Exhibit 10.11
[2011 CBL/OSIL Treaty]
THIS TREATY is made with effect from [the day on which the sale of the Reinsured’s parent company’s entire issued share capital is completed] (the “Effective Date”)
BETWEEN
(1) | [CANOPIUS BERMUDA]1 LIMITED, a company incorporated under the laws of Bermuda (registered number [— ]) whose registered office is at Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda (the “Reinsured”); and |
(2) | OMEGA SPECIALTY INSURANCE COMPANY LIMITED, a company incorporated under the laws of Bermuda (registered number EC37850) whose registered office is at Crown House, 4 Par-la-Ville Road, Hamilton HM 08, Bermuda (the “Reinsurer”). |
BACKGROUND
A | TheReinsured is party (as reinsurer) to the following contracts of quota share reinsurance: |
(i) | a contract (the “2010 CC2 LLQS”), originally made on 30 December 2009 but amended by endorsement dated 15 April 2010 and further amended and restated with effect from theEffective Date, under which theReinsured (as reinsurer) assumed by way of quota share reinsurance 85% of all rights and obligations of Canopius Capital Two Limited (“CC2”) in respect of its participation as a member ofSyndicate 4444 as constituted for the 2010 underwriting year of account; |
(ii) | a contract (the “2011 Flectat LLQS”), originally made on 15 December 2010 but amended and restated with effect from theEffective Date, under which theReinsured (as reinsurer) agreed to assume by way of quota share reinsurance 85% of all rights and obligations of Flectat Limited (“Flectat”) in respect of its participation as a member ofSyndicate 4444 as constituted for the 2011 underwriting year of account; and |
(iii) | a contract (the “2012 Flectat LLQS”), originally made on 1 December 2011 but amended and restated with effect from theEffective Date, under which theReinsured (as reinsurer) agreed to assume by way of quota share reinsurance 85% of all rights and obligations ofFlectat in respect of its participation as a member ofSyndicate 4444 as constituted for the 2012 underwriting year of account. |
B | TheReinsurer has agreed to provide to theReinsured, with effect from the |
1 | Name of Reinsurer square-bracketed pending confirmation as to the date of the envisaged change of name relative to the expected date of signature of the contract |
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Effective Date:
(i) | reinsurance cover in respect of certain of theReinsured’s rights and obligations pursuant to the2010 CC2 LLQS on the terms and subject to the conditions set out in a reinsurance treaty made between theReinsurer and theReinsured with effect from theEffective Date (the “2010 Treaty”); |
(ii) | reinsurance cover in respect of certain of theReinsured’s rights and obligations pursuant to the2011 Flectat LLQS on the terms and subject to the conditions set out in this Treaty; and |
(iii) | reinsurance cover in respect of certain of theReinsured’s rights and obligations pursuant to the2012 Flectat LLQS on the terms and subject to the conditions set out in a reinsurance treaty made between theReinsurer and theReinsured with effect from theEffective Date (the “2012 Treaty”). |
DEFINITIONS AND INTERPRETATION
A | In this Treaty, the following words and expressions have the meanings set out below: |
2010 CC2 LLQS:the meaning given in Recital A(i);
2011 Flectat LLQS: the meaning given in Recital A(ii);
2012 Flectat LLQS: the meaning given in Recital A(iii);
2010 Net Claims Paid:the meaning given in paragraph (iii) of Article II;
2010 & Prior Assumed Business: the meaning given in paragraph (i)c.i of Article IV;
2010 RITC Effective Date: the meaning given in paragraph (i)c.ii of Article IV;
2010 Treaty: the meaning given in Recital B(i);
2010 Treaty Premium Calculation Increase: the meaning given in paragraph (ii) of Article IV;
2010 Treaty Premium Calculation Reduction: the meaning given in paragraph (ii) of Article IV;
2012 Treaty: the meaning given in Recital B(iii);
Additional OSIL ECA FAL: the meaning given in paragraph (iii) of Article VIII and in the2012 Treaty;
Additional OSIL 2011 Solvency FAL: the meaning given in paragraph (i) of Article VIII;
CBL FAL: the meaning given in paragraph (i)a of Article VI;
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CBL/OSIL Interim Settlement Amount: the meaning given in paragraph (i) of Article V;
CC2:the meaning given in Recital A(i);
Closing QMA: the meaning given in paragraph (iii) of Article II;
Effective Date: the meaning given in the title to this Treaty;
FAL:funds at Lloyd’s in such form as is determined byLloyd’s in accordance with,inter alia, the Membership and Underwriting Conditions and Requirements (Funds at Lloyd’s) (as amended or replaced from time to time);
FAL Providers’ Deed:the deed with that name entered into between,inter alios, Canopius Group Limited, theReinsured, theReinsurer and Omega Specialty Insurance Company Limited having effect on theEffective Date;
Flectat: the meaning given in Recital A(ii);
Future 2010 & Prior Premium: the meaning given in paragraph (i)c.ii of Article IV;
Lloyd’s:the society incorporated by Lloyd’s Act 1871 by the name of Lloyd’s;
Lloyd’s Obligations:the meaning given in the Lloyd’s Deposit Trust Deeds or (as the case may be) Security and Trust Deeds (whether interavailable or non-interavailable versions) to whichFlectat (inter alios) is a party in respect ofFAL provided or procured to be provided by theReinsurer pursuant to Article VII;
Managing Agent:the meaning given in paragraph (ii)a.iii of Article II;
OSIL FAL:the meaning given in paragraph (i) of Article VII;
Paragraph (iv) Increase: the meaning given in paragraph (v) of Article IV;
Paragraph (ii) Reduction: the meaning given in paragraph (iii) of Article IV;
Pre-Adjustment Premium: the meaning given in paragraph (i) of Article IV;
Premium: the meaning given in paragraph (i) of Article IV;
Premium Debt: the meaning given in paragraph (vi) of Article II;
Q3 2012 QMA:the meaning given in paragraph (iii) of Article II;
Reference Date: the meaning given in paragraph (ii)a.i of Article II;
Relevant Cash Call Amount: the meaning given in paragraph (i) of Article VI;
Relevant Percentage: the meaning given in paragraph (ii) of Article II;
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RITC: reinsurance to close (as defined in Lloyd’s Definitions Byelaw, No. 7 of 2005);
Syndicate 4444: Syndicate 4444 atLloyd’s; and
Ultimate Net Loss:the meaning given in paragraph (ii) of Article II.
YYd:the meaning given in paragraph (iv) of Article IV; and
YYe:the meaning given in paragraph (ii) of Article IV.
B | Theejusdem generis rule of construction shall not apply to this Treaty and accordingly, general words shall not be given a restrictive meaning by reason of their being preceded or followed by words indicating a particular class or examples of acts, matters or things. |
C | References in this Treaty to the parties and to Recitals, Articles and paragraphs are respectively to the parties to and Recitals, Articles and paragraphs of this Treaty. |
Article I. | Commencement and Termination |
(i) | This Treaty shall commence [on theEffective Date]2. |
(ii) | Without prejudice to any rights that may have accrued under this Treaty or any of its rights or remedies, either party may at any time terminate this Treaty with immediate effect by giving written notice to the other party if the performance of this Treaty is prohibited or rendered impossiblede jure orde facto, in particular as a consequence of any law or regulation which is or shall be in force in any country or territory PROVIDED that any provisions of this Treaty which are expressly or impliedly intended to survive termination shall continue in force. |
Article II. | Cover |
(i) | By this Treaty, subject to the operation of Article III and on the other terms and conditions set out herein, theReinsurer agrees to pay an amount equal to theUltimate Net Loss. |
(ii) | For the purposes of this Treaty “Ultimate Net Loss” means: |
a. | theRelevant Percentage of theReinsured’s 85% share (as reinsurer ofFlectat pursuant to the2011 Flectat LLQS) of all amounts in respect of (1) claims against and other underwriting liabilities ofFlectat relating to its participation as a member ofSyndicate 4444 for the 2011 underwriting year of account (including, for the avoidance of any doubt, any amounts payable forRITCof the 2011 underwriting year of account ofSyndicate 4444) and (2) other obligations and outgoings ofFlectatincurred in connection with such participation, which are as applicable: |
2 | Any necessary conditionality language to be added once a clear understanding of the process for completion of the Third Party Sale, flows of funds etc has been reached |
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i. | paid byFlectat on or after 1 October 2012 (the “Reference Date”); |
ii. | accounted for byFlectaton or after theReference Date; or |
iii. | allocated or (as the case may be) charged toFlectatby the managing agent ofSyndicate 4444 (the “Managing Agent”) on or after theReference Date;plus |
b. | 89.86% of certain amounts charged to theReinsuredbyFlectaton or after theReference Date |
as specified (or more particularly specified) in paragraphs (iii) and (iv) below.
The “Relevant Percentage” is (1) 89.86% in respect of all insurance and reinsurance risks (including theRITC of the 2008 underwriting year of account of Syndicate 839 but not any other inward contract ofRITC) written byFlectatas a member ofSyndicate 4444 as constituted for the 2011 underwriting year of account (2) if before settlement pursuant to Article V the 2010 underwriting year of account ofSyndicate 4444 (including business assumed through theRITCof the 2009 and prior underwriting years of account ofSyndicate 4444) is closed into the 2011 underwriting year of account ofSyndicate 4444, 68% in respect of all business assumed through suchRITC byFlectatas a member ofSyndicate 4444 as constituted for the 2011 underwriting year of account.
(iii) | The amounts referred to in paragraph (ii)a above shall comprise the aggregate of: |
a. | amounts paid byFlectat, on or after theReference Date, in respect of claims (including in respect of unallocated loss adjustment expenses) againstSyndicate 4444 as constituted for the 2011 underwriting year of account (including, for the avoidance of any doubt, in respect of business assumed through theRITC of the 2010 and prior underwriting years of account ofSyndicate 4444)less: |
i. | recoveries received on or after theReference Dateunder reinsurances protecting the business written bySyndicate 4444 as constituted for the 2011 underwriting year of account (or, as the case may be, aLloyd’s syndicate as constituted for the 2010 or any prior underwriting year of account and closed by way ofRITC into the 2011 underwriting year of account ofSyndicate 4444); |
ii. | subrogated recoveries, salvages or other recoveries received on or after theReference Date, |
the quantum of which amounts shall (subject to paragraph (v) below) be calculated by reference to the difference between the figures stated in line 17, column E of Form 102 (Reporting Year of Account – 2011) in the Quarterly Monitoring Return A submitted toLloyd’s by theManaging Agent in respect ofSyndicate 4444 for Q3 2012 (the “Q3 2012 QMA”) and the figures in respect of the corresponding line items stated in theManaging Agent’s internal worksheets used for the purposes of
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preparing the Quarterly Monitoring Return A submitted toLloyd’s by theManaging Agent in respect ofSyndicate 4444 for Q4 of the year as at 31 December of which the 2011 underwriting year of account ofSyndicate 4444 is closed byRITC(the “Closing QMA”);
b. | the amount allocated and charged toFlectatby theManaging Agent asFlectat’s share of the amount of the premium paid by the members ofSyndicate 4444 as constituted for the 2011 underwriting year of account forRITCof the 2011 underwriting year of account ofSyndicate 4444, the quantum of which amount shall (subject to paragraph (vi) below) be calculated by reference to the amount shown in line 23, column E of theClosing QMA; |
(68% of theReinsured’s 85% share, as reinsurer ofFlectat pursuant to the2011 Flectat LLQS, of the aggregate of the amounts referred to in paragraphs a and b above in respect of2010 & Prior Assumed Business being the “2010 Net Claims Paid”);
c. | amounts allocated and charged toFlectatby theManaging Agent, on or after theReference Date, in respect of losses on exchange ofSyndicate 4444 as constituted for the 2011 underwriting year of account that arise on realisation or (as the case may be) revaluation, the quantum of which amounts shall (subject to paragraph (vi) below) be calculated by reference to the difference (if negative) between the figure stated in line 31, column E of Form 102 of theQ3 2012 QMAand the aggregate figures in respect of the corresponding line item stated in theManaging Agent’s internal worksheets used for the purposes of preparing the Closing QMA; |
d. | amounts allocated and charged toFlectatby theManaging Agent, on or after theReference Date, in respect of realised and unrealised losses on investments ofSyndicate 4444 as constituted for the 2011 underwriting year of account that arise on realisation or (as the case may be) revaluation, the quantum of which amounts shall (subject to paragraph (vi) below) be calculated by reference to the difference between the aggregate of the figures stated in lines 43 and 44, column E of Form 102 of theQ3 2012 QMAand the aggregate figures in respect of the corresponding line items stated in theManaging Agent’s internal worksheets used for the purposes of preparing the Closing QMA; |
e. | amounts allocated and charged toFlectatby theManaging Agent, on or after theReference Date, in respect of investment management charges toSyndicate 4444 as constituted for the 2011 underwriting year of account, the quantum of which amounts shall (subject to paragraph (vi) below) be calculated by reference to the difference between the figure stated in line 46, column E of Form 102 of theQ3 2012 QMAand the aggregate figures in respect of the corresponding line item stated in theManaging Agent’s internal worksheets used for the purposes of preparing the Closing QMA; |
f. | amounts allocated and charged toFlectatby theManaging Agent, on or after theReference Date, in respect ofFlectat’s share of those administrative expenses and charges in respect ofSyndicate 4444 as constituted for the 2011 underwriting year of account to which lines 32, |
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34, 35, 37 and 38 of Form 102 of the Quarterly Monitoring Return A relate, the quantum of which amounts shall (subject to paragraph (vi) below) be calculated by reference to the difference between the aggregate of the figures stated in those lines, column E of theQ3 2012 QMAand the aggregate figures in respect of the corresponding line items stated in theManaging Agent’s internal worksheets used for the purposes of preparing the Closing QMA; |
g. | amounts allocated and charged toFlectatby theManaging Agent, on or after theReference Date, in respect of income on investments ofSyndicate 4444 as constituted for the 2011 underwriting year of account and gains on such investments arising on realisation or (as the case may be) revaluation, the quantum of which amounts shall (subject to paragraph (vi) below) be calculated by reference to the difference between the aggregate of the figures stated in lines 40, 41, 42, 45 and 48, column E of Form 102 of theQ3 2012 QMAand the aggregate figures in respect of the corresponding line items stated in theManaging Agent’s internal worksheets used for the purposes of preparing the Closing QMA; and |
h. | amounts allocated and charged toFlectatby theManaging Agent, on or after theReference Date, in respect of gains on exchange ofSyndicate 4444 as constituted for the 2011 underwriting year of account that arise on realisation or (as the case may be) revaluation, the quantum of which amounts shall (subject to paragraph (vi) below) be calculated by reference to the difference (if positive) between the figure stated in line 31, column E of Form 102 of theQ3 2012 QMAand the aggregate figure in respect of the corresponding line item stated in theManaging Agent’s internal worksheets used for the purposes of preparing the Closing QMA. |
(iv) | The amounts referred to in paragraph (ii)b above shall comprise the aggregate of all amounts (if any) allocated and charged to theReinsured byFlectat, on or after theReference Date, in respect of the following items payable by theReinsured in accordance with the terms of the2011 Flectat LLQS: |
a. | Flectat’s standard personal expenses of Lloyd’s Central Fund contribution and Lloyd’s subscription in respect of the 2011 underwriting year of account; |
b. | the amount calculated by reference toFlectat’s member’s syndicate premium limit in respect of the 2011 underwriting year of account ofSyndicate 4444 referred to in paragraph (1)(v)(c) of Article 6 (Premium) of the2011 Flectat LLQS; |
c. | overriding commission of GBP50,000; |
d. | the amounts charged toFlectat by Canopius Group Limited or any of its subsidiaries or third parties as letter of credit or other fees for providing Funds at Lloyd’s or collateral to support the underwriting ofFlectat as a member ofSyndicate 4444 for the 2011 underwriting year of account as referred to in paragraph (1)(vii) of Article 6 (Premium) of the2011 Flectat LLQS; and |
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e. | the profit commission (if any) referred to in paragraph (1)(vi) of Article 6 (Premium) of the2011 Flectat LLQS. |
(v) | If at any time after theEffective Date there is a change in the syndicate financial reporting requirements ofLloyd’s (whether to the line or column items of Form 102 within the Quarterly Monitoring Return A or otherwise), the quantum of any amounts referred to in paragraph (iii) above in respect of which any such change has an impact shall be calculated by reference to the replacements for the affected line and column items referred to in paragraph (iii) (adjusted as may be necessary or appropriate if such replacements are not the exact equivalents of the relevant affected line and column items). |
(vi) | Without prejudice to the provisions of Article VI, at any time when there remains outstanding any debt from theReinsured to theReinsurer in respect of thePremium (“Premium Debt”), theReinsurer’s liability to make payments under paragraph (i) above shall, to the extent of the amount of thePremium Debtthen remaining outstanding, be satisfied only by way of set off as referred to in Article V. |
(vii) | Losses, liabilities, premium and other income, recoveries and gains on investments in currencies other than Pounds Sterling shall be converted into Pounds Sterling at the same rates of exchange as used inFlectat’s books of account and shall be payable in Pounds Sterling. |
Article III. | Limitations on Reinsurer’s Liability |
(i) | The liability of theReinsurer under Article II beyond an amount equal to the premium payable to theReinsurer under this Treaty (subject to the operation of the net settlement arrangements provided for by this Treaty) shall, when aggregated with all liabilities of theReinsurer under the2010 Treaty and the2012 Treaty beyond an amount equal to the aggregate of the premiums payable to theReinsurer under the2010 Treaty and the2012 Treaty(subject to the operation of the net settlement arrangements provided for by the2010 Treaty and the2012 Treaty), be limited to and in no circumstances exceed in aggregate £[— ]3plus the aggregate value of anyAdditional OSIL ECA FAL provided from time to time by theReinsurer toLloyd’s pursuant to the terms of this Treaty or the2012 Treaty. |
(ii) | For the avoidance of any doubt, the aggregate liability of theReinsurer under this Treaty alone shall not exceed an amount equal to the premium payable to theReinsurer under this Treaty (subject to the operation of the net settlement arrangements provided for by this Treaty)plus £[— ]4plus the aggregate value of anyAdditional OSIL ECA FAL provided from time to time by theReinsurer toLloyd’s pursuant to the terms of this Treaty or the2012 Treaty. |
3 | i.e. the value of the total FAL that OSIL will be providing at the outset for the benefit of CC2 and Flectat – to be ascertained |
4 | i.e. the value of the total FAL that OSIL will be providing at the outset for the benefit of CC2 and Flectat – to be ascertained |
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Article IV. | Premium |
(i) | Subject to the operation of paragraphs (ii) and (iii) or (iv) and (v) below (if and as applicable), the premium payable to theReinsurer by theReinsured for the cover which theReinsurer agrees to provide under this Treaty shall be: |
a. | £[— ]5;plus |
b. | an amount equal to 89.86% of theReinsured’s share (as reinsurer ofFlectat pursuant to the2011 Flectat LLQS) of the aggregate amount of net premiums written (net of acquisition costs, including in respect of amortisation after theReference Date of the deferred acquisition costs asset established by theManaging Agent as at 30 September 2012) in respect of all insurance and reinsurance risks (including theRITC of the 2008 underwriting year of account of Syndicate 839 but not any other inward contract ofRITC) written byFlectatas a member ofSyndicate 4444 for the 2011 underwriting year of account as allocated by theManaging Agent on or after theReference Date, the quantum of which amount shall be calculated by reference to the difference between the aggregate of the figures in respect of line items 5, 27, 28 and 29 of Form 102 within the Quarterly Monitoring Return A as stated in theManaging Agent’s internal worksheets used for the purposes of preparing each of theQ3 2012 QMAand the Closing QMA(provided that if at any time after theEffective Date there is a change in the syndicate financial reporting requirements ofLloyd’s - whether to the line or column items of Form 102 within the Quarterly Monitoring Return A or otherwise - the quantum of the amount referred to in this paragraph in respect of which any such change has an impact shall be calculated by reference to the replacements for the affected line and column items referred to in this paragraph (adjusted as may be necessary or appropriate if such replacements are not the exact equivalents of the relevant affected line and column items));plus |
c. | if before settlement pursuant to Article V the 2010 underwriting year of account ofSyndicate 4444 (including business assumed through theRITCof the 2009 and prior underwriting years of account ofSyndicate 4444) is closed into the 2011 underwriting year of account ofSyndicate 4444: |
i. | an amount equal to 68% of theReinsured’s share (as reinsurer ofFlectat pursuant to the2011 Flectat LLQS) of theRITC premium received (net of reinsurers’ share) byFlectat in respect of the business assumed by it as a member ofSyndicate 4444 as constituted for the 2011 underwriting year of account by way ofRITC of the 2010 and prior underwriting years of account ofSyndicate 4444(“2010 & Prior Assumed Business”);plus |
ii. | “Future 2010 & Prior Premium”, being an amount equal to 68% of theReinsured’s share (as reinsurer ofFlectat pursuant to the2011 Flectat LLQS) of the aggregate amount of net premiums written |
5 | i.e. such amount as is equal to 89.86% of CBL’s loss and loss expense reserves and unearned premium reserves as at the Reference Date in respect of Flectat’s underwriting as a member of S4444 for thepure 2011 year of account (based on figures which will appear in lines 8, 23 and 30 of the Q3 2012 QMA) |
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(net of acquisition costs, including in respect of amortisation after the date as at which the 2010 underwriting year of account ofSyndicate 4444 is closed byRITCinto the 2011 underwriting year of account ofSyndicate 4444– the “2010 RITC Effective Date” – of the deferred acquisition costs asset established by theManaging Agent as at the2010 RITC Effective Date) in respect of the2010 & Prior Assumed Business as allocated by theManaging Agent after the2010 RITC Effective Date, the quantum of which amount shall be calculated by reference to the difference between the aggregate of the figures in respect of line items 5, 27, 28 and 29 of Form 102 within the Quarterly Monitoring Return A as stated in theManaging Agent’s internal worksheets used for the purposes of preparing each of the Quarterly Monitoring Return A (Reporting Year of Account – 2011) to be submitted toLloyd’s by theManaging Agent in respect ofSyndicate 4444 for the quarter (of the year) in which the2010 RITC Effective Date occurs and the Closing QMA(provided that if at any time after theEffective Date there is a change in the syndicate financial reporting requirements ofLloyd’s - whether to the line or column items of Form 102 within the Quarterly Monitoring Return A or otherwise - the quantum of the amount referred to in this paragraph in respect of which any such change has an impact shall be calculated by reference to the replacement for the affected line and column item referred to in this paragraph (adjusted as may be necessary or appropriate if such replacements are not the exact equivalents of the relevant affected line and column items)) |
(such amount, prior to the operation of paragraphs (ii) and (iii) or (iv) and (v) below (if and as applicable), the “Pre-Adjustment Premium” and after the operation of paragraphs (ii) and (iii) or (iv) and (v) below (if and as applicable), the “Premium”).
(ii) | To the extent that an amount equal to the aggregate of: |
a. | 2010 Net Claims Paid after the2010 RITC Effective DatelessFuture 2010 & Prior Premium;plus |
b. | Net Claims Paid (as defined in the2010 Treaty except not including any amount in respect of the premium forRITC of the 2010 underwriting year of account ofSyndicate 4444) as at the2010 RITC Effective Dateless Future Premium (as defined in the2010 Treaty) as at the2010 RITC Effective Date |
is more than £[amount appearing at paragraph (i)a of Article IV in the 2010 Treaty - i.e. the 2010 & prior reserves as at 30/9/12 - to be inserted] (any such excess multiplied by 32/68, up to an amount equal to 32/68 x 3% of £[amount appearing at paragraph (i)a of Article IV in the 2010 Treaty - i.e. the 2010 & prior reserves as at 30/9/12 - to be inserted], being “YYe” and expressed as a positive number), the amount of thePre-Adjustment Premium shall, subject to the operation of paragraph (iii) below, be reduced (or increased, as the case may be):
i. | where there has been a reduction (expressed as a positive |
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number) under paragraph (ii) of Article IV of the2010 Treaty in calculating the amount of the premium payable to theReinsurer by theReinsured under the2010 Treaty (“2010 Treaty Premium Calculation Reduction”), by the amount if any by whichYYe exceeds the2010 Treaty Premium Calculation Reduction; or, as applicable |
ii. | where there has been an increase (expressed as a negative number) under paragraph (iii) of Article IV of the2010 Treaty in calculating the amount of the premium payable to theReinsurer by theReinsured under the2010 Treaty (“2010 Treaty Premium Calculation Increase”), by the amount if any by whichYYe exceeds the2010 Treaty Premium Calculation Increase. |
(iii) | The amount of any reduction or increase of thePre-Adjustment Premiumthat would be made under paragraph (ii) above before the operation of this paragraph (iii) (“Paragraph (ii) Reduction”) shall be reduced by an amount equal to 100/68 x 10.14% of the amount of theParagraph (ii) Reduction. |
(iv) | To the extent that an amount equal to the aggregate of: |
a. | 2010 Net Claims Paid on or after the2010 RITC Effective DatelessFuture 2010 & Prior Premium;plus |
b. | Net Claims Paid (as defined in the2010 Treatyexcept not including any amount in respect of the premium forRITC of the 2010 underwriting year of account ofSyndicate 4444) as at the2010 RITC Effective Dateless Future Premium (as defined in the2010 Treaty) as at the2010 RITC Effective Date |
is less than £[amount appearing at paragraph (i)a of Article IV in the 2010 Treaty - i.e. the 2010 & prior reserves as at 30/9/12 - to be inserted] (any such deficit multiplied by 32/68, up to an amount equal to 32/68 x 10% of £[amount appearing at paragraph (i)a of Article IV in the 2010 Treaty - i.e. the 2010 & prior reserves as at 30/9/12 - to be inserted], being “YYd” and expressed as a positive number), the amount of thePre-Adjustment Premium shall, subject to the operation of paragraph (v) below, be increased (or reduced, as the case may be):
i. | where there has been a2010 Treaty Premium Calculation Increase(expressed as a positive number), by the amount if any by whichYYd is more than the2010 Treaty Premium Calculation Increase; or, as applicable |
ii. | where there has been a2010 Treaty Premium Calculation Reduction(expressed as a negative number), by the amount if any by whichYYd is more than the amount of the2010 Treaty Premium Calculation Reduction. |
(v) | The amount of any increase or reduction of thePre-Adjustment Premiumthat would be made under paragraph (iv) above before the operation of this paragraph (v) (“Paragraph (iv) Increase”) shall be reduced by an amount equal to 100/68 x 10.14% of the amount of theParagraph (iv) Increase. |
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(vi) | Payments in respect of thePremium shall be made to theReinsurer by theReinsured as provided in Article V. |
Article V. | Settlement |
Interim settlement
(i) | WhereFlectat has received from the trustees of its Premiums Trust Fund an amount representing an interim profit ofFlectat in respect of its participation as a member of theSyndicate for the 2011 underwriting year of account and theReinsured receives fromFlectat (pursuant to the terms of the2011 Flectat LLQS) an ‘Interim Settlement Amount’ (as defined in the2011 Flectat LLQS), theReinsured shall pay to theReinsurer an amount by way of interim settlement (“CBL/OSIL Interim Settlement Amount”), reasonably determined by theReinsurer to be attributable to the business reinsured under this Treaty of the amount of the ‘Interim Settlement Amount’ (as defined in the2011 Flectat LLQS). Ifthe CBL/OSIL Interim Settlement Amount (or the aggregate of all CBL/OSIL Interim Settlement Amounts, if more than one) paid to theReinsurer as provided in this paragraph exceeds the amount due to theReinsurer (before taking account of theCBL/OSIL Interim Settlement Amount(s) paid to theReinsurer) as shown in the statement of account prepared by or on behalf of theReinsureras referred to in paragraph (iii)a below, theReinsurer shall, forthwith upon providing to theReinsured such statement of account, pay to theReinsured an amount equal to the excess. |
Final settlement
(ii) | WhenSyndicate 4444 as constituted for the 2011 underwriting year of account is closed byRITC(suchRITC to extend, for the avoidance of doubt, to liabilities assumed by the members ofSyndicate 4444 as constituted for the 2011 underwriting year of account by way ofRITC of aLloyd’s syndicate as constituted for the 2010 or any prior underwriting year of account), settlement between the parties shall be made in accordance with the provisions of paragraph (iii) below. |
(iii) | For the purposes of settlement between the parties as referred to in paragraph (ii) above: |
a. | there shall be prepared by theReinsurer(or by the Managing Agent on behalf of theReinsurer) a statement of account in a form to be agreed between theReinsurerand theReinsured; |
b. | there shall be added to the amount of thePremiuman amount equal to the aggregate of any amounts which may previously have been drawn down byLloyd’s from theOSIL FAL (or, as the case may be, anyAdditional OSIL ECA FAL) to meet an interim cash call made onFlectatby the Managing Agentas referred to in paragraph (i) of Article VI, to the extent theReinsurer shall not previously have been reimbursed in respect of the same; |
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c. | there shall then be set off against the result of the calculation made under paragraph b the amount which theReinsurer is liable (subject always to the operation of Article III) to pay under paragraph (i) of Article II; |
d. | subject to the provisions and operation of theFAL Providers’ Deed, if the result of the calculation made under paragraphs b and c is positive, theReinsured shall pay to theReinsurer an amount (in £Sterling, having converted any amounts in currencies other than £Sterling into £Sterling at the rates used inFlectat’s books of account at the time of settlement betweenFlectatand theReinsured under the2011 Flectat LLQS) equal to the result of that calculation, such payment to be made on (if it is not made before) the fifteenth day following receipt by theReinsured of the settlement payment due to it byFlectat under the2011 Flectat LLQS; |
e. | subject to the provisions and operation of theFAL Providers’ Deed, if the result of the calculation made under paragraphs b and c is negative, theReinsurer shall pay to theReinsured an amount (in £Sterling, having converted any amounts in currencies other than £Sterling into £Sterling at the rates used inFlectat’s books of account at the time of settlement betweenFlectatand theReinsured under the2011 Flectat LLQS) equal to the result of that calculation, such payment to be made on (if it is not made before) the date on which settlement is due to be made by theReinsured toFlectat under the2011 Flectat LLQS. |
(iv) | If a party to this Treaty fails to pay an amount (theoverdue amount) payable by it under this Treaty interest shall accrue and be payable by that party on the overdue amount from the date on which it becomes due up to the date of actual payment in full (after as well as before judgement) at the rate of 2 per cent above the base rate from time to time of National Westminster Bank Plc. Interest calculated under this paragraph shall be calculated day to day and on the basis of a 365 day year and interest payable in accordance with this paragraph shall be payable at the end of each month failing which it shall be compounded. |
Article VI. | Cash Calls |
(i) | The parties intend that shouldFlectat, after theEffective Date, become required by theManaging Agent to meet an interim cash call in respect ofSyndicate 4444’s 2011 underwriting year of account then 85% ofFlectat’s share of the amount of any such cash call (the “Relevant Cash Call Amount”) should be met: |
a. | as to 10% from the “CBL FAL” (beingFAL in the amount of £[— ]6 provided by theReinsured toLloyd’s for the benefit ofCC2 andFlectat pursuant to the terms of the2010 CC2 LLQS, the2011 Flectat LLQS and the2012 Flectat LLQS – not including, for the avoidance of any doubt, any of theOSIL FAL –plus the aggregate value of any ‘Reinsurer’s Additional ECA FAL’ (as defined in the2011 Flectat LLQS |
6 | i.e. the value of the total FAL that CBL will be providing itself at the outset of the Restructuring for the benefit of CC2 and Flectat – to be ascertained |
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and the 2012 Flectat LLQS) – not including any Additional OSIL ECA FAL – provided or procured to be provided from time to time by theReinsured toLloyd’s pursuant to the terms of the2011 Flectat LLQS or the 2012 Flectat LLQS); and |
b. | as to 90% from theOSIL FAL or (as the case may be) anyAdditional OSIL ECA FAL. |
(ii) | To the extent that there is met from theOSIL FAL or anyAdditional OSIL ECA FAL any part of aRelevant Cash Call Amount, the amount so met shall be treated (to the extent not repaid to theReinsurer before settlement between the Parties in accordance with Article V above) as a payment on account of the amount which theReinsurer may be liable (subject always to the operation of Article III) to pay under paragraph (i) of Article II. |
Article VII. | Provision of FAL |
(i) | In order to assist theReinsured to satisfy its obligations under the2010 CC2 LLQS, the2011 Flectat LLQS and the2012 Flectat LLQS concerning the provision ofFAL, theReinsurer shall provide or procure the provision toLloyd’s of one or more letters of credit, cash deposits and/or investments (in a form acceptable toLloyd’s), having an aggregate value of £[— ]7, to form part of theFALofCC2 which, by way of ‘forward interavailability’, will support the underwriting ofFlectat for the 2011 and subsequent underwriting years of account (and will also support the underwriting ofCC2for the 2010 underwriting year of account) (“OSIL FAL”). |
(ii) | The cost of provision of theOSIL FAL shall be met by theReinsurer. |
(iii) | TheReinsurer may, at any time permitted byLloyd’s, substitute for all or any part of theOSIL FAL any other assets of equivalent value acceptable underLloyd’s requirements asFAL. |
(iv) | Subject to the provisions and operation of theFAL Providers’ Deed, theOSIL FALstands as security for the performance (beyond set off against the amount of thePremium of the amount which theReinsurer is liable to pay under paragraph (i) of Article II) of theReinsurer’s obligations under this Treaty, as well as for the performance (beyond the corresponding set offs provided for under the2010 Treaty and the2012 Treaty) of theReinsurer’s obligations under the2010 Treaty and the2012 Treaty. |
(v) | For the avoidance of doubt, subject to the provisions of theFAL Providers’ Deed, theReinsurer shall have no obligation to reinstate the value of theOSIL FAL or anyAdditional OSIL ECA FAL following any drawdown thereon. |
Article VIII. Additional | FAL |
(i) | If at any time after theEffective Date and before the 2011 underwriting year of account ofSyndicate 4444 is closed theReinsured is required under the |
7 | Relevant figure to be inserted to be ascertained based on calculations utilising the ECA funding requirement for purposes of coming-into-line in November 2012 |
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terms of the2011 Flectat LLQS to provide toLloyd’s any Reinsurer’s Additional 2011 Solvency FAL (as defined in the2011 Flectat LLQS), theReinsurer shall promptly provide toLloyd’s, in a form acceptable toLloyd’s to stand asFAL supporting the underwriting ofFlectat to be deposited in theFAL ofFlectat (or in theFAL ofCC2 and made interavailable to support the underwriting of theFlectat) a letter of credit, cash or investments having a value equal to 89.86% of the amount of the Reinsurer’s Additional 2011 Solvency FAL (as so defined) which theReinsured is required to provide (“Additional OSIL 2011 Solvency FAL”). |
(ii) | If theReinsurer does not provide the full amount (or any) of theAdditional OSIL 2011 Solvency FAL then: |
a. | if theReinsured provides Reinsurer’s Additional 2011 Solvency FAL (as defined in the2011 Flectat LLQS) which is referable to the amount ofAdditional OSIL 2011 Solvency FAL that theReinsurer has not provided, theReinsurershall pay to theReinsured, promptly following release byLloyd’s fromFlectat’s or (as the case may be)CC2’sFALof all or part of such Reinsurer’s Additional 2011 Solvency FAL which is so referable, an amount calculated by (I) multiplying the amount of the released Reinsurer’s Additional 2011 Solvency FAL which is so referable by the percentage corresponding to five hundred basis points plus the LIBOR rate for a 6 month £Sterling deposit as at the date on which theReinsured provided the Reinsurer’s Additional 2011 Solvency FAL which is so referable and (II) multiplying the result of that calculation (“A”) by x/42 where x is the number of complete calendar months (or part thereof) for which the released Reinsurer’s Additional 2011 Solvency FAL which is so referable was deposited in theFALof CC2or Flectat(as applicable) PROVIDED that the amount payable by theReinsurer shall not exceedA; |
b. | if theReinsured does not provide Reinsurer’s Additional 2011 Solvency FAL (as defined in the2011 Flectat LLQS) which is referable to the amount ofAdditional OSIL 2011 Solvency FAL that theReinsurer has not provided andFlectatprovides (or permits there to be provided by another for its benefit) Other Additional 2011 Solvency FAL (as defined in the2011 Flectat LLQS) which is so referable, theReinsurershall pay to theReinsured, promptly following release byLloyd’s fromFlectat’s or (as the case may be)CC2’sFALof all or part of such Other Additional 2011 Solvency FAL which is so referable, an amount calculated by (I) multiplying the amount of the released Other Additional 2011 Solvency FAL which is so referable by the percentage corresponding to five hundred basis points plus the LIBOR rate for a 6 month £Sterling deposit as at the date on whichFlectat provided (or permitted there to be provided by another for its benefit) the Other Additional 2011 Solvency FAL which is so referable and (II) multiplying the result of that calculation (“B”) by x/42 where x is the number of complete calendar months (or part thereof) for which the released Other Additional 2011 Solvency FAL which is so referable was deposited in theFALof CC2or Flectat(as applicable) PROVIDED that the amount payable by theReinsurer shall not exceedB. |
(iii) | If under the terms of the2011 Flectat LLQS and/or the2012 Flectat LLQS |
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theReinsured is required to provide (or use its reasonable endeavours to procure that there is provided) toLloyd’sany ‘Reinsurer’s Additional ECA FAL’ (as defined in the2011 Flectat LLQSand the2012 Flectat LLQS), theReinsurer shall provide toLloyd’s, in a form acceptable toLloyd’s to stand asFAL supporting the underwriting ofFlectat to be deposited in theFAL ofFlectat (or in theFAL ofCC2 and made interavailable to support the underwriting ofFlectat), a letter of credit, cash or investments having a value equal to 89.86% of theRelevant Percentage of the amount set out in the ‘Additional ECA FAL Requirement Notification’ (as defined in the2011 Flectat LLQS and the2012 Flectat LLQS) (“Additional OSIL ECA FAL”). (The Parties acknowledge that the2012 Treaty contains a similar provision to that contained in this paragraph; that each provision concerns the same obligation; and that performance by theReinsurer of the obligation pursuant to one of the provisions will constitute performance of the obligation pursuant to the other provision.) |
(iv) | If theReinsurer does not provide the full amount (or any) of theAdditional OSIL ECA FAL then: |
a. | if theReinsured provides Reinsurer’s Additional ECA FAL (as defined in the2011 Flectat LLQSand the2012 Flectat LLQS) which is referable to the amount ofAdditional OSIL ECA FAL that theReinsurer has not provided, theReinsurershall pay to theReinsured, promptly following release byLloyd’s fromFlectat’s or (as the case may be)CC2’sFALof all or part of such Reinsurer’s Additional ECA FAL which is so referable, an amount calculated by (I) multiplying the amount of the released Reinsurer’s Additional ECA FAL which is so referable by the percentage corresponding to five hundred basis points plus the LIBOR rate for a 6 month £Sterling deposit as at the date on which theReinsured provided the Reinsurer’s Additional ECA FAL which is so referable and (II) multiplying the result of that calculation (“C”) by x/42 where x is the number of complete calendar months (or part thereof) for which the released Reinsurer’s Additional ECA FAL which is so referable was deposited in theFALof CC2or Flectat(as applicable) PROVIDED that the amount payable by theReinsurer shall not exceedC; |
b. | if theReinsured does not provide Reinsurer’s Additional ECA FAL (as defined in the2011 Flectat LLQSand the2012 Flectat LLQS) which is referable to the amount ofAdditional OSIL ECA FAL that theReinsurer has not provided andFlectatprovides (or permits there to be provided by another for its benefit) Other Additional ECA FAL (as defined in the2011 Flectat LLQSand the2012 Flectat LLQS) which is so referable, theReinsurershall pay to theReinsured, promptly following release byLloyd’s fromFlectat’s or (as the case may be)CC2’sFALof all or part of such Other Additional ECA FAL which is so referable, an amount calculated by (I) multiplying the amount of the released Other Additional ECA FAL which is so referable by the percentage corresponding to five hundred basis points plus the LIBOR rate for a 6 month £Sterling deposit as at the date on whichFlectat provided (or permitted there to be provided by another for its benefit) the Other Additional ECA FAL which is so referable and (II) multiplying the result of that calculation (“D”) by x/42 where x is the number of complete calendar months (or part thereof) for which the released Other Additional |
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ECA FAL which is so referable was deposited in theFALof CC2or Flectat(as applicable) PROVIDED that the amount payable by theReinsurer shall not exceedD. |
Article IX. | Errors and Omissions |
It is hereby understood and agreed that any inadvertent delays, omissions or errors made in connection with this Treaty shall not be held to relieve any of the parties hereto from any liability which would have attached to them hereunder if such delay, omission or error had not occurred provided that rectification is made upon discovery.
Article X. | Non-Waiver etc. |
Neither the obligations of theReinsurer nor the rights and remedies of theReinsured under this Treaty, or otherwise conferred by law in respect of this Treaty, shall be discharged, prejudiced or impaired by reason of any failure on the part of theReinsured or theReinsurer, whether intentional or not, to insist on compliance with this Treaty or to exercise any right or remedy hereunder (and no such failure shall constitute a waiver of any right or remedy contained herein nor prevent either party from thereafter demanding full and complete compliance nor prevent either party from exercising any such right or remedy in the future).
Article XI. | Arbitration |
Any dispute between theReinsurer and theReinsured arising out of or relating to the interpretation, performance or breach of this Treaty, as well as the formation, validity, binding effect and/or termination thereof and/or any non-contractual claims, shall be referred to arbitration under ARIAS UK Arbitration Rules by a panel of three arbitrators. TheReinsurer or theReinsured may request arbitration in writing sent to the other (the respondent) by certified or registered post, return receipt requested.
One arbitrator shall be chosen by theReinsurer and theReinsured, and the two arbitrators shall, before instituting the hearing, choose an impartial third arbitrator who shall preside at the hearing. If theReinsurer fails to appoint its arbitrator within 30 days after being requested to do so by theReinsured, theReinsured may appoint the second arbitrator.
Where the two party-appointed arbitrators have failed to appoint a third arbitrator within 30 days of the arbitration demand, then upon application ARIAS (UK) will appoint an arbitrator to fill the vacancy. At any time prior to the appointment by ARIAS (UK) the party or arbitrators in default may make such appointment.
All arbitrators will be disinterested persons (including those who have retired) having at least 10 years experience of insurance or reinsurance within the industry or as lawyers or other professional advisers serving the industry.
Within 30 days after notice of appointment of all arbitrators the panel will meet and determine timely periods for briefs, discovery procedures and schedules for hearings.
The panel may in its sole discretion make such orders and directions as it considers to be necessary for the final determination of the matters in dispute and shall have the widest discretion permitted under the law governing the arbitral procedure when making such orders or directions. Unless the panel agrees otherwise, arbitration will
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take place in England, but the venue may be changed when the panel deems such change to be in the best interest of the arbitration proceeding. The decision of any two arbitrators when rendered in writing will be final and binding. The panel is empowered to grant interim relief as it may deem appropriate.
Each party will bear the costs of its own arbitrator and will bear, jointly and equally with the other party, the costs of the third arbitrator. The panel will allocate the remaining costs of the arbitration. The panel may, at its discretion, award such further costs, interest and expenses as it considers appropriate, including without limitation, with respect to legal fees.
The governing law of this Treaty shall be the substantive law of England and Wales.
The provisions of this Article shall survive the expiration or termination of this Treaty.
Article XII. | Notices |
Any notice or other communication under or in connection with this Treaty shall be delivered personally, sent by facsimile or email with receipt confirmed (followed by delivery of an original via next-business-day or overnight mail or delivery) or sent by air courier to the intended recipient:
(a) | in the case of theReinsured at [— ] (marked for the attention of[— ]), fax no. [— ]; |
(b) | in the case of theReinsurer at [— ] (marked for the attention of [— ]), fax no. [— ] |
or in either case to such other addresses as the relevant party has specified in writing to the party giving notice.
In the absence of evidence of earlier receipt, any notice or other communication shall be deemed to have been duly given:
(i) | if delivered personally, at the time of delivery but if delivery takes place outside business hours, the commencement of business following delivery; |
(ii) | if sent by facsimile or email prior to 5:00 p.m. at the place of receipt, on the day on which such facsimile or email was sent, provided that a copy is also sent by next-business-day or overnight mail or delivery; |
(ii) | if sent by air courier and not delivered personally, on the third Business Day after delivery into the hands of the courier. |
In proving service by courier it shall be sufficient to prove that the envelope containing the notice was properly addressed and delivered into the hands of the courier.
Article XIII. | Counterparts |
This Treaty may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument.
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Article XIV. | Rights of Third Parties |
A person who is not a party to this Treaty has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Treaty but this does not affect any right or remedy of a third party which exists or is available apart from that Act.
Article XV. | Amendments and No Other Agreement |
Except as otherwise provided, this Treaty may be amended only by consent of the parties expressed in a written addendum executed by the parties with the same level of formality as this Treaty, and such addendum shall be deemed to be an integral part of this Treaty and binding on the parties. The parties agree that this Treaty represents the entire understanding, and constitutes the whole agreement, in relation to its subject matter and supersedes any previous agreement (whether oral or written) in relation thereto. Each of the parties acknowledges that, in entering into this Treaty, it is not relying on, has not been induced to enter into this Treaty by and shall have no right or remedy in respect of, any statement, representation, warranty or understanding (whether of fact or of law and whether made innocently or negligently) (“Representation”) of any person other than as expressly set out in this Treaty and agrees that the only rights and remedies available to it arising out of or in connection with a Representation shall be for breach of contract (provided that nothing in this paragraph shall exclude any liability for, or remedy in respect of, fraud or fraudulent misrepresentation).
Article | XVI. Confidentiality |
No party shall at any time divulge to any person any information relating to the terms of this Treaty, the negotiations preceding its execution or the other parties to this Treaty, save that any party may disclose such information to the extent that it is (i) required to be disclosed pursuant to law (ii) required by the terms of this Treaty (iii) disclosed pursuant to the requirements ofLloyd’s, the Bermuda Monetary Authority or any securities exchange or regulatory or governmental body to which any party is subject (iv) disclosed in confidence to the professional advisers of that party (v) disclosed in confidence to any holding company of that party (vi) information which has entered the public domain without any fault of that party (vii) disclosed with the prior written approval of the other parties.
AS WITNESS the hands of the parties
Signedby | ) | |
duly authorised for | ) | |
and on behalf of | ) | |
[CANOPIUS BERMUDA] LIMITED | ) |
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Signed by | ) | |||
duly authorised for | ) | |||
and on behalf of | ) | |||
OMEGA SPECIALTY INSURANCE | ) | |||
COMPANY LIMITED | ) |
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