FedNat Holding (FNHCQ) 8-K Entry into a Material Definitive Agreement

Exhibit 10.2

 (  STATE BOARD OF ADMINISTRATION OF FLORIDA  1801 HERMITAGE BOULEVARDTALLAHASSEE, FLORIDA 32308  (850) 488-4406  POST OFFICE BOX 13300 32317-3300  REIMBURSEMENT CONTRACT  Effective: June 1,2017 (Contract)  between  RICK SCOTT  GOVERNOR  CHAIR  JEFF ATWATER  CHIEF FINANCIAL OFFICER  PAM BONDI  ATTORNEY GENERAL  ASH WILLIAMSEXECUTIVE DIRECTOR & CIO  MONARCH NATIONAL INSURANCE COMPANY  (Company)  NAIC # 15715  and  THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA)WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)  (  PREAMBLE  The Legislature of the State of Florida has enacted Section 215.555, Florida Statutes (Statute), whichdirects the SBA to administer the FHCF. This Contract, consisting of the principal document entitledReimbursement Contract, addressing the mandatory FHCF coverage, and Addenda, is subject to theStatute and to any administrative rule adopted pursuant thereto, and is not intended to be in conflicttherewith. All provisions in the principal document are equally applicable to each Addendum unlessspecifically superseded by one of the Addenda.  In consideration of the promises set forth in this Contract, the parties agree as follows:  ARTICLE I - SCOPE OF AGREEMENT  As a condition precedent to the SBA’s obligations under this Contract, the Company, an AuthorizedInsurer or an entity writing Covered Policies under Section 627.351, Florida Statutes, in the State ofFlorida, shall report to the SBA in a specified format the business it writes which is described in thisContract as Covered Policies.  The terms of this Contract shall determine the rights and obligations of the parties. This Contract providesreimbursement to the Company under certain circumstances, as described herein, and does not provide orextend insurance or reinsurance coverage to any person, firm, corporation or other entity. The SBA shallreimburse the Company for its Ultimate Net Loss on Covered Policies, which were in force and in effectat the time of the Covered Event(s) causing the Loss, in excess of the Company’s Retention as a result ofeach Covered Event commencing during the Contract Year, to the extent funds are available, all as  (  hereinafter defined.  1 FHCF-2017K  Rule 19-8.010 F.A.C. 

 ARTICLE II - PARTIES TO THE CONTRACT  This Contract is solely between tire Company and the SBA which administers the FHCF. In no instanceshall any insured of the Company or any claimant against an insured of the Company, or any other thirdparty, have any rights under this Contract, except as provided in Article XV. The SBA will only disbursefunds to the Company, except as provided for in Article XV. The Company shall not, without the priorapproval of the Office of Insurance Regulation, sell, assign, or transfer to any third party, in return for afee or other consideration any sums the FHCF pays under this Contract or the right to receive such sums.  ARTICLE III - TERM  (1) Tire term of this Contract shall apply to Losses from Covered Events which commence during tire period horn 12:00:01 a.m., Eastern Time, June 1, 2017, to12:00 midnight, Eastern Time, May 31, 2018 (Contract Year). Pursuant to the terms of this Contract, the SBA shall not be liable for Losses from Covered Events which commence after the effective time and date of expiration or termination. Should this Contract expire or terminate while a Covered Event is in progress, the SBA shall be responsible for such Covered Event in progress in the same manner and to the same extent it would have been responsible had the Contract expired the day following the conclusion of the Covered Event in progress.  (2) The Company is required to designate a coverage level, make the required selections, and return this fully executed Contract to the FHCF Administrator so that the Contract is received by the FHCF Administrator no later than 5 p.m., Central Time, March 1, 2017. Failure to do so shall result in tire Company’s coverage level under tills Contract being deemed as follows:  (a) For Companies that are a member of a National Association of Insurance Commissioners (NAIC) group, the same coverage level selected by the other Companies of the same NAIC group shall be deemed. If executed Contracts for none of the members of an NAIC group have been received by tire FHCF Administrator, the coverage level from the prior Contract Year shall be deemed.  (b) For Companies that are not a member of an NAIC group under which other Companies are active participants in the FHCF, the coverage level from the prior Contract Year shall be deemed.  (c) For New Participants, as that term is defined in Article V(21), that are a member of an NAIC group, the same coverage level selected by the other Companies of the same NAIC group shall be deemed.  (d) For New Participants that are not a member of an NAIC group under which other Companies are active participants in the FHCF, the 45%, 75% or 90% coverage levels may be selected providing that the FHCF Administrator receives executed Contracts within 30 calendar days of the effective date of the first Covered Policy, otherwise, the 45% coverage level shall be deemed.  (3) Failure by the Company to meet the requirements of this Article may result in referral to the Office of Insurance Regulation.  ARTICLE IV - LIABILITY OF THE FHCF  (1) The SBA shall reimburse the Company, with respect to each Covered Event commencing during the Contract Year for the “Reimbursement Percentage” elected, this percentage times the amount of Ultimate Net Loss paid by the Company in excess of the Company’s Retention, as adjusted pursuant to Article V(28), plus 5% of the reimbursed Losses for Loss Adjustment Expense Reimbursement.  (2) The Reimbursement Percentage will be 45% or 75% or 90%, at the Company’s option as elected under Article XIX.  FHCF-2017K  2  Rule 19-8.010 F.A.C. 

 (3) The aggregate liability of the FHCF with respect to all Reimbursement Contracts covering this  Contract Year shall not exceed the limit set forth under Section 215.555(4)(c)l., Florida Statutes. Forspecifics regarding reimbursement calculations, see section (3)(c) of Article X.  (4) Upon the occurrence of a Covered Event, the SB A shall evaluate the potential Losses to the FFTCF  and the FHCF’s capacity at the time of the event. The initial Projected Payout Multiple used toreimburse the Company for its Losses shall not exceed the Projected Payout Multiple as calculatedbased on the capacity needed to provide the FHCF’s coverage. If it appears that the EstimatedClaims-Paying Capacity may be exceeded, the SBA shall reduce the projected payout factors ormultiples for determining each participating insurer’s projected payout uniformly among all insurersto reflect the Estimated Claims-Paying Capacity.  (5) Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from  other sources. Once the Company’s limit of coverage has been exhausted, the Company will not beentitled to further reimbursements.  (6) After the end of the calendar year, the SBA shall notify’ insurers of the estimated Borrowing  Capacity and the Balance of the Fund as of December 31. In May and October of each year, the SBAshall publish in the Florida Administrative Register a statement of the FFICF’s estimated BorrowingCapacity, Estimated Claims-Paying Capacity, and the projected Balance of the Fund as ofDecember 31.  (7) The obligation of the SBA with respect to all Contracts covering a particular Contract Year shall not  exceed tire Balance of the Fund as of December 31 of that Contract Year, together with themaximum amount tire SBA is able to raise through the issuance of revenue bonds or through othermeans available to the SBA under Section 23 5.555, Florida Statutes, up to the limit in accordancewith Section 2I5.555(4)(c)l. and (6), Florida Statutes. The obligations and the liability of the SBAare more fully described in Rule 19-8.013, Florida Administrative Code (F.A.C.).  ARTICLE V - DEFINITIONS  (1) Actual Claims-Paying Capacity of the FHCF  This term means the sum of the Balance of the Fund as of December 31 of a Contract Year-, plus anyreinsurance purchased by the FHCF, plus the amount the SBA is able to raise through the issuance ofrevenue bonds, or through other means available by law to the SBA, up to the limit in accordancewith Section 215.555(4)(c)l, and (6), Florida Statutes.  (2) Actuarially Indicated  This term means, with respect to Premiums paid by Companies for reimbursement provided by theFHCF, an amount determined in accordance with the definition provided in Section 215.555(2)(a),Florida Statutes.  (3) Additional Living Expense (ALE)  ALE Losses covered by the FHCF are not to exceed 40 percent of the insured value of a ResidentialStructure or its contents based on the coverage provided in the policy. Fair rental value, loss of rents,or business interruption losses are not covered by the FHCF.  (4) Administrator  This term means the entity with which the SBA contracts to perform administrative tasks associatedwith the operations of the FHCF. The Administrator is Paragon Strategic Solutions Inc.,8200Tower, 5600 West 83rd Street, Suite 1100, Minneapolis, Minnesota 55437. The telephone number is(800) 689-3863, and the facsimile number is (800) 264-0492,  FHCF-2017K  3  Rule 19-8.010 F.A.C. 

 (5)  Authorized Insurer  {  This term is defined in Section 624.09(1), Florida Statutes.  (6)  Borrowing Capacity  This term means the amount of funds which are able to be raised by the issuance of revenue bonds orthrough other financing mechanisms, less bond issuance expenses and reserves.  (7) Citizens Property Insurance Corporation (Citizens)  This term means Citizens Property Insurance Corporation as created under Section 627.351(6),Florida Statutes. For the purposes of the FHCF, Citizens Property Insurance Corporationincorporates two accounts, (a) the coastal account and (b) the personal lines and commercial linesaccounts. Each account is h eated by the FHCF as if it were a separate participating insurer with itsown reportable exposures, Reimbursement Premium, Retention, and Ultimate Net Loss,  (8)  Contract  This term means this Reimbursement Contract for the current Contract Year.  (9)  Covered Event  This term means any one storm declared to be a hurricane by Hie National FTurricane Center whichcauses insured losses in Florida. A Covered Event begins when a hurricane causes damage in Floridawhile it is a hurricane and continues throughout any subsequent downgrades in storm status by tireNational Hurricane Center regardless of whether the hurricane makes landfall. Any storm, includinga tropical storm, which does not become a hurricane is not a Covered Event.  (10)  Covered Policy or Covered Policies  (a)  Covered Policy, as defined in Section 215.555(2)(c), Florida Statutes, is further clarified to  mean only that portion of a binder, policy or contract of insurance that insures real or personal  property located in the State of Florida to the extent such policy insures a Residential Structure  f  or the contents of a Residential Structure, located in the State of Florida.  ^  (b)  Due to tire specialized nature of the definition of Covered Policies, Covered Policies are not  limited to only one line of business in tire Company’s annual statement required to be filed bySection624.424, Florida Statutes. Instead, Covered Policies are found in several lines ofbusiness on the Company’s annual statement Covered Policies will at a minimum be reportedin the Company’s statutory annual statement as;  1. Fire  2. Allied Lines  3. Farraowners Multiple Peril  4. Homeowners Multiple Peril  5. Commercial Multiple Peril (non liability portion, covering condominiums and  apartments)  6. Inland Marine  Note that where particular insurance exposures, e.g., mobile homes, are reported on an annualstatement is not dispositive of whether or not the exposure is a Covered Policy.  (c) This definition applies only to the first-party property section of a policy pertaining strictly to  the structure, its contents, appurtenant structures, or ALE coverage.  (d) Covered Policy also includes any collateral protection insurance policy covering personal  residences which protects both the borrower’s and the lender’s financial interest, in an amountat least equal to the coverage for the dwelling in place under the lapsed homeowner’s policy, ifsuch policy can be accurately reported as required in Section 215.555(5), Florida Statutes. A  Company will be deemed to be able to accurately report data if the required data, as specified inthe Premium Formula adopted in Section 215.555(5), Florida Statutes, is available.  (e) See Article VI for specific exclusions.  FHCF-2017K  4  Rule 19-8.010 F.A.C. 

 (11) Deductible Buy-Back Policy  This term means a specific policy that provides coverage to a policyholder for some portion of thepolicyholder’s deductible under a policy issued by another insurer,  (12) Estimated Claims-Paying Capacity of the FHCF  This term means the sum of the projected Balance of the Fund as of December 31 of a ContractYear, plus any reinsurance purchased by tire FHCF, plus the most recent estimate of the BorrowingCapacity of the FHCF, determined pursuant to Section 2I5.555(4)(c), Florida Statutes.  (13)  Excess Policy  This term, for the purposes of this Contract, means a policy that provides insurance protection forlarge commercial property risks and that provides a layer of coverage above a primary layer (whichis insured by a different insurer) that acts much the same as a very large deductible.  (14) Florida Department of Financial Services  This term means the Florida regulatory agency, created pursuant to Section 20.121, FloridaStatutes, which is charged with regulating the Florida insurance market and administering theFlorida Insurance Code,  (15) Florida Insurance Code  This term means those chapters identified in Section 624.01, Florida Statutes, which are designatedas the Florida Insurance Code.  (16) Formula or the Premium Formula  This term means the Formula approved by the SB A for the purpose of determining tile ActuariallyIndicated Premium to be paid to the FHCF. The Premium Formula is defined as an approach ormethodology which leads to the creation of premium rates. The Formula shall, pursuant to Section215.555(5)(b), Florida Statutes, include a cash build-up factor in the amount specified therein.  (17) Fund Balance or Balance of the Fund as of December 31  These terms mean the amount of assets available to pay claims, not including any bondingproceeds, resulting from Covered Events which occurred during the Contract Year.  (18)  Insurer Group  For purposes of the coverage option election In Section 215.555(4)(b), Florida Statutes, InsurerGroup means the group designation assigned by the National Association of InsuranceCommissioners (NAIC) for purposes of filing consolidated financial statements. A Company is amember of a group as designated by the NAIC until such Company is assigned another groupdesignation or is no longer a member of a group recognized by the NAIC.  (19)  Loss  “Loss” or “Losses” means incurred losses under a Covered Policy from a Covered Event, includingAdditional Living Expenses not to exceed 40 percent of the insured value of a Residential Structureor its contents and amounts paid as fees on behalf of or inuring to the benefit of a policyholder.“Loss” excludes allocated or unallocated loss adjustment expenses and also excludes any Item forwhich this Contract does not provide reimbursement pursuant to the exclusions in Article VI.  (20) Loss Adjustment Expense Reimbursement  (a) Loss Adjustment Expense Reimbursement shall be 5% of the reimbursed Losses under this Contract as provided in Article IV, pursuant to Section 215.555(4)(b)L, Florida Statutes.  (b) The 5% Loss Adjustment Expense Reimbursement is included in the total Payout Multiple applied to each Company.  (21) New Partidpant(s)  This term means all Companies which begin writing Covered Policies on or after the beginning ofthe Contract Year. A Company that removes exposure from Citizens pursuant to an assumptionagreement effective on or after June 1 and had written no other Covered Policies before June 1 isalso considered a New Participant.  FHCF-2017K  5  Rule 19-8.010 F.A.C. 

 (22) Office of Insurance Regulation  This term means that office within the Department of Financial Services and which was created inSection 20.121(3), Florida Statutes.  (23) Payout Multiple  This term means the multiple as calculated in accordance with Section 215.555(4) (c), FloridaStatutes, which is derived by dividing the single season Claims-Paying Capacity of the FF1CF bythe total aggregate industry Reimbursement Premium for the FHCF for the Contract Year billed asof December 31 of the Contract Year, The final Payout Multiple is determined onceReimbursement Premiums have been billed as of December 33 and the amount of bond proceedshas been determined.  (24)  Premium  This term means the same as Reimbursement Premium.  (25) Projected Payout Multiple  The Projected Payout Multiple is used to calculate a Company’s projected payout pursuant toSection 215.555(4)(d)2,, Florida Statutes. The Projected Payout Multiple is derived by dividing theestimated single season Claims-Paying Capacity of the FHCF by the estimated total aggregateindustry Reimbursement Premium for tire FHCF for tire Contract Year, Tire Company’sReimbursement Premium as paid to the SBA for the Contract Year is multiplied by the ProjectedPayout Multiple to estimate the Company’s coverage from tire FHCF for the Contract Year,  (26) Reimbursement Premium  This term means the Premium determined by multiplying each $3,000 of insured value reported bythe Company in accordance with Section 215.555(5)(b), Florida Statutes, by the rate as derivedfrom the Premium Formula, as described in Rule 19-8.028, F.A.C.  (27) Residential Structures  This term means units or buildings used exclusively or predominantly for dwelling or habitationaloccupancies, including the primary structure and appurtenant structures insured under the samepolicy and any other structures covered under endorsements associated with a policy covering aresidential structure. For the purpose of this Contract, a single structure which includes a mix ofcommercial habitational and commercial non-habitational occupancies, and which is insured undera commercial policy, is considered a Residential Structure if 50% or more of the total insured valueof the structure is used for habitational occupancies. Covered Residential Structures do not includeany structures listed under Article VI.  (28)  Retention  This term means the amount of Losses finm a Covered Event which must be incurred by theCompany before it is eligible for reimbursement from the FHCF,  (a) When the Company incurs Losses from one or two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the Covered Events.  (b) When the Company incurs Losses from more than two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the two Covered Events causing the largest Losses for the Company. For each other Covered Event resulting in Losses, the Company’s Retention shall he reduced to one-third of its full Retention.  1. All reimbursement of Losses for each Covered Event shall be based on the Company’s full Retention until December 31 of the Contract Year. Adjustments to reflect a reduction to one-third of the full Retention shall be made on or after January1 of the Contract Year provided the Company reports its Losses as specified in this Contract.  2. Adjustments to the Company’s Retention shall be based upon its paid and outstanding Losses as reported on the Company’s Proof of Loss Reports, but shall not include incurred but not reported Losses. The Company’s Proof of Loss Reports shall be used to determine  FHCF-2017K  6  Rule 19-8.010 F.A.C. 

 which Covered Events constitute the Company’s two largest Covered Events. After thisinitial determination, any subsequent adjustments shall be made quarterly by the SBA onlyif the Proof of Loss Reports reveal that loss development patterns have resulted in a change  in the order of Covered Events entitled to the reduction to one-third of the full Retention.  (c)The Company’s full Retention is established in accordance with the provisions of Section 215.555(2)(e), Florida Statutes, and shall be determined by multiplying the Retention Multiple by the Company’s Reimbursement Premium for the Contract Year.  (29) Retention Multiple  (a) The Retention Multiple is applied to the Company’s Reimbursement Premium to determine the Company’s Retention. The Retention Multiple for the 2017/2018 Contract Year shall be equal to $4.5 billion, adjusted based upon the reported exposure for the 2015/2016 Contract Year to reflect the percentage growth in exposure to the FHCF since 2004, divided by the estimated total industry Reimbursement Premium at the 90% reimbursement percentage level for the Contract Year as determined by the SBA.  (b) The Retention Multiple shall be adjusted to reflect the reimbursement percentage elected by the Company under this Contract as follows:  1. If the Company elects a 90% reimbursement percentage, the adjusted Retention Multiple is 100% of the amount determined under (29)(a) above;  2. If the Company elects a 75% reimbursement percentage, the adjusted Retention Multiple is 120% of the amount determined under (29) (a) above; or  3. If the Company elects a 45% reimbursement percentage, the adjusted Retention Multiple is 200% of the amount determined under (29)(a) above.  (30) Ultimate Net Loss  (a) This term means all Losses under Covered Policies in force at the time of a Covered Event prior to the application of the Company’s Retention and reimbursement percentage, and excluding loss adjustment expense and any exclusions under Article VI.  (b) The Company’s Ultimate Net Loss shall be determined in accordance with the deductible level as specified under the policy sustaining the Loss without taking into consideration any deductible discounts or deductible waivers.  (c) Salvages and all other recoveries, excluding reinsurance recoveries, shall be first deducted from such Loss to arrive at the amount of liability attaching hereunder.  (d) All salvages, recoveries or payments recovered or received subsequent to a Loss settlement under this Contract shall be applied as if recovered or received prior to the aforesaid settlement and all necessary adjustments shall be made by the parties hereto.  (e) Nothing in this clause shall be construed to mean that Losses under this Contract are not recoverable until the Company’s Ultimate Net Loss has been ascertained.  (f) The SBA shall be subrogated to the rights of the Company to the extent of its reimbursement of the Company. The Company agrees to assist and cooperate with the SBA in all respects as regards such subrogation. The Company further agrees to undertake such actions as may be necessary to enforce its rights of salvage and subrogation, and its rights, if any, against other insurers as respects any claim, loss, or payment arising out of a Covered Event.  ARTICLE VI - EXCLUSIONS  This Contract does not provide reimbursement for:  (1) Any losses not defined as being within the scope of a Covered Policy.  (2) Any policy which excludes wind or hurricane coverage.  FHCF-2017K  t  7  Rule 19-8.010 F.A.C. 

 (3) Any Excess Policy or Deductible Buy-Back Policy that requires individual ratemaking, as  determined by the FHCF,  (4) (a) Any policy for Residential Structures that provides a layer of coverage underneath an Excess  Policy issued by a different insurer;  (b) Any policy providing a layer of windstorm or hurricane coverage for a particular structure above or below a layer of windstorm or hurricane coverage under a separate policy issued by a different insurer, or any other circumstance in which two or more insurers provide primary windstorm or hurricane coverage for a single structure using separate policy forms;  (c) Any other policy providing a layer of windstorm or hurricane coverage for a particular structure below a layer of self-insured windstorm or hurricane coverage for the same structure; or  (d) The exclusions in this subsection do not apply to primary quota share policies written by Citizens Property Insurance Corporation under Section 627.351 (6)(c)2., Florida Statutes.  (5) Any liability of the Company attributable to losses for fair rental value, loss of rent or rental income,  or business interruption.  (6) Any collateral protection policy that does not meet the definition of Covered Policy as defined in  Article V(10)(d).  (7) Any reinsurance assumed by the Company.  (8) Any exposure for hotels, motels, timeshares, shelters, camps, retreats, and any other rental property  used solely for commercial purposes.  (9) Any exposure for homeowner associations if no habitational structures are insured under the policy.  (10) Any exposure for homes and condominium structures or units that are non-owner occupied and  rented for 6 or more rental periods by different parties during the course of a 12-month period.  (11) Commercial healthcare facilities and nursing homes; however, a nursing home which is an integral  part of a retirement community consisting primarily of habitational structures that are not nursinghomes will not be subject to this exclusion.  (12) Any exposure under commercial policies covering only appurtenant structures or structures that do  not function as a habitational structure (e.g,, a policy covering only the pool of an apartmentcomplex).  (13) Policies covering only Additional Living Expense.  (14) Any exposure for barns or barns with apartments or living quarters.  (15) Any exposure for builders risk coverage or new Residential Structures still under construction.  (16) Any exposure for recreational vehicles, golf carts, or boats (including boat related equipment)  requiring licensing and written on a separate policy or endorsement.  (17) Any liability of the Company for extra contractual obligations or liabilities in excess of original policy limits. This exclusion includes, but is not limited to, amounts paid as bad faith awards, punitive damages awards, or other court-imposed fines, sanctions, or penalties; or other amounts in excess of the coverage limits under the Covered Policy.  (18) Any losses paid in excess of a policy’s hurricane limit in force at the time of each Covered Event, including individual coverage limits (i.e., building, appurtenant structures, contents, and additional living expense), or other amounts paid as tire result of a voluntary expansion of coverage by the insurer, including, but not limited to, a discount on or waiver of an applicable deductible. This exclusion includes overpayments of a specific individual coverage limit even if total payments under the policy are within the aggregate policy limit.  (19) Any losses paid under a policy for Additional Living Expense, written as a time element coverage, in excess of the Additional Living Expense exposure reported for that policy under the Data Call for die applicable Contract Year (unless policy limits have changed effective after June30 of the Contract Year),  FHCF-2017K  8  Rule 19-8.010 F.A.C. 

 (20) Any losses which the Company’s claims files do not adequately support. Claim file support shall be deemed adequate if in compliance with the Records Retention Requirements outlined on the Form FHCF-L1B (Proof of Loss Report) applicable to the Contract Year.  (21) Any exposure for, or amounts paid to reimburse a policyholder for, condominium association loss assessments or under similar coverages for contractual liabilities.  (22) Losses in excess of the sum of the Balance of the Fund as of December 31 of the Contract Year and  the amount the SBA is able to raise through the issuance of revenue bonds or by the use of otherfinancing mechanisms, up to the limit pursuant to Section 215.555(4)(c), Florida Statutes.  (23) Any liability assumed by tire Company from Pools, Associations, and Syndicates. Exception:  Covered Policies assumed from Citizens under the terms and conditions of an executed assumptionagreement between the Authorized Insurer and Citizens are covered by this Contract.  (24) 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, which provides for any assessment of or paymentor assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of aninsurer, or its successors or assigns, which has been declared by any competent authority to beinsolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or otherobligation in whole or in part.  (25) Property losses that are proximately caused by any peril other than a Covered Event, including, but  not limited to, fire, theft, flood or rising water, or windstorm that does not constitute a CoveredEvent, or any liability of the Company for loss or damage caused by or resulting from nuclearreaction, nuclear radiation, or radioactive contamination from any cause, whether direct or indirect,proximate or remote, and regardless of any other cause or event contributing concurrently or in anyother sequence to the loss.  (26) The FEICF does not provide coverage for water damage which is generally excluded under property  insurance contracts and has been defined to mean flood, surface water, waves, tidal water, overflowof a body of water, storm surge, or spray from any of these, whether or not driven by wind,  (27) Policies and endorsements predominantly covering Specialized Fine Arts Risks or collectible types  of property meeting the following requirements:  (a) A policy or endorsement predominantly covering Specialized Fine Arts Risks and not covering any Residential Structure if it meets the description in subparagraph1 and if the conditions in subparagraph 2 are met.  1. For purposes of this exemption, a Specialized Fine Arts Risk policy or endorsement is a policy or endorsement that;  a.Insures works of art, of rarity, or of historic value, such as paintings, works on paper, etchings, art glass windows, pictures, statuary, sculptures, tapestries, antique furniture, antique silver, antique rugs, rare books or manuscripts, jewelry, or other similar items;fa. Charges a minimum premium of $500; and  c. Insures scheduled items valued, in the aggregate, at no less than $100,000.  2. The insurer offers specialized loss prevention services or other collector services designed to prevent or minimize loss, or to value or inventory the Specialized Fine Arts for insurance purposes, such as:  a. Collection risk assessments;  b. Fire and security loss prevention;  c. Warehouse inspections to protect items stored off-site;  d. Assistance with collection inventory management; or  FHCF-2017K  9  Rule 19-8.010 F.A.C, 

 r  e. Collection valuation reviews.  1  (b) A policy fonn or endorsement generally used by the Company to cover personal property which  could include property of a collectible nature, including fine aits, as further described in thisparagraph, either on a scheduled basis or written under a blanket limit, and not coveringanything other than personal property. All such policy forms or endorsements are subject to theexclusion provided in this paragraph when the policy or endorsement limit equals or exceeds$500,000. Generally such collectible property has unusually high values due to its investible,artistic, or unique intrinsic nature. The class of property covered under such a policy orendorsement represents an unusually high exposure value and such policy is intended to providecoverage for a class or classes of property that is not typical for the contents coverage underresidential property insurance policies. In many cases propeify may be located at variouslocations either in or outside the state of Florida or the location of the property may change fromtime to time. The investment nature of such property distinguishes this type of exposur e from thetypical contents associated with a Covered Policy.  (28) Any losses under liability coverages.  (29) Any exposure for a condominium structure insured on a commercial policy in which more than 50% of the individual units are non-owner occupied and rented for 6 or more rental periods by different parties during the course of a 12-month period.  (30) Any structure used exclusively or predominantly for non-dwelling or non-habitational occupancies.  ARTICLE VII - MANAGEMENT OF CLAIMS AND LOSSES  The Company shall investigate and settle or defend all claims and Losses. All payments of claims orLosses by the Company within tire terms and limits of the appropriate coverage parts of Covered Policies  / shall be binding on the SB A, subject to the terms of this Contract, including the provisions in Article XIII  relating to inspection of records and examinations.  ARTICLE YIII -REIMBURSEMENT ADJUSTMENTS  Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the right to seek the return ofexcess reimbursements which have been paid to tire Company along with interest thereon. Excessreimbursements are those payments made to the Company by the SBA that are in excess of the  Company’s coverage under the Contract Year, Excess reimbursements may result from adjustments to theProjected Payout Multiple or tire Payout Multiple, incorrect exposure(Data Call) submissions orresubmissions, incorrect calculations of Reimbursement Premiums or Retentions, incorrect Proof of LossReports, incorrect calculation of reinsurance recoveries, or subsequent readjustment of policyholderclaims, including subrogation and salvage, or any combination of the foregoing. The Company will besent an invoice showing the due date for adjustments along with the interest due thereon through the duedate. The applicable interest rate for interest credits, and for interest charges for adjustments beyond theCompany’s control, will be the average rate earned by the SBA for the FHCF for the first four months ofthe Contract Year, The applicable interest rate for interest charges on excess reimbursements due toadjustments resulting from incorrect exposure submissions or Proof of Loss Reports will accrue at thisrate plus 5%. Ail interest will continue to accrue if not paid by the due date.  ARTICLE IX - REIMBURSEMENT PREMIUM  (I) The Company shall, in a timely manner, pay the SBA its Reimbursement Premium for the Contract Year, Tire Reimbursement Premium for the Contract Year shall be calculated in accordance with Section 215.555, Florida Statutes, with any rules promulgated thereunder, and with Article X(2).  (2) The Company’s Reimbursement Premium is based on its June 30 exposure in accordance with Article X, except as provided for New Participants under Article X, and is not adjusted to reflect an  FHCF-2017K  10  Rule 19-8.010 F.A.C. 

 increase or decrease in exposure for Covered Policies effective after June 30 nor is dieReimbursement Premium adjusted when the Company cancels policies or is liquidated or otherwisechanges its business status(merger, acquisition, or termination) or stops writing new business  (continues in business with its policies in a runoff mode). Similarly, new business written after June  30 will not increase or decrease the Company’s FHCF Reimbursement Premium or impact its FHCFcoverage. FHCF Reimbursement Premiums are required of all Companies based on their writingCovered Policies in Florida as of June 30, and each Company’s FHCF coverage as based on die  definition in Section 2I5.555(2)(m), Florida Statutes, shall exist for die entirety of the Contract Yearregardless of exposure changes, except as provided for New Participants under Article X.  (3) Since the calculation of the Actuarially Indicated Premium assumes that the Companies will pay  their Reimbursement Premiums timely, interest charges will accrue under the followingcircumstances, A Company may choose to estimate its own Premium installments. However, if theCompany’s estimation is less than the provisional Premium billed, an interest charge will accrue onthe difference between the estimated Premium and the final Premium, If a Company estimates itsfirst installment, the Administrator shall bill that estimated Premium as the second installment aswell, which will be considered as an estimate by the Company. No interest will accrue regarding anyprovisional Premium if paid as billed by the FHCF’s Administrator, except in the case of anestimated second installment as set forth in this Article. Also, if a Company makes an estimation thatis higher than the provisional Premium billed but is less than the final Premium, interest will notaccrue. If the Premium payment is not received from a Company when it is due, an interest chargewill accrue on a daily basis until the payment is received. Interest will also accrue on Premiumsresulting from submissions or resubmissions finalized after December 1 of the Contract Year. Aninterest credit will be applied for any Premium which is overpaid as either an estimate or as aprovisional Premium. Interest shall not be credited past December1 of the Contract Year. Theapplicable interest rate for interest credits will be the average rate earned by the SB A for the FHCFfor the first four months of the Contract Year, The applicable interest rate for interest charges willaccrue at this rate plus 5%.  ARTICLE X - REPORTS AND REMITTANCES  (1) Exposures  (a) If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall report to the SBA, unless otherwise provided in Rule19-8.029, F.A.C., no later than the statutorily required date of September1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of June 30 of the Contract Year as outlined in tire annual reporting of insured values form, FHCF- D1A (Data Call) adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.  (b) If the Company first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year, the Company shall report to the SBA, no later than February 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of November 30 of the Contract Year as outlined in the Supplemental Instructions for New Participants section of the Data Call adopted for the Contract Year under Rule19-8.029, F.A.C., and other data or information in the format specified by the SBA.  (c) If the Company first begins writing Covered Policies on December 1 through and including May 31 of the Contract Year, the Company shall not report its exposure data for the Contract Year to the SBA.  (d) The requirement that a report is due on a certain date means that the report shall be received by the SBA no later than 4 p.m. Eastern Time on the due date. If the applicable due date is a  FHCF-2017K  11  Rule 19-8.010 F.A.C. 

 Saturday, Sunday or legal holiday, then the actual due date will be the day immediately  I  following the applicable due date which is not a Saturday, Sunday or legal holiday. For  purposes of the timeliness of the submission, neither the United States Postal Service postmarknor a postage meter date is in any way determinative. Reports sent to the FHCF Administratorin Minneapolis, Minnesota, will be returned to the sender. Reports not in the physicalpossession of the SBA by 4 p.m., Eastern Time, on the applicable due date are late.  (2) Reimbursement Premium  (a) If the Company writes Covered Policies before June I of the Contract Year, the Company shall  pay the FHCF its Reimbursement Premium in installments due on or before August 1,October 1, and December 1 of tire Contract Year in amounts to be determined by the FHCF.However, if the Company’s Reimbursement Premium for the prior Contract Year was less than  $5,000, the Company’s full provisional Reimbursement Premium, in an amount equal to theReimbursement Premium paid in the prior year, shall be due in full on or before August i of theContract Year. Tire Company will be invoiced for amounts due, if any, beyond the provisional  Reimbursement Premium payment, on or before December 1 of the Contract Year.  (b) If the Company is under administrative supervision, or if any control or oversight of the  Company has been transferred through any legal or regulatory action to a state regulator orcourt appointed receiver or rehabilitator (referred to in die aggregate as “state action”):  1. The full annual provisional Reimbursement Premium as billed and any outstanding balances will be due and payable on August1, or the date that such State action occurs after August 1 of the Contract Year.  2. Failure by such Company to pay the full annual provisional Reimbursement Premium as specified in I, above by the applicable due date(s) shall result in the 45% coverage level being deemed for the complete Contract Year regardless of the level selected for the  l  Company through the execution of this Contract and regardless of whether a hurricane  event occurred or triggered coverage,  3. The provisions required in 1. and 2. above will not apply when tire state regulator, receiver, or rehabilitator provides a letter of assurance to the FHCF that the Company will have the resources and will pay the full Reimbursement Premium for the coverage level selected through the execution of this Contract.  4. When control or oversight has been transferred, in whole or in part, through a legal or regulatory action, the controlling management of the Company shall specify by August 1 or as soon thereafter as possible (but not to exceed two weeks after any regulatory or legal action) in a letter to tire FHCF as to the Company’s intentions to either pay die full FHCF Reimbursement Premium as specified in 1. above, to default to the 45% coverage being deemed as specified in 2. above, or to provide the assurances as specified in 3. above.  (c) A New Participant that first begins writing Covered Policies on or after June 1 but prior to  December 1 of the Contract Year shall pay tine FHCF a provisional Reimbursement Premium of$1,000 upon execution of this Contract. The Administrator shall calculate the Company's actualReimbursement Premium for die period based on its actual exposure as of November 30 of theContract Year, as reported on or before February 1 of the Contract Year. To recognize that NewParticipants have limited exposure during this period, the actual Premium as determined byprocessing the Company's exposure data shall then be divided in half, the provisional Premiumshall be credited, and the resulting amount shall be the total Premium due for the Company forthe remainder of the Contract Year. However, if that amount is less than $1,000, then theCompany shall pay $1,000. The Premium payment is due no later than April 1 of the ContractYear. The Company’s Retention and coverage will be determined based on the total Premiumdue as calculated above.  FHCF-2017K  12  Rule 19-8.010 F.A.C. 

 (d) A New Participant that first begins writing Covered Policies on or after December 1 through and including May 31 of the Contract Year shall pay the FHCF a Reimbursement Premium of $1,000 upon execution of this Contract  (e) The requirement that the Reimbursement Premium is due on a certain date means that the Premium shall be remitted by wire transfer or ACH and shall have been credited to the FHCF’s account at its bank in Tampa, Florida, as set out on the invoice sent to the Company, on the due date applicable to the particular installment If the applicable due date is a Saturday, Sunday or legal holiday, then the actual due date will be the day immediately following the applicable due date which is not a Saturday, Sunday or legal holiday. Reimbursement Premiums not credited to the FHCF’s account on the applicable due date are late.  (f) Except as required by Section 215,555(7)(c), Florida Statutes, or as described in the following sentence, Reimbursement Premiums, together with earnings thereon, received in a given Contract Year will be used only to pay for Losses attributable to Covered Events occurring in that Contract Year or for Losses attributable to Covered Events in subsequent Contract Years and will not be used to pay for past Losses or for debt service on post-event revenue bonds  ' issued pursuant to Section 215.555(6) (a)L, Florida Statutes. Reimbursement Premiums andearnings thereon may be used for payments relating to such revenue bonds in the eventemergency assessments are insufficient. If Reimbursement Premiums or earnings thereon are  used for debt service on post-event revenue bonds, then the amount of the ReimbursementPremiums or earnings thereon so used shall be returned, without interest, to the Fund whenemergency assessments or other legally available funds remain available after making paymentrelating to the post-event revenue bonds and any other purposes for which emergencyassessments were levied.  (3) Losses  (a) In General  Losses resulting from a Covered Event commencing during the Contract Year shall be reportedby the Company and reimbursed by the FHCF as provided herein and in accordance with dieStatute, this Contract, and any rules adopted pursuant to the Statute. For a Companyparticipating in a quota share primary insurance agreements) with Citizens Property InsuranceCorporation Coastal Account, Citizens and the Company shall report only their respectiveportion of Losses under the quota share primary insurance agreements). Pursuant to Section215.555(4)(c), Florida Statutes, the SB A is obligated to pay for Losses not to exceed the ActualClaims-Paying Capacity of the FHCF, up to the limit in accordance with Section215.555(4)(c)L, Florida Statutes, for any one Contract Year.  (b) Loss Reports  1. At the direction of the SBA, the Company shall report its projected Ultimate Net Loss from each Covered Event to provide information to the SBA in determining any potential liability for possible reimbursable Losses under the Contract on the Interim Loss Report, Form FHCF-L1 A, adopted for the Contract Year under Rule 19-8.029, F.A.C. Interim Loss Reports (including subsequent Interim Loss Reports if required by the SBA) will be due in no less than fourteen days from the date of the notice from the SBA that such a report is required.  2. FHCF reimbursements will be issued based on Ultimate Net Loss information reported by the Company on the Proof of Loss Report, Form FHCF-L1B, adopted for the Contract Year under Rule 19-8,029, F.A.C.  a. To qualify for reimbursement, the Proof of Loss Report must have the electronic signatures of two executive officers authorized by the Company to sign or submit the report.  FHCF-2017K  13  Rule 19-8.010 F.A.C. 

 b. The Company must also submit a Detailed Claims Listing, Form FHCF-DCL, adopted for the Contract Year under Rule 19-8.029, F.A.C., at the same time it submits its first Proof of Loss Report for a specific Covered Event that qualifies the Company for reimbursement under that Covered Event, and should be prepared to supply a Detailed Claims Listing for any subsequent Proof of Loss Report upon request.  c. While the Company may submit a Proof of Loss Report requesting reimbursement at any time following a Covered Event, the Company shall submit a mandatory Proof of Loss Report for each Covered Event no earlier than December1 and no later than December 31 of the Contract Year during which the Covered Event occurs using the most current data available, regardless of the amount of Ultimate Net Loss or the amount of reimbursements or advances already received.  d. For the Proof of Loss Reports due by December 31 of the Contract Year, and the required subsequent quarterly and annual reports required under subparagraphs 3. and  4. below, the Company shall submit its Proof of Loss Reports by each quarter-end oryear-end using the most current data available. However, the date of such data shall notbe more than sixty days prior to the applicable quarter-end or year-end date,  3. Updated Proof of Loss Reports for each Covered Event are due quarterly thereafter until all Losses resulting from a Covered Event are fully discharged including any adjustments to such Losses due to salvage or other recoveries, or the Company has received its full coverage under the Contract Year in which the Covered Event occurred. Guidelines follow:  a. Quarterly Proof of Loss Reports are due by March 31 from a Company whose Losses exceed, or are expected to exceed, 50% of its FHCF Retention for a specific Covered Event.  b. Quarterly Proof of Loss Reports are due by June 30 from a Company whose Losses exceed, or are expected to exceed, 75% of its FHCF Retention for a specific Covered Event.  c. Quarterly Proof of Loss Reports are due by September 30 and quarterly thereafter from a Company whose Losses exceed, or are expected to exceed, its FHCF Retention for a specific Covered Event.  If the Company’s Retention must be recalculated as the result of an exposure resubmission,and if the recalculated Retention changes the FHCF’s reimbursement obligations, then theCompany shall submit additional Proof of Loss Reports for recalculation of the FHCF’sobligations.  4. Annually after December 31 of the Contract Year, all Companies shall submit a mandatory year-end Proof of Loss Report for each Covered Event, as applicable, using the most current data available, accompanied by a Detailed Claims Listing. This Proof of Loss Report shall be filed no ear lier than December 1 and no later than December 31 of each year1 and shall continue until the earlier of the commutation process described in (3)(d) below or until all Losses resulting from the Covered Event are fully discharged including any adjustments to such Losses due to salvage or other recoveries.  5. The SB A, except as noted below, will determine and pay, within 30 days or as soon as practicable after receiving Proof of Loss Reports, the reimbursement amount due based on Losses paid by the Company to date and adjustments to this amount based on subsequent quarterly information. The adjustments to reimbursement amounts shall require the SBA to pay, or the Company to return, amounts reflecting the most recent determination of Losses,  a. The SBA shall have the right to consult with all relevant regulatory agencies to seek all relevant information, and shall consider any other factors deemed relevant, prior to the issuance of reimbursements.  FHCF-2017K  14  Rule 19-8.010 F.A.C. 

 b. The SBA shall require commercial self-insurance funds established under Section 624.462, Florida Statutes, to submit contractor receipts to support paid Losses reported on a Proof of Loss Report, and the SBA may hire an independent consultant to confirm Losses, prior to the issuance of reimbursements.  c. The SBA shall have the right to conduct a loss examination prior to the issuance of any advances or reimbursements requested by Companies that have been placed under regulatory supervision by a State or where control has been transferred through any legal or regulatory proceeding to a state regulator or court appointed receiver or rehabilitator.  6. All Proof of Loss Reports received will be compared with the FHCF’s exposure data to establish the facial reasonableness of the reports. The SBA may also review the results of current and prior Contract Year exposure and loss examinations to determine the reasonableness of the reported Losses. Except as noted in paragraph 4, above. Companies meeting these tests for reasonableness will be scheduled for reimbursement. Companies not meeting these tests for reasonableness will be handled on a case-by-case basis and will be contacted to provide specific information regarding their individual book of business. The discovery of errors in a Company’s reported exposure under the Data Call may require a resubmission of the current Contract Year Data Call which, as the Data Call impacts the Company’s Premium, Retention, and coverage for the Contract Year, will be required before the Company’s request for reimbursement or an advance will be fully processed by the Administrator.  (c) Loss Reimbursement Calculations  1. In general, the Company’s paid Ultimate Net Losses must exceed its full FHCF Retention for a specific Covered Event before any reimbursement is payable from the FHCF for that Covered Event. As described in Article V(28)(b), Retention adjustments will be made on or after January 1 of the Contract Year. No interest is payable on additional payments to the Company due to this type of Retention adjustment, Each Company, including entities created pursuant to Section 627.351(6), Florida Statutes, incurring reimbursable Losses will receive the amount of reimbursement due under the individual Company’s Contract up to the amount of tire Company’s payout. If more than one Covered Event occurs in any one Contract Year, any reimbursements due from the FHCF shall take into account the Company’s Retention for each Covered Event. However, the Company’s reimbursements from tire FHCF for all Covered Events occurring during the Contract Year shall not exceed, in aggregate, the Projected Payout Multiple or Payout Multiple, as applicable, tunes the individual Company’s Reimbursement Premium for the Contract Year,  2. Reserve established. When a Covered Event occurs in a subsequent Contract Year when reimbursable Losses are still being paid for a Covered Event in a previous Contract Year, the SBA will establish a reserve for the outstanding reimbursable Losses for the previous Contract Year, based on the length of time the Losses have been outstanding, the amount of Losses already paid, the percentage of incurred Losses still unpaid, and any other factors specific to the loss development of the Covered Events involved.  (d) Commutation  1. Not less than 36 months or more than 60 months after the end of the Contract Year, the Company shall file a final Proof of Loss Report(s), with the exception of Companies having no reportable Losses as described in paragraph (3)(d)l.a. below. Otherwise, the final Proof of Loss Report(s) is required as specified in paragraph (3)(d)l.b. below. The Company and SBA may mutually agree to initiate commutation after 36 months and prior to 60 months after the end of the Contract Year, The commutation negotiations shall begin at the later of  60 months after the end of the Contract Year or upon completion of the FHCF lossexamination for the Company and the resolution of all outstanding examination issues.  FHCF-2017K  15  Rule 19-8.01 OF.A.C. 

 a. If the Company’s most recently submitted Proof of Loss Report(s) indicates that it has no Losses resulting from Covered Events during the Contract Year, the SB A shall after  36 months request that the Company execute a final commutation agreement. The finalcommutation agreement shall constitute a complete and final release of all obligations ofthe SB A with respect to Losses. If the Company chooses not to execute a finalcommutation agreement, the SBA shall be released from all obligations60 monthsfollowing the end of the Contract Year if no Proof of Loss Report indicatingreimbursable Losses had been filed and tire commutation shall be deemed concluded.However during this time, if the Company determines that it does have Losses to reportfor FHCF reimbursement, the Company must submit an updated Proof of Loss Reportprior to the end of 60 months after the Contract Year and the Company shall be requiredto follow the commutation provisions and time frames otherwise specified in thissection.  b. If the Company has submitted a Proof of Loss Report indicating that it does have Losses  resulting from a Covered Event during the Contract Year1, the SBA may require theCompany to submit within 30 days an updated, current Proof of Loss Report for eachCovered Event during the Contract Year. The Proof of Loss Report must include all paid  Losses as well as all outstanding Losses and incurred but not reported Losses, which arenot finally settled and which may be reimbursable Losses under this Contract, and mustbe accompanied by supporting documentation (at a minimum an adjuster’s summary  report or equivalent details) and a copy of a written opinion on the present value of theoutstanding Losses and incurred but not reported Losses by the Company’s certifyingactuary. Failure of the Company to provide an updated current Proof of Loss Report,  supporting documentation, and an opinion by the date requested by the SBA may resultin referral to the Office of Insurance Regulation for a violation of the Contract. Increasesin reported paid, outstanding, or incurred but not reported Losses on original or  corrected Proof of Loss Report filings received later than 60 months after the end of theContract Year shall not be eligible for reimbursement or commutation.  Determining the present value of outstanding Losses.  a. If the Company exceeds or expects to exceed its Retention, the Company and tire SBA or their respective representatives shall attempt, by mutual agreement, to agree upon the present value of all outstanding Losses, both reported and inclined but not reported, resulting from Covered Events during the Contract Year. Payment by the SBA of its portion of any amount or amounts so mutually agreed and certified by the Company’s certifying actuary shall constitute a complete and final release of the SBA in respect of all Losses, both reported and unreported, under this Contract.  b. If agreement on present value cannot be reached within 90 days of the FHCF’s receipt of the final Proof of Loss Report and supporting documentation, the Company and the SBA may mutually appoint an actuary, adjuster, or appraiser to investigate and determine such Losses. If both parties then agree, the SBA shall pay its portion of the amount so determined to be the present value of such Losses.  c. If the parties fail to agree, then any difference shall be settled by a panel of three actuaries, as provided in this paragraph.  i. One actuary shall be chosen by each party, and the third actuary shall be chosen by those two actuaries. If either party does not appoint an actuary within 30 days, the other party may appoint two actuaries. If the two actuaries fail to agree on the selection of an independent third actuary within 30 days of their appointment, each of them shall name two, of whom the other shall decline one and the decision shall be made by drawing lots.  FHCF-2017K  16  Rule 19-8.010 F.A.C. 

 ii. All of tiie actuaries shall be regularly engaged in the valuation of property claims and losses and shall be members of the Casualty Actuarial Society and of the American Academy of Actuaries.  iii. None of the actuaries shall be under the control of either party to this Contract,  iv. Each party shall submit its case to the pane! in writing on the 30th day after the  appointment of the third actuary. Following the submission of the case to the panel,the parties are prohibited from providing any further information or othercommunication except at the request of the panel. Such responses to requests fromthe panel must be in writing and simultaneously provided to the other party and allmembers of the panel, except that the parrel may require the response to be providedin a meeting or teleconference attended by both parties and all members of thepanel,  v. The decision in writing of any two actuaries, when fried with the parties hereto, shall be final and binding on both parties.  d. The reasonable and customary expense of tire actuaries and of the commutation (as a result of b. and c. above) shall be equally divided between the two parties. Sard commutation shall take place in Tallahassee, Florida, unless some other place is mutually agreed upon by the Company and the SBA.  (4)  Advances  (a) The SBA may make advances for loss reimbursements as defined herein, at market interest  rates, to the Company in accordance with Section 215.555(4)(e), Florida Statutes. An advanceis an early reimbursement which allows the Company to continue to pay claims in a timelymanner. Advances will be made based on the Company’s paid and reported outstanding Lossesfor Covered Policies (excluding all incurred but not reported Losses) as reported on a Proof ofLoss Report, and shall include Loss Adjustment Expense Reimbursement as calculated by theFHCF. In order to be eligible for an advance, the Company must submit its exposure data forthe Contract Year as required under paragraph(1) of this Article. Except as noted below,advances, if approved, will be made as soon as practicable after the SBA receives a writtenrequest, signed by two officers of the Company, for an advance of a specific amount and anyother information required for the specific type of advance under subparagraphs(c) and(e)below. All reimbursements due to the Company shall be offset against any amount ofoutstanding advances plus the interest due thereon.  (b) For advances or excess advances, which are advances that are in excess of the amount to which  the Company is entitled, the market interest rate shall be the prime rate as published in tire WallStreet Journal on the first business day of the Contract Year. This rate will be adjusted annuallyon the first business day of each subsequent Contract Year, regardless of whether the Companyexecutes subsequent Contracts. In addition to the prime rate, an additional 5% interest chargewill apply on excess advances. All interest charged will commence on the date the SBA issuesa check for an advance and will cease on the date upon which the FHCF has received theCompany’s Proof of Loss Report for the Covered Event for which the Company qualifies forreimbursement. If such reimbursement is less than the amount of outstanding advances issuedto the Company, interest will continue to accrue on the outstanding balance of the advancesuntil subsequent Proof of Loss Reports qualify the Company for reimbursement under anyCovered Event equal to or exceeding the amount of any outstanding advances. Interest shall bebilled on a periodic basis. If it is determined that the Company received funds in excess of thoseto which it was entitled, the interest as to those sums will not cease on the date of the receipt ofthe Proof of Loss Report but will continue until the Company reimburses the FHCF for theoverpayment.  FHCF-2017K  17  Rule 19-8.010 F.A.C. 

 (c) If Hie Company has an outstanding advance balance as of December 31 of this or any other Contract Year, the Company is required to have an actuary certify outstanding and incurred but not reported Losses as reported on the applicable December Proof of Loss Report.  (d) The specific type of advances enumerated in Section 215.555, Florida Statutes, follow. 1.Advances to Companies to prevent insolvency, as defined under Article XIV.  a. Section 215,555(4) (e)L, Florida Statutes, provides that the SBA shall advance to the  Company amounts necessary to maintain the solvency of the Company, up to 50percent of the SBA ‘'s estimate of the reimbursement due to the Company.  b. In addition to the requirements outlined in subparagraph (4)(a) above, the requirements for an advance to a Company to prevent insolvency are that the Company demonstrates it is likely to qualify for reimbursement and that the immediate receipt of moneys from the SBA is likely to prevent the Company from becoming insolvent, and the Company provides the following information:  i. Current assets;  ii. Current liabilities other than liabilities due to the Covered Event;iii. Current surplus as to policyholders;  iv. Estimate of other expected liabilities not due to Hie Covered Event; and  v. Amount of reinsurance available to pay claims for the Covered Event under other reinsurance treaties.  c. The SBA’s final decision regarding an application for an advance to prevent insolvency shall be based on wheflier or not, considering Hie totality of the circumstances, including Hie SBA’s obligations to provide reimbursement for ail Covered Events occurring during the Contract Year, granting an advance is essential to allowing the entity to continue to pay additional claims for a Covered Event in a timely manner.  2. Advances to entities created pursuant to Section 627.351 (6), Florida Statutes.  a. Section 215.555(4) (e)2., Florida Statutes, provides that Hie SBA may advance to an  entity created pursuant to Section 627.351(6), Florida Statutes, up to 90% of the lesserof the SBA’s estimate of the reimbursement due or the entity’s share of the actualaggregate Reimbursement Premium for that Contract Year, multiplied by the currentavailable liquid assets of the FHCF.  b. In addition to the requirements outlined in subparagraph (4)(a) above, Hie requirements for an advance to entities created pursuant to Section 627.351(6), Florida Statutes, are that the entity must demonstrate to Hie SBA that Hie advance is essential to allow the entity to pay claims for a Covered Event.  3. Advances to limited apportionment companies.  Section 215.555(4)(e)3., Florida Statutes, provides Hiat the SBA may advance the amountof estimated reimbursement payable to limited apportionment companies.  (e) In determining whether or not to grant an advance and the amount of an advance, the SBA:  1. Shall determine whether its assets available for the payment of obligations are sufficient  and sufficienHy liquid to fulfill its obligations to other Companies prior to granting anadvance;  2. Shall review and consider all Hie information submitted by such Companies;  3. Shall review such Companies’ compliance with all requirements of Section 215.555,  Florida Statutes;  4. Shall consult with all relevant regulatory agencies to seek all relevant information;  FHCF-2017K  18  Rule 19-8.010 F.A.C. 

 5. Shall review the damage caused by the Covered Event and when that Covered Event occurred;  6. Shall consider whether the Company has substantially exhausted amounts previously advanced;  7. Shall consider any other factors deemed relevant; and  8. Shall require commercial self-insurance funds established under section 624.462, Florida Statutes, to submit a copy of written estimates of expenses in support of the amount of advance requested.  (f) Any amount advanced by the SBA shall be used by the Company only to pay claims of its policyholders for the Covered Event which has precipitated the immediate need to continue to pay additional claims as they become due.  (5) Inadequate Data Submissions  If exposure data or other information required to be reported by the Company under the terms of thisContract is not received by the FHCF in the format specified by the FHCF or is inadequate to theextent that the FHCF requires resubmission of data, the Company will be required to pay the FHCF aresubmission fee of $1,000 for resubmissions that are not a result of an examination by the SBA. If aresubmission is necessary as a result of an examination report issued by the SBA, the firstresubmission fee will be $2,000. If the Company’s examination-required resubmission is inadequateand the SBA requires an additional resubmission(s), the resubmission fee for each subsequentresubmission shall be $2,000. A resubmission of exposure data may delay the processing of theCompany’s request for reimbursement or an advance.  (6) Confidential Information/Trade Secret Information  Pursuant to the provisions of Section 215.557, Florida Statutes, the reports of insured values underCovered Policies by ZIP Code submitted to the SBA pursuant to Section 215,555, Florida Statutes,are confidential and exempt from the provisions of Section 119.07(1), Florida Statutes, and Section24(a), Art. I of the State Constitution, If other information submitted by the Company to the FHCFcould reasonably be ruled a “trade secret” as defined in Section812,081, Florida Statutes, suchinformation must be clearly marked “Trade Secret Information,”  ARTICLE XI - TAXES  In consideration of the terms under which this Contract is issued, the Company agrees to make nodeduction in respect of the Premium herein when making premium tax returns to the appropriateauthorities. Should any taxes be levied on the Company in respect of the Premium herein, the Companyagrees to make no claim upon the SBA for reimbursement in respect of such taxes.  ARTICLE XII - ERRORS AND OMISSIONS  Any inadvertent delay, omission, or error on the part of the SBA shall not be held to relieve the Companyfrom any liability which would attach to it hereunder if such delay, omission, or error had not been made.  ARTICLE XIII - INSPECTION OF RECORDS  The Company shall allow the SBA to inspect, examine, and verify, at reasonable times, all records of theCompany relating to the Covered Policies under this Contract, including Company files concerningclaims. Losses, or legal proceedings regarding subrogation or claims recoveries which involve thisContract, including premium, loss records and reports involving exposure data or Losses under CoveredPolicies. This right by the SBA to inspect, examine, and verify shall survive the completion and closureof an exposure examination or loss examination file and the termination of the Contract. The Companyshall have no right to re-open an exposure or loss examination once closed and the findings have been  FHCF-20 i 7K  19  Rule 19-8.010 F.A.C, 

 accepted by the Company; any re-opening shall be at the sole discretion of the SBA. If the State Board of  I  L  c  Administration Finance Corporation has issued revenue bonds and relied upon the exposure and Lossdata submitted and certified by the Company as accurate to determine the amount of bonding needed, theSBA may choose not to require, or accept, a resubmission if the resubmission will result in additionalreimbursements to tire Company. The SBA may require any discovered errors, inadvertent omissions,and typographical errors associated with the data reporting of insured values, discovered prior to dieclosing of the file and acceptance of the examination findings by die Company, to be corrected to reflectdie proper values. The Company shall retain its records in accordance with die requirements for recordsretention regarding exposure reports and claims reports outlined herein, and in any administrative rulesadopted pursuant to Section 215.555, Florida Statutes. Companies writing covered collateral protectionpolicies, as defined in definition(10)(d) of Article V, must be able to provide documentation diat thepolicy covers personal residences, protects both the borrower’s and lender’s interest, and that thecoverage is in an amount at least equal to the coverage for the dwelling in place under tire lapsedhomeowner’s policy.  (1) Purpose of FHCF Examination  The purpose of the examinations conducted by the SBA is to evaluate the accuracy of the FHCFexposure or Loss data reported by the Company. However, due to the limited nature of theexamination, it cannot be relied upon as an assurance that a Company’s data is reported accurately orin its entirety. The Company should not rely on the FHCF to identify every type of reporting error inits data. In addition, the reporting requirements are subject to change each Contract Year so it is theCompany’s responsibility to be familiar' with the applicable Contract Year requirements and toincorporate any changes into its data for drat Contract Year. It is also the Company’s responsibilityto ensure that its data is reported accurately and to comply with Florida Statutes and any applicablerules when reporting exposure data. The examination report is not intended to provide a legaldetermination of the Company’s compliance.  (2) Examination Requirements for Exposure Verification  The Company shall retain complete and accurate records, in policy level detail, of all exposure datasubmitted to the SBA in any Contract Year until the SBA has completed its examination of theCompany’s exposure submissions. The Company shall also retain complete and accurate records ofany completed exposure examination for any Contract Year in which tire Company incurred Lossesuntil the completion of the loss reimbursement examination and commutation for that Contract Year.The records to be retained are outlined in the Data Call adopted for the Contract Year under Rule 19-  8.029, F.A.C. A complete list of records to be retained for the exposure examination is set forth inForm FHCF-EAP1, adopted for the Contract Year under Rule 19-8.030, F.A.C.  (3) Examination Requirements for Loss Reports  The Company shall retain complete and accurate records of all reported Losses and/or advancessubmitted to the SBA until the SBA has completed its examination of tire Company’s reimbursableLosses and commutation for the Contr act Year (if applicable) has been concluded. The records to beretained ar e set forth as par t of the Proof of Loss Report, Form FHCF-L1B, adopted for the ContractYear under Rule 19-8,029, F.A.C., and Form FHCF-LAP1, adopted for the Contract Year- underRule 19-8.030, F.A.C.  (4) Examination Procedures  (a) The FHCF will send an examination notice to tire Company providing the commencement date of the examination, the site of the examination, any accommodation requirements of tire  examiner, and the reports and data which must be assembled by the Company and forwarded tothe FHCF upon request. The Company shall be prepared to choose one location in which to beexamined, unless otherwise specified by the SBA.  FHCF-2017K  20 Rule 19-8.010 F.A.C. 

 (b) The reports and data are required to be forwarded to the FHCF as set forth in an examination notice letter. The information is then forwarded to the examiner. If the FHCF receives accurate and complete records as requested, the examiner will contact the Company to inform the Company as to what policies or other documentation will be required once the examiner is on site. Any records not required to be provided to the examiner in advance shall be made available at the time the examiner arrives on site. Any records to support reported exposure or Losses which are provided after the examiner has left die work-site will, at the SBA’s discretion, result in an additional examination of exposure and/or Loss records or an extension or expansion of the examination already in progress. All costs associated with such additional examination or with the extension or expansion of the original examination shall be borne by the Company.  (c) At the conclusion of the examiner’s work and the management review of the examiner’s report, findings, recommendations, and work papers, the FHCF will forward an examination report to the Company and require a response from the Company by a date certain as to the examination findings and recommendations, if any.  (d) If the Company accepts the examination findings and recommendations, and there is no recommendation for additional information, the examination report will be finalized and the exam file closed.  (e) If the Company disputes the examiner’s findings, the areas in dispute will be resolved by a meeting or a conference call between the Company and FHCF management.  (I) 1. If the recommendation of the examiner is to resubmit the Company’s exposure data for the  Contract Year in question, then the FHCF will send the Company a letter outlining theprocess for resubmission and including a deadline to resubmit. Once the resubmission isreceived, the FHCF’s Administrator calculates a revised Reimbursement Premium for theContract Year which has been examined. The SB A shall then review the resubmission withrespect to the examiner’s findings, and accept tire resubmission or contact the Company withany questions regarding the resubmission. Once the SBA has accepted the resubmission as asufficient response to the examiner’s findings, the exam is closed.  2, If the recommendation of the examiner is to give the Company the option to either resubmit the exposure data or to pay the estimated Premium difference, then the FHCF will send the Company a letter outlining the process for resubmission or for paying the estimated Premium difference and including a deadline for the resubmission or the payment to be received by the FHCF’s Administrator. If the Company chooses to resubmit, the same procedures outlined in Article XIII(4) apply.  (g) If the recommendation of the examiner is to update the Company’s Proof of Loss Report(s) for the Contract Year under review, the FHCF will send the Company a letter outlining the process for submitting the Proof of Loss Report(s) and including a deadline to file. Once the Proof of Loss Report(s) is received by the FHCF Administrator, the FHCF’s Administrator will calculate a revised reimbursement. The SBA shall then review the submitted Proof of Loss Report(s) with respect to the examiner’s findings, and accept the Proof of Loss Report(s) as filed, or contact the Company with any questions. Once the SBA has accepted the corrected Proof of Loss Report(s) as a sufficient response to the examiner’s findings, the exam is closed.  (h) The examiner’s list of errors is made available in the examination report sent to the Company. Given that the examination was based on a sample of the Company’s policies or claims rather than the whole universe of the Company’s Covered Policies or reported claims, the error list is not intended to provide a complete list of errors but is intended to indicate what information needs to be reviewed and corrected throughout the Company’s book of Covered Policy business or claims information to ensure more complete and accurate reporting to the FHCF.  FHCF-2017K  21  Rule 19-8.010 F.A.C. 

 (5) Costs of the Examinations  The costs of the examinations shall be borne by the SBA. However, in order to remove any incentivefor a Company to delay preparations for an examination, the SBA shall be reimbursed by theCompany for any examination expenses incurred in addition to the usual and customary costs, whichadditional expenses were incurred as a result of the Company’s failure, despite proper notice, to beprepared for the examination or as a result of a Company’s failure to provide requested information.All requested information must be complete and accurate.  ARTICLE XIV - OFFSETS  The SBA reserves the right to offset amounts payable to the SBA from the Company, including amountspayable under the Reimbursement Contract for any Contract Year and also including the Company’s fullPremium for the current Contract Year (regardless of installment due dates), against any (1) premiumrefunds under any Contract Year, (2) reimbursement or advance amounts, or (3) amounts agreed to in acommutation agreement, which are due and payable to the Company fi’ora the SBA as a result of theliability of the SBA.  ARTICLE XV - INSOLVENCY OF THE COMPANY  Company shall notify the FHCF immediately upon becoming insolvent. Except as otherwise providedbelow, no reimbursements will be made until the FHCF has completed and closed its examination of theinsolvent Company’s Losses, unless an agreement is entered into by the court appointed receiver  specifying that all data and computer systems required for FHCF exposure and loss examinations will bemaintained until completion of the Company’s exposure and loss examinations. Except as otherwiseprovided below, in order to account for potential erroneous reporting, the SBA shall hold back 25% ofrequested reimbursements until the exposure and loss examinations for the Company are completed. Onlythose Losses supported by the examination will be reimbursed. Pursuant to Section 215.555(4)(g), Florida  Statutes, the FHCF is required to pay the “net amount of all reimbursement moneys” due an insolventinsurer to the Florida Insurance Guaranty Association (FIGA) for the benefit of Florida policyholders. Forthe purpose of this Contract, a Company is insolvent when an order of liquidation with a finding ofinsolvency has been entered by a court of competent jurisdiction. In light of the need for an immediateinfusion of funds to enable policyholders of insolvent companies to be paid for their claims, the SBA mayenter into agreements with FIGA allowing exposure and loss examinations to take place immediatelywithout the usual notice and response time limitations and allowing the FHCF to make reimbursements(net of any amounts payable to the SBA from the Company or FIGA) to FIGA before the examinationsare completed and before the response time expires for claims filing by reinsurers and financialinstitutions, which have a priority interest in those funds pursuant to Section215,555(4)(g), FloridaStatutes. Such agreements must ensure the availability of the necessary records and adequate securitymust be provided so that if the FHCF determines that it overpaid FIGA on behalf of the Company, or ifclaims are filed by reinsurers or financial institutions having a priority interest in these funds, that thefunds will be repaid to the FHCF by FIGA within a reasonable time.  ARTICLE XVI - TERMINATION  The FHCF and the obligations of both parties under this Contract can be terminated only as may beprovided by law or applicable rules.  FHCF-2017K  22  Rule 19-8.010 F.A.C. 

 ARTICLE XVII - VIOLATIONS  (1) Statutory Provisions  (a) Section 215,555 (10), Florida Statutes, provides that any violation of Section 215.555, Florida  Statutes, or of rules adopted under that section, constitutes a violation of the Florida InsuranceCode, This Contract has been adopted as part of Rule19-8.010, Florida Administrative Code,under the authority of that section of Florida Statutes.  (b) Section 215.555(11), Florida Statutes, authorizes the SBA to take any action necessary to enforce the rules and the provisions and requirements of this Contract, required by and adopted pursuant to Section 215.555, Florida Statutes.  (2) Noncompliance  (a) As used in this Article, the term “noncompliance” means the failure of the Company to meet any applicable requirement of Section215.555, Florida Statutes, or of any rule adopted under the authority of that section of Florida Statutes, including, but not limited to, any failure to meet a deadline for an FHCF payment. Data Call submissions or resubmissions, Loss reporting or commutation documentation, or a deadline related to SBA examination requirements. The Company remains in a state of noncompliance as long as the Company fails to meet tire applicable requirement(s).  (b) If the Company is in a state of noncompliaoce, the SBA reserves the right to withhold any payments or advances due the Company until the SBA determines that the Company is no longer in a state of noncompliance.  ARTICLE XVIII - APPLICABLE LAW  This Contract shall be governed by and construed according to the laws of the State of Florida in respectof any matter relating to or arising out of this Contract.  FHCF-2017K  23  Rule 19-8,010 F.A.C, 

 ARTICLE XIX-REIMBURSEMENT CONTRACT ELECTIONS  (I) Reimbursement Percentage  For purposes of determining reimbursement (if any) due the Company under this Contract and inaccordance with the Statute, the Company has the option to elect a45% or75% or90%reimbursement percentage under this Contract. If the Company is a member of an NAIC group, allmembers must elect the same reimbursement percentage, and the individual executing this Contracton behalf of the Company, by placing his or her initials in the box under (a) below, affirms that theCompany has elected the same reimbursement percentage as all members of its NAIC group. If theCompany is an entity created pursuant to Section 627,351, Florida Statutes, the Company must electthe90% reimbursement percentage. The Company shall not be permitted to change itsreimbursement percentage during the Contract Year, The Company shall be permitted to change itsreimbursement percentage at the beginning of a new Contract Year, but may not reduce itsreimbursement percentage if a Covered Event required the issuance of revenue bonds, until thebonds are no longer outstanding.  The Reimbursement Percentage elected by the Company for tire prior Contract Year effectiveJune 1, 2016 was as follows: Monarch National Insurance Company - 75%  (a) NAIC Group Affirmation: Initial the following box if the Company is part of an NAIC  Group;  o-[s^-\  (  (b) Reimbursement Percentage Election; The Company hereby elects the following Reimbursement Percentage for the Contract Year from 12:00:01 a.m., Eastern Time, June 1,  2017, to 12:00 a.m,, Eastern Time, May 31, 2018, (the individual executing this Contract onbehalf of the Company shall place his or her initials in the box to the left of the percentageelected for the Company):  45% 75% OR 90%  (101) Additional Living Expense (ALE) Written as Time Element Coverage  If your Company writes Covered Policies that provide ALE coverage on a time element basis (i.e.,coverage is based on a specific period of time as opposed to a stated dollar limit), you must initialthe‘Yes - Time Element ALE’ box below. If your Company does not write time element ALE  Element ALE Element ALE  24 FHCF-2017K  Rule 19-8.010 F. A. C. 

 ARTICLE XX - SIGNATURES  Approved by:  Florida Hurricane Catastrophe Fund  By: State Board of Administration of the State of Florida  By:  Ashbel C. Williams  Date  Executive Director & CIO  Approved as to legality:  By:  Date  Authority to sign on behalf of the Company:  The person signing this Contract on behalf of the Company hereby represents that he or she is an officerof the Company, acting within his or her authority to enter into this Contract on behalf of the Company,with the requisite authority to bind the Company and make the representations on behalf of the Companyas set forth in this Contract.  Monarch National Insurance Company  Printed Name and Title  By:  25 FHCF-20I7K  Rule 19-8.010 F.A.C.