QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
This agreement made by and between Employers Mutual Casualty
Company ("Employers") and EMC Reinsurance Company ("EMC Re").
ARTICLE I
EMC Re is an affiliate of Employers and was formed by Employers
for the sole purpose of engaging in the business of reinsurance.
It is the intention of the parties hereto that EMC Re will
solicit, underwrite, and assume reinsurance risks in a mode of
operation similar to that heretofore conducted by Employers, and
that consistent therewith, EMC Re will gradually assume by means
of this Quota Share Agreement, the major portion of the reinsurance
assumed business of Employers as is in force or as may be placed
in force by Employers.
ARTICLE II
Excluded from this Quota Share Agreement at its inception
are: (1) all direct insurance business written by Employers
and its affiliated companies; (2) all involuntary insurance or
reinsurance business written by Employers and classed by Employers
as "facilities business"; (3) facultative reinsurance assumed
contracts; (4) intercompany reinsurance contracts between
96
Employers and its affiliated companies; (5) reinsurance assumed
contracts that have been terminated or are in the process of
termination.
ARTICLE III
Pursuant to and subject to the foregoing, Employers hereby
cedes and transfers to EMC Re, and EMC Re hereby accepts, a
quota share portion of the reinsurance contracts on which Employers
is subject to liability which were outstanding and in force as
of 12:01 a.m. January 1, 1981, or which were issued thereafter,
or as shall be issued hereafter, in accordance with the Assumption
Addendum attached hereto. Such liability shall include reserves
for unearned premiums, outstanding loss and loss expenses (including
unreported losses) and all other underwriting and administrative
expenses, but shall not include liabilities incurred in connection
with investment transactions. Employers hereby assigns and trans-
fers to EMC Re amounts equal to the aggregate of the liabilities
quota shared as above, less a commission for the prepaid expenses
of Employers.
ARTICLE IV
Employers shall not be prejudiced in any way by any error
or omission through accident or oversight resulting in a failure
to accurately or fully cede, report, or recover with respect to
this Quota Share Agreement, but any such error or omission shall
be corrected immediately upon discovery.
97
ARTICLE V
This agreement is a continuing one and is unlimited as to
duration, but may be terminated as of the end of any calendar
year upon ninety days prior written notice; or may be otherwise
terminated by agreement of the parties.
ARTICLE VI
Each of the parties hereto agrees that the reinsurance
business quota shared hereunder shall be payable by EMC Re on
the basis of the liability of Employers under the contracts
reinsured without diminution because of the insolvency of
Employers; provided that such reinsurance shall be payable
directly to Employers or its liquidator, receiver or such other
statutory successor, except as provided by Section 315 of new
York Insurance Law, or except (a) where the contract specifically
provides another payee for such reinsurance in the event of the
insolvency of the ceding insurer and (b) where EMC Re, with the
consent of the direct reinsured company, has assumed such contract
obligations of Employers as direct obligations of EMC Re to the
payees under wich reinsurance contracts and in substitution for
the obligations of Employers to such payees; and further provided
that the liquidator, receiver or statutory successor of Employers
shall give written notice of the pendency of any claim against
Employers on such contracts with any reasonable time after such
claim; and EMC Re may investigate such claim and interpose, at
its own expense, in the proceeding where such claim is to be
98
ajudicated in the defense or defenses which it may deem
available to Employers or its liquidator, receiver or statutory
successor, the expense thus incurred by EMC Re to be chargable,
subject to court approval, against Employers as part of the expense
of liquidation to the extent of a proportionate share of the benefit
which may accrue to Employers solely as a result of the defense
undertaken by EMC Re.
Executed by the parties hereto the day and year as reflected
in the Assumption Addendum attached hereto.
99
ASSUMPTION ADDENDUM
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
This agreement shall incept as 12:01 a.m. on the date
executed by the parties hereto. The parties to this agreement
mutually agree that as of its inception, the quota share
portion of the net liabilities of Employers as 12:01 a.m.
January 1, 1981 ceded to and assumed by EMC Re shall be five
percent.
Executed by the parties hereto this 10th day of
June, 1981.
Employers Mutual Casualty Company
By:/s/ Robb B. Kelley
--------------------------------------
Robb B. Kelley, President
EMC Reinsurance Company
By:/s/ Richard E. Haskins
--------------------------------------
Richard E. Haskins, President
100
AMENDMENT #1
TO
ASSUMPTION ADDENDUM
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
The parties to this agreement mutually agree that the quota
share portion of the net liabilities of Employers at 12:01 a.m.
January 1, 1982 ceded to and assumed by EMC Re shall be twenty-
five percent.
Executed by the parties hereto this 3rd day of January, 1982.
Employers Mutual Casualty Company
By:/s/ Robb B. Kelley
------------------------------
Robb B. Kelley, President
EMC Reinsurance Company
By:/s/ Richard E. Haskins
------------------------------
Richard E. Haskins, President
101
AMENDMENT #2
TO
ASSUMPTION ADDENDUM
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
The parties to this agreement mutually agree that the quota
share portion of the net liabilities of Employers at 12:01 a.m.
January 1, 1983 ceded to and assumed by EMC Re shall be fifty
percent.
Executed by the parties hereto this 18th day of March, 1983.
Employers Mutual Casualty Company
By:/s/ George W. Kochheiser
------------------------------
George W. Kochheiser, President
EMC Reinsurance Company
By:/s/ Richard E. Haskins
------------------------------
Richard E. Haskins, President
102
AMENDMENT #3
TO
ASSUMPTION ADDENDUM
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
The parties to this agreement mutually agree that the quota
share portion of the net liabilities of Employers at 12:01 a.m.
January 1, 1984 ceded to and assumed by EMC Re shall be seventy-
five percent.
Executed by the parties hereto this 3rd day of January, 1984.
Employers Mutual Casualty Company
By:/s/ Robb B. Kelley
-------------------------------
Robb B. Kelley, Chairman & CEO
EMC Reinsurance Company
By:/s/ Richard E. Haskins
-------------------------------
Richard E. Haskins, President
103
AMENDMENT #4
TO
ASSUMPTION ADDENDUM
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
The parties to this agreement mutually agree that the quota
share portion of the net liabilities of Employers at 12:01 a.m.
January 1, 1988 ceded to and assumed by EMC Re shall be ninety-
five percent.
Executed by the parties hereto this 9th day of March, 1988.
Employers Mutual Casualty Company
By:/s/ Robb B. Kelley
------------------------------
Robb B. Kelley, Chairman & CEO
EMC Reinsurance Company
By:/s/ Richard E. Haskins
------------------------------
Richard E. Haskins, President
104
ENDORSEMENT #1
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
It is understood and agreed by and between the parties as follows:
1. Certain business subject to this agreement and ceded hereunder was
protected by pro-rata and excess of loss reinsurances; such
reinsurances to enure to the benefit of the parites as their
interests appear herein.
2. Such reinsurances were represented to be collectable; there was no
intent to transfer to the reinsurer the credit risk of non-
collectable reinsurances other than as would be deemed incidental;
and there was no consideration contemplated nor given for the
assumption of such credit risk.
3. At various times during the pendency of this agreement the parties
have come to perceive that recoverables from on such reinsurer,
Transit Casualty Company, were becoming of doubtful collectability,
and the parties began a scheduled "write down" of receivables from
that source as their interests appeared in order to recognize the
degree of doubt perceived.
4. The parties have now determined that no part of such receivables
from Transit Casualty Company are collectable, and that the entire
account should be written off as a bad debt.
5. The parties further recognize that the combination of a) increases
in the percentages of business ceded hereunder, and b) the more
than 200 percent growth in the loss amounts now recognized as non-
recoverable from Transit, have exacerbated the adverse affects upon
EMC Re hereunder to the point of severely reducing EMC Re's surplus,
and to the frustration of the purpose of this contract and to the
goals of the parties when it was drafted.
Now therefore, in consideration of the foregoing, the parties agree as
follows:
1. EMC Re will pay Employers in full the outstanding portion of its 95%
pro-rata part of the Transit Casualty Company scheduled write off as
105
booked through September 30, 1988, in the amount of 95% of
$2,650,000.
2. Employers Mutual Casualty Company will retain (in addition to its 5%
quota share portion), and hereby releases EMC Re from liability
therefore, any additional non-recoverable sums now due or in the
future recognized as necessary to be written off, applicable not
only to Transit but to any other non-collectable reinsurance
protections on business subject to this quota share agreement, from
its inception.
Executed by the parties hereto this 6th day of December, 1988.
Employers Mutual Casualty Company
By: /s/ Robb B. Kelley
------------------------------
Robb B. Kelley, Chairman & CEO
EMC Reinsurance Company
By: /s/ Richard E. Haskins
------------------------------
Richard E. Haskins, President
106
COMMUTATION AGREEMENT AND RELEASE
This Agreement entered into by and between Employers Mutual
Casualty Company (the "Company") and EMC Reinsurance Company
(the "Reinsurer") and shall be effective as of September 30,
1989 (the "commutation date").
WHEREAS, the parties have entered into a certain quota share
reinsurance contract effective from January 1, 1981, and
remaining in full force and effect, and
WHEREAS, the Company and the Reinsurer desire to settle, adjust
and determine the liabilities of the Reinsurer thereunder for
losses occurring during all years prior to 12:01 A.M., January
1, 1981, and
WHEREAS, by reason of which settlement agreement there is due
and owing to the Company from the Reinsurer the sum of
$2,982,882.00,
NOW, THEREFORE, in consideration of the payment to the Company
by the Reinsurer of $2,982,882.00, the Company has released and
discharged, and by these presents does for itself, its succes-
sors and assigns, release and discharge the Reinsurer with
respect to any contractual obligations under the aforesaid quota
share reinsurance contract as respects, and only as respects,
losses occurring during any and all years prior to 12:01 A.M.,
January 1, 1981.
IN WITNESS WHEREOF, the parties have caused these presents to be
executed in duplicate this 5th day of December, 1989.
EMPLOYERS MUTUAL CASUALTY COMPANY
By /s/ George W. Kochheiser
-----------------------------
George W. Kochheiser
President
EMC REINSURANCE COMPANY
By /s/ Richard E. Haskins
-----------------------------
Richard E. Haskins
President
107
ENDORSEMENT #2
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
It is understood and agreed by and between the parties as
follows:
Effective January 1, 1993 Article III of the Quota Share is
amended by adding the follosing additional paragraph:
Notwithstanding the foregoing terms, it is agreed that the
maximum liability transferred to EMC Re for loss resulting
from any one occurrence, including reinstatement premium
costs resulting from such occurrence, is limited to
$1,000,000. As consideration to Employers for this per
occurrence limitation, it is agreed that EMC Re shall allow
Employers an additional ceding commission of 5.25%
Executed by the parties this 2nd day of December, 1992.
Employers Mutual Casualty Company
by /s/ Bruce G. Kelley
---------------------------------
EMC Reinsurance Company
by /s/ Dean P. McClaflin
---------------------------------
108
COMMUTATION AGREEMENT AND RELEASE
This Agreement entered into by and between Employers Mutual
Casualty Company (the "Company") and EMC Reinsurance Company (the
"Reinsurer") and shall be effective as of June 30, 1993 (the
"commutation date").
WHEREAS, the parties have entered into a certain quota share
reinsurance contract effective from January 1, 1981, and
remaining in full force and effect, and
WHEREAS, the Company and the Reinsurer desire to settle, adjust
and determine final liabilities of the Reinsurer thereunder for
losses originating from the business written by Russell
Reinsurace Services, Inc., and
WHEREAS, by reason of such settlement agreement there is due and
owing to the Company from the Reinsurer the sum of $17,806,179.
NOW, THEREFORE, in consideration of the payment to the Company by
the Reinsurer of $17,806,179, the Company has released and
discharged, and by these presents does for itself, its successors
and assigns, release and discharge the Reinsurer with respect to
any contractual obligations under the aforesaid quota share
reinsurance contract as respects, all business originating
through Russell Reinsurance Services, Inc.
IN WITNESS WHEREOF, the parties have caused these presents to be
executed in duplicate this 29th day of July, 1993.
EMPLOYERS MUTUAL CASUALTY COMPANY
By /s/ Bruce G. Kelley
-----------------------------
Bruce G. Kelley
President
EMC REINSURANCE COMPANY
By /s/ Dean P. McClaflin
-----------------------------
Dean P. McClaflin
President
109
COMMUTATION AGREEMENT AND RELEASE
This Agreement entered into by and between Employers Mutual
Casualty Company (the "Company") and EMC Reinsurance Company (the
"Reinsurer") and shall be effective as of October 31, 1993 (the
"commutation date").
WHEREAS, the parties have entered into a certain quota share
reinsurance contract effective from January 1, 1981, and
remaining in full force and effect, and
WHEREAS, the Company and the Reinsurer desire to settle, adjust
and determine final liabilities of the Reinsurer thereunder for
losses originating from the business written by Improved Risk
Mutual, and
WHEREAS, by reason of such settlement agreement there is due and
owing to the Company from the Reinsurer the sum of $2,619,776.
NOW, THEREFORE, in consideration of the payment to the Company by
the Reinsurer of $2,619,776, the Company has released and
discharged, and by these presents does for itself, its successors
and assigns, release and discharge the Reinsurer with respect to
any contractual obligations under the aforesaid quota share
reinsurance contract as respects, all business originating through
Improved Risk Mutual.
IN WITNESS WHEREOF, the parties have caused these presents to be
executed in duplicate this 1st day of December, 1993.
EMPLOYERS MUTUAL CASUALTY COMPANY
By /s/ Bruce G. Kelley
-----------------------------
Bruce G. Kelley
President
EMC REINSURANCE COMPANY
By /s/ Dean P. McClaflin
-----------------------------
Dean P. McClaflin
President
110