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EXHIBIT 10.29
SPECIAL CATASTROPHE EXCESS OF LOSS
RETROCESSIONAL AGREEMENT
ARTICLE PAGE
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COVERAGE I 2
TERM AND CANCELLATION II 3
EXTENDED TERMINATION III 3
TERRITORY IV 4
EXCLUSIONS V 4
DEFINITIONS VI 7
LIMIT VII 8
NET RETAINED LIABILITY VIII 8
PREMIUM IX 9
CONTINGENT PROFIT COMMISSION X 10
EXTRA CONTRACTUAL OBLIGATIONS AND
EXCESS LIMITS LIABILITY XI 11
REPORTS AND REMITTANCES XII 13
RESERVES AND LETTERS OF CREDIT XIII 13
LOSS NOTICES AND SETTLEMENTS XIV 16
OFFSET XV 16
SALVAGE AND SUBROGATION XVI 17
DELAYS, ERRORS, OR OMISSIONS XVII 17
AMENDMENTS XVIII 18
ACCESS TO RECORDS XIX 18
INSOLVENCY XX 18
ARBITRATION XXI 20
TAXES XXII 21
FEDERAL EXCISE TAX XXIII 22
CURRENCY XXIV 22
SERVICE OF SUIT XXV 23
INTERMEDIARY XXVI 24
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SPECIAL 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 Limit Article for any loss or losses occurring on or
after inception 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, except as
modified herein. 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 AND CANCELLATION
This Agreement will apply to all losses occurring on or after 12:01
a.m. Eastern Standard Time on January 1, 1997, and will remain in full force and
effect until 12:01 a.m. Eastern Standard Time on January 1, 2000.
This Agreement may be canceled any January 1 by either party giving at
least 60 days prior notice by certified or registered mail to the other party.
During any such period of notice, the Retrocessionaires will remain bound by the
terms of this Agreement; however, the Retrocessionaires will not be liable for
any losses occurring on or after the cancellation or expiration date.
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
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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.
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.
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3. Nuclear Energy Risks Exclusion Clause (1994)
(Reinsurance) (Worldwide Excluding U.S.A. & Canada)
attached to this Agreement, or as may be revised
hereafter by the Lloyd's Underwriters' Non-Marine
Association.
4. Nuclear Incident Exclusion Clause -- 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.
The Retrocedent will be the sole judge as to which insurance
or reinsurance companies come within the scope of this
definition.
O. All losses sustained by the Retrocedent howsoever and
wheresoever arising including all Business Interruption,
Consequential Loss and/or
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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.
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.
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
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Retrocessionaires, it will be subject to the terms of this Agreement, except as
such terms are modified by such acceptance.
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. "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.
C. "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 claims related extra contractual obligations
and/or excess limits liabilities incurred by any original
reinsured and 80% of any claims related 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 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
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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.
D. "Agreement year" as used in this Agreement will mean a period
of 12 consecutive months, commencing with the inception of
this Agreement, or any anniversary thereof.
ARTICLE VII
LIMIT
The Retrocessionaires will be liable for up to $8,000,000 of the amount
of ultimate net loss incurred by the Retrocedent during the term of this
Agreement, subject to no more than $4,000,000 any one Agreement year in respect
of any loss or losses on the Retrocedent's net retained liability as follows:
Retrocedent's Catastrophe Layer Net
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100% of $2,000,000 Excess of $ 2,000,000 $2,000,000
100% of $2,000,000 Excess of $10,000,000 $2,000,000.
The structure of the limit for the second and subsequent Agreement
years will be mutually agreed upon at the commencement of each Agreement year.
ARTICLE VIII
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
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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.
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ARTICLE IX
PREMIUM
For the first Agreement year, there will be a deposit premium of
$1,450,000, payable in equal quarterly installments of $362,500 on January 1,
1997, April 1, 1997, July 1, 1997, and October 1, 1997.
For the second Agreement year, there will be a deposit premium of
$1,450,000, payable in equal quarterly installments of $362,500 on January 1,
1998, April 1, 1998, July 1, 1998, and October 1, 1998. At January 1, 1998, the
Retrocedent will also pay an additional premium equal to 33% of losses incurred
during the first Agreement year.
For the third Agreement year, there will be a deposit premium of
$1,450,000, payable in equal quarterly installments of $362,500 on January 1,
1999, April 1, 1999, July 1, 1999, and October 1, 1999. At January 1, 1999, the
Retrocedent will also pay an additional premium equal to 100% of losses incurred
during the first two Agreement years, less previously paid additional premium.
At January 1, 2000, the Retrocedent will pay a final additional premium
of 100% of losses incurred during the three-year term of this Agreement, less
previously paid additional premium, subject, however, to a maximum additional
premium payment for the entire three-year term of $2,544,500. In no event,
however, will the total premium paid as deposit premium and additional premium
exceed $6,894,500 for the entire three-year term of this Agreement.
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All premiums due hereunder will be payable by wire transfer and will be
received by the Retrocessionaires within 30 days of inception of this Agreement
and within 30 days of each calendar quarter thereafter.
ARTICLE X
CONTINGENT PROFIT COMMISSION
The Retrocessionaires will allow the Retrocedent a contingent profit
commission of 100% of the net profit of this Agreement. "Net profit" as used
herein is the earned reinsurance premium as in A. below, less reinsurance losses
as in B. below:
A. "Earned reinsurance premium" is 85% of the deposit premium and
100% of any additional premium.
B. "Reinsurance losses" are the Retrocessionaires' portion of
payments (including loss expense) made on losses occurring
during the adjustment period, plus the Retrocedent's estimate
of the Retrocessionaires' portion of the reserve for
outstanding losses (including loss expenses) occurring during
said period.
The adjustment period will extend from January 1, 1997 through and
including December 31, 1999. If, by reason of cancellation of this Agreement,
the adjustment period is less than three years, it will be subject to adjustment
as if it were a complete adjustment period. The contingent profit commission
will be computed and a statement forwarded to the Retrocessionaires within 30
days following expiration or early cancellation. Upon verification of amount
due, the Retrocessionaires will immediately pay the Retrocedent.
Notwithstanding expiration or early cancellation of this Agreement,
annual computations for the adjustment period will continue to be made until all
accounts
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relating to income and outgo for the adjustment period have been closed. If an
incurred loss is reported in the Agreement year preceding an adjustment, the
Retrocedent has an additional 60 days to recalculate the contingent profit
commission. In the event that reinsurance losses used in any contingent profit
commission computation are found to have been over- or under- estimated by
subsequent developments, then either party on an annual basis may request a
revision of previous computations to reflect such developments. The Retrocedent
will refund to the Retrocessionaires, or the Retrocessionaires will pay the
Retrocedent, whatever amount is due as a result of the revision. Such revision
may be requested even though this Agreement has expired or been terminated prior
to the time of such request.
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
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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
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
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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 Limit Article.
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ARTICLE XII
REPORTS AND REMITTANCES
As soon as possible following the end of each Agreement year, the
Retrocedent will furnish the Retrocessionaires with a report of reinsurance
premium due them for that period. Such report will contain such other
information as may be required by the Retrocessionaires for completion of their
NAIC annual statements. The premium due the Retrocessionaires will be balanced
against amounts previously paid as set forth in the Premium Article, and any
balance shown to be due the Retrocessionaires will be remitted with said annual
report.
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
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Retrocedent of a clean, irrevocable, and unconditional Letter of Credit, dated
on or before 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 that
Retrocessionaire's 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.
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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.
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.
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ARTICLE XIV
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 ultimate net loss will be payable by the Retrocessionaires
immediately upon reasonable evidence of the amount paid or to be paid being
furnished by the Retrocedent.
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, less recovery expense, pertaining to the claims and
settlements involving reinsurance hereunder.
Salvage and/or subrogation will always be used to reimburse the
Retrocessionaires in the reverse order of their participation (including the
Retrocedent's pro rata share in excess layers) in said loss before being used in
any way to reimburse the Retrocedent for the loss as set forth in the Limit
Article. 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
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
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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 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 XVIII
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 XIX
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 XX
INSOLVENCY
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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.
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 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
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with the terms of this Agreement as though such expense had been incurred by the
Retrocedent.
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ARTICLE XXI
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 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.
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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.
ARTICLE XXII
TAXES
The Retrocedent will pay all taxes (except Federal Excise Tax) on
premiums reported to the Retrocessionaires on this Agreement.
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ARTICLE XXIII
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 XXIV
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 XXV
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.
ARTICLE XXVI
INTERMEDIARY
Aon Re Inc. is hereby recognized as the Intermediary negotiating this
Agreement for all business hereunder. Correspondence regarding Agreement terms,
including provisional notice of cancellation (if applicable), will be
transmitted through Aon Re Inc., Two World Trade Center, New York, New York
10048. All statements for premiums, return premiums, commissions, taxes, losses,
loss expense, salvages, and loss settlements will be transmitted through Aon Re
Inc., 123 North Wacker Drive, Chicago, Illinois 60606. Payments by the
Retrocedent to Aon Re Inc. will be deemed payment to the Retrocessionaires.
Payments by the Retrocessionaires to Aon Re Inc. will be deemed payment to the
Retrocedent only to the extent that such payments are actually received by the
Retrocedent.
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