of this exclusion, then
the provision(s) of the POLICY shall supersede the conflicting
provision(s) of this exclusion. This exclusion will not be more
limiting than any medical malpractice exclusion contained in, or
followed by, any POLICY issued by the COMPANY.
N. Business classified as Environmental Impairment Liability when written
as such.
O. Asbestos, except as respects such coverage as may be provided by the
XL 004 policy form (or similar provisions of other occurrence-reported
or claims-made forms).
P. Aviation Liability, unless such coverage pertains to an incidental
part of the original insured's overall operations. Additionally,
Aircraft Products Liability will not be covered when the POLICY is
issued to an original named insured whose primary business is the
manufacture of aircraft, aircraft engines or aircraft propellers. This
exclusion does not apply to:
1. Fuel or other fluids and lubricants utilized for aircraft;
2. Any aviation liability arising out of aircraft that an original
insured leases to others if such insured is not principally
engaged in the manufacture of aircraft, aircraft engines or
aircraft propellers or in the carrying of passengers aboard
aircraft for a fee.
3. "Industrial aid aircraft" or "industrial aid aircraft use" as
such terms are defined in the POLICY.
If a POLICY contains, or follows as in the case of a follow-form
POLICY, any aviation liability or aircraft exclusion that includes any
provision(s) in conflict with any provision(s) of this exclusion, then
the provision(s) of the POLICY shall supersede the conflicting
provision(s) of this exclusion. This exclusion will not be more
limiting than any aviation liability or aircraft exclusion contained
in, or followed by, any POLICY issued by the COMPANY.
Q. Employment Practices Liability, when written as such.
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R. Methyl tertiary-butyl ether (MTBE) on POLICIES issued to original
insureds that are engaged in the:
1. Refining or manufacturing of MTBE;
2. Refining of petroleum products; or
3. Blending of MTBE with other petroleum products;
However, this exclusion does not apply to persons or organizations
that qualify as additional insureds under POLICIES issued to original
insureds that are not engaged in any of the operations described in 1.
through 3. above.
S. Loss or liability arising out of:
1. Enron, Worldcom or Xxxxxx Xxxxxxxx, but only with respect to
Directors & Officers Liability, Fiduciary Liability, Surety,
Lawyers Professional Liability and Accountants Professional
Liability when written as such; or
2. The terrorist attacks that took place in the United States of
America on September 11th, 2001, including, but not limited to,
losses either directly or indirectly caused by the hijacking and
the crashes of the four passenger aircraft on that day.
T. Pure financial loss.
II. With respect to POLICIES otherwise subject to Sections B or C of the
Coverage Article, this AGREEMENT does not apply to and specifically
excludes the following:
A. POLICIES issued to original named insureds that are major
pharmaceutical manufacturers; provided, however, that this exclusion
does not apply to:
1. Nutraceutical companies;
2. Over-the-counter (non-ethical) drug companies; or
3. Diversified manufacturers whose ethical pharmaceutical revenues
are less than 20.00% of total corporate revenues for the
twelve-month period that immediately precedes the effective or
RENEWAL date of the POLICY.
III. With respect to POLICIES otherwise subject to Section C of the Coverage
Article, this AGREEMENT does not apply to and specifically excludes the
following:
A. "Bodily injury" or "property damage" (as such terms are defined in the
involved original POLICY) that directly results from the following
premises or operations; provided, however, that this exclusion does
not apply to such "bodily injury" or "property damage" that is
included in the "products-completed operations hazard" (as such hazard
is defined in the involved original POLICY):
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1. Demolition operations when written as such (this exclusion does
not apply to any mining or quarrying operations or any blasting
operations of original insureds whose primary business is not
demolition operations);
2. Fraternity premises when written as such [this exclusion does not
apply to any educational institution that is found liable for its
oversight (or failure thereof) of the premises, operations or
conduct of fraternities];
3. Ship-building; ship repair yards or dry dock operations;
4. Amusement parks, carnivals or automobile racing events when
written as such (this exclusion does not apply to original
insureds that do not operate such events or premises, but do:
i) Promote, market or advertise such events or premises;
ii) Use such events or premises in their promotional, marketing
or advertising activities; or
iii) Sell or give away tickets to such events or premises);
5. Airports, but only as respects loss or liability that directly
results from the ownership, maintenance or use of aircraft or
from flight operations;
6. Construction of subways, tunnels or dams (this exclusion does not
apply to the construction of:
i) A dam that has an embankment less than 20 feet in height or
a reservoir capacity less than 100 acre-feet;
ii) A pool or impoundment; or
iii) A pond);
7. The application of insecticides or pesticides within a building
(this exclusion does not apply to an original insured that owns,
occupies, rents, leases or uses such a building);
8. Underground mining operations (this exclusion does not apply to
surface mining or quarrying operations); or
9. LOW-RISE RESIDENTIAL CONSTRUCTION OPERATIONS;
Provided, however, that if:
(1) A POLICY contains, or follows as in the case of a follow-form
POLICY, an exclusion of any of the premises or operations (or
both) listed above; and
(2) Such exclusion includes any provision(s) in conflict with any
provision(s) of this exclusion A.;
Then the provision(s) of such POLICY will supersede the conflicting
provision(s) of this exclusion A. with respect to such premises or
operations (or both). This exclusion A. will not be more limiting than
any exclusion of such premises or operations (or both) listed above,
which is contained in, or followed by, any POLICY issued by the
COMPANY.
This exclusion A. will not apply to any original insured that performs
work or operations at, or incidental to, any of the premises or
operations listed above unless such insured is also principally
engaged in the ownership of such premises or the performance of such
operations listed above.
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B. "Bodily injury" or "property damage" (as such terms are defined in the
involved original POLICY) included in the "products-completed
operations hazard" (as such hazard is defined in the involved original
POLICY), but only if such "bodily injury" or "property damage"
directly results from the manufacturing of:
1. Automobiles or motorcycles;
2. Springboards or trampolines;
3. Helmets intended to be used in athletic events or athletic
activities;
4. Underground storage tanks intended to be used for the storage of
petroleum products;
5. Firearms or guns;
6. Paints containing lead;
7. Fireworks;
8. Medical devices intended to be used for implantation into humans;
9. Cell phones;
10. Smoke detectors;
11. NutraSweet or saccharin intended to be used in food or beverage
products for human consumption (this exclusion does not apply to
an original insured who handles, sells or distributes food or
beverage products intended for human consumption that contain
NutraSweet or saccharin, unless such insured is principally
engaged in the manufacturing of NutraSweet or saccharin);
12. Latex gloves;
13. Rides intended for use in amusement parks;
14. Tobacco products (this exclusion does not apply injury or damage
due to a fire caused by lighted tobacco products);
15. Diving boards or diving towers;
16. Insecticides, pesticides or herbicides;
17. Manganese welding rods; or
18. Explosives or nitroglycerine, celluloid, pyroxlin or other
explosive substances intended for use in explosives;
Provided, however, that if:
(1) A POLICY contains, or follows as in the case of a follow-form
POLICY, an exclusion of any of the products or completed
operations (or both) listed above; and
(2) Such exclusion includes any provision(s) in conflict with any
provision(s) of this exclusion B.;
Then the provision(s) of such POLICY shall supersede the conflicting
provision(s) of this exclusion B. with respect to such products or
completed operations (or both) listed above. This exclusion B. will
not be more limiting than any exclusion of such products or completed
operations (or both) listed above, which is contained in, or followed
by, any POLICY issued by the COMPANY.
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Except as noted above, this exclusion B. will not apply to any original
insured that produces, manufactures or assembles any component parts,
subassemblies, chemicals, materials or substances used in any of the
products or completed operations listed above unless such insured is also
principally engaged in the final production, manufacturing or assembly of
such product(s) or the performance of such completed operations listed
above.
The COMPANY may submit in writing to the REINSURER, for special acceptance
hereunder, a POLICY that would otherwise not be covered by this AGREEMENT. If
said business is accepted in writing by the REINSURER, it will be subject to the
terms and conditions of this AGREEMENT for that REINSURER'S percentage
participation hereon, except as such terms and conditions are modified by such
acceptance.
REINSURANCE PREMIUM AND CEDING COMMISSION ARTICLE
The COMPANY will cede to the REINSURER the REINSURER'S quota share percentage
(as specified for such REINSURER in the Interests And Liabilities Agreement
attaching to and forming a part of this AGREEMENT) of the NET SUBJECT WRITTEN
PREMIUM on all POLICIES written or RENEWED with an effective date on or after
the effective date of this AGREEMENT, less a flat ceding commission on the NET
SUBJECT WRITTEN PREMIUM ceded as follows:
Section A: Flat rate of 25.00% of NET SUBJECT WRITTEN PREMIUM.
Section B: Flat rate of 22.50% of NET SUBJECT WRITTEN PREMIUM.
Section C: Flat rate of 22.50% of NET SUBJECT WRITTEN PREMIUM.
The flat ceding commission will include premium taxes of all kinds, local board
assessments, and all other expenses and charges whatsoever based on the premium
for POLICIES ceded under this AGREEMENT, except for Federal Excise Tax as
described in the Federal Excise Tax Article.
OTHER REINSURANCE ARTICLE
The COMPANY is permitted to purchase other treaty or facultative reinsurance
subject to the Warranties Article contained herein.
EXTRA CONTRACTUAL OBLIGATIONS AND EXCESS OF LIMITS LIABILITY ARTICLE
This AGREEMENT will extend to cover any claims-related EXTRA CONTRACTUAL
OBLIGATIONS or EXCESS OF LIMITS LIABILITY (or both) arising because of, but not
limited to, the following:
A. Failure of the COMPANY to agree to pay a claim within the POLICY limits or
to provide a defense against such claims.
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B. Actual or alleged bad faith, fraud, or negligence in investigating or
handling a claim or in rejecting an offer of settlement.
C. Negligence or breach of duty in the preparation of the defense or the
conduct of a trial or the preparation or prosecution of any appeal or
subrogation (or both) or any subsequent action resulting therefrom.
EXTRA CONTRACTUAL OBLIGATIONS as used in this AGREEMENT means those liabilities
not covered under any other provision of this AGREEMENT for which the COMPANY is
liable to its insured or a third-party claimant, or that the COMPANY paid as its
share of a claims-related extra contractual obligation awarded against one or
more of its co-insurers.
EXCESS OF LIMITS LIABILITY as used in this AGREEMENT will mean any amount for
which the COMPANY would have been contractually liable to pay had it not been
for the limits of the reinsured POLICY.
There will be no recovery hereunder where the EXTRA CONTRACTUAL OBLIGATIONS or
EXCESS OF LIMITS LIABILITY (or both) have been incurred due to fraud committed
by a member of the board of directors or a corporate officer of the COMPANY,
acting individually, collectively, or in collusion with a member of the board of
directors, a corporate officer, or a partner of any other corporation,
partnership, or organization involved in the defense or settlement of a claim on
behalf of the COMPANY.
The date on which any EXTRA CONTRACTUAL OBLIGATIONS or EXCESS OF LIMITS
LIABILITY (or both) is incurred by the COMPANY will be deemed, in all
circumstances, to be the date of the original loss. Nothing in this Article will
be construed to create a separate or distinct loss apart from the original
covered loss that gave rise to the EXTRA CONTRACTUAL OBLIGATIONS or EXCESS OF
LIMITS LIABILITY (or both) discussed in the preceding paragraphs. The
REINSURERS' liability as respects EXTRA CONTRACTUAL OBLIGATIONS or EXCESS OF
LIMITS LIABILITY (or both) under this AGREEMENT will be in addition to the
REINSURERS' indemnification coverage set forth in the Coverage Article;
provided, however, that each REINSURER'S additional liability as respects EXTRA
CONTRACTUAL OBLIGATIONS or EXCESS OF LIMITS LIABILITY (or both) will not exceed
the sum of:
1. Its quota share percentage (as specified for such REINSURER in the
Interests And Liabilities Agreement attaching to and forming a part of this
AGREEMENT) of the interests and liabilities of the POLICIES subject to
Section A. of the Coverage Article multiplied by $25,000,000; plus
2. Its maximum quota share percentage (as specified for such REINSURER in the
Interests And Liabilities Agreement attaching to and forming a part of this
AGREEMENT) of the interests and liabilities of the POLICIES subject to
Section B. of the Coverage Article multiplied by $50,000,000; plus
3. Its quota share percentage (as specified for such REINSURER in the
Interests And Liabilities Agreement attaching to and forming a part of this
AGREEMENT) of the interests and liabilities of the POLICIES subject to
Section C. of the Coverage Article multiplied by $25,000,000;
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In the aggregate for each AGREEMENT YEAR.
REPORTS AND REMITTANCES ARTICLE
Within forty-five (45) calendar days after the close of each month, the COMPANY
will furnish the REINSURER with a report summarizing the premium, premium ceded
less return premium and ceding commission, ULTIMATE NET LOSS paid, LOSS
ADJUSTMENT EXPENSE paid, EXTRA CONTRACTUAL OBLIGATIONS paid, EXCESS OF LIMITS
LIABILITY paid, monies recovered, and net balance due either party. Said monthly
reports will also include the following information for each POLICY subject to
this AGREEMENT that is written or RENEWED during the month:
A. First named insured;
B. POLICY effective date;
C. POLICY limits;
D. POLICY attachment point(s);
E. POLICY premium;
F. Premium ceded to REINSURERS;
G. Paid ULTIMATE NET LOSS;
H. Reserves for outstanding ULTIMATE NET LOSS;
I. Paid LOSS ADJUSTMENT EXPENSE; and
J. Reserves for outstanding LOSS ADJUSTMENT EXPENSE.
Amounts due the REINSURER will accompany said reports. Except with respects to
amounts due under paragraph B. of the Loss And LOSS ADJUSTMENT EXPENSE Article,
any balances due the COMPANY will be paid within forty-five (45) calendar days
after the COMPANY has furnished the REINSURER with the report.
Semi-annually the COMPANY will provide the REINSURER with a report listing all
claims subject to this AGREEMENT to which the COMPANY has assigned the claim
code of "D", "P", or "R". Such report will contain with respect to each claim
listed the following information:
1. First named insured;
2. POLICY effective date;
3. Date of loss;
4. Date of report;
5. Amount paid;
6. Amount reserved; and
7. Status of claim (i.e. whether open or closed).
In addition, the COMPANY will furnish the REINSURER with such other information
as may be required by the REINSURER for completion of its NAIC interim and/or
annual statements.
LOSS AND LOSS ADJUSTMENT EXPENSE ARTICLE
20
A. The COMPANY alone and at its full discretion will adjust, settle or
compromise all claims and losses. All such settlements, compromises, and
adjustments, whether involving coverage issues or otherwise, will be
binding on the REINSURER in proportion to its percentage participation. The
COMPANY will likewise at its sole discretion commence, continue, defend,
compromise, settle or withdraw from actions, suits or proceedings and
generally do all such matters and things relating to any claim or loss as
in its judgment may be beneficial or expedient, and all payments made and
costs and expenses incurred in connection therewith or in taking legal
advice therefore (including those which are the result of actions or
disputes between the insured and the COMPANY and including the pro rata
share, according to the time occupied in adjusting such loss, of salaries
and expenses of the COMPANY'S field employees and salaried adjusters who
have no administrative duties, including but not limited to charges or
expenses incurred through the use of third party claim services or
technical services, and expenses of the COMPANY'S officials incurred in
connection with the loss; but excluding salaries of the COMPANY'S officials
and regular office employees and office expenses of the COMPANY) will be
shared by the REINSURER proportionately. The REINSURER will, on the other
hand, benefit proportionately from all reductions of LOSS ADJUSTMENT
EXPENSE by salvage, compromise or otherwise.
B. If the amount due the COMPANY for the sum of ULTIMATE NET LOSS, LOSS
ADJUSTMENT EXPENSE, EXTRA CONTRACTUAL OBLIGATIONS, or EXCESS OF LIMITS
LIABILITY (whether individually or collectively) recoverable under this
AGREEMENT for any one OCCURRENCE is in excess of:
1. $1,500,000 with respect to POLICIES subject to Section A of the
Coverage Article;
2. $5,000,000 with respect to POLICIES subject to Section B of the
Coverage Article; or
3. $1,500,000 with respect to POLICIES subject to Section C of the
Coverage Article;
The REINSURER will, upon the COMPANY'S demand and its receipt of
SATISFACTORY PROOFS OF LOSS (as defined in the Loss Settlements Article),
remit the amount due the COMPANY within five (5) business days.
LOSS SETTLEMENTS ARTICLE
All settlements, compromises, and adjustments made by the COMPANY, whether
involving coverage issues or otherwise, will be binding on the REINSURER. Such
settlements, compromises, or adjustments will be considered SATISFACTORY PROOFS
OF LOSS, and amounts falling to the share of the REINSURER will be payable to
the COMPANY upon presentation of reasonable evidence of the amount paid or due
and payable by the COMPANY, subject to the provisions of the Reports And
Remittances Article and the Loss and LOSS ADJUSTMENT EXPENSE Article.
21
OFFSET ARTICLE
Each party hereto will have, and may exercise at any time and from time to time,
the right to offset any undisputed balance or balances, whether on account of
premiums or on account of losses or otherwise, due from such party to the other
(or, if more than one, any other) party hereto under this AGREEMENT or under any
other reinsurance agreement heretofore or hereafter entered into by and between
them, and may offset the same against any undisputed balance or balances due to
the former from the latter under the same or any other reinsurance agreement
between them, and the party asserting the right of offset will have and may
exercise such right whether the undisputed balance or balances due to such party
from the other are on account of premiums or on account of losses or otherwise
and regardless of the capacity, whether as assuming reinsurer or as ceding
insurer, in which each party acted under the agreement or, if more than one, the
different agreements involved, provided, however, that, in the event of the
insolvency of a party hereto, offsets will only be allowed in accordance with
the provisions of Section 7427 of the Insurance Law of the State of New York.
Where the COMPANY is authorized under the Insurance Companies Act (Canada) to
insure risks in Canada, for the purpose of this Article, the branch of a COMPANY
in Canada will be considered as a party separate and distinct from the COMPANY
and the right of offset provided for in this Article will belong to and be
applied against that branch as though it were a separate and distinct party.
SALVAGE AND SUBROGATION ARTICLE
The REINSURER will be credited with its proportionate share of salvage or
subrogation (or both) in respect of claims and settlements under this AGREEMENT,
less its share of recovery expense. Unless the COMPANY and the REINSURER agree
to the contrary, the COMPANY will enforce its right to salvage or subrogation
(or both) and will prosecute all claims arising out of such right. Should the
COMPANY refuse or neglect to enforce this right, the REINSURER is hereby
empowered and authorized to institute appropriate action in the name of the
COMPANY.
The REINSURER will benefit proportionately from all reductions of ULTIMATE NET
LOSS by salvage, compromise or otherwise. If the amount recovered exceeds the
recovery expense, such expense will be borne by each party in proportion to its
benefit from the recovery. If the recovery expense exceeds the amount recovered,
the amount recovered (if any) will be applied to the reimbursement of recovery
expense and the remaining expense will be borne by each party in proportion to
its liability for the loss before recovery was attempted.
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WARRANTIES ARTICLE
I. Subject to the provisions of the Currency Valuation Article, it is hereby
warranted and agreed that:
1. The REINSURERS' maximum limit of liability for ULTIMATE NET LOSS
arising from Section A will not exceed $10,000,000, E10,000,000, or
L6,000,000, each OCCURRENCE under each reinsured POLICY, subject to
any reinstatement or any aggregate provisions (or both) in the
reinsured POLICY;
2. The REINSURERS' maximum limit of liability for ULTIMATE NET LOSS
arising from Section B will not exceed $25,000,000, E25,000,000, or
L15,000,000, each OCCURRENCE under each reinsured POLICY, subject to
any reinstatement or any aggregate provisions (or both) in the
reinsured POLICY;
3. The REINSURERS' maximum limit of liability for ULTIMATE NET LOSS
arising from Section C will not exceed $10,000,000, each OCCURRENCE
under each reinsured POLICY, subject to any reinstatement or any
aggregate provisions (or both) in the reinsured POLICY;
4. Only as respects POLICIES subject to Section A of this AGREEMENT, the
COMPANY will retain no less than a 60.00% quota share percentage of
the interests and liabilities of the subject POLICIES net and
unreinsured, except as specified below;
5. Only as respects POLICIES subject to Section B of this AGREEMENT, the
COMPANY will retain net and unreinsured, except as specified below, a
quota share percentage of the interests and liabilities of each POLICY
that is reinsured hereunder that is no less than the percentage which
results when $25,000,000, E25,000,000, or L15,000,000 is divided by
such POLICY'S total original limit, except as specified below; and
6. Only as respects POLICIES subject to Section C of this AGREEMENT, the
COMPANY will retain no less than a 60.00% quota share percentage of
the interests and liabilities of the subject POLICIES net and
unreinsured, except as specified below.
II. Any:
A. Inter-company pooling reinsurance agreements among the parties
comprising the COMPANY hereunder;
B. Aggregate excess-of-loss reinsurance written on an each-OCCURRENCE
(a.k.a. "clash") basis rather than on an
each-occurrence-under-each-POLICY (a.k.a. "per risk") basis that the
COMPANY chooses to purchase; or
C. Facultative reinsurance that the COMPANY chooses to purchase;
23
Will not be deducted from the amount of the COMPANY'S net and
unreinsured retention for purposes of determining whether the COMPANY
has breached any warranted retention in paragraph 4. 5. or 6. above.
III. Premiums ceded by the COMPANY for reinsurance described in II. A. and
II. B. above will not be deducted from the NET SUBJECT WRITTEN PREMIUM
on POLICIES reinsured hereunder and such reinsurance (if any) will not
inure to the benefit of this AGREEMENT.
IV. Premiums ceded by the COMPANY for reinsurance described in II. C.
above will be deducted from the NET SUBJECT WRITTEN premium on
POLICIES reinsured hereunder and such reinsurance (if any) will inure
to the benefit of this AGREEMENT.
V. The sign "$" in this AGREEMENT refers to U.S. dollars. The sign "E"
refers to euros, the currency of the European Union. The sign "L"
refers to UK pounds sterling.
For purposes of:
1. Determining which currency and amount of the applicable warranted
REINSURERS' maximum limit of liability stated in I. 1. and I. 2.
above will be used for a given POLICY; or
2. The calculation of the warranted COMPANY'S retention in I. 5.
above for a given POLICY;
The applicable amount stated in I. 1., I. 2. or I. 5. above that is to
be used for such purposes will be the one that has a currency that is
identical to the currency of such POLICY'S original limit(s).
Where the POLICY'S original limit(s) refer(s) to a currency other than
one of the preceding currencies in this paragraph V., such POLICY'S
original limit(s) will be:
a) Converted into its(their) U.S. dollar equivalents; and
b) The warranted REINSURERS' maximum limit of liability and the
amount used in the calculation the warranted COMPANY'S retention
will be the applicable U.S. dollar amount specified in I. 1., I.
2. I. 3. or I. 5. above;
Subject to the provisions of the Currency Revaluation And Foreign
Exchange Article.
DELAYS, ERRORS, OR OMISSIONS ARTICLE
Any inadvertent delay, omission or error will not 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
immediately upon discovery.
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ENTIRE AGREEMENT, INTERPRETATION ARTICLE
A. With respect to the POLICIES being reinsured hereunder, (i) this AGREEMENT
constitutes the entire agreement between the parties, and (ii) there are no
understandings or agreements between the parties other than those expressed
in this AGREEMENT. Any change to, or modification of, this AGREEMENT will
be made by written amendment to this AGREEMENT and signed by the parties
hereto.
B. This AGREEMENT is between sophisticated parties, each of which has reviewed
the AGREEMENT and is fully knowledgeable about its terms and conditions.
The parties therefore agree that this AGREEMENT will be construed without
regard to the authorship of the language and without any presumption or
rule of construction in favor of either of them.
ACCESS TO RECORDS ARTICLE
The REINSURER, or its duly authorized representative, will have free access at
all reasonable times during and after the currency of this AGREEMENT, to books
and records maintained by any of the division, department and branch offices of
the COMPANY, which are involved in the subject matter of this AGREEMENT and
which pertain to the reinsurance provided hereunder and all losses in connection
therewith.
CONFIDENTIALITY ARTICLE
All terms and conditions of this AGREEMENT and any materials provided in the
course of inspection will be kept confidential by the REINSURER as against third
parties, unless the disclosure is required pursuant to process of law or unless
the disclosure is to the REINSURER'S retrocessionaires, financial auditors or
governing regulatory bodies. Disclosing or using this information for any
purpose beyond the scope of this AGREEMENT, or beyond the exceptions set forth
above, is expressly forbidden without the prior consent of the COMPANY.
INSOLVENCY ARTICLE
(This Article will apply severally to each reinsured company referenced within
the definition of the COMPANY in the Preamble to this AGREEMENT. Further, this
Article and the laws of the domiciliary state will apply in the event of the
insolvency of any company intended to be covered hereunder. In the event of a
conflict between any provision of this Article and the laws of the domiciliary
state of any company intended to be covered hereunder, that domiciliary state's
laws will prevail.)
A. In the event of the insolvency of the COMPANY, this reinsurance will be
payable directly to the COMPANY, or to its liquidator, receiver,
conservator or statutory successor, immediately upon demand on the basis of
the liability of the COMPANY without diminution because of the insolvency
of the COMPANY or because the liquidator, receiver, conservator or
statutory
25
successor of the COMPANY 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 COMPANY will give written notice to the
REINSURER of the pendency of a claim against the COMPANY, which would
involve a possible liability on the part of the REINSURER, indicating the
POLICY or bond reinsured, within a reasonable time after such claim is
filed in the conservation or liquidation proceeding or in the receivership.
It is further agreed 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 COMPANY or its liquidator, receiver,
conservator, or statutory successor. The expense thus incurred by the
REINSURER will be chargeable, subject to the approval of the Court, against
the COMPANY 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 COMPANY
solely as a result of the defense undertaken by the REINSURER.
B. Where two or more of the REINSURERS are involved in the same claim and a
majority in interest elects to interpose defense to such claim, the expense
will be apportioned in accordance with the terms of the AGREEMENT as though
such expense had been incurred by the COMPANY.
C. The reinsurance will be payable by the REINSURER to the COMPANY or to its
liquidator, receiver, conservator, or statutory successor, except as
provided by Section 4118(a) (1) (A) and 1114 (c) 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 original insured or insureds
has voluntarily 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 the payees. Then, and in
that event only, the COMPANY, with the prior approval of the certificate of
assumption on New York risks by the Superintendent of Insurance of the
State of New York, is entirely released from its obligation and the
REINSURER will pay any loss directly to payees under such POLICY.
D. Notwithstanding paragraphs A., B., and C., where the COMPANY is authorized
under the Insurance Companies Act (Canada) to insure risks in Canada, in
the event of the insolvency of the COMPANY, reinsurance payable in respect
of the insurance business in Canada of the COMPANY will be payable to the
Chief Agent in Canada of the COMPANY or to the liquidator, receiver,
conservator or statutory successor appointed in Canada in respect of the
insurance business in Canada of the COMPANY without diminution because of
the insolvency of the COMPANY or because the COMPANY or a liquidator,
receiver, conservator or statutory successor of the COMPANY has failed to
pay all or any portion of any claim. All other terms and conditions of
paragraphs A., B., and C. remain in effect and apply to this paragraph D.,
which will prevail if there is a conflict or inconsistency.
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ARBITRATION ARTICLE
A. As a condition precedent to any right of action under this AGREEMENT, any
and all disputes arising under or relating to this AGREEMENT, including its
formation and validity, will be finally and fully determined in Xxxxxxxx,
Bermuda under the provisions of The Bermuda International Conciliation and
Arbitration Act of 1993 (exclusive of the Conciliation Part of such Act),
as may be amended and supplemented, by a Board composed of three
arbitrators to be selected for each controversy as follows:
In the event of a dispute, controversy or claim, any party may notify the
other party or parties to such dispute, controversy or claim of its desire
to arbitrate the matter, and at the time of such notification the party
desiring arbitration will notify any other party or parties of the name of
the arbitrator selected by it. The other party who has been so notified
will within thirty (30) calendar days thereafter select an arbitrator and
notify the party desiring arbitration of the name of such second
arbitrator. If the party notified of a desire for arbitration will fail or
refuse to nominate the second arbitrator within thirty (30) calendar days
following receipt of such notification, the party who first served notice
of a desire to arbitrate will, within an additional period of thirty (30)
calendar days, apply to the Supreme Court of Bermuda for the appointment of
a second arbitrator and in such a case the arbitrator appointed by such
court will be deemed to have been nominated by the party or parties who
failed to select the second arbitrator. The two arbitrators, chosen as
above provided, will within thirty (30) calendar days after the appointment
of the second arbitrator choose a third arbitrator. In the event of the
failure of the first two arbitrators to agree on a third arbitrator within
said thirty (30) calendar day period, the third arbitrator will be drawn
automatically utilizing the Dow Xxxxx Industrial Average on the third
working day after both names have been chosen in writing. A Dow Xxxxx
Industrial Average ending in an even number before the decimal point shall
be deemed to be the selection of the claimant's name and the Dow Xxxxx
Industrial Average ending in an odd number before the decimal point shall
be deemed to be the selection of the respondent's name. The three
arbitrators shall decide by majority. The umpire will also act as Chair of
the Tribunal and, in the event that no majority can be reached, the verdict
of the umpire will prevail.
B. All claims, demands, denials of claims and notices pursuant to this Article
will be given in writing and given by hand, prepaid express courier,
airmail or telecopier properly addressed to the appropriate party and will
be deemed as having been effected only upon actual receipt.
C. The Board of Arbitration will fix, by a notice in writing to the parties
involved, a reasonable time and place for the hearing and may prescribe
reasonable rules and regulations governing the course and conduct of the
arbitration proceeding, including without limitation discovery by the
parties. The Board will be relieved of all judicial formality and will not
be bound by the strict rules of procedure evidence. The Board will
interpret this AGREEMENT as if it were an honorable engagement rather than
as merely a legal obligation.
D. The Board will, within ninety (90) calendar days following the conclusion
of the hearing, render its decision on the matter or matters in controversy
in writing and will cause a copy thereof to be served on all the parties
thereto. In case the Board fails to reach a unanimous
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decision, the decision of the majority of the members of the Board will be
deemed to be the decision of the Board. Such decision will be a complete
defense to any attempted appeal or litigation of such decision of the Board
of Arbitration by, any court or other body to the fullest extent permitted
by applicable law.
E. Any order as to the costs of the arbitration will be in the sole discretion
of the Board, who may direct to whom and by whom and in what manner they
will be paid.
F. All awards made by the Arbitration Board will be final and no right of
appeal will lie from any award rendered by the Arbitration Board. The
parties agree that the Supreme Court of Bermuda: (1) will not grant leave
to appeal any award based upon a question of law arising out of the award;
(ii) will not grant leave to make an application with respect to an award;
and (iii) will not assume jurisdiction upon any application by a party to
determine any issue of law arising in the course of the arbitration
proceeding.
All awards made by the Arbitration Board may be enforced in the same manner
as a judgment or order from the Supreme Court of Bermuda and judgment may
be entered pursuant to the terms of the award by leave from the Supreme
Court of Bermuda.
G. If the COMPANY and more than one REINSURER are involved in the SAME
DISPUTE(S) OR DIFFERENCE(S) ARISING OUT OF THIS agreement, and the COMPANY
requests consolidated arbitration with those REINSURERS in an initial
notice of arbitration or response, then those REINSURERS will constitute
and act as one party for purposes of the arbitration and thus will select a
single party-appointed arbitrator among them. If the COMPANY requests
consolidation in its notice of arbitration, then both parties will elect
their party-appointed arbitrators within forty-five (45) calendar days of
the commencement of the arbitration proceeding. If the COMPANY requests
consolidation in its response, then (i) that response will be appended to
the COMPANY'S notice of arbitration to the additional REINSURER(S) joined
in the proceeding, (ii) any arbitral appointment made before that response
will be of no effect, and (iii) the REINSURERS will select their arbitrator
within forty-five (45) calendar days of their receipt of those pleadings.
For purposes of this paragraph, any instance in which two or more of the
REINSURERS have not paid their proportional shares of the same balance
claimed due by the COMPANY will be deemed to involve the SAME DISPUTE(S) OR
DIFFERENCE(S) ARISING OUT OF THIS AGREEMENT. Communications will be made by
the COMPANY to each of the REINSURERS constituting one party. Nothing in
this paragraph will impair the rights of REINSURERS to assert several
rather than joint defenses or claims, change their liability under this
AGREEMENT from several to joint, or impair their rights to retain separate
counsel in connection with the arbitration.
H. Unless prohibited by law, the Supreme Court of Bermuda will have exclusive
jurisdiction over any and all court proceedings that either party may
initiate in connection with the arbitration, including proceedings to
compel, stay, or enjoin arbitration or to confirm, vacate, modify, or
correct an arbitration award.
I. This Article will survive the expiration or termination of this AGREEMENT.
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GOVERNING LAW ARTICLE
This AGREEMENT, and any dispute, controversy or claim arising out of or relating
to this AGREEMENT, will be governed by and construed according to the laws of
the State of New York, except with regard to:
A. The payment of punitive damages; and
B. The procedural law required under the Arbitration Article of this
AGREEMENT, which will be construed in accordance with the laws of Bermuda.
Notwithstanding the foregoing, as to rules regarding credit for reinsurance, the
rules of all applicable states or other jurisdictions will pertain thereto.
CURRENCY REVALUATION AND FOREIGN EXCHANGE ARTICLE
I. It is understood and agreed that any original limit(s) or original
sub-limit(s) of liability, underlying limit(s) or attachment point(s) of a
reinsured POLICY in currencies other than United States of America (U.S.)
dollars, euros, or UK pounds sterling will be converted into its(their)
U.S. dollar equivalent using the same rate of exchange used by the COMPANY
when such POLICY was entered by the COMPANY into its own books of account.
In the event that there is a subsequent change in the parity value of the
U.S. dollar (from that used by the COMPANY when such POLICY was entered by
the COMPANY into its own books of account) which results in:
A. The warranted REINSURERS' maximum limit of liability for such POLICY
being exceeded;
B. Such POLICY being subject to Section A instead of Section B of this
AGREEMENT (or subject to Section B instead of Section A of this
AGREEMENT); or
C. Any minimum initial attachment point threshold in U.S. dollars, which
is required by exclusion G. or by the Coverage Article in order for
such POLICY to be reinsured hereunder, not being met;
Then:
1. In the case of A. above, the COMPANY will be held covered for such
excess limit;
2. In the case of B. above, the reinsured POLICY will remain subject to
the section of this AGREEMENT that applied based on the exchange rate
that was used by the COMPANY when such POLICY was entered by the
COMPANY into its own books of account; and
3. In the case of C. above, the required minimum initial attachment point
threshold will be deemed to have been met for such POLICY to be
reinsured hereunder;
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Until the next RENEWAL of the POLICY, at which time:
a) The warranted REINSURERS' maximum U.S. dollar limit of liability;
b) Section A or Section B under the Coverage Article of this AGREEMENT;
and
c) The minimum initial attachment point threshold in U.S. dollars, which
is required by exclusion G. or by the Coverage Article in order for
such POLICY to be reinsured hereunder;
Will apply to such POLICY based on the exchange rate used by the COMPANY
when such RENEWAL is entered by the COMPANY into its own books of account.
II. All amounts due to either the COMPANY or the REINSURER under this AGREEMENT
will be paid in United States of America (U.S.) dollars subject to
paragraphs III. and IV. below.
III. NET SUBJECT WRITTEN PREMIUM, as well as any subsequent adjustments thereto,
collected or returned by the COMPANY in other than U.S. dollars will be
paid to, or by, the REINSURER in U.S. dollars at the same rates of exchange
at which the COMPANY entered such transaction into its own books of
account.
IV. Amounts due the COMPANY for ULTIMATE NET LOSS, LOSS ADJUSTMENT EXPENSE,
EXTRA CONTRACTUAL OBLIGATIONS, or EXCESS OF LIMITS LIABILITY hereunder in
other than U.S. dollars will be converted into U.S. dollars at the same
rates of exchange at which the COMPANY entered the payment(s) of such loss
into its own books of account.
SERVICE OF SUIT ARTICLE
This Article is not intended to conflict with or override the parties'
obligation to arbitrate their disputes in accordance with the Arbitration
Article.
A. This paragraph A. applies:
1. Only to POLICIES that are subject to Section A or Section B of the
Coverage Article; and
2. To a REINSURER unauthorized in any jurisdiction that has authority
over the COMPANY and in which a subject suit has been instituted.
In the event any REINSURER hereon fails to pay any amount claimed due
hereunder, such REINSURER, at the request of the COMPANY, will submit to
the jurisdiction of a court of competent jurisdiction within England or
Bermuda and will comply with all requirements necessary to give that court
jurisdiction.
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B. This paragraph B. applies:
1. Only to POLICIES that are subject to Section C of the Coverage
Article; and
2. To a REINSURER either:
(a) Domiciled outside the United States of America; or
(b) Unauthorized in any state, territory or district of the United
States of America that has jurisdiction over the COMPANY and in
which a subject suit has been instituted.
In the event of the failure of any REINSURER hereon to pay any amount
claimed to be due hereunder, such REINSURER, at the request of the COMPANY,
will submit to the jurisdiction of a court of competent jurisdiction within
the United States. Nothing in this Article constitutes or should be
understood to constitute a waiver of the REINSURER'S right to commence an
action in any court of competent jurisdiction in the United States, to
remove an action to a United States District Court, or to seek a transfer
of a case to another court as permitted by the laws of the United States or
of any state in the United States. The REINSURER, once the appropriate
court is accepted by the REINSURER or is determined by removal, transfer,
or otherwise, as provided for above, will comply with all requirements
necessary to give said court jurisdiction. In any suit instituted against
it 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.
Service of process in such suit may be made upon Mendes and Mount, LLP, 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, when such suit is instituted
in the state of New York; Mendes and Mount, LLP, 000 Xxxxx Xxxxxxxx, 00xx
Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000, when such suit is instituted in
the state of California; either of the foregoing if the suit is not
instituted in New York or California; or another party specifically
designated in the applicable Interests and Liabilities Agreement attached
hereto (hereinafter "agent for service of process"). However, if another
party is so designated, the REINSURER in question recognizes that the laws
of the states of New York and California require that service be made on a
law firm located in the respective state if a suit is instituted in that
state, so that if the party designated on the REINSURER'S Interests and
Liabilities Agreement is not located in California as respects a suit
instituted in California, or New York as respects a suit instituted in New
York, the applicable office of Mendes and Mount stipulated above must be
used for service of suit unless the provisions of the final paragraph of
this Article apply.
The agent for service of process is 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 the REINSURER'S behalf in
the event such a suit is instituted.
Further, pursuant to any statute of any state, territory, or district of
the United States that makes provision therefor, the REINSURER hereby
designates the Superintendent, Commissioner, or Director of Insurance or
other officer specified for that purpose in the
31
statute, or the 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, and hereby designates the above
named as the person to whom the said officer is authorized to mail such
process or a true copy thereof.
AGENCY ARTICLE
For purposes of sending and receiving notices and payments required by this
AGREEMENT, the reinsured company that is set forth first in the definition of
COMPANY in the Preamble to this AGREEMENT will be deemed the agent of all other
reinsured companies referenced in the Preamble. In no event, however, will any
reinsured company be deemed the agent of another with respect to the terms of
the Insolvency Article.
INTERMEDIARY ARTICLE
Aon Re Inc., an Illinois corporation, or one of its affiliated corporations duly
licensed as a reinsurance intermediary, is hereby recognized as the INTERMEDIARY
negotiating this AGREEMENT for all POLICIES reinsured hereunder. All
communications (including, but not limited to, notices, statements, premiums,
return premiums, commissions, taxes, ULTIMATE NET LOSS, LOSS ADJUSTMENT
EXPENSES, EXTRA CONTRACTUAL OBLIGATIONS, EXCESS OF LIMITS LIABILITY, salvages,
and recoveries) relating to this AGREEMENT will be transmitted to the COMPANY or
the REINSURERS through the INTERMEDIARY. Payments by the COMPANY to the
INTERMEDIARY will be deemed payment to the REINSURERS. Payments by the
REINSURERS to the INTERMEDIARY will be deemed payment to the COMPANY only to the
extent that such payments are actually received by the COMPANY.
RESERVES AND FUNDING ARTICLE
This Article applies only to a REINSURER, which reinsures POLICIES subject to
Section C of the Coverage Article of this AGREEMENT and which is non-admitted in
the jurisdiction where the COMPANY is domiciled.
1. As regards POLICIES issued by the COMPANY coming within the scope of this
AGREEMENT, the COMPANY agrees that when it will file with the insurance
regulatory authority or set up on its books reserves for unearned premium,
losses, and LOSS ADJUSTMENT EXPENSE reinsured hereunder, which it shall be
required by law to set up, it will forward to the REINSURER a statement
showing the proportion of such reserves which is applicable to the
REINSURER. The REINSURER hereby agrees to fund such reserves in respect of:
A. Unearned premium;
B. Known outstanding losses that have been reported to the REINSURER and
LOSS ADJUSTMENT EXPENSE relating thereto;
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C. Losses and LOSS ADJUSTMENT EXPENSE paid by the COMPANY but not
recovered from the REINSURER; plus
D. Reserves, including incurred-but-not-reported (IBNR) reserves as
determined by the COMPANY, for losses and LOSS ADJUSTMENT EXPENSE
relating thereto;
All of which are hereinafter referred to as REINSURER'S OBLIGATIONS, by
funds withheld, cash advances, a letter of credit, or a trust. The
REINSURER will have the option of determining the method of funding
provided it is acceptable to the insurance regulatory authorities having
jurisdiction over the COMPANY'S reserves.
2. When funding by a letter of credit, the REINSURER shall apply for and
secure timely delivery to the COMPANY of a clean, irrevocable and
unconditional letter of credit issued by a bank and containing provisions
acceptable to the COMPANY and any insurance regulatory authorities having
jurisdiction over the COMPANY in an amount equal to the REINSURER'S
OBLIGATIONS. Such letter of credit will be issued for a period of not less
than one year and will be automatically extended for one year from its date
of expiration or any future expiration date unless thirty (30) calendar
days [sixty (60) calendar days where required by insurance regulatory
authorities] prior to the expiration date of such letter of credit the
issuing bank notifies the COMPANY by certified or registered mail that the
issuing bank elects not to consider the letter of credit extended for any
additional period.
3. The REINSURER and COMPANY agree that the letters of credit provided by the
REINSURER pursuant to the provisions of this AGREEMENT may be drawn upon at
any time, notwithstanding any other provision of this AGREEMENT, and be
utilized by the COMPANY or any successor, by operation of law, of the
COMPANY including, without limitation, any liquidator, rehabilitator,
receiver, or conservator of the COMPANY for the following purposes, unless
otherwise provided for in a separate trust agreement:
A. To reimburse the COMPANY for the REINSURER'S OBLIGATIONS, the payment
of which is due under the terms of this AGREEMENT and which has not
been otherwise paid;
B. To make refund of any sum which is in excess of the actual amount
required to pay the REINSURER'S OBLIGATIONS under this AGREEMENT;
C. To fund an account with the COMPANY for the REINSURER'S OBLIGATIONS.
Such cash deposit will be held in an interest-bearing account separate
from the COMPANY'S other assets, and interest thereon not in excess of
the prime rate shall accrue to the benefit of the REINSURER.
D. If prior to any expiration date the issuing bank has sent notice that
it elects not to consider the letter of credit extended for any
additional period. This paragraph (D.) shall only apply if the
REINSURER has failed to replace the expiring letter of credit at least
fifteen (15) calendar days prior its expiration with an irrevocable
and unconditional, letter of credit issued by another bank and
containing provisions acceptable to the COMPANY and any insurance
regulatory authorities having jurisdiction over the COMPANY in an
amount equal to the REINSURER'S OBLIGATIONS of said reserves.
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4. In the event the amount drawn by the COMPANY on any letter of credit is in
excess of the actual amount required for 3. A., 3. B., or 3. D. above, the
COMPANY shall promptly return to the REINSURER the excess amount so drawn.
All of the foregoing will be applied without diminution because of
insolvency on the part of the COMPANY or the REINSURER.
5. The issuing bank shall have no responsibility whatsoever in connection with
the propriety of withdrawals made by the COMPANY or the disposition of
funds withdrawn, except to ensure that withdrawals are made only upon the
order of properly authorized representatives of the COMPANY.
6. At annual intervals, or more frequently as agreed but never more frequently
than quarterly, the COMPANY shall prepare a specific statement of the
REINSURER'S OBLIGATIONS, for the sole purpose of amending the letter of
credit, in the following manner:
A. If the statement shows that the REINSURER'S OBLIGATIONS exceed the
balance of credit as of the statement date, the REINSURER shall,
within thirty (30) calendar days after receipt of notice of such
excess, secure delivery to the COMPANY of an amendment to the letter
of credit increasing the amount of credit by the amount of such
difference;
B. If, however, the statement shows that the REINSURER'S OBLIGATIONS are
less than the balance of credit as of the statement date, the COMPANY
shall, within thirty (30) calendar days after receipt of written
request from the REINSURER, release such excess credit by agreeing to
secure an amendment to the letter of credit reducing the amount of
credit available by the amount of such excess credit.
FEDERAL EXCISE TAX ARTICLE
(This Article is applicable to those REINSURERS, excepting Underwriters at
Lloyd's London and other REINSURERS exempt from Federal Excise Tax, who are
domiciled outside the United States of America.)
Only as respects POLICIES subject to Section C of the Coverage Article, the
REINSURERS will allow the COMPANY to deduct, for the purpose of paying Federal
Excise Tax, the applicable percentage of any premium payable hereon (as imposed
under Section 4371 of the Internal Revenue Service Code) to the extent such
premium is subject to such tax. In the event of any return of such premium, the
REINSURERS will deduct the aforesaid percentage from the return premium payable
hereon and the COMPANY or its agent will recover such tax from the United States
Government.
DEFINITIONS ARTICLE
The following definitions apply to this AGREEMENT:
A. AGREEMENT means this contract of reinsurance, including the Nuclear
Incident Exclusion Clauses, the Insolvency Funds Exclusion Clause and the
Interests And Liabilities
34
Agreements attached hereto as well as any written amendment to this
AGREEMENT that has been by signed by both the COMPANY and the REINSURER.
B. AGREEMENT YEAR means the period from March 1, 2006, 12:01 a.m. AST to March
1, 2007, 12:01 a.m. AST. Each subsequent period of 12 consecutive months
commencing with March 1, 2007, 12:01 a.m. AST will be a separate,
successive AGREEMENT YEAR.
C. CRITICAL AUTO PARTS mean brakes and component parts, alternators, engine
and engine control parts, clutch set, axle/joint, fuel/gas tanks and
component parts, ignition parts, shock/strut, steering/suspension,
electrical switches, transmission/gearbox, wheels/tires, seatbelts, door
latches and airbags.
D. DATE OF LOSS means:
1. The date of the OCCURRENCE or accident as determined by a POLICY
responding to the loss if the POLICY was issued on an OCCURRENCE
basis;
2. The date the claim is made as determined by a POLICY responding to the
loss if the POLICY was issued on a claims-made basis; or
3. The date the OCCURRENCE is reported as determined by a POLICY
responding to the loss if the POLICY is issued on an
OCCURRENCES-reported basis.
The date of any:
a) Claim made under a claims-made POLICY; or
b) OCCURRENCE reported under a OCCURRENCES-reported POLICY;
Will be deemed to be the date as determined under the terms of the POLICY,
except that the date of any claim made or OCCURRENCE reported under a Basic
EXTENDED REPORTING PERIOD, Supplemental EXTENDED REPORTING PERIOD or
DISCOVERY PERIOD provided by such a POLICY will be deemed to be the initial
termination date of the POLICY.
E. DECLARATORY JUDGMENT EXPENSE means all expenses incurred by the COMPANY in
direct connection with declaratory judgment actions brought to determine
the COMPANY'S defense or indemnification obligations (or both) that are
allocable to specific POLICIES and claims subject to this AGREEMENT.
DECLARATORY JUDGMENT EXPENSE will be deemed to have been incurred by the
COMPANY on the DATE OF LOSS.
F. EXTENDED REPORTING PERIOD or DISCOVERY PERIOD means a specific time period
after a POLICY'S termination date within which claims may be made or
OCCURRENCES may be reported (under a reinsured POLICY written on a
claims-made or OCCURRENCES-reported basis) with respect to OCCURRENCES
happening between the reinsured POLICY'S retroactive date, if any, and the
termination date of that POLICY.
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G. INTEGRATED OCCURRENCE or BATCH OCCURRENCE has the same meaning as defined
in the reinsured POLICY, if applicable.
H. JOINT VENTURE means any joint venture, co-venture, joint lease, joint
operating agreement, limited liability partnership, limited liability
company or partnership, in which an original insured has an interest.
I. LOSS ADJUSTMENT EXPENSE means all expenses incurred by the COMPANY in the
investigation, appraisal, adjustment, litigation and/or defense of claims
under POLICIES reinsured hereunder, including expenses identified in the
Loss and LOSS ADJUSTMENT Expense Article, court costs, interest accrued
prior to final judgment if included as part of expense on reinsured
POLICIES, and interest accrued after final judgment, but excluding salaries
of the COMPANY'S officials and regular office employees and office expenses
of the COMPANY. LOSS ADJUSTMENT EXPENSE will also include DECLARATORY
JUDGMENT EXPENSE. The REINSURER will bear its pro rata share of all LOSS
ADJUSTMENT EXPENSE.
J. LOW-RISE RESIDENTIAL CONSTRUCTION OPERATIONS mean the construction of:
1. Homes;
2. Townhomes;
3. Residential apartment buildings; or
4. Residential condominium buildings;
That are under three stories in height.
K. NET SUBJECT WRITTEN PREMIUM means the gross written premium of the COMPANY
for the POLICIES reinsured hereunder, including any premium paid by
original insureds in respect of any EXTENDED REPORTING PERIODS or DISCOVERY
PERIODS and any reinstatement premium payable by the original insureds,
less returned premium for cancellations, premium audits and reductions, and
less premium for inuring reinsurance as set forth in the Warranties
Article.
L. OCCURRENCE has the same meaning as defined in the reinsured POLICY. If not
defined in the reinsured POLICY, it will mean each and every accident or
occurrence or series of accidents or occurrences arising out of one event.
If a reinsured POLICY has an "each accident," "each wrongful act," "each
common cause," "each disease," "each location," or "each offense" limit of
liability, then OCCURRENCE as used in this AGREEMENT will have the same
meaning as an "accident," "wrongful act," "common cause," "disease,"
"location," or "offense" in such reinsured POLICY with respect to such
limit of liability.
M. POLICY means any policy, binder, contract, or agreement of insurance or
reinsurance. Where the COMPANY has issued two or more ceded policies
covering the same original named insured, or group of original named
insureds, at different attachment points, then such policies will be deemed
to be a single reinsured POLICY hereunder.
The MAXIMUM POLICY PERIOD for subject business will be:
36
1. Twelve (12) months plus odd time, not to exceed eighteen (18) months
in all, for all POLICIES other than those described in paragraph 2.
below; and
2. Sixty (60) months plus odd time, not to exceed sixty-six (66) months
in all, for all POLICIES written to insure a specific construction
project or series of construction projects;
Provided, however:
a) That the limitation in 1. above will not apply to POLICIES issued for
POLICY periods of greater than eighteen (18) months if they can be
re-priced and re-underwritten without limitation, other than such
limitations as are described in c) below, at the expiration of each
annual period during the POLICY period. The commencement of each
subsequent annual period will be considered a separate RENEWAL for
purposes of this AGREEMENT;
b) In determining whether a POLICY has exceeded the MAXIMUM POLICY
PERIOD, the POLICY period of such POLICY will not include any:
i. EXTENDED REPORTING PERIODS (whether basic, supplemental or both);
ii. DISCOVERY PERIOD(S); or
iii. Products-completed operations extensions;
That are provided under the terms and conditions of that POLICY; and
c) If the COMPANY is limited or prevented by statute, regulation, or
judicial decision from re-pricing, re-underwriting, cancelling, or
non-renewing a POLICY, then the maximum POLICY period shall be
extended until the first RENEWAL date when the COMPANY can lawfully
re-price, re-underwrite, cancel or non-renew such POLICY.
Any products-completed operations extension provided under a POLICY that is
reinsured hereunder will commence at the end of the POLICY period of such
POLICY and will not extend beyond the greatest amount of time allowed
under:
(1) The longest applicable statute of repose (including any applicable
extensions thereof); or
(2) The longest applicable statute of limitations (including any
applicable extensions thereof).
N. RENEWAL or RENEWED will include any POLICY with a POLICY period of one year
or less that is renewed at its expiration or anniversary date as well as
any POLICY that is issued for more than one year, but which can be
re-priced and re-underwritten at the expiration of each annual period
during its POLICY period.
37
O. ULTIMATE NET LOSS means the amount of any settlement, award, or judgment
paid by the COMPANY, or for which the COMPANY has become liable to pay,
including interest accrued prior to, or after, the final judgment if such
interest erodes the applicable limit of liability of the reinsured POLICY.
All inuring reinsurance, whether recovered or not, will be deducted from
the amount of the ULTIMATE NET LOSS. ULTIMATE NET LOSS will not include any
element of LOSS ADJUSTMENT EXPENSE, unless that element of LOSS ADJUSTMENT
EXPENSE erodes the applicable limit of liability of the reinsured POLICY.
38
INSOLVENCY FUNDS EXCLUSION CLAUSE
This AGREEMENT excludes all liability of the COMPANY arising by contract,
operation of law, or otherwise, from its participation or membership, whether
voluntary or involuntary, in any INSOLVENCY FUND. INSOLVENCY FUND includes any
guaranty fund, insolvency fund, plan, pool, association, fund, or other
arrangement, howsoever denominated, established, or governed, that provides for
any assessment of or payment or assumption by the COMPANY of part, or all of,
any claim, debt, charge, fee, or other obligation of an insurer, or its
successors 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.
In the following NUCLEAR INCIDENT EXCLUSION CLAUSES and NUCLEAR ENERGY RISKS
EXCLUSION CLAUSES:
1. The terms "this reinsurance," "this agreement," and "Reinsurance" will be
understood to refer to this AGREEMENT.
2. The terms "policy" and "contract" will have the same meaning as the term
POLICY in this AGREEMENT.
3. The terms "policies" and "contracts" will have the same meaning as the term
POLICIES in this AGREEMENT.
4. The terms "Reassured" and "Reinsured" will have the same meaning as the
term COMPANY in this AGREEMENT.
U.S.A.
NUCLEAR INCIDENT EXCLUSION CLAUSE--LIABILITY--REINSURANCE
1. This reinsurance does not cover any loss or liability accruing to the
Reassured as a member of, or subscriber to, any association of insurers or
reinsurers formed for the purpose of covering nuclear energy risks or as a
direct or indirect reinsurer of any such member, subscriber or association.
2. Without in any way restricting the operation of paragraph 1 of this Clause
it is understood and agreed that for all purposes of this reinsurance all
the original policies of the Reassured (new, renewal and replacement) of
the classes specified in Clause II of this paragraph 2 from the time
specified in Clause III in this paragraph 2 shall be deemed to include the
following provision (specified as the Limited Exclusion Provision):
Limited Exclusion Provision*
I. It is agreed that the policy does not apply under any liability coverage,
to injury, sickness, disease, death or destruction bodily injury or
property damage with respect to which an insured under the policy is also
an insured under a nuclear energy liability policy issued by Nuclear Energy
Liability Insurance Association, Mutual Atomic Energy Liability
Underwriters or Nuclear Insurance Association of Canada, or would be an
insured under any such policy but for its termination upon exhaustion of
its limit of liability.
II. Family Automobile Policies (liability only), Special Automobile
Policies (private passenger automobiles, liability only), Farmers
Comprehensive Personal Liability Policies (liability only),
Comprehensive Personal Liability Policies (liability only) or policies
of a similar nature; and the liability portion of combination forms
related to the four classes of policies stated above, such as the
Comprehensive Dwelling Policy and the applicable types of Homeowners
Policies.
III. The inception dates and thereafter of all original policies as
described in II above, whether new, renewal or replacement, being
policies which either
(a) become effective on or after 1st May, 1960, or
(b) become effective before that date and contain the Limited
Exclusion Provision set out above;
provided this paragraph 2 shall not be applicable to Family Automobile
Policies, Special Automobile Policies, or policies or combination
policies of a similar nature, issued by the Reassured on New York
risks, until 90 days following approval of the Limited Exclusion
Provision by the Governmental Authority having jurisdiction thereof.
Page 1 of 4
3. Except for those classes of policies specified in Clause II of paragraph 2
and without in any way restricting the operation of paragraph 1 of this
Clause, it is understood and agreed that for all purposes of this
reinsurance the original liability policies of the Reassured (new, renewal
and replacement) affording the following coverages:
Owners, Landlords and Tenants Liability, Contractual Liability,
Elevator Liability, Owners or Contractors (including railroad)
Protective Liability, Manufacturers and Contractors Liability, Product
Liability, Professional and Malpractice Liability, Storekeepers
Liability, Garage Liability, Automobile Liability (including
Massachusetts Motor Vehicle or Garage Liability)
shall be deemed to include, with respect to such coverages, from the time
specified in Clause V of this paragraph 3, the following provision
(specified as the Broad Exclusion Provision):
Broad Exclusion Provision*
It is agreed that the policy does not apply:
I. Under any Liability Coverage, to injury, sickness, disease, death or
destruction bodily injury or property damage
(a) with respect to which an insured under the policy is also an
insured under a nuclear energy liability policy issued by Nuclear
Energy Liability Insurance Association, Mutual Atomic Energy
Liability Underwriters or Nuclear Insurance Association of
Canada, or would be an insured under any such policy but for its
termination upon exhaustion of its limit of liability; or
(b) resulting from the hazardous properties of nuclear material and
with respect to which (1) any person or organization is required
to maintain financial protection pursuant to the Atomic Energy
Act of 1954, or any law amendatory thereof, or (2) the insured
is, or had this policy not been issued would be, entitled to
indemnity from the United States of America, or any agency
thereof, under any agreement entered into by the United States of
America, or any agency thereof, with any person or organization.
II. Under any Medical Payments Coverage, or under any Supplementary
Payments Provision relating to immediate medical or surgical relief
first aids to expenses incurred with respect to bodily injury,
sickness, disease or death bodily injury resulting from the hazardous
properties of nuclear material and arising out of the operation of a
nuclear facility by any person or organization.
Page 2 of 4
III. Under any Liability Coverage, to injury, sickness, disease, death or
destruction bodily injury or property damage resulting from the
hazardous properties of nuclear material, if
(a) the nuclear material (1) is at any nuclear facility owned by, or
operated by or on behalf of, an insured or (2) has been
discharged or dispersed therefrom;
(b) the nuclear material is contained in spent fuel or waste at any
time possessed, handled, used, processed, stored, transported or
disposed of by or on behalf of an insured; or
(c) the injury, sickness, disease, death or destruction bodily injury
or property damage arises out of the furnishing by an insured of
services, materials, parts or equipment in connection with the
planning, construction, maintenance, operation or use of any
nuclear facility, but if such facility is located within the
United States of America, its territories, or possessions or
Canada, this exclusion (c) applies only to injury to or
destruction of property at such nuclear facility. property damage
to such nuclear facility and any property thereat.
IV. As used in this endorsement:
"HAZARDOUS PROPERTIES" include radioactive, toxic or explosive
properties; "NUCLEAR MATERIALS" means source materials, special
nuclear material or byproduct material; "SOURCE MATERIAL," "SPECIAL
NUCLEAR MATERIAL," and "BYPRODUCT MATERIAL" have the meanings given
them in the Atomic Energy Act of 1954 or in any law amendatory
thereof; "SPENT FUEL" means any fuel element or fuel component, solid
or liquid, which has been used or exposed to radiation in a nuclear
reactor; "waste" means any waste material (1) containing byproduct
material and (2) resulting from the operation by any person or
organization of any nuclear facility included within the definition of
nuclear facility under paragraph (a) or (b) thereof; "NUCLEAR
FACILITY" means
(a) any nuclear reactor,
(b) any equipment or device designed or used for (1) separating the
isotopes of uranium or plutonium, (2) processing or utilizing
spent fuel, or (3) handling, processing or packaging waste,
(c) any equipment or device used for the processing, fabricating or
alloying of special nuclear material if at any time the total
amount of such material in the custody of the insured at the
premises where such equipment or device is located consists of or
contains more than 25 grams of plutonium or uranium 233 or any
combination thereof, or more than 250 grams of uranium 235,
Page 3 of 4
(d) any structure, basin, excavation, premises or place prepared or
used for the storage or disposal of waste, and includes the site
on which any of the foregoing is located,
all operations conducted on such site and all premises used for
such operations; "NUCLEAR REACTOR" means any apparatus designed
or used to sustain nuclear fission in a self-supporting chain
reaction or to contain a xxxxxxxx xxxx of fissionable material;
With respect to injury to or destruction of property, the word
"injury" or "destruction" includes all forms of radioactive
contamination of property. "property damage" includes all forms
of radioactive contamination of property.
V. The inception dates and thereafter of all original policies affording
coverages specified in this paragraph 3, whether new, renewal or
replacement, being policies which become effective on or after 1st
May, 1960, provided this paragraph 3 shall not be applicable to
(i) Garage and Automobile Policies issued by the Reassured on New
York risks, or
(ii) statutory liability insurance required under Chapter 90, General
Laws of Massachusetts,
until 90 days following approval of the Broad Exclusion Provision
by the Governmental Authority having jurisdiction thereof.
4. Without in any way restricting the operation of paragraph 1 of this Clause,
it is understood and agreed that paragraphs 2 and 3 above are not
applicable to original liability policies of the Reassured in Canada and
that with respect to such policies this Clause shall be deemed to include
the Nuclear Energy Liability Exclusion Provisions adopted by the Canadian
Underwriters' Association or the Independent Insurance Conference of
Canada.
----------
* NOTE: The words printed in italics in the Limited Exclusion Provision and
in the Broad Exclusion Provision shall apply only in relation to original
liability policies which include a Limited Exclusion Provision or a Broad
Exclusion Provision containing those words.
N.M.A. 1590 (21/9/67)
Approved by Lloyd's Underwriters' Non-Marine Association
AMENDMENT TO THE DEFINITION OF WASTE
It is agreed that the definition of "WASTE" contained in sub-paragraph IV above
is amended to read as follows:
"WASTE" means any material
(a) containing byproduct material other than the tailings or waste produced by
the extraction or concentration of uranium or thorium from any ore
processed primarily for its source material content, and
(b) resulting from the operation by any person or organization of any nuclear
facility included under the first two paragraphs of the definition of
nuclear facility.
Page 4 of 4
CANADA
NUCLEAR INCIDENT EXCLUSION CLAUSE--LIABILITY--REINSURANCE
1. This Agreement does not cover any loss or liability accruing to the
Reinsured as a member of, or subscriber to, any association of insurers or
reinsurers formed for the purpose of covering nuclear energy risks or as a
direct or indirect reinsurer of any such member, subscriber or association.
2. Without in any way restricting the operation of paragraph 1 of this clause
it is agreed that for all purposes of this Agreement all the original
liability contracts of the Reinsured, whether new, renewal or replacement,
of the following classes, namely,
Personal Liability.
Farmers' Liability.
Storekeepers' Liability.
which become effective on or after 31st December 1992, shall be deemed to
include, from their inception dates and thereafter, the following
provision:-
Limited Exclusion Provision
This Policy does not apply to bodily injury or property damage with respect
to which the Insured is also insured under a contract of nuclear energy
liability insurance (whether the Insured is unnamed in such contract and
whether or not it is legally enforceable by the Insured) issued by the
Nuclear Insurance Association of Canada or any other group or pool of
insurers or would be an Insured under any such policy but for its
termination upon exhaustion of its limits of liability.
With respect to property, loss of use of such property shall be deemed to
be property damage.
3. Without in any way restricting the operation of paragraph 1 of this clause
it is agreed that for all purposes of this Agreement all the original
liability contracts of the Reinsured, whether new, renewal or replacement,
of any class whatsoever (other than Personal Liability, Farmers' Liability,
Storekeepers' Liability or Automobile Liability contracts), which become
effective on or after 31st December 1992, shall be deemed to include from
their inception dates and thereafter, the following provision:-
Broad Exclusion Provision
It is agreed that this Policy does not apply:
(a) to liability imposed by or arising from any nuclear liability act, law
or statute or any law amendatory thereof; nor
Page 1 0f 3
(b) to bodily injury or property damage with respect to which an Insured
under this policy is also insured under a contract of nuclear energy
liability insurance (whether the Insured is unnamed in such contract
and whether or not it is legally enforceable by the Insured) issued by
the Nuclear Insurance Association of Canada or any other insurer or
group or pool of insurers or would be an Insured under any such policy
but for its termination upon exhaustion of its limit of liability; nor
(c) to bodily injury or property damage resulting directly or indirectly
from the nuclear energy hazard arising from:
(i) the ownership, maintenance, operation or use of a nuclear
facility by or on behalf of an Insured;
(ii) the furnishing by an Insured of services, materials, parts or
equipment in connection with the planning, construction,
maintenance, operation or use of any nuclear facility; and
(iii) the possession, consumption, use, handling, disposal or
transportation of fissionable substances, or of other radioactive
material (except radioactive isotopes, away from a nuclear
facility, which have reached the final stage of fabrication so as
to be usable for any scientific, medical, agricultural,
commercial or industrial purpose) used, distributed, handled or
sold by an Insured.
As used in this Policy:
1. The term "nuclear energy hazard" means the radioactive, toxic,
explosive, or other hazardous properties of radioactive material;
2. The term "radioactive material" means uranium, thorium, plutonium,
neptunium, their respective derivatives and compounds, radioactive
isotopes of other elements and any other substances which may be
designated by or pursuant to any law, act or statute, or law
amendatory thereof as being prescribed substances capable of releasing
atomic energy, or as being requisite for the production, use or
application of atomic energy;
3. The term "nuclear facility" means:
(a) any apparatus designed or used to sustain nuclear fission in a
self-supporting chain reaction or to contain a xxxxxxxx xxxx of
plutonium, thorium and uranium or any one or more of them;
(b) any equipment or device designed or used for (i) separating the
isotopes of plutonium, thorium and uranium or any one or more of
them, (ii) processing or utilizing spent fuel, or (iii) handling,
processing or packaging waste;
Page 2 of 3
(c) any equipment or device used for the processing, fabricating or
alloying of plutonium, thorium or uranium enriched in the isotope
uranium 233 or in the isotope uranium 235, or any one or more of
them if at any time the total amount of such material in the
custody of the Insured at the premises where such equipment or
device is located consists of or contains more than 25 grams of
plutonium or uranium 233 or any combination thereof, or more than
250 grams of uranium 235;
(d) any structure, basin, excavation, premises or place prepared or
used for the storage or disposal of waste radioactive material;
and includes the site on which any of the foregoing is located,
together with all operations conducted thereon and all premises used
for such operations.
4. The term "fissionable substance" means any prescribed substance that
is, or from which can be obtained, a substance capable of releasing
atomic energy by nuclear fission.
5. With respect to property, loss of use of such property shall be deemed
to be property damage.
N.M.A. 1979a (01/04/96)
Form approved by Lloyd's Underwriters' Non-Marine Association Limited
Page 3 of 3
NUCLEAR ENERGY RISKS EXCLUSION CLAUSE (REINSURANCE) (1994)
(WORLDWIDE EXCLUDING U.S.A. AND CANADA)
(INCLUDES JAPANESE AMENDMENT)
This agreement shall exclude Nuclear Energy Risks whether such risks are written
directly and/or by way of reinsurance and/or via Pools and/or Associations.
For all purposes of this agreement Nuclear Energy Risks shall mean all first
party and/or third party insurances or reinsurances (other than Workers'
Compensation and Employers' Liability) in respect of:
(I) All Property on the site of a nuclear power station. Nuclear Reactors,
reactor buildings and plant and equipment therein on any site other
than a nuclear power station.
(II) All Property, on any site (including but not limited to the sites
referred to in (I) above) used or having been used for:
(a) the generation of nuclear energy; or
(b) the Production, Use or Storage of Nuclear Material.
(III) Any other Property eligible for insurance by the relevant local
Nuclear Insurance Pool and/or Association but only to the extent of
the requirements of that local Pool and/or Association.
(IV) The supply of goods and services to any of the sites, described in (I)
to (III) above, unless such insurances or reinsurances shall exclude
the perils of irradiation and contamination by Nuclear Material.
Except as undernoted, Nuclear Energy Risks shall not include:
(i) Any insurance or reinsurance in respect of the construction or
erection or installation or replacement or repair or maintenance or
decommissioning of Property as described in (I) to (III) above
(including contractors' plant and equipment);
(ii) Any Machinery Breakdown or other Engineering insurance or reinsurance
not coming within the scope of (i) above;
Provided always that such insurance or reinsurance shall exclude the perils of
irradiation and contamination by Nuclear Material.
However, the above exemption shall not extend to:
(1) The provision of any insurance or reinsurance whatsoever in respect
of:
Page 1 of 3
(a) Nuclear Material;
(b) Any Property in the High Radioactivity Zone or Area of any
Nuclear Installation as from the introduction of Nuclear Material
or - for reactor installations - as from fuel loading or first
criticality where so agreed with the relevant local Nuclear
Insurance Pool and/or Association.
(2) The provision of any insurance or reinsurance for the undernoted
perils:
- Fire, lightning, explosion;
- Earthquake;
- Aircraft and other aerial devices or articles dropped therefrom;
- Irradiation and radioactive contamination;
- Any other peril insured by the relevant local Nuclear Insurance
Pool and/or Association;
in respect of any other Property not specified in (1) above which
directly involves the Production, Use or Storage of Nuclear Material
as from the introduction of Nuclear Material into such Property.
Definitions
"Nuclear Material" means:
(i) Nuclear fuel, other than natural uranium and depleted uranium, capable
of producing energy by a self-sustaining chain process of nuclear
fission outside a Nuclear Reactor, either alone or in combination with
some other material; and
(ii) Radioactive Products or Waste.
"Radioactive Products or Waste" means any radioactive material produced in, or
any material made radioactive by exposure to the radiation incidental to the
production or utilisation of nuclear fuel, but does not include radioisotopes
which have reached the final stage of fabrication so as to be usable for any
scientific, medical, agricultural, commercial or industrial purpose.
"Nuclear Installation" means:
(i) Any Nuclear Reactor;
(ii) Any factory using nuclear fuel for the production of Nuclear Material,
or any factory for the processing of Nuclear Material, including any
factory for the reprocessing of irradiated nuclear fuel; and
(iii)Any facility where Nuclear Material is stored, other than storage
incidental to the carriage of such material.
Page 2 of 3
"Nuclear Reactor" means any structure containing nuclear fuel in such an
arrangement that a self-sustaining chain process of nuclear fission can occur
therein without an additional source of neutrons.
"Production, Use or Storage of Nuclear Material" means the production,
manufacture, enrichment, conditioning, processing, reprocessing, use, storage,
handling and disposal of Nuclear Material.
"Property" shall mean all land, buildings, structures, plant, equipment,
vehicles, contents (including but not limited to liquids and gases) and all
materials of whatever description whether fixed or not.
"High Radioactivity Zone or Area" means:
(i) For nuclear power stations and Nuclear Reactors, the vessel or
structure which immediately contains the core (including its supports
and shrouding) and all the contents thereof, the fuel elements, the
control rods and the irradiated fuel store; and
(ii) For non-reactor Nuclear Installations, any area where the level of
radioactivity requires the provision of a biological shield.
Notwithstanding the provisions of this Clause, certain liabilities the type of
which by market practice and custom have not been declared to the Japanese
Nuclear Pool are covered hereunder.
N.M.A. 1975a (10/3/94) (with Japanese Amendment added).
Approved by Lloyd's Underwriters' Non-Marine Association.
Page 3 of 3
U.S.A.
NUCLEAR INCIDENT EXCLUSION CLAUSE--PHYSICAL DAMAGE--
REINSURANCE
1. This Reinsurance does not cover any loss or liability accruing to the
Reassured, directly or indirectly and whether as Insurer or Reinsurer, from
any Pool of Insurers or Reinsurers formed for the purpose of covering
Atomic or Nuclear Energy risks.
2. Without in any way restricting the operation of paragraph (1) of this
Clause, this Reinsurance does not cover any loss or liability accruing to
the Reassured, directly or indirectly and whether as Insurer or Reinsurer,
from any insurance against Physical Damage (including business interruption
or consequential loss arising out of such Physical Damage) to:
I. Nuclear reactor power plants including all auxiliary property on the
site, or
II. Any other nuclear reactor installation, including laboratories
handling radioactive materials in connection with reactor
installations, and "critical facilities" as such, or
III. Installations for fabricating complete fuel elements or for processing
substantial quantities of "special nuclear material", and for
reprocessing, salvaging, chemically separating, storing or disposing
of "spent" nuclear fuel or waste materials, or
IV. Installations other than those listed in paragraph (2) III above using
substantial quantities of radioactive isotopes or other products of
nuclear fission.
3. Without in any way restricting the operations of paragraphs (1) and (2)
hereof, this Reinsurance does not cover any loss or liability by
radioactive contamination accruing to the Reassured, directly or
indirectly, and whether as Insurer or Reinsurer, from any insurance on
property which is on the same site as a nuclear reactor power plant or
other nuclear installation and which normally would be insured therewith
except that this paragraph (3) shall not operate
(a) where Reassured does not have knowledge of such nuclear reactor power
plant or nuclear installation, or
(b) where said insurance contains a provision excluding coverage for
damage to property caused by or resulting from radioactive
contamination, however caused. However on and after 1st January 1960
this sub-paragraph (b) shall only apply provided the said radioactive
contamination exclusion provision has been approved by the
Governmental Authority having jurisdiction thereof.
4. Without in any way restricting the operations of paragraphs (1), (2) and
(3) hereof, this Reinsurance does not cover any loss or liability by
radioactive contamination
Page 1 of 2
accruing to the Reassured, directly or indirectly, and whether as Insurer
or Reinsurer, when such radioactive contamination is a named hazard
specifically insured against.
5. It is understood and agreed that this Clause shall not extend to risks
using radioactive isotopes in any form where the nuclear exposure is not
considered by the Reassured to be the primary hazard.
6. The term "special nuclear material" shall have the meaning given it in the
Atomic Energy Act of 1954 or by any law amendatory thereof.
7. Reassured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
NOTE: Without in any way restricting the operation of paragraph (1) hereof, it
is understood and agreed that
(a) all policies issued by the Reassured on or before 31st December 1957
shall be free from the application of the other provisions of this
Clause until expiry date or 31st December 1960 whichever first occurs
whereupon all the provisions of this Clause shall apply.
(b) with respect to any risk located in Canada policies issued by the
Reassured on or before 31st December 1958 shall be free from the
application of the other provisions of this Clause until expiry date
or 31st December 1960 whichever first occurs whereupon all the
provisions of this Clause shall apply.
N.M.A. 1119 (12/12/57)
Page 2 of 2
CANADA
NUCLEAR INCIDENT EXCLUSION CLAUSE--PHYSICAL DAMAGE--
REINSURANCE
1. This Agreement does not cover any loss or liability accruing to the
Reinsured directly or indirectly, and whether as Insurer or Reinsurer, from
any Pool of Insurers or Reinsurers formed for the purpose of covering
Atomic or Nuclear Energy risks.
2. Without in any way restricting the operation of paragraph 1 of this clause,
this Agreement does not cover any loss or liability accruing to the
Reinsured, directly or indirectly, and whether as Insurer or Reinsurer,
from any insurance against Physical Damage (including business interruption
or consequential loss arising out of such Physical Damage) to:
(a) nuclear reactor power plants including all auxiliary property on the
site, or
(b) any other nuclear reactor installation, including laboratories
handling radioactive materials in connection with reactor
installations, and critical facilities as such, or
(c) installations for fabricating complete fuel elements or for processing
substantial quantities of radioactive materials, and for reprocessing,
salvaging, chemically separating, storing or disposing of spent
nuclear fuel or waste materials, or
(d) installations other than those listed in (c) above using substantial
quantities of radioactive isotopes or other products of nuclear
fission.
3. Without in any way restricting the operation of paragraphs 1 and 2 of this
clause, this Agreement does not cover any loss or liability by radioactive
contamination accruing to the Reinsured, directly or indirectly, and
whether as Insurer or Reinsurer, from any insurance on property which is on
the same site as a nuclear reactor power plant or other nuclear
installation and which normally would be insured therewith, except that
this paragraph 3 shall not operate:
(a) where the Reinsured does not have knowledge of such nuclear reactor
power plant or nuclear installation, or
(b) where the said insurance contains a provision excluding coverage for
damage to property caused by or resulting from radioactive
contamination, however caused.
4. Without in any way restricting the operation of paragraphs 1, 2 and 3 of
this clause, this Agreement does not cover any loss or liability by
radioactive contamination accruing to the Reinsured, directly or
indirectly, and whether as Insurer or Reinsurer, when such radioactive
contamination is a named hazard specifically insured against.
Page 1 of 2
5. This clause shall not extend to risks using radioactive isotopes in any
form where the nuclear exposure is not considered by the Reinsured to be
the primary hazard.
6. The term "radioactive material" means uranium, thorium, plutonium,
neptunium, their respective derivatives and compounds, radioactive isotopes
of other elements and any other substances which may be designated by or
pursuant to any law, act or statute, or any law amendatory thereof as being
prescribed substances capable of releasing atomic energy, or as being
requisite for the production, use or application of atomic energy.
7. Reinsured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
8. Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of
this clause, this Agreement does not cover any loss or liability accruing
to the Reinsured, directly or indirectly, and whether as Insurer or
Reinsurer caused:
(a) by any nuclear incident as defined in or pursuant to the Nuclear
Liability Act or any other nuclear liability act, law or statute, or
any law amendatory thereof, or nuclear explosion, except for ensuing
loss or damage which results directly from fire, lightning or
explosion of natural, coal or manufactured gas;
(b) by contamination by radioactive material.
NOTE: Without in any way restricting the operation of paragraphs 1, 2, 3 and 4
of this clause, paragraph 8 of this clause shall only apply to all original
contracts of the Reinsured whether new, renewal or replacement which become
effective on or after December 31, 1992.
N.M.A. 1980a (01/04/96)
Form approved by Lloyd's Underwriters' Non-Marine Association Ltd.
Page 2 of 2
U.S.A.
NUCLEAR INCIDENT EXCLUSION CLAUSE--PHYSICAL DAMAGE AND LIABILITY (BOILER
AND MACHINERY POLICIES)--REINSURANCE
(1) This reinsurance does not cover any loss or liability accruing to the
Reassured as a member of, or subscriber to, any association of insurers or
reinsurers formed for the purpose of covering nuclear energy risks or as a
direct or indirect reinsurer of any such member, subscriber or association.
(2) Without in any way restricting the operation of paragraph (1) of this
Clause it is understood and agreed that for all purposes of this
reinsurance all original Boiler and Machinery Insurance or Reinsurance
contracts of the Reassured shall be deemed to include the following
provisions of this paragraph;
This Policy does not apply to "loss," whether it be direct or indirect,
proximate or remote
(a) from an Accident caused directly or indirectly by nuclear reaction,
nuclear radiation or radioactive contamination, all whether controlled
or uncontrolled; or
(b) from nuclear reaction, nuclear radiation or radioactive contamination,
all whether controlled or uncontrolled, caused directly or indirectly
by, contributed to or aggravated by an Accident.
(3) However, it is agreed that loss arising out of the use of Radioactive
Isotopes in any form is not hereby excluded from reinsurance protection.
(4) Without in any way restricting the operation of paragraph (1) hereof, it is
understood and agreed that
(a) all policies issued by the Reassured effective on or before 30th
April, 1958, shall be free from the application of the other
provisions of this Clause until expiry date or 30th April, 1961,
whichever first occurs, whereupon all the provisions of this Clause
shall apply,
(b) with respect to any risk located in Canada policies issued by the
Reassured effective on or before 30th June, 1958, shall be free from
the application of the other provisions of this Clause until expiry
date or 30th June, 1961, whichever first occurs, whereupon all the
provisions of this Clause shall apply.
N.M.A. 1166 (23/6/58)
Page 1 of 1
CANADA
NUCLEAR INCIDENT EXCLUSION CLAUSE--PHYSICAL DAMAGE AND LIABILITY (BOILER
AND MACHINERY POLICIES)--REINSURANCE
(1) This reinsurance does not cover any loss or liability accruing to the
Reassured as a member of, or subscriber to, any association of insurers or
reinsurers formed for the purpose of covering nuclear energy risks or as a
direct or indirect reinsurer of any such member, subscriber or association.
(2) Without in any way restricting the operation of paragraph (1) of this
Clause it is understood and agreed that for all purposes of this
reinsurance all original Boiler and Machinery Insurance or Reinsurance
contracts of the Reassured shall be deemed to include the following
provisions of this paragraph;
This Policy does not apply to loss, whether it be direct or indirect,
proximate or remote
(a) from an Accident caused directly or indirectly by nuclear reaction,
nuclear radiation or radioactive contamination, all whether controlled
or uncontrolled; or
(b) from nuclear reaction, nuclear radiation or radioactive contamination,
all whether controlled or uncontrolled, caused directly or indirectly
by, contributed to or aggravated by an Accident.
(3) However, it is agreed that loss arising out of the use of Radioactive
Isotopes in any form is not hereby excluded from reinsurance protection.
(4) Without in any way restricting the operation of paragraph (1) hereof, it is
understood and agreed that policies issued by the Reassured effective on or
before 31st December, 1958, shall be free from the application of the other
provisions of this Clause until expiry date or 31st December, 1961,
whichever first occurs, whereupon all the provisions of this Clause shall
apply.
N.M.A. 1251 (29/10/59)
Approved by Lloyd's Underwriters' Fire and Non-Marine Association.
Page 1 of 1
INTERESTS AND LIABILITIES AGREEMENT
attaching to and forming a part of
CASUALTY VARIABLE QUOTA SHARE REINSURANCE AGREEMENT
between
ALLIED WORLD ASSURANCE COMPANY, LTD
and/or
ALLIED WORLD ASSURANCE COMPANY (EUROPE) LIMITED
and/or
ALLIED WORLD ASSURANCE CO (RE) LTD
and/or
ALLIED WORLD ASSURANCE (US) INC.
and/or
NEWMARKET UNDERWRITERS INSURANCE COMPANY
(hereinafter called the "Company")
and
FEDERAL INSURANCE COMPANY
(hereinafter called the "Subscribing Reinsurer")
It is hereby mutually understood and agreed by and between the Company and
the Subscribing Reinsurer that as of 12:01 a.m. Atlantic Standard Time, March 1,
2006, the Subscribing Reinsurer's share in the interests and liabilities of the
Reinsurers on the attached Agreement will be:
Subscribing
Subscribing Reinsurer's Reinsurer's Maximum
Quota Share Percentage Limit of Liability
of the Interests and Subscribing With Respect to
Liabilities on the Reinsurer's Percentage Ultimate Net Loss
Policies Subject to the of the Cession for the Under the Treaty
Treaty Section Treaty Section Section
----------------------- ---------------------- --------------------
Section A NIL NIL NIL
Section B Variable up to a $2,500,000;
maximum of L1,500,000; or
5.00000% 10.52632% 2,500,000 Euros
Xxxxxxx X XXX XXX XXX
XX 00000 -- 3/1/06 1
It is further understood and agreed that with respect to POLICIES written
or RENEWED with an effective date on or after March 1, 2006, 12:01 a.m. Atlantic
Standard Time, the Agreement will be amended as follows:
a) The penultimate paragraph of the Commencement and Termination Article
will be amended to read as follows:
"In the event that POLICIES subject to this AGREEMENT are written
in a jurisdiction where cancellation, renewal, or nonrenewal of
coverage is regulated by the insurance authorities and the
COMPANY is bound by statute or regulation of said jurisdiction or
by a judicial decision to continue coverage after the termination
date of this AGREEMENT, then the REINSURER will remain liable on:
A. Any POLICIES continuing such coverage (and will receive the
premium therefor) until the earliest of the following times:
1. The first RENEWAL date when the COMPANY can lawfully
nonrenew, or the first date when the COMPANY can
lawfully cancel, said POLICIES; or
2. Thirty-six (36) months from the termination date of
this AGREEMENT; and
B. Any EXTENDED REPORTING PERIODS (whether basic, supplemental
or both), DISCOVERY PERIOD(S) or products-completed
operations extensions applicable to such POLICIES without
limitation.
If, however, the COMPANY decides to hold the business net and for
its own account, or has other reinsurance agreements that would
apply to such business, the REINSURER will not be liable for
longer than the run-off period set forth above."
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b) The Special Termination or Settlement Article will be amended in its
entirety to read as follows:
"SPECIAL TERMINATION OR SETTLEMENT ARTICLE (Applicable separately
as between the COMPANY and each REINSURER)
"Section I.
A. Either party may terminate this AGREEMENT upon forty-five
(45) calendar days notice in the event that:
1. The other party should at any time (whether voluntarily
or otherwise) become insolvent, or suffer any
IMPAIRMENT OF PAID-UP CAPITAL, or become the subject of
any liquidation, rehabilitation, receivership,
supervision, conservation, or bankruptcy action or
proceeding (whether judicial otherwise) or of a
proposed Scheme of Arrangement, or be acquired or
controlled (whether directly or indirectly) by any
other company or organization; or
2. There is a severance or obstruction of free and
unfettered communication and/or normal commercial
and/or financial intercourse between Bermuda and the
country in which the REINSURER is incorporated or has
its principal office as a result of war, currency
regulations, or any circumstances arising out of
political, financial or economic emergency.
IMPAIRMENT OF PAID-UP CAPITAL does not include a voluntary
reduction in paid-up capital by either party to this
AGREEMENT for purposes of buying back its outstanding shares
of stock to increase its earnings per share.
B. The COMPANY may terminate this AGREEMENT forthwith in the
event that:
1. The REINSURER ceases writing reinsurance; or
2. The REINSURER at any time:
3
(i) Has a Standard & Poor's (S&P) Insurer Financial
Strength Rating of lower than "A-"; or
(ii) Ceases to have any S&P Insurer Financial Strength
Rating (including a designation of "not rated" or
"NR") after having had an S&P rating at or after
the inception of this AGREEMENT;
3. The REINSURER at any time:
(i) Has an A.M. Best Financial Strength Rating of
lower than "A-"; or
(ii) Ceases to have any A.M. Best Financial Strength
Rating (including a designation of "not rated" or
"NR") after having had an A.M. Best Financial
Strength Rating at or after the inception of this
AGREEMENT;
4. Over any period not exceeding twelve months, the
policyholders' surplus of the REINSURER, as reported in
such financial statements of the REINSURER as
designated by the COMPANY, drop by 20.00% or more; or
5. (Applicable to REINSURERS domiciled in the United
States)
Upon application of the NAIC Insurance Regulatory
Information System (IRIS) tests to the REINSURER'S most
recent statutory Annual Statement (which the REINSURER
hereby agrees to furnish to the COMPANY upon request),
it is found that four or more of the REINSURER'S IRIS
financial ratio values are outside of the usual range
established in the IRIS system.
Notwithstanding the above, subparts 4 and 5 will not apply
to any REINSURER having at all times both S&P Insurer
Financial Strength and and A. M. Best Financial Strength
Rating of "A" or higher.
C. Termination under Part A. or B. of this Article will be
effected by written notice. The COMPANY will elect whether
the termination will be on a run-off basis or a clean-cut
basis with an immediate settlement of all present and future
obligations under this AGREEMENT. If the
4
COMPANY initially elects a run-off basis, within fifteen
(15) calendar days of receiving notice of the COMPANY'S
election, any non-admitted REINSURER will secure all such
obligations through a trust account or a clean,
unconditional, irrevocable, and evergreen letter of credit
from a financial institution acceptable to the COMPANY.
However, even if such security is requested by the COMPANY
and/or provided by the REINSURER, it is agreed that the
COMPANY will retain the right to require an immediate
settlement of all present and future obligations at any
subsequent date.
"Section II
A. After the expiration or termination of this AGREEMENT for
any reason other than a Special Termination governed by
Section I., above, if the REINSURER has any remaining
present or future obligations to the COMPANY and any of the
five events described in Part B. of Section I. should occur,
the COMPANY (i) may require an immediate settlement of all
present and future obligations under this AGREEMENT, or (ii)
may require any non-admitted REINSURER to secure all such
obligations through a trust account or a clean,
unconditional, irrevocable, and evergreen letter of credit
from a financial institution acceptable to the COMPANY.
B. If the COMPANY initially requires security under Part A. of
this Section, it will notify any non-admitted REINSURER in
writing and the REINSURER will provide such trust account or
letter of credit within fifteen (15) calendar days. However,
even if such security is requested by the COMPANY and/or
provided by the REINSURER, it is agreed that the COMPANY
will retain the right to require an immediate settlement of
all present and future obligations at any subsequent date.
"Section III
A. For purposes of this Article, ALL PRESENT AND FUTURE
OBLIGATIONS means outstanding ULTIMATE NET LOSS, EXTRA
CONTRACTUAL OBLIGATIONS, EXCESS OF LIMITS LIABILITY and LOSS
ADJUSTMENT EXPENSE [including reserves for
incurred-but-not-reported ULTIMATE NET LOSS and LOSS
ADJUSTMENT EXPENSE (IBNR)], return of unearned premiums, and
all other present or future balances, obligations, or
amounts due the COMPANY under this AGREEMENT.
5
B. In no event will this Article be construed to limit the
amount of, or the rights and obligations of the parties with
respect to, any security withheld or required in accordance
with the Reserves and Funding Article hereof (if
applicable).
C. In the event of an immediate settlement of ALL PRESENT AND
FUTURE OBLIGATIONS, upon receipt of final payment, the
COMPANY and the REINSURER will execute a full and final
commutation and mutual release of their respective
liabilities under the AGREEMENT.
D. When requested by either party an appraisal of IBNR will be
made by a disinterested actuary.
E. Settlements under this Article will be adjusted for net
present value.
F. In the event of any conflict between this Article and any
other Article of this AGREEMENT, the terms of this Article
will control.
"This Article will survive the expiration or termination of this
AGREEMENT."
The share of the Subscribing Reinsurer will be separate and apart from the
shares of the other Reinsurers and will not be joint with those of the other
Reinsurers, and the Subscribing Reinsurer will in no event participate in the
interests and liabilities of other Reinsurers.
If the Subscribing Reinsurer wishes to designate an alternate party to that
named in the Service of Suit Article contained in the attached Agreement, then
service of process will be made upon the party hereinafter named:
________________________________________________________________________________
________________________________________________________________________________
This Interests and Liabilities Agreement may be executed in two or more
counterparts, each of which, when duly executed will be deemed an original, but
all of which together will constitute one and the same instrument.
6
IN WITNESS WHEREOF, the parties hereto have caused this Interests and
Liabilities Agreement to be executed by their duly authorized representatives.
ALLIED WORLD ASSURANCE COMPANY, LTD
ALLIED WORLD ASSURANCE COMPANY (EUROPE) LIMITED
ALLIED WORLD ASSURANCE CO (RE) LTD
ALLIED WORLD ASSURANCE (US) INC.
NEWMARKET UNDERWRITERS INSURANCE COMPANY
Signed at: Hamilton, Bermuda
--------------------------
Signature: /s/ Jordan X. Xxxxx Title: EVP
-------------------------- ---------------------------------
Printed Name: Jordan X. Xxxxx Date: April 27, 2006
----------------------- ----------------------------------
Attest: /s/ Xxxxx X'Xxxxxx
-----------------------------
Attest Printed Name: Xxxxx X'Xxxxxx
----------------
HARBOR POINT SERVICES, INC.
ON BEHALF OF
FEDERAL INSURANCE COMPANY
Signed at: Bernardsville, NJ
--------------------------
Signature: /s/ Xxxx XxXxx Title: VP
-------------------------- ---------------------------------
Printed Name: Xxxx XxXxx Date: May 8, 2006
----------------------- ----------------------------------
Attest: /s/ Xxxxx Xxxxxxx
-----------------------------
Attest Printed Name: Xxxxx Xxxxxxx
----------------
Reference No.: T545
----------------------
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