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EXHIBIT 10.28
FIRST LAYER PROPERTY CATASTROPHE EXCESS OF LOSS
RETROCESSIONAL AGREEMENT
ARTICLE PAGE
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COVERAGE I 2
TERM II 3
EXTENDED TERMINATION III 3
TERRITORY IV 4
EXCLUSIONS V 4
DEFINITIONS VI 7
RETENTION AND LIMIT VII 8
REINSTATEMENT VIII 8
NET RETAINED LIABILITY IX 9
RATE AND PREMIUM X 9
EXTRA CONTRACTUAL OBLIGATIONS AND
EXCESS LIMITS LIABILITY XI 10
REPORTS AND REMITTANCES XII 11
RESERVES AND LETTERS OF CREDIT XIII 12
LOSS NOTICES AND SETTLEMENTS XIV 14
OFFSET XV 15
SALVAGE AND SUBROGATION XVI 15
WARRANTY XVII 16
DELAYS, ERRORS, OR OMISSIONS XVIII 16
AMENDMENTS XIX 17
ACCESS TO RECORDS XX 17
INSOLVENCY XXI 17
ARBITRATION XXII 19
TAXES XXIII 20
FEDERAL EXCISE TAX XXIV 20
CURRENCY XXV 21
SERVICE OF SUIT XXVI 21
INTERMEDIARY XXVII 23
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FIRST LAYER PROPERTY CATASTROPHE EXCESS OF LOSS
RETROCESSIONAL AGREEMENT
THIS AGREEMENT is made and entered into by and between TRENWICK AMERICA
REINSURANCE CORPORATION, a Connecticut corporation (hereinafter called the
"Retrocedent") of the one part, and the various Retrocessionaires as identified
by the Interests and Liabilities Agreements attaching to and forming a part of
this Agreement (hereinafter called the "Retrocessionaires") of the other part.
WITNESSETH:
That in consideration of the mutual covenants hereinafter contained and
upon the terms and conditions hereinbelow set forth, the parties hereto agree as
follows:
ARTICLE I
COVERAGE
The Retrocessionaires will indemnify the Retrocedent, subject to the
limits set forth in the Retention and Limit Article for any loss or losses
occurring during the term of this Agreement under all original contracts
underwritten by the Retrocedent and classified by the Retrocedent as:
PROPERTY REINSURANCE BUSINESS ASSUMED, INCLUDING THE PROPERTY PORTIONS
OF MULTI-LINE BUSINESS AND WORKERS COMPENSATION AND/OR EMPLOYERS
LIABILITY LOSSES ARISING FROM ONE OR MORE OF THE FOLLOWING PERILS:
FIRE, LIGHTNING, EXPLOSION, STRUCTURAL COLLAPSE, WINDSTORM, HAIL,
FLOOD, SEISMIC ACTIVITY, VOLCANIC ERUPTION, COLLISION, RIOTS AND
STRIKES, CIVIL COMMOTION, OR MALICIOUS MISCHIEF, AND ANY PHYSICAL
DAMAGE AND/OR CONSEQUENTIAL LOSS COVERAGE CONTINGENT THEREON EFFECTED
BY AN INSURED ON BEHALF OF ANOTHER PARTY.
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All reinsurance for which the Retrocessionaires will be obligated by
virtue of this Agreement will be subject to the same terms, conditions,
interpretations, waivers, modifications, and alterations as the respective
original contracts of the Retrocedent to which this Agreement applies. Nothing
herein will in any manner create any obligations or establish any rights against
the Retrocessionaires in favor of any third parties or any persons not parties
to this Agreement except as provided in the Insolvency Article.
ARTICLE II
TERM
This Agreement will apply to all losses occurring during the 12-month
term incepting at 12:01 a.m. Eastern Standard Time on January 1, 1997.
Notwithstanding the expiration of this Agreement as hereinabove
provided, its provisions will continue to apply to all unfinished business
hereunder to the end that all obligations and liabilities incurred by each party
hereunder will be fully performed and discharged.
ARTICLE III
EXTENDED TERMINATION
Should this Agreement expire while a loss occurrence covered hereunder
is in progress, subject to the other conditions of this Agreement, the
Retrocessionaires will indemnify the Retrocedent as if the entire loss
occurrence had arisen during the term of this Agreement, and provided that no
part of said loss occurrence is claimed against any renewal of this Agreement.
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ARTICLE IV
TERRITORY
The territorial limits of this Agreement will include the United States
of America, the District of Columbia, Canada, and incidental locations
elsewhere.
ARTICLE V
EXCLUSIONS
No reinsurance indemnity will be afforded under this Agreement for:
A. Loss or damage directly caused by war and/or civil war, but
this exclusion will not apply to business written in
accordance with the Market War and/or Civil War Exclusion
Agreement.
B. Any loss or liability accruing to the Retrocedent directly or
indirectly and whether as insurer or reinsurer from any pool
of insurers or reinsurers formed for the purposes of covering
Atomic or Nuclear Energy Risks.
C. Nuclear risks as defined in the following:
1. Nuclear Incident Exclusion Clause -- Physical Damage
-- Reinsurance (U.S.A.) attached to this Agreement,
or as may be revised hereafter by the Lloyd's
Underwriters' Non-Marine Association.
2. Nuclear Incident Exclusion Clause -- Physical Damage
-- Reinsurance (Canada) attached to this Agreement,
or as may be revised hereafter by the Lloyd's
Underwriters' Non-Marine Association.
3. Nuclear Energy Risks Exclusion Clause (Reinsurance)
(1994) (Worldwide Excluding U.S.A. & Canada) attached
to this Agreement, or as may be revised hereafter by
the Lloyd's Underwriters' Non-Marine Association.
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4. Nuclear Incident Exclusion Clauses -- Physical Damage
and Liability (Boiler and Machinery Policies) --
Reinsurance (U.S.A. and Canada) attached to this
Agreement, or as may be revised hereafter by the
Lloyd's Underwriters' Non-Marine Association.
D. Financial Guarantee, Insolvency, or Credit Business.
E. Fidelity and Surety.
F. Reinsurance of Coastal Pools when written as such.
G. Life business, other than Accidental Death and Dismemberment.
H. Aviation, Aerospace, and Satellite business.
I. Casualty business, except as set forth in the Coverage
Article.
J. Hail damage to growing or standing crops.
K. Banking or Funding Plans.
L. Target Risks as excluded in the Retrocedent's original
contracts or the original policies of the Retrocedent's
reinsureds.
M. Loss or liability excluded by the Insolvency Funds Exclusion
Clause attached to this Agreement.
N. Reinsurance assumed on an excess of loss and/or pro rata
reinsurance basis issued in the name of and for the account of
a Lloyd's Syndicate or of an insurance or reinsurance company,
whether such liability is accepted either directly or under
any form of reinsurance from other insurers and/or reinsurers,
and all such liability is excluded from the protection of this
Reinsurance and cannot be taken into account in arriving at
the amount in the excess of which this Reinsurance attaches or
the ultimate net loss sustained by the Retrocedent.
O. All losses sustained by the Retrocedent howsoever and
wheresoever arising including all Business Interruption,
Consequential Loss and/or other contingent losses proximately
caused by a peril insured in respect of the Retrocedent's
exposures from:
1. All marine business when written as such; however,
not to exclude such exposures if they emanate from a
multi-line insurance contract and/or policy.
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2. All Offshore exposures arising from business of any
description connected with the oil and/or gas and/or
sulphur and/or uranium exploration and production
industries in all their phases and including all
associated support and/or service industries.
"Offshore" will be defined as:
(a) That area encompassing locations covered by
oceans or seas in which the water ebbs and
flows
and/or
(b) Other navigable waters or waterways which
will mean any water which is in fact
navigable by ships or vessels, whether or
not the tide ebbs and flows there, and
whether or not there is a public right of
navigation on that water.
P. Losses in respect of overhead transmission and distribution
lines and their supporting structures other than those on or
within 500 feet of the insured premises; however, 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
transmitter's or distributor's policy.
Q. Auto Collision.
The exclusions set forth above will not apply where the Retrocedent is
obliged to provide coverage by reason of membership in any state plan, pool,
facility, joint underwriting association or similar involuntary participation.
The Retrocedent may submit to the Retrocessionaires, for special
acceptance hereunder, business not covered by this Agreement. If said business
is accepted by the Retrocessionaires, it will be subject to the terms of this
Agreement, except as such terms are modified by such acceptance.
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ARTICLE VI
DEFINITIONS
The following words and phrases used in this Agreement will have the
indicated meanings:
A. "Original contracts" as used in this Agreement will mean any
and all policies, binders, certificates, acceptances,
contracts, or agreements of reinsurance, whether written or
oral.
B. "Net written premium" as used in this Agreement will mean 100%
of the gross written premium on property business and 5% of
the gross written premium on Workers Compensation and
Employers Liability business both the subject of and accounted
for during the term of this Agreement, less returned premiums,
and less premiums paid for reinsurance, recoveries under which
inure to the benefit of this Agreement.
C. "Loss occurrence" as used in this Agreement will mean all
losses arising out of or following one event. As regards
aggregate and/or stop loss original contracts assumed by the
Retrocedent, the proportion of such loss or losses that forms
part of the Retrocedent's ultimate net loss under this
Agreement will be the proportion of the whole aggregate
recovery that the original reinsured's individual catastrophe
loss bears to its total losses used in arriving at aggregate
excess recoveries.
D. "Ultimate net loss" as used in this Agreement will mean the
actual loss or losses sustained by the Retrocedent both as
regards the original contracts and this Agreement, including
100% of any extra contractual obligations and/or excess limits
liabilities incurred by any original reinsured and 80% of any
extra contractual obligations and/or excess limits liabilities
incurred by the Retrocedent, on its net retained liability
after making deductions for all recoveries, salvages, and all
reinsurance (other than underlying reinsurance) whether
collectible or not. Ultimate net loss will cover loss expense
incurred by the Retrocedent (both as regards the original
contracts and this Agreement) and arising from the settlement
of claims, including interest and court costs incurred in
investigation, adjustment, and litigation and a pro rata share
of salaries and expenses of the field adjusters of the
original reinsured and the Retrocedent while adjusting such
claims, and expenses of other employees of the original
reinsured and the Retrocedent who have been temporarily
diverted from their normal and customary duties as a result of
such claims. However, both salaries of other employees and
office expenses of the original reinsured and Retrocedent
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will be excluded. All salvages, recoveries, or reinsurance
payments received subsequent to any loss settlement hereunder
will be applied as if received prior to the settlement, and
all necessary adjustments will be made by the parties hereto.
Nothing in this definition, however, should be construed to
mean that losses under this Agreement are not recoverable
until the Retrocedent's ultimate net loss has been
ascertained.
ARTICLE VII
RETENTION AND LIMIT
No claim will be made hereunder unless the Retrocedent has first
sustained an ultimate net loss in excess of $4,000,000 each and every loss
occurrence. The Retrocessionaires will then be liable for the amount of ultimate
net loss in excess of $4,000,000 each and every loss occurrence, but the limit
of liability of the Retrocessionaires will not exceed $6,000,000 with respect to
each and every loss occurrence.
ARTICLE VIII
REINSTATEMENT
In the event that all or any portion of the reinsurance under this
Agreement is exhausted by loss, the amount so exhausted will be reinstated from
the time of occurrence of such loss. The Retrocessionaires' liability will not
exceed $6,000,000 in respect of each and every loss occurrence nor $12,000,000
during the 12-month term of this Agreement.
For each amount so reinstated, the Retrocedent will pay an additional
premium based upon the pro rata amount of the reinstatement only. The
provisional reinstatement
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premium, based on the minimum and deposit premium and finally adjusted as set
forth in the Rate and Premium Article, will be paid by the Retrocedent at the
time of the reinstatement.
ARTICLE IX
NET RETAINED LIABILITY
In computing the amount or amounts in excess of which this Agreement
attaches, only a loss or losses in respect to that portion of any reinsurance
that the Retrocedent retains net for its own account will be included. The
amount of the Retrocessionaires' liability hereunder with respect to any loss or
losses will not be increased by the inability of the Retrocedent to collect from
any other Retrocessionaires any amounts that may have become due from them,
whether such inability arises from the insolvency of such Retrocessionaires or
otherwise.
ARTICLE X
RATE AND PREMIUM
For the term of this Agreement, there will be a minimum and deposit
premium hereon of $1,200,000, payable in equal semi-annual installments of
$600,000 on January 1 and July 1. At Agreement expiration, the Retrocedent will
adjust the minimum and deposit premium against a rate of 85% of the net written
premium (excluding any reinstatement premium) for business classified by the
Retrocedent as catastrophe business
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and 5.95% of the net written premium (excluding any reinstatement premium) for
all other business covered hereunder.
ARTICLE XI
EXTRA CONTRACTUAL OBLIGATIONS AND EXCESS LIMITS LIABILITY
This Agreement will extend to cover losses arising from claims related
extra contractual obligations and/or excess limits liabilities whether incurred
by the original reinsured or the Retrocedent in accordance with the percent
factors as set forth in the ultimate net loss definition.
"Extra contractual obligations" as used in this Agreement will mean
those liabilities not covered under any other provision of this Agreement, which
arise from the handling of any claim on business covered hereunder, such
liabilities arising because of, but not limited to, the following: failure to
settle within the policy limit, by reason of alleged or actual negligence,
fraud, or bad faith in rejecting an offer of settlement, in the preparation of
the defense, in the trial of any action against the insured or reinsured, or in
the preparation or prosecution of an appeal consequent upon such action.
"Excess limits liabilities" as used in this Agreement will mean damages
payable in excess of the original reinsured's policy limit as a result of
alleged or actual negligence, fraud, or bad faith in failing to settle and/or
rejecting a settlement within the policy limit, in the preparation of the
defense, in the trial of any action against the insured or reinsured, or in the
preparation or prosecution of an appeal consequent upon such action. Excess
limits liabilities will mean any amounts for which the original reinsured or the
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Retrocedent would have been contractually liable to pay had it not been for the
limits of the original policy.
There will be no recovery hereunder for an extra contractual obligation
and/or excess limits liability loss that has been incurred due to fraud
committed by a member of the board of directors or a corporate officer of an
original reinsured or the Retrocedent, 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 an original reinsured or the
Retrocedent.
The date on which any extra contractual obligation and/or excess limits
liability is incurred by an original reinsured or the Retrocedent will be
deemed, in all circumstances, to be the date of the related occurrence under the
original policy. 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 excess limits liabilities
discussed in the preceding paragraphs. In no event will the total limit of
liability of the Retrocessionaires exceed their applicable limit of liability as
set forth in the Retention and Limit Article.
ARTICLE XII
REPORTS AND REMITTANCES
Within 60 days of the close of each quarter, the Retrocedent will
furnish the Retrocessionaires with a report of reinsurance premium due them for
that annual period.
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Such report will show and properly segregate the Retrocedent's premium to which
the reinsurance rate applies as well as contain such other information as may be
required by the Retrocessionaires for completion of their NAIC annual
statements. Within 60 days of Agreement expiration, the premium due the
Retrocessionaires will be balanced against the minimum and deposit premium set
forth in the Rate and Premium Article, and any balance shown to be due the
Retrocessionaires will be remitted with said annual report. Any balance shown to
be due the Retrocedent will be paid within 30 days following receipt of the
annual report by the Retrocessionaires.
ARTICLE XIII
RESERVES AND LETTERS OF CREDIT
(This Article is only applicable to those Retrocessionaires who cannot
qualify for credit by each state or governmental authority having
jurisdiction over the Retrocedent's loss reserves.)
As regards original contracts issued by the Retrocedent coming within
the scope of this Agreement, the Retrocedent agrees that, when it files with the
Insurance Department or sets up on its books reserves for known losses that have
been reported to the Retrocessionaires (including loss and loss expense paid by
the Retrocedent but not recovered from the Retrocessionaires and loss and loss
expense reported and outstanding), which it is required by law to set up, it
will forward to the Retrocessionaires a statement showing the proportion of such
loss reserves applicable to them. The Retrocessionaires hereby agree that they
will apply for and secure delivery to the Retrocedent of a clean, irrevocable,
and unconditional Letter of Credit, dated on or before
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December 31 of the year in which the request is made, and issued by Citibank,
N.A. (or another member of the Federal Reserve System) or any bank approved for
use by the NAIC Securities Valuation Office, and containing provisions
acceptable to the insurance regulatory authorities having jurisdiction over the
Retrocedent's reserves in an amount equal to the Retrocessionaires' proportion
of such reserves as shown in the statement prepared by the Retrocedent. Under no
circumstances will any amount relating to reserves in respect of Incurred But
Not Reported losses be included in the amount of the Letter of Credit.
The Letter of Credit will be issued for a period of not less than one
year, and will be automatically extended for one year from its date of
expiration or any future expiration date unless 30 days prior to any expiration
date the issuing bank notifies the Retrocedent by registered mail that it elects
not to consider the Letter of Credit extended for any additional period. An
issuing bank, not a member of the Federal Reserve System or not chartered in the
state of domicile of the Retrocedent, will provide 60 days notice to the
Retrocedent prior to any expiration in the event of nonextension.
Notwithstanding any other provisions of this Agreement, the Retrocedent
or its court-appointed successor in interest may draw upon such credit at any
time without diminution because of the insolvency of the Retrocedent or of any
Retrocessionaire for one or more of the following purposes only:
A. To pay the Retrocessionaire's share or to reimburse the
Retrocedent for the Retrocessionaire's share of any loss
reinsured by this Agreement, which has not been otherwise
paid.
B. To make refund of any sum in excess of the actual amount
required to pay the Retrocessionaire's share of any liability
reinsured by this Agreement.
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C. In the event of nonextension of the Letter of Credit as
provided for above, to establish deposit of the
Retrocessionaire's share of reserves for losses under this
Agreement. Such cash deposit will be held in an interest
bearing account separate from the Retrocedent's other assets,
and interest thereon will accrue to the benefit of the
Retrocessionaires.
The issuing bank will have no responsibility whatsoever in connection
with the propriety of withdrawals made by the Retrocedent or the disposition of
funds withdrawn, except to ensure that withdrawals are made only upon the order
of properly authorized representatives of the Retrocedent.
At annual intervals, or more frequently as agreed but never more
frequently than semi-annually, the Retrocedent will prepare a specific
statement, for the sole purpose of amending the Letter of Credit, of the
Retrocessionaires' share of reserves for losses. If the statement shows that the
Retrocessionaires' share of such reserves exceeds the balance of credit as of
the statement date, the Retrocessionaires will, within 30 days after receipt of
notice of such excess, secure delivery to the Retrocedent of an amendment of the
Letter of Credit, increasing the amount of credit by the amount of such
difference. If, however, the statement shows that the Retrocessionaires' share
of such reserves is less than the balance of credit as of the statement date,
the Retrocedent will, within 30 days after receipt of written request from the
Retrocessionaires, release such excess credit by agreeing to secure an amendment
to the Letter of Credit, reducing the amount of credit available by the amount
of such excess credit.
ARTICLE XIV
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LOSS NOTICES AND SETTLEMENTS
The Retrocedent will advise the Retrocessionaires promptly of all
losses that, in the opinion of the Retrocedent, appear to involve the
Retrocessionaires under this Agreement and of all subsequent developments
pertaining thereto that, in the opinion of the Retrocedent, may materially
affect them as well. Inadvertent omission in dispatching the aforementioned
notices will in no way affect the obligation of the Retrocessionaires under this
Agreement, providing the Retrocedent informs the Retrocessionaires of such
omission promptly upon discovery.
The Retrocedent will have the right to settle all claims under this
Agreement. The loss settlements of the original reinsured, provided they are
within the terms of the original contracts, and the loss settlements of the
Retrocedent, provided they are within the terms of this Agreement, will be
unconditionally binding on the Retrocessionaires in proportion to their
participation in this Agreement. Amounts due the Retrocedent hereunder in the
settlement of loss and loss expense will be payable by the Retrocessionaires
immediately upon being furnished by the Retrocedent with reasonable evidence of
the amount paid or to be paid in excess of the Retrocedent's ultimate net loss
retention as set forth in the Retention and Limit Article, by reason of any one
loss occurrence.
ARTICLE XV
OFFSET
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The Retrocedent and each Retrocessionaire hereunder will be entitled to
deduct from amounts due the other party under this Agreement any amounts due
itself from the other party under this Agreement.
ARTICLE XVI
SALVAGE AND SUBROGATION
The Retrocessionaires will be credited with their share of salvage
and/or subrogation (i.e., reimbursement obtained or recovery made by the
Retrocedent less expense incurred in obtaining such reimbursement or making such
recovery) pertaining to the claims and settlements involving reinsurance
hereunder.
Salvage and/or subrogation will always be used to reimburse the excess
Retrocessionaires (and the Retrocedent if it carries a portion of the excess
coverage net) in the reverse order of their participation in said loss before
being used in any way to reimburse the Retrocedent for the loss within its
primary retention. If salvage and/or subrogation is insufficient to cover the
expense incurred in its recovery, the net expense (after deduction of the amount
recovered, if any) will be added to ultimate net loss as will loss expense
incurred by the Retrocedent prior to any reimbursement for salvage and/or
subrogation.
ARTICLE XVII
WARRANTY
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It is hereby warranted that no claim will be paid hereunder unless two
or more original risks are involved in the same loss occurrence. It is further
warranted that the Retrocedent will retain 5% net and unreinsured.
ARTICLE XVIII
DELAYS, ERRORS, OR OMISSIONS
Inadvertent delays, errors, or omissions made in connection with this
Agreement or any transaction hereunder will not relieve either party from any
liability that would have attached had such delay, error, or omission not
occurred, provided always that such error or omission is rectified immediately
upon discovery. The liability of the Retrocessionaires under this Agreement will
in no event exceed the limits specified in the Retention and Limit Article, nor
will the Retrocessionaires' liability be extended to cover any risks, perils, or
classes of insurance excluded herein except as set forth in the Exclusions
Article.
ARTICLE XIX
AMENDMENTS
This Agreement may be altered or amended in any of its terms and
conditions by mutual consent of the Retrocedent and the Retrocessionaires by
addenda hereto, which will then constitute a part of this Agreement.
ARTICLE XX
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ACCESS TO RECORDS
Provided that the Retrocedent has been given reasonable notice, the
Retrocessionaires will have the right to inspect at any reasonable time, through
their designated representatives, all records of the Retrocedent that pertain in
any way to this Agreement.
ARTICLE XXI
INSOLVENCY
In the event of the Retrocedent's insolvency, the reinsurance under
this Agreement will be payable by the Retrocessionaires directly to the
Retrocedent, its liquidator, receiver, conservator, or statutory successor, on
the basis of the Retrocedent's liability under the original contracts without
diminution because of the Retrocedent's insolvency or because the liquidator,
receiver, conservator, or statutory successor of the Retrocedent has failed to
pay all or a portion of any claims, subject however, to the right of the
Retrocessionaires to offset from such funds due hereunder, any sums that may be
payable to it by said insolvent Retrocedent in accordance with the Offset
Article.
As a condition precedent to the Retrocessionaires' foregoing
obligation, however, the liquidator, receiver, conservator, or statutory
successor of the Retrocedent will give written notice of the pendency of a claim
against the insolvent Retrocedent on the original contract or contracts
reinsured within a reasonable time after such claim is filed in the insolvency
proceeding. During the pendency of such claim, the Retrocessionaires may
investigate such claim and interpose, at their own expense, in the proceeding
where such
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claim is to be adjudicated, any defense that they may deem available to the
Retrocedent, its liquidator, receiver, conservator, or statutory successor. The
expense thus incurred by the Retrocessionaires will be chargeable against the
Retrocedent, subject to court approval, as part of the expense of conservation
or liquidation to the extent that such proportionate share of the benefit will
accrue to the Retrocedent solely as a result of the defense undertaken by the
Retrocessionaires. Where two or more Retrocessionaires are involved in the same
claim and a majority in interest elect to interpose defense to such claim, the
expense will be apportioned in accordance with the terms of this Agreement as
though such expense had been incurred by the Retrocedent.
ARTICLE XXII
ARBITRATION
In the event of any arbitration between the Retrocedent and its
original reinsureds under the terms of any original contract, the
Retrocessionaires agree unreservedly to abide by the result of such arbitration.
If any dispute will arise between the parties to this Agreement with
reference to the interpretation of this Agreement or their rights with respect
to any transaction involved, whether such dispute arises before or after
termination of this Agreement, such dispute, upon the written request of either
party, will 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
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the two arbitrators fail to agree in the selection of a third arbitrator within
thirty days of their appointment, the third arbitrator will be selected from a
panel of three names to be supplied by the Insurance Arbitration Forums. If the
two arbitrators cannot mutually agree on the arbitrator to be chosen from this
panel, each party to the arbitration will have the right to reject one member of
the panel. This rejection process will be sequential, with the right of first
rejection to be decided by a toss of a coin. All arbitrators will be active or
retired disinterested officers of insurance or reinsurance companies not under
the control of either party to this Agreement.
The arbitrators will interpret this Agreement as an honorable
engagement and not as merely a legal obligation. The arbitrators will adopt
their own rules and procedures. They will make their award with a view of
effecting the general purpose of this Agreement in a reasonable manner rather
than in accordance with a literal interpretation of the language. Each party
will 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, will 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 will bear the expense of its own arbitrator and will
jointly and equally bear with the other party the expense of the third
arbitrator and of the arbitration. Said arbitration will take place in the City
in which the Retrocedent's Head Office is located unless some other place is
mutually agreed upon by the parties to this Agreement.
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ARTICLE XXIII
TAXES
The Retrocedent will pay all taxes (except Federal Excise Tax) on
premiums reported to the Retrocessionaires on this Agreement.
ARTICLE XXIV
FEDERAL EXCISE TAX
(This Article applies to Retrocessionaires domiciled outside the United
States of America, excepting Lloyd's London Underwriters and other
Retrocessionaires exempt from Federal Excise Tax.)
The Retrocessionaires will allow for the purpose of paying Federal
Excise Tax the applicable percentage of the premium payable hereon (as imposed
under Section 4371 of the Internal Revenue Service Code) to the extent such
premium is subject to such tax. In the event of any return of premium, the
Retrocessionaires will deduct the aforesaid percentage from the return premium
payable hereon and the Retrocedent or its agent will recover such tax from the
United States Government.
ARTICLE XXV
CURRENCY
The use of the sign "$" in this Agreement is in reference to United
States of America Dollars. Therefore, premiums due the Retrocessionaires and
loss payments due the Retrocedent hereunder will be in United States of America
Dollars.
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ARTICLE XXVI
SERVICE OF SUIT
(This Article applies to those Retrocessionaires domiciled outside the
United States of America as well as those Retrocessionaires
unauthorized in the Retrocedent's state of domicile. This Article is
not intended to conflict with or override the parties' obligation to
arbitrate their disputes in accordance with the Arbitration Article.)
In the event of the failure of any Retrocessionaire hereon to pay any
amount claimed to be due hereunder, the Retrocessionaire, at the request of the
Retrocedent, will submit to the jurisdiction of a Court of competent
jurisdiction within the United States. Nothing in this Article constitutes or
should be understood to constitute a waiver of the Retrocessionaire's right 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 10019-6829, or another
party specifically designated in the applicable Interests and Liabilities
Agreement attached hereto. In any suit instituted against it upon this
Agreement, the Retrocessionaire 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 Retrocessionaire in any such suit and/or upon the
request of the Retrocedent to give a written undertaking to the Retrocedent that
they will enter a general appearance upon the Retrocessionaire's behalf in the
event such a suit is instituted.
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Further, pursuant to any statute of any state, territory, or district
of the United States that makes provision therefor, the Retrocessionaire hereby
designates 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 Retrocedent or any beneficiary hereunder arising out of this Agreement,
and hereby designates the above named as the person to whom the said officer is
authorized to mail such process or a true copy thereof.
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ARTICLE XXVII
INTERMEDIARY
Aon Re Inc. is hereby recognized as the Intermediary negotiating this
Agreement for all business hereunder. All communications (including but not
limited to notices, statements, premiums, return premiums, commissions, taxes,
losses, loss expenses, salvages, and loss settlements) relating thereto will be
transmitted to the Retrocedent or the Retrocessionaires through Aon Re Inc., 123
N. Wacker Drive, Chicago, Illinois 60606. Payments by the Retrocedent to the
Intermediary will be deemed payment to the Retrocessionaires. Payments by the
Retrocessionaires to the Intermediary will be deemed payment to the Retrocedent
only to the extent that such payments are actually received by the Retrocedent.
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