E. W. BLANCH CO.
R:\97R\11341.DOC Reinsurance Services
Property Excess and Surplus Lines
Excess Per Risk Reinsurance Contract
Effective: January 1, 1997
issued to
Associated International Insurance Company
Woodland Hills, California
Calvert Insurance Company
Hoboken, New Jersey
Timberline Insurance Company
Eugene, Oregon
and
any additional company established or acquired
by Associated International Insurance Company, Calvert Insurance
Company, Timberline Insurance Company or
Gryphon Holdings, Inc., New York, New York,
to be included hereunder
E. W. Blanch Co.
Reinsurance Services
3500 West 80th Street
Minneapolis, Minnesota 55431
Property Excess and Surplus Lines
Excess Per Risk Reinsurance Contract
Effective: January 1, 1997
issued to
Associated International Insurance Company
Woodland Hills, California
Calvert Insurance Company
Hoboken, New Jersey
Timberline Insurance Company
Eugene, Oregon
and
any additional company established or acquired
by Associated International Insurance Company, Calvert Insurance
Company, Timberline Insurance Company or
Gryphon Holdings, Inc., New York, New York,
to be included hereunder
Reinsurers Participations
American Re-Insurance Company 33.0%
Employers Reinsurance Corporation 8.0
First Excess and Reinsurance Corporation 3.5
Great Lakes American Reinsurance Company 6.5
Munich American Reinsurance Company 5.0
NAC Reinsurance Corporation 7.5
SOREMA North America Reinsurance Company 5.0
Transatlantic Reinsurance Company 7.5
Through Minet Burn & Roche Pty. Ltd.
GIO Insurance Ltd. (trading as GIO Reinsurance) 20.0
Through Denis M. Clayton & Co. Ltd.
Companies Per Signing Schedule(s) 4.0
Total 100.0%
E. W. Blanch Co.
Reinsurance Services
3500 West 80th Street
Minneapolis, Minnesota 55431
Table of Contents
Article Page
I Classes of Business Reinsured 1
II Term 2
III Territory 2
IV Exclusions 2
V Retention and Limit 4
VI Other Reinsurance 5
VII Definitions 5
VIII Losses and Loss Adjustment Expense 8
IX Special Provisions 9
X Salvage and Subrogation 10
XI Commission (BRMA 10A) 10
XII Premium 10
XIII Profit Sharing 11
XIV Offset (BRMA 36C) 12
XV Access to Records (BRMA 1D) 12
XVI Liability of the Reinsurer 12
XVII Net Retained Lines (BRMA 32E) 13
XVIII Errors and Omissions (BRMA 14F) 13
XIX Taxes (BRMA 50C) 13
XX Federal Excise Tax (BRMA 17A) 13
XXI Unauthorized Reinsurers 14
XXII Insolvency 15
XXIII Arbitration 16
XXIV Service of Suit (BRMA 49C) 17
XXV Agency Agreement 17
XXVI Intermediary (BRMA 23A) 18
Appendix A
Property Excess and Surplus Lines
Excess Per Risk Reinsurance Contract
Effective: January 1, 1997
issued to
Associated International Insurance Company
Woodland Hills, California
Calvert Insurance Company
Hoboken, New Jersey
Timberline Insurance Company
Eugene, Oregon
and
any additional company established or acquired
by Associated International Insurance Company, Calvert Insurance
Company, Timberline Insurance Company or
Gryphon Holdings, Inc., New York, New York,
to be included hereunder
(hereinafter referred to collectively as the "Company")
by
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the "Reinsurer")
Article I - Classes of Business Reinsured
A. By this Contract the Company obligates itself to cede to the
Reinsurer and the Reinsurer obligates itself to accept
reinsurance of the Company's liability under policies,
contracts and binders of insurance or reinsurance (hereinafter
called "policies") in force at the effective date hereof or
issued or renewed on or after that date, underwritten in the
General E&S Division and classified by the Company as Fire and
Allied Lines, Commercial Multiple Peril (property perils
only), Homeowners (property perils only) and Inland Marine,
subject to the terms, conditions and limitations set forth
herein and in Appendix A attached to and forming part of this
Contract.
B. It is understood that west coast earthquake business
underwritten in the General E&S Division, other than
earthquake on Course of Construction policies, is not subject
to this Contract.
Article II - Term
A. This Contract shall become effective on January 1, 1997, with
respect to losses occurring on or after that date, and shall
remain in force until December 31, 1997, both days inclusive.
B. Reinsurance hereunder on business in force on the effective
date of expiration shall remain in full force and effect until
expiration, cancellation or next premium anniversary of such
business, whichever first occurs, but in no event beyond the
effective date of expiration as follows:
1. As regards Course of Construction policies, 36
months;
2. As regards all other policies, 12 months plus odd
time not to exceed 18 months.
C. Notwithstanding the provisions of paragraph B above, the
Company shall have the option of reassuming the unexpired
liability of the Reinsurer hereunder on business in force on
the effective date of expiration, in which event the Reinsurer
shall return to the Company the ceded unearned premium
hereunder as of the effective date of termination (less ceding
commission allowed thereon) and the Reinsurer shall have no
liability hereunder with respect to losses occurring after the
date of expiration.
D. In the event renewal negotiations are not completed by
December 31, 1997, at the Company's option, this Contract
shall be extended through March 31, 1998.
Article III - Territory
This Contract shall apply to the territorial limits set forth in
the Company's policies reinsured hereunder.
Article IV - Exclusions
A. This Contract does not apply to and specifically excludes the
following:
1. Loss or liability excluded under the terms of the
"Pools, Associations & Syndicates Exclusion Clause"
attached to and forming part of this Contract.
2. Nuclear risks as defined in the "Nuclear Incident
Exclusion Clause - Physical Damage - Reinsurance
(U.S.A.)," the "Nuclear Incident Exclusion Clause -
Physical Damage - Reinsurance (Canada)," and the "Nuclear
Energy Risks Exclusion Clause - Reinsurance (Worldwide
Excluding U.S.A. & Canada)," attached to and forming part
of this Contract.
3. All reinsurance assumed, except intra-company
reinsurance. However, this exclusion shall not apply to
reinsurance of captive companies when pricing for business
reinsured is quoted by a non-related entity.
4. Risks of war, whether or not declared, invasion,
civil war, insurrection, rebellion, revolution or
confiscation by duly constituted governmental or civil
authority as excluded under a standard policy containing a
standard War Exclusion Clause.
5. Hail insurance or reinsurance covering growing,
drying or standing crops when written as such.
6. Flood when written as such. However, this exclusion
shall not apply to flood when included in Difference in
Conditions, Inland Marine and All Risk policies.
7. All armored car business, except when written in
excess of $500,000.
8. Credit, financial or insolvency guarantees.
9. Livestock insurance or reinsurance when written as
such.
10. Third Party Bodily Injury and Property Damage
Liability, Medical Payments, Workers' Compensation,
Fidelity and Surety, whether written separately or as part
of a Multiple Peril policy. However, nothing herein
contained shall be construed as excluding liability for
damage to property in an insured's care, custody or
control or for which the insured may be liable.
11. Ocean Marine when written as such.
12. Aircraft, meaning direct damage to hulls insured
under Aircraft Hull policies, but not to exclude aircraft
hulls insured under regular Fire, Inland Marine and All
Risk policies (other than Aircraft Hull policies). In no
event shall any liability attach to the Reinsurer
hereunder in respect of aircraft while in flight or
taxiing.
13. Offshore drilling rigs.
14. Onshore drilling rigs.
15. Grain elevators.
16. Petrochemical risks and refineries.
17. Underground mining.
18. Automobile risks insured under Automobile policies,
with the exception of "floor plans."
19. Space and space related risks for the intention of
ignition of the launch vehicle which includes taxiing
within the launch site area and in flight.
20. Inland Marine policies covering jeweler's block and
motor truck cargo.
21. Mortgage Impairment insurance.
22. All liability of the Company arising by contract,
operation of law, or otherwise, from its participation or
membership, whether voluntary or involuntary, in any
insolvency fund. "Insolvency fund" includes any guaranty
fund, insolvency fund, plan, pool, association, fund or
other arrangement, however denominated, established or
governed, which provides for any assessment of or payment
or assumption by the Company of part or all of any claim,
debt, charge, fee or other obligation of an insurer, or
its successors or assigns, which has been declared by any
competent authority to be insolvent, or which is otherwise
deemed unable to meet any claim, debt, charge, fee or
other obligation in whole or in part.
23. Kidnap and Ransom.
24. Residual Value and Credit insurance.
25. Crop Insurance.
26. Burglary and Theft when written as such.
27. Strike Insurance.
28. Product impairment, recall and tampering.
29. Data processing companies and media exposures.
30. Equipment maintenance, warranty or similar coverages.
However, this exclusion shall not be construed to apply to
business classified as Course of Construction or Utilities
where testing of equipment is involved.
31. Risks as detailed in the "Target Risks Exclusion
Clause" attached to and forming part of this Contract.
B. Notwithstanding the foregoing, any exclusion set forth in
paragraph A (except subparagraphs 2, 3, 4, 6, 8, 11, 12, 13,
19, 22 and 31) shall be waived automatically when, in the
opinion of the Company, the exposure excluded therein is
incidental to the principal exposure on the risk in question.
Article V - Retention and Limit
A. The Company shall retain and be liable for the first $500,000
of ultimate net loss as respects any one risk, each loss. The
Reinsurer shall then be liable for the amount by which such
ultimate net loss exceeds the Company's retention, but the
liability of the Reinsurer shall not exceed $9,500,000 as
respects any one risk, each loss, nor shall it exceed
$20,000,000 as respects all risks involved in any one loss
occurrence.
B. The Company shall be the sole judge of what constitutes "one
risk," except that in no event shall a building and its
contents be considered more than one risk.
Article VI - Other Reinsurance
A. The Company shall be permitted to carry excess catastrophe
reinsurance, recoveries under which shall inure solely to the
benefit of the Company and be entirely disregarded in applying
all of the provisions of this Contract.
B. The Company shall purchase or be deemed to have purchased
inuring excess reinsurance to limit its ultimate net loss
under any one policy so as to comply with the maximum policy
limits set forth in Article IX.
Article VII - Definitions
A. The term "ultimate net loss" shall mean the actual loss
incurred by the Company under policies covered hereunder.
Such loss shall include sums paid in settlement of claims and
suits and in satisfaction of judgments, including prejudgment
interest when added to a judgment. Such loss also shall
include any losses in excess of policy limits and any extra
contractual obligations incurred by the Company. It is
understood that the term "incurred" as used in this paragraph
shall mean those sums paid or imminent to be paid by the
Company.
All salvages, recoveries, payments and reversals or reductions
of verdicts or judgments whether recovered, received or
obtained prior or subsequent to loss settlement under this
Contract, including amounts recoverable under other
reinsurance whether collected or not, shall be applied as if
recovered, received or obtained prior to the aforesaid
settlement and shall be deducted from the actual losses
sustained to arrive at the amount of the net loss. Nothing
herein shall be construed to mean losses are not recoverable
until the net loss to the Company finally has been
ascertained.
B. "Loss adjustment expense" as used herein shall include:
1. Expenses sustained in connection with settlement and
litigation of claims and suits, satisfaction of judgments,
resistance to or negotiations concerning a loss (which
shall include the pro rata share of the Company's outside
employees according to the time occupied in adjusting such
loss and the salaries and expenses of the Company's
employees while diverted from their normal duties to the
service of field adjustment, but shall not include any
salaries of officers nor normal overhead expenses of the
Company);
2. Legal expenses and costs incurred in connection with
coverage questions and legal actions, including
declaratory judgment actions, connected thereto;
3. All interest on judgments other than prejudgment
interest when added to a judgment, and;
4. Expenses sustained to obtain recoveries, salvages and
other reimbursements, or to secure the reversal or
reduction of a verdict or judgment.
C. "Loss in excess of policy limits" and "extra contractual
obligations" as used herein shall be defined as follows:
1. "Loss in excess of policy limits" shall mean 90.0% of
any amount paid or payable by the Company in excess of its
policy limits, but otherwise within the terms of its
policy, as a result of an action against it by its insured
or its insured's assignee to recover damages the insured
is legally obligated to pay to a third party claimant
because of the Company's alleged or actual negligence or
bad faith in rejecting a settlement within policy limits,
or in discharging its duty to defend or prepare the
defense in the trial of an action against its insured, or
in discharging its duty to prepare or prosecute an appeal
consequent upon such an action.
2. "Extra contractual obligations" shall mean 90.0% of
any punitive, exemplary, compensatory or consequential
damages, other than loss in excess of policy limits, paid
or payable by the Company as a result of an action against
it by its insured, its insured's assignee or a third party
claimant, which action alleges negligence or bad faith on
the part of the Company in handling a claim under a policy
subject to this Contract. An extra contractual obligation
shall be deemed to have occurred on the same date as the
loss covered or alleged to be covered under the policy.
There will be no recovery hereunder for an extra contractual
obligation or loss in excess of policy limits that has been
incurred due to fraud committed by a member of the board of
directors or a corporate officer of the Company, acting
individually, collectively, or in collusion with a member of
the board of directors, a corporate officer, or a partner of
any other corporation, partnership, or organization involved
in the defense or settlement of a claim on behalf of the
Company.
The date on which any extra contractual obligation and/or loss
in excess of policy limits is incurred by the Company will be
deemed, in all circumstances, to be the date of the original
loss occurrence. Nothing in this Article will be construed to
create a separate or distinct loss occurrence apart from the
original covered loss occurrence that gave rise to the extra
contractual obligations and/or loss in excess of policy limits
discussed in the preceding paragraphs. In no event will the
total liability of the Reinsurer exceed its applicable limit
of liability as set forth in Article V.
Recoveries from any form of insurance or inuring reinsurance,
if any, which protects the Company against claims the subject
matter of this paragraph shall inure to the benefit of this
Contract.
D. 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 occurs anywhere in the world
but limited in the United States of America and Canada to 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 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 introductory portion of this
paragraph D) 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 frozen pipes and tanks) may be
included in the Company's "loss occurrence."
Except for those "loss occurrences" referred to in
subparagraphs 1 and 2 above, 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.
However, as respects those "loss occurrences" referred to in
subparagraphs 1 and 2 above, if the disaster, accident or loss
occasioned by the event is of greater duration than
72 consecutive hours, then the Company may divide that
disaster, accident or loss into two or more "loss
occurrences," provided that no two periods overlap and no
individual loss is included in more than one such period, and
provided that no period commences 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.
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.
E. "Premiums earned" as used herein shall mean ceded net written
premium for policies which are in force on the effective date
of this Contract or have effective or renewal dates during the
term of this Contract, less the unearned portion thereof as of
the effective date of calculation, it being understood and
agreed that all premiums for policies which are in force on
the effective date of this Contract or have effective or
renewal dates during the term of this Contract shall be
credited to this Contract, unless this Contract expires on a
"cut-off" basis, in which event the unearned reinsurance
premium (less previously allowed commission) as of the date of
expiration shall be returned by the Reinsurer to the Company.
F. "Losses incurred" as used herein shall mean ceded losses and
loss adjustment expense paid as of the effective date of
calculation, plus:
1. The ceded reserves for losses and loss adjustment
expense outstanding as of the same date;
2. An amount representing Incurred But Not Reported
Losses (hereinafter called "IBNR") equal to 20.0% of the
premiums earned for Course of Construction business
hereunder for the term of this Contract (said IBNR factor
to be applied) until all premiums for Course of
Construction business are earned, at which time no further
amounts of IBNR will be added);
it being understood and agreed that all losses and related
loss adjustment expense under policies which are in force on
the effective date of this Contract or have effective or
renewal dates during the term of this Contract shall be
charged to this Contract, regardless of the date said losses
actually occur, unless this Contract expires on a "cutoff"
basis, in which event the Reinsurer shall have no liability
for losses occurring after the effective date of expiration.
Article VIII - Losses and Loss Adjustment Expense
A. Whenever a loss sustained by the Company appears likely to
result in a claim hereunder, the Company shall notify the
Reinsurer, and the Reinsurer shall have the right to
participate in the adjustment of the loss at its own expense.
B. All loss settlements made by the Company, provided they are
within the terms of this Contract, shall be binding upon the
Reinsurer, and the Reinsurer agrees to pay all amounts for
which it may be liable upon receipt of reasonable evidence of
the amount paid (or scheduled to be paid) by the Company.
C. In the event of loss hereunder, loss adjustment expenses (as
defined in Article VII) incurred by the Company in connection
therewith shall be shared by the Company and the Reinsurer in
the proportion the ultimate net loss paid or payable by the
Reinsurer bears to the total ultimate net loss paid or payable
by the Company, prior to any reinsurance recoveries, but after
deduction of all salvage and other recoveries. The
Reinsurer's liability for loss adjustment expenses shall be in
addition to its limit of liability for ultimate net loss.
Notwithstanding the foregoing, if the ultimate net loss to the
Company (exclusive of loss adjustment expenses) is less than
the Company's retention stated in Article V, then loss
adjustment expenses shall be included in the ultimate net loss
for purposes of recovery hereunder, but subject to the limit
of liability stated in Article V.
D. In the event the ultimate net loss subject to recovery
hereunder includes an amount of loss in excess of policy
limits and/or extra contractual obligations, then the actual
ultimate net loss recovered hereunder shall be allocated among
indemnity loss, loss in excess of policy limits and/or extra
contractual obligations as follows:
1. When the limit defined in paragraph A of Article V
with regard to all risks subject to recovery hereunder
involved in any one loss occurrence has not been exceeded,
the actual ultimate net loss recovered hereunder as
respects any one risk, each loss shall be allocated to
indemnity loss, loss in excess of policy limits and/or
extra contractual obligations in the same proportion that
each bears to the total ultimate net loss subject to
recovery on that risk.
2. When the limit defined in paragraph A of Article V
with regard to all risks subject to recovery hereunder
involved in any one loss occurrence has been exceeded, the
actual ultimate net loss recovered hereunder as respects
any one loss occurrence shall be allocated to indemnity
loss, loss in excess of policy limits and/or extra
contractual obligations in the same proportion that each
bears, before application of the per occurrence limit, to
the total ultimate net loss subject to recovery on that
loss occurrence.
Article IX - Special Provisions
A. The Company's maximum policy limits subject to this Contract
shall be as follows:
1. $10,000,000 for all policies except as outlined in
subparagraph 2 below, or so deemed;
2. As respects coverage for Transmission and
Distribution lines, the maximum policy limit subject
hereto shall not exceed $1,000,000 each risk, or so
deemed.
B. As respects loss or damage or costs or expenses arising from
asbestos or seepage and/or pollution and/or contamination,
other than contamination from smoke damage, the maximum
sublimit shall be $25,000 per risk, each loss except business
classified as Railroad in which case the sublimit shall be
$250,000 each risk, each loss. Nevertheless, this does not
preclude payment of the cost of removal of debris of property
damaged by a loss otherwise covered hereunder.
Article X - Salvage and Subrogation
The Reinsurer shall be credited with salvage (i.e., reimbursement
obtained or recovery made by the Company, less the actual cost,
excluding salaries of officials and employees of the Company and
sums paid to attorneys as retainer, of obtaining such
reimbursement or making such recovery) on account of claims and
settlements involving reinsurance hereunder. Salvage thereon
shall always be used to reimburse the excess carriers in the
reverse order of their priority according to their participation
before being used in any way to reimburse the Company for its
primary loss. The Company hereby agrees to enforce its rights to
salvage or subrogation relating to any loss, a part of which loss
was sustained by the Reinsurer, and to prosecute all claims
arising out of such rights.
Article XI - Commission (BRMA 10A)
A. The Reinsurer shall allow the Company a 30.0% commission on
all premiums ceded to the Reinsurer hereunder. The Company
shall allow the Reinsurer return commission on return premiums
at the same rate.
B. It is expressly agreed that the ceding commission allowed the
Company includes provision for all dividends, commissions,
taxes, assessments, and all other expenses of whatever nature,
except loss adjustment expense.
Article XII - Premium
A. With respect to business issued or renewed on or after the
effective date of this Contract, as premium for the
reinsurance provided hereunder, the Company shall pay to the
Reinsurer a reinsurance premium based on Appendix A and
calculated by applying the applicable Coded Excess Factor to
the gross written premium of each policy ceded hereunder.
With respect to business in force on the effective date of
this Contract, as premium for the reinsurance provided
hereunder, the Company shall pay to the Reinsurer a
reinsurance premium based on Appendix A and calculated by
applying the applicable Coded Excess Factor to the gross
unearned premium, as of January 1, 1997, of each policy ceded
hereunder.
1. The Coded Excess Factor will be determined based
upon:
a. The size of the gross policy limit (before all
other reinsurance);
b. The attachment point;
c. The Company's participation in the primary
insurance limit;
and will be in compliance with the Coded Excess
Factor Table included in Appendix A attached to and
forming part of this Contract. It is understood and
agreed that the Coded Excess Factor Table included in
Appendix A cannot contemplate each specific combination of
gross policy limit and attachment point for business
subject to this Contract. In the event the combination of
gross policy limit and attachment point on a specific risk
does not coincide with the Coded Excess Factor Tables, the
Company shall be permitted to utilize the original formula
methodology used to construct the Coded Excess Factor
Tables in determining the appropriate reinsurance premium
for such risk.
2. The gross written premium and gross unearned premium
will be the gross premium of the policy for the coverage
provided before deduction of premium for all other
reinsurance.
B. At inception, the Company shall report its gross unearned
premium applicable to subject business in force at inception.
The premium due the Reinsurer, based upon the cessions
outlined in paragraph A, shall be paid by the Company with its
report.
C. Within 60 days after the end of each calendar quarter, the
Company shall report its gross written premium for the
quarter. The premium due the Reinsurer, based upon the
cessions outlined in paragraph A above, shall be paid by the
Company with its report.
D. As respects business classified as "National Accounts," the
Company shall provide a quarterly report to the Reinsurer
detailing the following for each insured:
1. Total insured values and California, Texas, Florida
and Puerto Rico total insured values;
2. Overall gross rate for coverage provided;
3. Gross written premium for coverages provided; and
4. Premium split between earthquake and all other
perils/all other lines covered.
E. Annually, the Company shall furnish the Reinsurer with such
information as the Reinsurer may require to complete its
Annual Convention Statement.
Article XIII - Profit Sharing
A. The Reinsurer shall pay the Company profit sharing equal to
50.0% of the net profit, if any, accruing to the Reinsurer
during the term of this Contract.
B. The Reinsurer's net profit for the term of this Contract shall
be calculated in accordance with the following formula, it
being understood that a positive balance equals net profit and
a negative balance equals net loss:
1. Premiums earned for the term of this Contract; less
2. Ceding commission allowed the Company on premiums
earned for the term of this Contract; less
3. Expenses incurred by the Reinsurer at 30.0% of
premiums earned for the term of this Contract; less
4. Losses incurred for the term of this Contract.
C. The Company shall calculate and report the Reinsurer's net
profit no sooner than 12 months following the expiration of
this Contract, and no sooner than 12 months following the end
of each 12-month period thereafter until all premiums subject
hereto have earned and all losses subject hereto have been
finally settled. Each such calculation shall be based on
cumulative transactions hereunder from the beginning of the
term of this Contract through the date of calculation. As
respects the initial calculation referred to above, any profit
sharing shown to be due the Company shall be paid by the
Reinsurer as promptly as possible after receipt and
verification of the Company's report. As respects each
recalculation, any additional profit sharing shown to be due
the Company shall be paid by the Reinsurer as promptly as
possible after receipt and verification of the Company's
report. Any return profit sharing shown to be due the
Reinsurer shall be paid by the Company with its report.
Article XIV - Offset (BRMA 36C)
The Company and the Reinsurer shall have the right to offset any
balance or amounts due from one party to the other under the
terms of this Contract. The party asserting the right of offset
may exercise such right any time whether the balances due are on
account of premiums or losses or otherwise.
Article XV - Access to Records (BRMA 1D)
The Reinsurer or its designated representatives shall have access
at any reasonable time to all records of the Company which
pertain in any way to this reinsurance.
Article XVI - Liability of the Reinsurer
A. The liability of the Reinsurer shall follow that of the
Company in every case and be subject in all respects to all
the general and specific stipulations, clauses, waivers and
modifications of the Company's policies and any endorsements
thereon. However, in no event shall this be construed in any
way to provide coverage outside the terms and conditions set
forth in this Contract.
B. Nothing herein shall in any manner create any obligations or
establish any rights against the Reinsurer in favor of any
third party or any persons not parties to this Contract.
Article XVII - Net Retained Lines (BRMA 32E)
A. This Contract applies only to that portion of any policy which
the Company retains net for its own account (prior to
deduction of any underlying reinsurance specifically permitted
in this Contract), and in calculating the amount of any loss
hereunder and also in computing the amount or amounts in
excess of which this Contract attaches, only loss or losses in
respect of that portion of any policy which the Company
retains net for its own account shall be included.
B. The amount of the Reinsurer's liability hereunder in respect
of any loss or losses shall not be increased by reason of the
inability of the Company to collect from any other
reinsurer(s), whether specific or general, any amounts which
may have become due from such reinsurer(s), whether such
inability arises from the insolvency of such other
reinsurer(s) or otherwise.
Article XVIII - Errors and Omissions (BRMA 14F)
Inadvertent delays, errors or omissions made in connection with
this Contract or any transaction hereunder shall not relieve
either party from any liability which would have attached had
such delay, error or omission not occurred, provided always that
such error or omission is rectified as soon as possible after
discovery.
Article XIX - Taxes (BRMA 50C)
In consideration of the terms under which this Contract is
issued, the Company will not claim a deduction in respect of the
premium hereon when making tax returns, other than income or
profits tax returns, to any state or territory of the United
States of America, the District of Columbia or Canada.
Article XX - Federal Excise Tax (BRMA 17A)
(Applicable to those reinsurers, excepting Underwriters at
Lloyd's London and other reinsurers exempt from Federal Excise
Tax, who are domiciled outside the United States of America.)
A. The Reinsurer has agreed to allow for the purpose of paying
the Federal Excise Tax the applicable percentage of the
premium payable hereon (as imposed under Section 4371 of the
Internal Revenue Code) to the extent such premium is subject
to the Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder
the Reinsurer will deduct the applicable percentage from the
return premium payable hereon and the Company or its agent
should take steps to recover the tax from the United States
Government.
Article XXI - Unauthorized Reinsurers
A. If the Reinsurer is unauthorized in any state of the United
States of America or the District of Columbia, the Reinsurer
agrees to fund its share of the Company's ceded United States
unearned premium and outstanding loss and loss adjustment
expense reserves (including incurred but not reported loss
reserves) by:
1. Clean, irrevocable and unconditional letters of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
bank or banks meeting the NAIC Securities Valuation Office
credit standards for issuers of letters of credit and
acceptable to said insurance regulatory authorities;
and/or
2. Escrow accounts for the benefit of the Company;
and/or
3. Cash advances;
if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved. The Reinsurer,
at its sole option, may fund in other than cash if its method
and form of funding are acceptable to the insurance regulatory
authorities involved.
B. If the Reinsurer is unauthorized in any province or
jurisdiction of Canada, the Reinsurer agrees to fund 115% of
its share of the Company's ceded Canadian unearned premium and
outstanding loss and loss adjustment expense reserves
(including incurred but not reported loss reserves) by:
1. A clean, irrevocable and unconditional letter of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
Canadian bank or banks meeting the NAIC Securities
Valuation Office credit standards for issuers of letters
of credit and acceptable to said insurance regulatory
authorities, for no more than 15/115ths of the total
funding required; and/or
2. Cash advances for the remaining balance of the
funding required;
if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved.
C. With regard to funding in whole or in part by letters of
credit, it is agreed that each letter of credit will be in a
form acceptable to insurance regulatory authorities involved,
will be issued for a term of at least one year and will
include an "evergreen clause," which automatically extends the
term for at least one additional year at each expiration date
unless written notice of non-renewal is given to the Company
not less than 30 days prior to said expiration date. The
Company and the Reinsurer further agree, notwithstanding
anything to the contrary in this Contract, that said letters
of credit may be drawn upon by the Company or its successors
in interest at any time, without diminution because of the
insolvency of the Company or the Reinsurer, but only for one
or more of the following purposes:
1. To reimburse itself for the Reinsurer's share of
unearned premiums returned to insureds on account of
policy cancellations, unless paid in cash by the
Reinsurer;
2. To reimburse itself for the Reinsurer's share of
losses and/or loss adjustment expense paid under the terms
of policies reinsured hereunder, unless paid in cash by
the Reinsurer;
3. To reimburse itself for the Reinsurer's share of any
other amounts claimed to be due hereunder, unless paid in
cash by the Reinsurer;
4. To fund a cash account in an amount equal to the
Reinsurer's share of any ceded unearned premium and/or
outstanding loss and loss adjustment expense reserves
(including incurred but not reported loss reserves) funded
by means of a letter of credit which is under non-renewal
notice, if said letter of credit has not been renewed or
replaced by the Reinsurer 10 days prior to its expiration
date;
5. To refund to the Reinsurer any sum in excess of the
actual amount required to fund the Reinsurer's share of
the Company's ceded unearned premium and/or outstanding
loss and loss adjustment expense reserves (including
incurred but not reported loss reserves), if so requested
by the Reinsurer.
In the event the amount drawn by the Company on any letter of
credit is in excess of the actual amount required for C(1),
C(2) or C(4), or in the case of C(3), the actual amount
determined to be due, the Company shall promptly return to the
Reinsurer the excess amount so drawn.
Article XXII - Insolvency
A. In the event of the insolvency of one or more of the reinsured
companies, this reinsurance shall be payable directly to the
company or to its liquidator, receiver, conservator or
statutory successor immediately upon demand, with reasonable
provision for verification, on the basis of the liability of
the company without diminution because of the insolvency of
the company or because the liquidator, receiver, conservator
or statutory 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 Reinsurer 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 Reinsurer 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 Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses
that it may deem available to the company or its liquidator,
receiver, conservator or statutory successor. The expense thus
incurred by the Reinsurer 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 Reinsurer.
B. 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 this Contract as though such expense had been
incurred by the company.
C. It is further understood and agreed that, in the event of the
insolvency of one or more of the reinsured companies, the
reinsurance under this Contract shall be payable directly by
the Reinsurer to the company or to its liquidator, receiver or
statutory successor, except as provided by Section 4118(a) of
the New York Insurance Law or except (1) where this Contract
specifically provides another payee of such reinsurance in the
event of the insolvency of the company or (2) where the
Reinsurer with the consent of the direct insured or insureds
has assumed such policy obligations of the company as direct
obligations of the Reinsurer to the payees under such policies
and in substitution for the obligations of the company to such
payees.
Article XXIII - Arbitration
A. As a condition precedent to any right of action hereunder, in
the event of any dispute or difference of opinion hereafter
arising with respect to this Contract, it is hereby mutually
agreed that such dispute or difference of opinion shall be
submitted to arbitration. One Arbiter shall be chosen by the
Company, the other by the Reinsurer, and an Umpire shall be
chosen by the two Arbiters before they enter upon arbitration,
all of whom shall be active or retired disinterested executive
officers of insurance or reinsurance companies or Lloyd's
London Underwriters. In the event that either party should
fail to choose an Arbiter within 30 days following a written
request by the other party to do so, the requesting party may
choose two Arbiters who shall in turn choose an Umpire before
entering upon arbitration. If the two Arbiters fail to agree
upon the selection of an Umpire within 30 days following their
appointment, each Arbiter shall nominate three candidates
within 10 days thereafter, two of whom the other shall
decline, and the decision shall be made by drawing lots.
B. Each party shall present its case to the Arbiters within 30
days following the date of appointment of the Umpire. The
Arbiters shall consider this Contract as an honorable
engagement rather than merely as a legal obligation and they
are relieved of all judicial formalities and may abstain from
following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but
failing to agree, they shall call in the Umpire and the
decision of the majority shall be final and binding upon both
parties. Judgment upon the final decision of the Arbiters may
be entered in any court of competent jurisdiction.
C. If more than one reinsurer is involved in the same dispute,
all such reinsurers shall constitute and act as one party for
purposes of this Article and communications shall be made by
the Company to each of the reinsurers constituting one party,
provided, however, that nothing herein shall impair the rights
of such reinsurers to assert several, rather than joint,
defenses or claims, nor be construed as changing the liability
of the reinsurers participating under the terms of this
Contract from several to joint.
D. Each party shall bear the expense of its own Arbiter, and
shall jointly and equally bear with the other the expense of
the Umpire and of the arbitration. In the event that the two
Arbiters are chosen by one party, as above provided, the
expense of the Arbiters, the Umpire and the arbitration shall
be equally divided between the two parties.
E. Any arbitration proceedings shall take place at Woodland
Hills, California, unless otherwise mutually agreed.
F. It is agreed that the jurisdiction of the Arbiters to make or
render any decision or award shall be limited by the limit of
liability expressly hereinbefore set forth, and that the
Arbiters shall have no jurisdiction to make any decision or
render any award exceeding such expressly stated limit of
liability of the Reinsurer, nor do they have the jurisdiction
to authorize any punitive, exemplary or consequential damage
awards between the parties hereto.
Article XXIV - Service of Suit (BRMA 49C)
(Applicable if the Reinsurer is not domiciled in the United
States of America, and/or is not authorized in any State,
Territory or District of the United States where authorization is
required by insurance regulatory authorities)
A. It is agreed that in the event the Reinsurer fails to pay any
amount claimed to be due hereunder, the Reinsurer, at the
request of the Company, will submit to the jurisdiction of any
court of competent jurisdiction within the United States.
Nothing in this Article constitutes or should be understood to
constitute a waiver of the Reinsurer's 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.
B. Further, pursuant to any statute of any state, territory or
district of the United States which makes provision therefor,
the Reinsurer hereby designates the party named in its
Interests and Liabilities Agreement, or if no party is named
therein, 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 its true
and lawful attorney upon whom may be served any lawful process
in any action, suit or proceeding instituted by or on behalf
of the Company or any beneficiary hereunder arising out of
this Contract.
Article XXV - Agency Agreement
Associated International Insurance Company shall be deemed the
agent of the other reinsured companies for purposes of sending or
receiving notices required by the terms and conditions of this
Contract, and for purposes of remitting or receiving any monies
due any party.
Article XXVI - Intermediary (BRMA 23A)
E. W. Blanch Co. is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All
communications (including but not limited to notices, statements,
premium, return premium, commissions, taxes, losses, loss
adjustment expense, salvages and loss settlements) relating
thereto shall be transmitted to the Company or the Reinsurer
through E. W. Blanch Co., Reinsurance Services, 3500 West 80th
Street, Minneapolis, Minnesota 55431. Payments by the Company to
the Intermediary shall be deemed to constitute payment to the
Reinsurer. Payments by the Reinsurer 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.
In Witness Whereof, the Company by its duly authorized
representative has executed this Contract as of the date
undermentioned at:
Woodland Hills, California, this ________ day of ______________________________
199___.
__________________________________________________
___
Associated International Insurance Company
Calvert Insurance Company
Timberline Insurance Company
Appendix A
Property Excess and Surplus Lines
Excess Per Risk Reinsurance Contract
Effective: January 1, 1997
issued to
Associated International Insurance Company
Woodland Hills, California
Calvert Insurance Company
Hoboken, New Jersey
Timberline Insurance Company
Eugene, Oregon
and
any additional company established or acquired
by Associated International Insurance Company, Calvert Insurance
Company, Timberline Insurance Company or
Gryphon Holdings, Inc., New York, New York,
to be included hereunder
General E&S Division
Property Rating Grid
XOL 9,500 Reten 500,00 Q.S. % 0% Placeme 100.00%
Limit ,000 tion 0 nt %
Limit
Exposed 50.00 80.00 90.00 93.33 95.00%63.33% 47.50% 38.00% 19.00% 9.50%
% % % %
Gross 1,000 2,500 5,000 7,500 10,00015,000, 20,000 25,000, 50,000,100,00
Limit ,000 ,000 ,000 ,000 ,000 000 ,000 000 000 0,000
Attachm
ent
Point
0 14.25 28.19 36.21 40.17 42.71% 27.17% 19.72% 15.40% 7.16% 3.34%
% % % %
100,000 26.88 47.45 57.10 61.36 63.93% 40.08% 28.78% 22.27% 10.06% 4.58%
% % % %
250,000 32.63 55.52 65.36 69.48 71.89% 45.26% 32.54% 25.17% 11.33% 5.12%
% % % %
500,000 37.42 62.09 71.93 75.85 78.08% 49.55% 35.76% 27.73% 12.51% 5.63%
% % % %
1,000,0 41.78 68.05 77.82 81.51 83.55% 53.60% 38.96% 30.35% 13.83% 6.24%
00 % % % %
2,500,0 45.92 73.86 83.59 87.03 88.86% 57.85% 42.50% 33.39% 15.56% 7.12%
00 % % % %
5,000,0 47.78 76.57 86.34 89.69 91.42% 60.03% 44.42% 35.10% 16.69% 7.78%
00 % % % %
7,500,0 48.47 77.62 87.42 90.75 92.44% 60.94% 45.24% 35.85% 17.22% 8.12%
00 % % % %
10,000, 48.83 78.17 88.01 91.33 93.01% 61.45% 45.71% 36.28% 17.55% 8.34%
000 % % % %
25,000, 49.52 79.24 89.16 92.47 94.13% 62.49% 46.68% 37.20% 18.28% 8.88%
000 % % % %
50,000, 49.76 79.61 89.57 92.89 94.55% 62.89% 47.07% 37.57% 18.60% 9.14%
000 % % % %
100,000 49.88 79.81 89.78 93.11 94.77% 63.11% 47.28% 37.78% 18.79% 9.30%
,000 % % % %
When
AIIC
parti
cipat
es in
a
layer
of
insur
ance,
the
reins
uranc
e
premi
um
facto
r
from
the
above
table
will
be
calcu
lated
as
follo
ws:
Limit
Expos
ed
(AIIC
net)
/
Limit
Expos
ed
(Gros
s
Layer
) *
Facto
r for
Gross
Layer
at
given
attac
hment
.
Examp Layer $10M
le: : part
of
$100M
xs
$100M
R/I 95.0
Facto / 9.5
r * 9.3
=
93.0%
of
AIIC'
s
actua
l
gross
premi
um to
be
ceded
to
reins
urers
.
Examp
le is
for
the
combi
ned
1st
and
2nd
layer
s.
*Gross Rate applied to WP net of Fac. but before any Q/S.
POOLS, ASSOCIATIONS & 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.
(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 builder's risks on the classes of risks
specified in this subsection (d) only.
Where this clause attaches to Catastrophe Excesses, the
following Section C is added:
Nevertheless the Reinsurer specifically agrees that
liability accruing to the Company from its participation in:
(1) The following so-called "Coastal Pools":
Alabama Insurance Underwriting Association
Florida Windstorm Underwriting Association
Louisiana Insurance Underwriting Association
Mississippi Insurance Underwriting Association
North Carolina Insurance Underwriting Association
South Carolina Windstorm and Hail Underwriting
Association
Texas Catastrophe Property Insurance Association
AND
(2) All "Fair Plan" business
for all perils otherwise protected hereunder shall not be
excluded, except, however, that this reinsurance does not include
any increase in such liability resulting from:
(i) The inability of any other participant in such
"Coastal Pool" or "Fair Plan" to meet its liability.
(ii) Any claim against such "Coastal Pool" or "Fair
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 Fund Exclusion Clause
incorporated in this Contract).