PAGE
EXHIBIT 17.b
INTERESTS AND LIABILITIES AGREEMENT
(hereinafter referred to as the "Agreement")
to the
PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT
(hereinafter referred to as the "Contract")
between
The Insurance Companies comprising THE SELECTIVE INSURANCE GROUP, including,
but not limited to:
SELECTIVE INSURANCE COMPANY OF AMERICA
SELECTIVE WAY INSURANCE COMPANY
SELECTIVE INSURANCE COMPANY OF THE SOUTHEAST
SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA
EXCHANGE INSURANCE COMPANY
and/or any insurance affiliates which are now owned or hereafter may be
acquired by The Selective Insurance Group.
(hereinafter referred to collectively or individually as the "Company")
and
(hereinafter referred to as the "Subscribing Reinsurer")
It is mutually agreed by and between the Company on the one part, and the
Subscribing Reinsurer on the other part that the Subscribing Reinsurer's
share in the interests and liabilities of the Reinsurers as set forth in
the Contract attached hereto and forming a part of this Agreement,
effective 12:01 a.m., Standard Time at the location of the risk or risks,
January 1, 1997, to 12:01 a.m., Standard Time at the location of the risk
or risks, January 1, 1998, shall be for:
% of up to $45,000,000 each Loss Occurrence.
% of up to $25,000,000 each Loss Occurrence.
% of up to $35,000,000 each Loss Occurrence.
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The share of the Subscribing Reinsurer in the interests and liabilities of
all Reinsurers in respect of the said Contract shall be separate and apart
from the shares of the other reinsurers to the said Contract, and the
interests and liabilities of the Subscribing Reinsurer shall not be joint
with those of the other reinsurers and in no event shall the Subscribing
Reinsurer participate in the interests and liabilities of the other
reinsurers.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives this day of
, 199__.
SELECTIVE INSURANCE COMPANY OF AMERICA
SELECTIVE WAY INSURANCE COMPANY
SELECTIVE INSURANCE COMPANY OF THE SOUTHEAST
SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA
EXCHANGE INSURANCE COMPANY
and/or any insurance affiliates which are now owned or hereafter may be
acquired by The Selective Insurance Group.
- ------------------------------------------------------------------------
Effective: January 1, 1997
3645-21
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PAGE
and on this day of , 199__.
- ----------------------------------------------------------------------
Effective: January 1, 1997
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PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT
TABLE OF CONTENTS
-----------------
Article Page
- ------- ----
Preamble.............................................. 1
1 Term.................................................. 2
2 Exclusions............................................ 2
3 Definitions........................................... 4
4 Self-Insured Obligations.............................. 5
5 Reinsuring Clause..................................... 6
6 Reinstatement......................................... 6
7 Premium............................................... 7
8 Ultimate Net Loss..................................... 8
9 Net Retained Lines.................................... 8
10 Loss Settlements...................................... 9
11 Currency.............................................. 9
12 Taxes................................................. 10
13 Federal Excise Tax.................................... 10
14 Errors and Omissions.................................. 10
15 Access to Records..................................... 10
16 Insolvency............................................ 11
17 Arbitration........................................... 12
18 Service of Suit....................................... 12
19 Loss Reserves......................................... 13
20 Intermediary.......................................... 15
Attachments
- -----------
Pools, Associations And Syndicates Exclusion Clause.. 16
Nuclear Incident Exclusion Clause - Physical Damage -
Reinsurance - U.S.A.................................. 18
Nuclear Incident Exclusion Clause - Physical Damage -
Reinsurance - Canada................................. 20
Effective: January 1, 1997
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PAGE
PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT
(hereinafter referred to as the "Contract")
In consideration of the mutual covenants hereinafter contained and upon the
terms and conditions hereinafter set forth
VARIOUS INSURANCE AND/OR REINSURANCE COMPANIES
AND/OR UNDERWRITING MEMBERS OF LLOYD'S
(hereinafter collectively referred to as the "Reinsurers")
one of whom is
THE "SUBSCRIBING REINSURER" WHOSE NAME APPEARS
ON THE INTERESTS AND LIABILITIES AGREEMENT
ATTACHING TO AND FORMING A PART OF THIS CONTRACT
do hereby indemnify, as herein provided and specified,
SELECTIVE INSURANCE COMPANY OF AMERICA
SELECTIVE WAY INSURANCE COMPANY
SELECTIVE INSURANCE COMPANY OF THE SOUTHEAST
SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA
EXCHANGE INSURANCE COMPANY
and/or any insurance affiliates which are now owned or hereafter may be
acquired by The Selective Insurance Group.
(hereinafter referred to collectively or individually as the "Company")
PREAMBLE
- --------
The Reinsurers hereby reinsure the excess liability of the Company resulting
from losses occurring during the term of this Contract, covering anywhere in
the world, under all of its policies, other than policies or portions
thereof hereinafter excluded, subject to the following conditions:
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ARTICLE 1
---------
TERM
- ----
The term of this Contract shall be from 12:01 a.m., Standard Time at the
location of the risk or risks, January 1, 1997, to 12:01 a.m., Standard
Time at the location of the risk or risks, January 1, 1998.
Should this Contract terminate while a Loss Occurrence, as defined in
Article 3, Definitions, is in progress, the Reinsurers shall nevertheless
be liable to the extent of their interest, subject to the other conditions
of this Contract, for all losses resulting from such Loss Occurrence,
whether such losses arise before or after such termination, provided that
no part of such Loss Occurrence shall be recoverable from any renewal of
this Contract.
ARTICLE 2
---------
EXCLUSIONS
- ----------
This Contract shall not apply to and specifically excludes:
A. Loss or liability excluded by the provisions of the "Pools,
Associations and Syndicates Exclusion Clause" attached hereto.
B. Any risks written by the Company's Aviation Department or written by
the Company as a member of an Aviation Insurance Group. However, with
respect to Property business, the exclusion shall not apply to
stationary ground risks, cargo and/or aircraft property damage.
C. Accident and Health business.
D. Fidelity business, except when written as a miscellaneous hazard in
Inland Marine transportation policies.
E. All business classified by the Company as Casualty, (including the
Casualty sections of Homeowners, Farmowners and Commercial Multiple
Peril policies).
F. Boiler and Machinery.
G. Workers' Compensation and Employers' Liability business.
H. Hail on growing or standing crops.
I. Livestock Mortality.
J. Mortgage Impairment Insurance with respect to Flood and Earthquake.
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K. Stop loss reinsurance, quota share treaty reinsurance, and surplus
treaty reinsurance assumed from other insurance and reinsurance
companies and from Lloyd's Syndicates.
L. Contract Surety and Credit Insurance.
M. Liability excluded under the provisions of the "Nuclear Incident
Exclusion Clause - Physical Damage - Reinsurance - U.S.A." and the
"Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance -
Canada", attached hereto.
N. Liability arising from participation or membership in an Insolvency
Fund.
O. Financial Guarantee and Insolvency business.
P. War Risks.
Q. Loss/or damage/or costs/or expenses arising from seepage and/or
pollution and/or contamination, other than contamination from smoke
damage. Nevertheless, this exclusion does not preclude any payment of
the cost of removal of debris of property damaged by a loss otherwise
covered hereunder, but subject always to a limit of twenty-five percent
of the Company's property loss under the original policy.
R. Losses in respect of overhead transmission and distribution lines and
their supporting structures, other than those on or within 150 meters
(or 500 feet) of the insured premises. It is understood and agreed
that public utilities extension and/or suppliers extension and/or
contingent business interruption coverages are not subject to this
exclusion, provided that these are not part of a transmitters or
distribution policy.
S. Notwithstanding any other provision of this Contract, the Reinsurers
shall not be liable to the Company for any Extra Contractual
Obligations or Losses in Excess of Policy Limits.
"Extra Contractual Obligations" means those liabilities of the Company,
together with any legal costs and expenses incurred in connection
therewith, paid or payable by the Company as a result of an action
against it or its reassured, by any assured or reassured, the assignee
of any assured or reassured, or a third party claimant, which arise
from the handling of any claim on any insurance contract, such
liabilities arising because of, but not limited to, the following:
failure by the Company or its reassured to settle within the policy
limit, or by reason of alleged or actual negligence, fraud, or bad
faith in rejecting an offer of settlement or in the preparation of the
defense or in the trial of any action against its assured or reassured
or in the preparation or prosecution of an appeal consequent upon such
action.
"Losses in Excess of Policy Limits" means those losses of the Company
or its reassured in excess of the limit of any contract of insurance
or reinsurance reinsured hereunder, such loss in excess of the limit
having been incurred because of failure by the Company or its reassured
to settle within the policy limit or by reason of alleged or actual
negligence, fraud, or bad faith in rejecting an offer of settlement or
in the preparation of the defense or in the
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trial of any action against its assured or reassured or in the
preparation or prosecution of an appeal consequent upon such action.
No inference shall be drawn from the foregoing exclusion of liabilities
that this Contract or any portion of this Contract otherwise covers
such liabilities in the absence of said exclusion.
It is understood that Exclusion B. shall not apply when such hazards are
incidental to and form a minor part of the usual operations of the assured.
These Exclusions, other than M., N., O. and P. shall also not apply in the
event of the Company being interested without its knowledge on an excluded
risk, either by an existing assured extending its operations or by an
inadvertent acceptance by an agent or otherwise; this Contract shall attach
in respect of such prohibited risk, but only until discovery by the
Management of the Home Office and then only for thirty (30) days thereafter.
ARTICLE 3
--------
DEFINITIONS
- -----------
A. The term "policies" wherever used herein, shall mean all policies,
contracts, binders and other evidences of insurance and reinsurance,
whether oral or written, heretofore issued or which may be issued
hereafter by the Company.
B. The term "Loss Occurrence" shall mean the sum of all individual losses
directly occasioned by any one disaster, accident or loss or series of
disasters, accidents or losses arising out of one event which, with
respect to Continental U.S. losses and/or Canadian losses, occurs within
the area of one state of the United States or province of Canada and
states or provinces contiguous thereto and to one another. However,
the duration and extent of any one "Loss Occurrence" shall be limited to
all individual losses sustained by the Company occurring during any
period of 168 consecutive hours arising out of and directly occasioned
by the same event except that the term "Loss Occurrence" shall be
further defined as follows:
1. As regards windstorm, hail, tornado, hurricane, cyclone, including
ensuing collapse and water damage, all individual losses sustained
by the Company occurring during any period of 72 consecutive hours
arising out of and directly occasioned by the same event. However,
the event need not be limited to one state or province or states or
provinces contiguous thereto.
2. As regards riot, riot attending a strike, civil commotion, vandalism
and malicious mischief, all individual losses sustained by the
Company occurring during any period of 72 consecutive hours within
the area of one municipality or county and the municipalities or
counties contiguous thereto arising out of and directly occasioned
by the same event. The maximum duration of 72 consecutive hours may
be extended in respect of individual losses which occur beyond such
72 consecutive hours during the
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continued occupation of an assured's premises by strikers, provided
such occupation commenced during the aforesaid period.
3. As regards earthquake (the epicenter of which need not necessarily
be within the territorial confines referred to in the opening
paragraph of this Section B.) and fire following directly occasioned
by the earthquake, only those individual fire losses which commence
during the period of 168 consecutive hours may be included in the
Company's "Loss Occurrence".
4. As regards "Freeze", only individual losses directly occasioned by
collapse, breakage of glass and water damage (caused by bursting of
frozen pipes and tanks) may be included in the Company's "Loss
Occurrence".
For all those "Loss Occurrences" the Company may choose the date and time
when any such period of consecutive hours commences provided that it is not
earlier than the date and time of the occurrence of the first recorded
individual loss sustained by the Company arising out of that disaster,
accident or loss and provided that only one such period of 168 consecutive
hours shall apply with respect to one event, except for any "Loss
Occurrence" referred to in sub-paragraphs 1. and 2. above where only one
such period of 72 consecutive hours shall apply with respect to one event,
regardless of the duration of the event.
No individual losses occasioned by an event that would be covered by 72
hours clauses may be included in any "Loss Occurrence" claimed under the
168 hours provision.
C. The term "premium income" shall mean gross earned premiums on business
covered hereunder, less return premiums for cancellations and
reductions.
ARTICLE 4
---------
SELF-INSURED OBLIGATIONS
- ------------------------
There shall be included herein all obligations of the Company assumed by it
as a self-insurer or self-insured obligations in excess of any valid and
collectible insurance available to the Company to the same extent as if all
types of insurance described in the Contract were afforded under the
broadest form of policy(ies) issued by the Company.
An insurance or reinsurance wherein any of the companies hereby reinsured
and/or its affiliated and/or subsidiary companies are named as the insured
or reinsured party, either alone or jointly with some other party, shall be
deemed to be an insurance or reinsurance coming within the scope of this
Contract, notwithstanding that no legal liability may arise in respect
thereof by reason of the fact that any of the companies hereby reinsured
and/or its affiliated and/or subsidiary companies may not be obligated by
law to pay a claim to itself and/or its affiliated and/or subsidiary
companies.
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In respect of all such business, the Company shall include in the premium
income hereunder, as defined in Article 3, Definitions, the premiums that
would be paid were such obligations covered by a normal policy or policies.
ARTICLE 5
---------
REINSURING CLAUSE
- -----------------
The Reinsurers will pay to the Company for any loss under this Contract,
whenever the Company has paid or advanced or agreed to pay or advance or
become liable to pay as the result of any one Loss Occurrence, as defined
in Article 3, Definitions, an amount of Ultimate Net Loss, as defined in
Article 8, Ultimate Net Loss, the excess of the appropriate retention(s),
as set forth in the following Schedule, and the sum recoverable hereunder
for each Loss Occurrence shall be 100% of the amount of Ultimate Net Loss
the excess of the appropriate retention(s), but not more than the amount of
the limit of the Reinsurers' liability for each Excess Layer, as set forth
in the following Schedule, and subject further to the limitations set forth
in Article 6, Reinstatement.
Schedule
--------
Retention
(each Loss Limit of Reinsurers' Liability
Occurrence) (each Loss Occurrence)
----------- ------------------------------
A. First Excess Layer $10,000,000 $45,000,000 the excess of
$10,000,000.
B. Third Excess Layer $75,000,000 $25,000,000 the excess of
$75,000,000.
C. Fourth Excess Layer $100,000,000 $35,000,000 the excess of
$100,000,000.
The Company shall retain 100% of the Second Excess Layer with limits of
$20,000,000 excess of $55,000,000.
ARTICLE 6
---------
REINSTATEMENT
- -------------
In the event of any portion of the limit under this Contract being exhausted
by loss, each Loss Occurrence, as defined in Article 3, Definitions, reduces
the amount of indemnity provided under this Contract by the amount paid.
The amount so exhausted shall be automatically reinstated from the time of
the Loss Occurrence, and for each amount so reinstated the Company agrees to
pay to the Reinsurers an additional reinsurance premium calculated at pro
rata of the premium (excluding
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reinstatement premium) as respects the fraction of indemnity exhausted and
100% of the premium regardless of the unexpired term of this Contract, to
be settled simultaneously with the payment of losses by the Reinsurers.
Nevertheless, the Reinsurers' liability shall never be more than 100% of:
In respect of all Loss
In respect of any one Occurrences during the
Loss Occurrence the term of this Contract
--------------------- -------------------------
A. First Excess Layer $45,000,000 $90,000,000
B. Third Excess Layer $25,000,000 $50,000,000
C. Fourth Excess Layer $35,000,000 $70,000,000
ARTICLE 7
---------
PREMIUM
- -------
The Company shall pay to the Reinsurers a deposit reinsurance premium for
each layer as provided in the following Schedule. It is agreed that the
final developed premium for each layer, calculated by applying the
following rates to the Company's premium income, as defined in Article 3,
Definitions, shall also be subject to a minimum premium for the layer as
follows:
Schedule
--------
Annual Reinsurance Premiums
---------------------------
Rate Deposit Premium Minimum Premium
---- --------------- ---------------
A. First Excess Layer 2.795% $4,400,000 $3,520,000
B. Third Excess Layer 0.754% $1,187,500 $950,000
C. Fourth Excess Layer 0.778% $1,225,000 $980,000
Deposit premiums shall be paid to the Reinsurers in equal semi-annual
installments at January 1, 1997, and July 1, 1997. As soon as practicable
after the January 1, 1998 expiration of this Contract, the Company shall
furnish to the Reinsurers a statement of the premium income, as defined in
Article 3, Definitions, accounted for by the Company during the term of this
Contract, and adjustment shall then be made in accordance with the foregoing
Schedule.
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ARTICLE 8
---------
ULTIMATE NET LOSS
- -----------------
The term "Ultimate Net Loss" shall mean the amount paid or payable by the
Company in settlement of losses or liability, after deducting all
recoveries, all salvage and all amounts due from any other reinsurers
(except as noted in Article 9, Net Retained Lines) and shall include all
adjustment and legal expenses in connection with the adjustment and
settlement of claims including an allowance for salaried adjusters or other
salaried employees employed by the Company while diverted from normal duties
to the service of field adjustment in connection with losses for which claim
is made hereunder, at the per diem rate normally applied in the Company's
books to such employees, plus expenses incurred by such employees in
connection with such adjustments. Also, expenses of the Company's officials
incurred in connection with the loss, but no salaries of the Company's
officials or any normal overhead charges, such as rent, postage, lighting,
heating, cleaning, etc., shall be included.
All salvage and recoveries received subsequent to a loss settlement under
this Contract shall be applied as if received prior to said loss settlement,
and all necessary adjustments shall be made between the Company and the
Reinsurers.
Nothing in this Article shall be construed to mean that losses under this
Contract are not recoverable until the Company's Ultimate Net Loss has been
ascertained.
ARTICLE 9
---------
NET RETAINED LINES
- ------------------
Except as otherwise specifically provided, this Contract applies only to
that portion of any insurance or reinsurance which the Company retains for
its own account (including the Company's net retention in all underlying
reinsurance programs) and, in calculating the amount of loss hereunder and
also in computing the amount or amounts in excess of which this Contract
attaches, only loss in respect of that portion of any insurance or
reinsurance which the Company retains net for its own account shall be
included.
The amount of the Reinsurers' liability hereunder in any Loss Occurrence,
as defined in Article 3, Definitions, shall not be increased by reason of
the inability of the Company to collect from any other reinsurers, whether
specific or general, any amount which may have become due from them, whether
such inability arises from the insolvency of such other reinsurers or not.
Notwithstanding the preceding paragraphs, the Company has in effect an 85%
New Jersey Homeowners Quota Share Reinsurance Contract, where a portion of
the recoveries shall inure to the benefit of the Company, subject to a
minimum net retention, any one loss occurrence, as
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defined therein, of not less than $1,000,000, any and all recoveries in
excess of the $1,000,000 minimum net retention shall inure to the benefit
of the Reinsurers hereunder.
It is warranted that in addition to the initial net loss retentions
hereunder, the Company shall retain for its own account and not reinsured in
any way at least 5% of the excess loss covered under this Contract.
ARTICLE 10
----------
LOSS SETTLEMENTS
- ----------------
The Company shall advise the Reinsurers promptly of all Loss Occurrences,
as defined in Article 3, Definitions, which, in the opinion of the Company,
may result in a claim under this Contract and shall also keep the Reinsurers
advised of any subsequent material developments in connection therewith.
All loss settlements made by the Company, provided they are within the terms
of the original policies and of this Contract, shall be unconditionally
binding on the Reinsurers, who agree to pay all amounts for which they may
be liable immediately upon being furnished by the Company with reasonable
evidence of the amount due or to be due.
ARTICLE 11
----------
CURRENCY
- --------
For purposes of this Contract, the net retained liability, as defined in
Article 9, Net Retained Lines, and the Ultimate Net Loss of the Company, as
defined in Article 8, Ultimate Net Loss, and the limit of the Reinsurers'
liability, as determined in Article 5, Reinsuring Clause, shall be
considered in terms of the Canadian currency for all policies issued by the
Company in Canadian Dollars and in terms of United States Dollars for all
other policies. If a Loss Occurrence, as defined in Article 3, Definitions,
involves policies issued in both United States and Canadian Dollars, the net
retained liability and the Ultimate Net Loss of the Company and the limit of
the Reinsurers' liability shall be apportioned between the two currencies in
the proportion that the Ultimate Net Loss in each currency bears to the
total Ultimate Net Loss of the Company. All loss payments hereunder shall
be made in United States or Canadian Dollars in accordance with these
provisions.
Payment of the reinsurance premium hereunder at the rate specified in
Article 5, Reinsuring Clause, shall be made in Canadian Dollars for policies
issued by the Company in Canadian Dollars and in United States Dollars for
all other policies.
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ARTICLE 12
----------
TAXES
- -----
In consideration of the terms under which this Contract is issued, the
Company agrees not to claim any deduction in respect of the premium hereon
when making Canadian tax returns or tax returns, other than Income or
Profits Tax returns, to any state or territory of the United States of
America or the District of Columbia.
ARTICLE 13
----------
FEDERAL EXCISE TAX
- ------------------
(This Article applies only to those Reinsurers, excepting Underwriters at
Lloyd's, London and other Reinsurers exempt from the Federal Excise Tax, who
are domiciled outside the United States of America.)
The Reinsurers have agreed to allow for the purpose of paying the Federal
Excise Tax the percentage specified by United States law of the premium
payable hereon to the extent such premium is subject to Federal Excise Tax.
In the event of any return of premium becoming due hereunder, the Reinsurers
will deduct the percentage specified by United States law from the amount of
the return and the Company or its agent should take steps to recover the tax
from the U.S. Government.
ARTICLE 14
----------
ERRORS AND OMISSIONS
- --------------------
Any inadvertent delay, omission or error shall not be held to relieve either
party hereto from any liability which would attach to it hereunder if such
delay, omission or error had not been made, provided such delay, omission or
error is rectified as soon as practicable upon discovery.
ARTICLE 15
----------
ACCESS TO RECORDS
- -----------------
The Reinsurers or their designated representatives shall have access at any
reasonable time to all records of the Company which pertain in any way to
this Contract.
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ARTICLE 16
----------
INSOLVENCY
- ----------
In the event of the insolvency of the Company, this reinsurance shall be
payable directly to the Company, or to its liquidator, receiver, conservator
or statutory successor on the basis of the liability of the Company under
the policies or contracts reinsured without diminution because of the
insolvency of the Company or because the liquidator, receiver, conservator
or statutory successor of the Company has failed to pay all or a portion of
any claim. It is agreed, however, that the liquidator, receiver,
conservator, or statutory successor of the Company shall give written notice
to the Reinsurers of the pendency of a claim against the Company indicating
the policy or bond reinsured, which claim would involve a possible liability
on the part of the Reinsurers within a reasonable time after such claim is
filed in the conservation or liquidation proceeding or in the receivership,
and that during the pendency of such claim, the Reinsurers may investigate
such claim and interpose, at their own expense, in the proceeding where such
claim is to be adjudicated any defense or defenses that they may deem
available to the Company or its liquidator, receiver, conservator or
statutory successor. The expense thus incurred by the Reinsurers shall be
chargeable, subject to the approval of the court, against the Company as
part of the expense of conservation or liquidation to the extent of a pro
rata share of the benefit which may accrue to the Company solely as a result
of the defense undertaken by the Reinsurers.
Where two or more Reinsurers are involved in the same claim and a majority
in interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of the reinsurance Contract as
though such expense had been incurred by the Company.
As to all reinsurance made, ceded, renewed or otherwise becoming effective
under this Contract, the reinsurance shall be payable as set forth above by
the Reinsurers to the Company or to its conservator, liquidator or statutory
successor, (except as provided by Section 4118(a)(1)(A) and Section 1114(c)
of the New York Insurance Law or) except (1) where the Contract specifically
provides another payee in the event of the insolvency of the Company, and
(2) where the Reinsurers, with the consent of the direct assured or
assureds, have assumed such policy obligations of the Company as direct
obligations of the Reinsurers to the payees under such policies and in
substitution for the obligations of the Company to such payees. Then, and
in that event only, the Company, with the prior approval by the
Superintendent of Insurance of the State of New York of the certificate of
assumption on New York risks, is entirely released from its obligation and
the Reinsurers pay any loss directly to payees under such policy.
Should any party hereto be placed in rehabilitation or liquidation or should
a rehabilitator, liquidator, receiver, conservator or other person or entity
of similar capacity be appointed as respects such party, all amounts due any
of the parties hereto whether by reason of premiums, losses or otherwise
under this Contract or any other Contract(s) of reinsurance heretofore or
hereafter entered into between the parties (whether or not any such
Contract(s) be assumed or ceded) shall at all times be subject to the right
of offset at any time and from time to time, and upon the exercise of same,
only the net balance shall be due and payable in accordance with
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Section 7427 of the Insurance Law of the State of New York to the extent
such statute or any other applicable law, statute or regulation governing
such offset shall apply.
ARTICLE 17
----------
ARBITRATION
- -----------
As a precedent to any right of action hereunder, if any dispute shall arise
between the parties to this Contract with reference to the interpretation of
this Contract or their rights with respect to any transaction involved,
whether such dispute arises before or after termination of this Contract,
such dispute, upon the written request of either party, shall be submitted
to three arbitrators, one to be chosen by each party, and the third by the
two so chosen. If either party refuses or neglects to appoint an arbitrator
within thirty days after the receipt of written notice from the other party
requesting it to do so, the requesting party may appoint two arbitrators.
If the two arbitrators fail to agree in the selection of a third arbitrator
within thirty 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. All arbitrators shall be active or retired disinterested executive
officers of insurance or reinsurance companies or Underwriters at Lloyd's,
London not under the control of either party to this Contract.
The arbitrators shall interpret this Contract as an honorable engagement and
not as merely a legal obligation. They are relieved of all judicial
formalities and may abstain from following the strict rules of law. They
shall make their award with a view to effecting the general purpose of this
Contract in a reasonable manner rather than in accordance with a literal
interpretation of the language. Each party shall submit its case to its
arbitrator within thirty days of the appointment of the third arbitrator.
The decision in writing of any two arbitrators, when filed with the parties
hereto, shall be final and binding on both parties. Judgment may be entered
upon the final decision of the arbitrators in any court having jurisdiction.
Each party shall bear the expense of its own arbitrator and shall jointly
and equally bear with the other party the expense of the third arbitrator
and of the arbitration. Said arbitration shall take place in the city in
which the Company's Head Office is located unless some other place is
mutually agreed upon by the parties to this Contract.
ARTICLE 18
----------
SERVICE OF SUIT
- ---------------
(This Article applies only to those Reinsurers not domiciled in the United
States of America, and/or not authorized in any state, territory and/or
district of the United States where authorization is required by insurance
regulatory authorities.)
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It is agreed that in the event of the failure of a Subscribing Reinsurer to
pay any amount claimed to be due under this Contract, the Subscribing
Reinsurer, at the request of the Company, will submit to the jurisdiction
of any court of competent jurisdiction within the United States of America
and will comply with all requirements necessary to give such court
jurisdiction; and all matters arising hereunder shall be determined in
accordance with the law and practice of such court. Nothing in this Article
constitutes or should be understood to constitute a waiver of the
Subscribing Reinsurer's rights to commence an action in any court of
competent jurisdiction in the United States, to remove an action to a United
States District Court, or to seek a transfer of a case to another court as
permitted by the laws of the United States or of any state in the United
States.
Service of process in such suit may be made upon Mendes and Mount, 750
Seventh Avenue, New York, New York 10019-6879 (hereinafter, "agent for
service of process") and in any suit instituted against a Reinsurer upon
this Contract, that Reinsurer will abide by the final decision of such court
or of any appellate court in the event of an appeal.
The above named are authorized and directed to accept service of process on
behalf of the Reinsurer in any such suit and/or upon the request of the
Company to give a written undertaking to the Company that the agent for
service of process will enter a general appearance on behalf of the
Reinsurer in the event such a suit shall be instituted.
Further, pursuant to any statute of any state, territory or district of the
United States of America which makes provision therefor, the Reinsurers
hereby designate the Superintendent, Commissioner or Director of Insurance
or other officer specified for that purpose in the statute, or his successor
or successors in office, as their true and lawful attorney upon whom may be
served any lawful process in any action, suit or proceeding instituted by or
on behalf of the Company or any beneficiary hereunder arising out of this
Contract and hereby designate the agent for service of process as the firm
to whom the said officer is authorized to mail such process or a true copy
thereof.
ARTICLE 19
----------
LOSS RESERVES
- -------------
(This Article applies to those Reinsurers who do not qualify for credit by
any state or any other governmental authority having jurisdiction over the
Company's loss reserves.)
A: Where a Letter of Credit Trust Agreement is used, the following clause
shall apply:
It is agreed that when the Company files with the Insurance Department
or establishes reserves for claims covered hereunder, as required by
law, the Company will forward to the Reinsurers a statement showing the
proportion of such loss reserves which is applicable to the Reinsurers.
The Reinsurers hereby agree to apply for and secure delivery to the
Company of a clean, irrevocable and unconditional Letter of Credit, with
a minimum term of
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one year, that is issued or confirmed, and presentable and payable in
the United States by any bank or trust company that must be issued or
confirmed by a bank member of the Federal Reserve System, and is in a
format acceptable to the governmental authority having jurisdiction
over the Company's loss reserves in an amount equal to the Reinsurers'
proportion of said loss reserves. Under no circumstances shall any
amount relating to reserves in respect of incurred but not reported
losses be funded in the amount of the Letter of Credit. The foregoing
shall not affect the Company's authority to draw upon the Letter of
Credit to cover all obligations due or which become due to the Company
under this Contract, including losses incurred but not reported, in the
event that a nonrenewal or nonextension notice is received from the
issuing bank.
The Company and the Reinsurers agree that such Letter of Credit will be
subject to the terms of a separate Letter of Credit Trust Agreement,
and that said trust agreement shall be in a form acceptable to the
governmental authority having jurisdiction over the Company's loss
reserves.
The designated bank shall have no responsibility whatsoever in
connection with the propriety of withdrawals made by the Company or the
disposition of funds withdrawn, except to see that withdrawals are made
only upon the order of properly authorized representatives of the
Company.
B: Where a Letter of Credit Trust Agreement is not used, the following
clause shall apply:
It is agreed that when the Company files with the Insurance Department
or establishes reserves for claims covered under this Contract, as
required by law, the Company will forward to the Reinsurers a statement
showing the proportion of such loss reserves which is applicable to the
Reinsurers. The Reinsurers hereby agree to apply for and secure
delivery to the Company of a clean, irrevocable and unconditional Letter
of Credit, with a minimum term of one year, that is issued or confirmed,
and presentable and payable in the United States by any bank or trust
company that must be issued or confirmed by a bank member of the Federal
Reserve System, and is in a format acceptable to the governmental
authority having jurisdiction over the Company's loss reserves in an
amount equal to the Reinsurers' proportion of said loss reserves. Under
no circumstances shall any amount relating to reserves in respect of
incurred but not reported losses be funded in the amount of the Letter
of Credit. The foregoing shall not affect the Company's authority to
draw upon the Letter of Credit to cover all obligations due or which
become due to the Company under this Contract, including losses incurred
but not reported, in the event that a nonrenewal or nonextension notice
is received from the issuing bank.
The Company and the Reinsurers agree that the Letter of Credit provided
by the Reinsurers under this provision may be drawn upon at any time,
notwithstanding any other provisions in this Contract, and be utilized
by the Company or any successor by operation of law of the Company,
including, without limitation, any liquidator, rehabilitator, receiver
or conservator of such insurer for the following purposes:
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1. to reimburse the Company for the Reinsurers' share of surrenders
and benefits or losses paid by the Company under the terms and
provisions of the policies reinsured under this Contract,
2. to fund an account with the Company in an amount at least equal to
the deduction, for reinsurance ceded, from the Company's liabilities
for policies ceded under this Contract. Such amount shall include,
but not be limited to, amounts for policy reserves, reserves for
claims and losses incurred (including losses incurred but not
reported), and loss adjustment expenses,
3. to pay any other amounts the Company claims are due under this
Contract,
4. to return any amounts drawn down on Letters of Credit in excess of
the actual amounts required for 1. and 2. above, or in case of 3.
above, any amounts which are subsequently determined not to be due.
All of the foregoing should be applied without diminution because of
insolvency on the part of the Company or the Reinsurers.
The designated bank shall have no responsibility whatsoever in
connection with the propriety of withdrawals made by the Company or the
disposition of funds withdrawn, except to see that withdrawals are made
only upon the order of properly authorized representatives of the
Company.
ARTICLE 20
----------
INTERMEDIARY
- ------------
Guy Carpenter & Company, Inc. is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All communications
(including but not limited to notices, statements, premiums, return
premiums, commissions, taxes, losses, loss adjustment expenses, salvages,
and loss settlements) relating thereto shall be transmitted to the Company
or the Reinsurers through Guy Carpenter & Company, Inc., Two World Trade
Center, New York, New York 10048. Payments by the Company to the
Intermediary shall be deemed to constitute payment to the Reinsurers.
Payments by the Reinsurers to the Intermediary shall be deemed to constitute
payment to the Company only to the extent that such payments are actually
received by the Company.
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POOLS, ASSOCIATIONS AND SYNDICATES EXCLUSION CLAUSE
---------------------------------------------------
SECTION A
- ---------
Excluding:
(a) All Business derived directly or indirectly from any Pool,
Association or Syndicate which maintains its own reinsurance
facilities.
(b) Any Pool or Scheme (whether voluntary or mandatory) formed after
March 1, 1968 for the purpose of insuring Property whether on a
country-wide basis or in respect of designated areas. This
exclusion shall not apply to so-called Automobile Insurance Plans
or other Pools formed to provide coverage for Automobile Physical
Damage.
SECTION B
- ---------
It is agreed that business written by the Company for the same perils, which
is known at the time to be insured by, or in excess of underlying amounts
placed in the following Pools, Associations or Syndicates, whether by way of
insurance or reinsurance, is excluded hereunder:
Industrial Risk Insurers; Associated Factory Mutuals; Improved Risk
Mutuals.
Any Pool, Association or Syndicate formed for the purpose of writing
Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs.
United States Aircraft Insurance Group, Canadian Aircraft Insurance
Group, Associated Aviation Underwriters, American Aviation Underwriters.
Section B does not apply:
(a) Where the Total Insured Value over all interests of the risk in
question is less than $300,000,000. Except in relation to
business where Hartford and I.R.I. are jointly insuring a risk,
the Total Insured Value over all interests of the risk in question
is less than $500,000,000.
(b) To interests traditionally underwritten as Inland Marine or Stock
and/or Contents written on a Blanket basis.
(c) To Contingent Business Interruption, except when the Company is
aware that the key location is known at the time to be insured in
any Pool, Association or Syndicate named above, other than as
provided for under Section B (a).
(d) To risks as follows: Offices, Hotels, Apartments, Hospitals,
Educational Establishments, Public Utilities (other than Railroad
Schedules) and Builders Risks on the classes of risks specified in
this subsection (d) only.
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SECTION C
- ---------
NEVERTHELESS the Reinsurers specifically agree that liability accruing to
the Company from its participation in Residual Market Mechanisms, including
but not limited to,
(1) The following so-called "Coastal Pools"
ALABAMA INSURANCE UNDERWRITING ASSOCIATION
FLORIDA WINDSTORM UNDERWRITING ASSOCIATION
LOUISIANA INSURANCE UNDERWRITING ASSOCIATION
MISSISSIPPI WINDSTORM UNDERWRITING ASSOCIATION
NORTH CAROLINA INSURANCE UNDERWRITING ASSOCIATION
SOUTH CAROLINA WINDSTORM AND HAIL UNDERWRITING ASSOCIATION
TEXAS CATASTROPHE PROPERTY INSURANCE ASSOCIATION
GEORGIA UNDERWRITING ASSOCIATION
VIRGINIA PROPERTY INSURANCE ASSOCIATION
(2) All "Fair Plan" and "Rural Risk Plan" Business, for all perils
otherwise protected hereunder shall not be excluded, except that this
Contract does not include any increase in such liability resulting
from:
(i) The inability of any other participant in such Residual Market
Mechanisms, including but not limited to, "Coastal Pool" and/or
"Fair Plan" and/or "Rural Risk Plan", to meet its liability.
(ii) Any Claim against such Residual Market Mechanisms, including but
not limited to, "Coastal Pool" and/or "Fair Plan", and/or "Rural
Risk Plan" or any participant therein, including the Company,
whether by way of subrogation or otherwise, brought by or on
behalf of any insolvency fund (as defined in the Insolvency Funds
Exclusion Clause incorporated in this Contract).
- ---------------------------------------------------------------------------
NOTES: Wherever used herein the terms:
"Company" shall be understood to mean "Company", "Reinsured",
"Reassured" or whatever other term is used in the
attached reinsurance document to designate the
reinsured company or companies.
"Agreement" shall be understood to mean "Agreement", "Contract",
"Policy" or whatever other term is used to designate
the attached reinsurance document.
"Reinsurers" shall be understood to mean "Reinsurers",
"Underwriters" or whatever other term is used in the
attached reinsurance document to designate the
reinsurer or reinsurers.
Effective: January 1, 1997 17 of 21
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NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE -
REINSURANCE - U.S.A.
1. This Reinsurance does not cover any loss or liability accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer,
from any Pool of Insurers or Reinsurers formed for the purpose of
covering Atomic or Nuclear Energy risks.
2. Without in any way restricting the operation of paragraph (1) of this
clause, this Reinsurance does not cover any loss or liability accruing
to the Reassured, directly or indirectly and whether as Insurer or
Reinsurer, from any insurance against Physical Damage (including
business interruption or consequential loss arising out of such
Physical Damage) to:
I. Nuclear reactor power plants including all auxiliary property on
the site, or
II. Any other nuclear reactor installation, including laboratories
handling radioactive materials in connection with reactor
installations, and "critical facilities" as such, or
III. Installations for fabricating complete fuel elements or for
processing substantial quantities of "special nuclear material",
and for reprocessing, salvaging, chemically separating, storing or
disposing of "spent" nuclear fuel or waste materials, or
IV. Installations other than those listed in paragraph (2) III above
using substantial quantities of radioactive isotopes or other
products of nuclear fission.
3. Without in any way restricting the operations of paragraphs (1) and (2)
hereof, this Reinsurance does not cover any loss or liability by
radioactive contamination accruing to the Reassured, directly or
indirectly, and whether as Insurer or Reinsurer, from any insurance on
property which is on the same site as a nuclear reactor power plant or
other nuclear installation and which normally would be insured therewith
except that this paragraph (3) shall not operate
(a) where Reassured does not have knowledge of such nuclear reactor
power plant or nuclear installation, or
(b) where said insurance contains a provision excluding coverage for
damage to property caused by or resulting from radioactive
contamination, however caused. However on and after 1st January
1960 this sub-paragraph (b) shall only apply provided the said
radioactive contamination exclusion provision has been approved by
the Governmental Authority having jurisdiction thereof.
4. Without in any way restricting the operations of paragraphs (1), (2)
and (3) hereof, this Reinsurance does not cover any loss or liability
by radioactive contamination accruing to the Reassured, directly or
indirectly, and whether as Insurer or Reinsurer, when such radioactive
contamination is a named hazard specifically insured against.
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5. It is understood and agreed that this clause shall not extend to risks
using radioactive isotopes in any form where the nuclear exposure is
not considered by the Reassured to be the primary hazard.
6. The term "special nuclear material" shall have the meaning given it in
the Atomic Energy Act of 1954 or by any law amendatory thereof.
7. Reassured to be sole judge of what constitutes:
(a) substantial quantities, and
b) the extent of installation, plant or site.
12/12/57
NMA 1119
- -------------------------------------------------------------------------
NOTES: Wherever used herein the terms:
"Reassured" shall be understood to mean "Company", "Reinsured",
"Reassured" or whatever other term is used in the
attached reinsurance document to designate the
reinsured company or companies.
"Agreement" shall be understood to mean "Agreement", "Contract",
"Policy" or whatever other term is used to designate
the attached reinsurance document.
"Reinsurers" shall be understood to mean "Reinsurers",
"Underwriters" or whatever other term is used in the
attached reinsurance document to designate the
reinsurer or reinsurers.
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NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE - CANADA
1. This Contract does not cover any loss or liability accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer,
from any Pool of Insurers or Reinsurers formed for the purpose of
covering Atomic or Nuclear Energy risks.
2. Without in any way restricting the operation of paragraph 1 of this
clause, this Contract does not cover any loss or liability accruing to
the Reassured, directly or indirectly, and whether as Insurer or
Reinsurer, from any insurance against Physical Damage (including
business interruption or consequential loss arising out of such
Physical Damage) to:
(a) Nuclear reactor power plants including all auxiliary property on
the site, or
(b) Any other nuclear reactor, installation, including laboratories
handling radioactive materials in connection with reactor
installations, and critical facilities as such, or
(c) Installations for fabricating complete fuel elements or for
processing substantial quantities of prescribed substances, and
for reprocessing, salvaging, chemically separating, storing or
disposing of spent nuclear fuel or waste materials, or
(d) Installations other than those listed in (c) above using
substantial quantities of radioactive isotopes or other products
of nuclear fission.
3. Without in any way restricting the operation of paragraphs 1 and 2 of
this clause, this Contract does not cover any loss or liability by
radioactive contamination accruing to the Reassured, directly or
indirectly, and whether as Insurer or Reinsurer from any insurance on
property which is on the same site as a nuclear reactor power plant or
other nuclear installation and which normally would be insured
therewith, except that this paragraph 3 shall not operate.
(a) where the Reassured does not have knowledge of such nuclear reactor
power plant or nuclear installation, or
(b) where the said insurance contains a provision excluding coverage
for damage to property caused by or resulting from radioactive
contamination, however caused.
4. Without in any way restricting the operation of paragraphs 1, 2 and 3
of this clause, this Contract does not cover any loss or liability by
radioactive contamination accruing to the Reassured, directly or
indirectly, and whether as Insurer or Reinsurer, when such radioactive
contamination is a named hazard specifically insured against.
5. This clause shall not extend to risks using radioactive isotopes in any
form where the nuclear exposure is not considered by the Reassured to
be the primary hazard.
6. The term "prescribed substances" shall have the meaning given it by the
Atomic Energy Control Act or by any law amendatory thereof.
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7. The Reassured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
8. Without in any way restricting the operation of paragraphs 1, 2, 3
and 4 of this clause, this Contract does not cover any loss or
liability accruing to the Reassured, directly or indirectly, and
whether as Insurer or Reinsurer, caused:
(a) by any nuclear incident as defined in the Nuclear Liability Act or
any other nuclear liability act, law or statute, or any law
amendatory thereof or nuclear explosion, except for ensuing loss or
damage which results directly from fire, lightning or explosion of
natural, coal or manufactured gas; or
(b) by contamination by radioactive material.
NOTE: - Without in any way restricting the operation of paragraph 1, 2, 3
and 4 of this clause, paragraph 8 of this clause shall only apply to all
original contracts of the Reassured whether new, renewal or replacement
which become effective on or after December 31, 1992.
NMA 1980
(1/1/93)
- --------------------------------------------------------------------------
NOTES: Wherever used herein the terms:
"Reassured" shall be understood to mean "Company", "Reinsured",
"Reassured" or whatever other term is used in the
attached reinsurance document to designate the
reinsured company or companies.
"Contract" shall be understood to mean "Agreement", "Contract",
"Policy" or whatever other term is used to designate
the attached reinsurance document.
"Reinsurers" shall be understood to mean "Reinsurers",
"Underwriters" or whatever other term is used in the
attached reinsurance document to designate the
reinsurer or reinsurers.
Effective: January 1, 1997 21 of 21
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SUMMARY OF CHANGES
to the
THE SELECTIVE INSURANCE GROUP
PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT
This Contract effective January 1, 1997, follows the 1996 Contract with the
exception of the following:
1. Throughout the Contract, all dates, rates, and premium amounts have
been amended to reflect the terms of the firm order, and the current
structure of:
First - $45MM xs $10MM
Third - $25MM xs $75MM
Fourth - $35MM xs $100MM.
2. Article 3, Definitions; Paragraph C. has been amended to delete the
phrase "less premiums inuring to the benefit of the Reinsurers hereunder"
in accordance with the placement slip.
3. Article 5, Reinsuring Clause; All limits and retentions have been
amended to reflect the current structure in #1 above. The following
sentence has also been added "The Company shall retain 100% of the Second
Excess Layer with limits of $20,000,000 excess of $55,000,000", in
accordance with the placement slip.
4. Article 6, Reinstatement; The first paragraph has been amended to
delete the reference to "annual premium"; add the phrase "(excluding
reinstatement premiums)"; amend the last line to read "to be settled
simultaneously"; and amend the Reinsurers' limit of liability in accordance
with the placement slip.
5. Article 9, Net Retained Lines; The first paragraph has been amended to
read "otherwise specifically provided", and the third paragraph has been
amended to delete the reference to "various underlying reinsurances" and
replace it with the reference to the Company's 85% New Jersey Homeowners
Quota Share, in accordance with the placement slip.
6. Article 20, Catastrophe Claims Trust Fund Settlement; This Article has
been deleted in accordance with the placement slip.
Effective: January 1, 1997
3645-21