EXHIBIT 10.3
SELECTED MEMBERS OF THE
INFINITY PROPERTY AND CASUALTY CORPORATION
AUTOMOBILE PHYSICAL DAMAGE
VARIABLE QUOTA SHARE REINSURANCE AGREEMENT
EFFECTIVE: JANUARY 1, 2004
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TABLE OF CONTENTS
ARTICLE PAGE
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I APPLICATION OF AGREEMENT 1
II COVER 2
III WARRANTY 2
IV TERRITORY 3
V COMMENCEMENT AND TERMINATION 3
VI DEFINITIONS 4
VII EXCLUSIONS 4
VIII LOSSES AND LOSS 6
ADJUSTMENT EXPENSES
IX PREMIUM AND COMMISSION 6
X FUNDS WITHHELD ACCOUNT 8
XI PROFIT SHARING 8
XII REPORTS AND REMITTANCES 9
XIII ASSIGNMENT 9
XIV CHANGES IN CONDITIONS 10
XV CURRENCY 11
XVI ORIGINAL CONDITIONS 11
XVII TAXES (BRMA 50B) 11
XVIII DELAYS, ERRORS AND OMISSIONS 12
XIX ACCESS TO RECORDS 12
XX INSOLVENCY 12
XXI OFFSET 12
XXII GOVERNING LAW 13
XXIII AMENDMENTS AND ALTERATIONS 13
AUTOMOBILE PHYSICAL DAMAGE
VARIABLE QUOTA SHARE REINSURANCE AGREEMENT
(the "Agreement")
Made and Entered Into By and Between
THE LEADER INSURANCE COMPANY, CONSISTING OF:
TICO INSURANCE COMPANY, LEADER INSURANCE COMPANY, LEADER
PREFERRED INSURANCE COMPANY, LEADER SPECIALTY INSURANCE
COMPANY;
THE INFINITY INSURANCE COMPANY, CONSISTING OF:
INFINITY INSURANCE COMPANY, INFINITY SELECT INSURANCE COMPANY,
INFINITY NATIONAL INSURANCE COMPANY, AMERICAN PREMIER INSURANCE
COMPANY, ATLANTA RESERVE INSURANCE COMPANY, ATLANTA SPECIALTY
INSURANCE COMPANY, ATLANTA CASUALTY COMPANY;
THE WINDSOR INSURANCE COMPANY, CONSISTING OF:
WINDSOR INSURANCE COMPANY, REGAL INSURANCE COMPANY, AMERICAN
DEPOSIT INSURANCE COMPANY, COVENTRY INSURANCE COMPANY;
(hereinafter collectively referred to as the "Company")
and
AMERICAN RE-INSURANCE COMPANY
A Delaware Corporation with administrative offices in Princeton, New Jersey
(hereinafter referred to as the "Reinsurer").
WITNESSETH:
The Reinsurer hereby reinsures the Company to the extent and on the terms and
conditions and subject to the exceptions, exclusions and limitations hereinafter
set forth and nothing hereinafter shall in any manner create any obligations or
establish any rights against the Reinsurer in favor of any third parties or any
persons not parties to this Agreement.
ARTICLE I - APPLICATION OF AGREEMENT
This Agreement applies to Private Passenger Automobile Physical Damage Policies
written or renewed by the Company during the Term of this Agreement. The term
"Policies" as used herein means each of the Company's binders, policies and
contracts written and classified by the Company as Private Passenger Automobile
Physical Damage insurance (including Collision and Other Than Collision).
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ARTICLE II - COVER
A. The Company shall cede to the Reinsurer and the Reinsurer shall accept
a variable quota share cession of the Company's Ultimate Net Loss on
Policies covered hereunder, subject to a minimum cession of 10% and a
maximum cession of 90%, the basis for establishing the cession amount
as set forth in paragraph B, below. The quota share percentage cession
will apply to each company reinsured hereunder.
B. The Company shall have the right to elect the cession percentage for
each calendar quarter that this Agreement is in effect, subject to the
minimum and maximum cession percentages stated above, and shall inform
the Reinsurer in writing of the elected cession percentage no less than
twenty calendar days prior to the first calendar day of the calendar
quarter for which the cession percentage election is being made. The
Company shall retain net for its own account that portion of the
Company's Ultimate Net Loss not ceded to this Agreement, subject only
to catastrophe reinsurance.
C. The Reinsurer shall only be liable for its quota share interest in the
first $1,000,000 per occurrence of the Company's Ultimate Net Loss
arising from catastrophe losses subject to this Agreement, subject to
an aggregate limit under this Agreement equal to the lesser of 3.75% of
premium ceded or $3,000,000.
D. The Reinsurer shall only be liable for its quota share interest in the
first $75,000 per vehicle of the Company's Ultimate Net Loss.
E. The aggregate liability of the Reinsurer, subject to all terms and
conditions of this Agreement, shall be unlimited, and the Company and
the Reinsurer shall have the right to cancel the Agreement on a cut-off
basis at any time with sixty (60) days notice to the other party.
ARTICLE III - WARRANTY
A. The Company also warrants that it will advise the Reinsurer
prospectively of any changes to its practices, procedures or policies
regarding the use of Original Equipment Manufacturer parts in the
repair of vehicles as outlined in the "Material Damage Claims Handling
Guidelines Manual" dated May 1, 2002, which has been forwarded to the
Reinsurer, it being understood and agreed that the Reinsurer shall have
the option to terminate this Agreement on a cut-off basis as of the
earlier of the date when the Company's practices and procedures
regarding the use of Original Equipment Manufacturer parts in the
repair of vehicles changed or the effective date of a change in the
Company's policies regarding the use of Original Equipment Manufacturer
parts in the repair of vehicles as outlined in the "Material Damage
Claims Handling Guidelines Manual" dated May 1, 2002.
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B. Additionally, the Company warrants that the Company's State Mix of
Business for the Agreement period will not increase by more than five
(5) percentage points per State from the Expected State Mix of Business
Exhibit A, attached to and forming part of this Agreement. The Expected
State Mix of Business is calculated as the Net Written Premium in each
State divided by the Subject Net Written Premium. In the event that the
Net Written Premium in any individual state increases by more than five
(5) percentage points of the total Subject Net Written Premium during
the Agreement Period, for purposes of calculations under this Agreement
the Net Written Premium for that state will be adjusted to a maximum
increase of five (5) percentage points of the Subject Net Written
Premium, and the Reinsurer shall only be liable for its quota share
percentage of the Ultimate Net Loss from that state, which shall be
equal to the cession percentage multiplied by the Maximum State Mix,
multiplied by the Subject Net Written Premium, divided by the actual
unadjusted Net Written Premium for that state.
ARTICLE IV - TERRITORY
The Reinsurer's liability shall be limited to losses occurring within the
territorial limits covered by the original Policies reinsured hereunder.
ARTICLE V - COMMENCEMENT AND TERMINATION
A. The Term of this Agreement shall be from 12:01 A.M., Eastern Standard
Time, January 1, 2004 through Midnight, Eastern Standard Time, December
31, 2004, both days inclusive. The liability of the Reinsurer hereunder
shall attach as respects Policies written or renewed during the Term
hereof and shall continue in full force and effect until the expiry of
this Agreement, upon which the provisions of the following paragraphs
shall apply.
B. Upon expiration, the Reinsurer shall have no liability for losses
occurring on Policies attaching subsequent to the date of expiration.
However, the Reinsurer shall remain liable for losses occurring on all
Policies in force at the date of expiration until the natural
expiration or prior cancellation of such Policies, whichever occurs
first, not to exceed twelve months in all.
C. Either Party shall have the right to cancel this Agreement on a cut-off
basis at any time with sixty (60) days notice to the other party, and
the Reinsurer shall be relieved of all liability for losses occurring
subsequent to the date of expiration. In such event, the Reinsurer
shall return to the Company the unearned premium less the previously
allowed ceding commission on all Policies in force as of the date of
expiration of this Agreement.
D. Notwithstanding the expiration of this Agreement as provided above, the
provisions of this Agreement shall continue to apply to all unfinished
business hereunder to the end that all obligations and liabilities
incurred by each party hereunder prior to such expiration shall be
fully performed and discharged.
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ARTICLE VI - DEFINITIONS
A. The term "Ultimate Net Loss" shall mean all sums paid by the Company in
settlement of losses for which it is liable under the policies
reinsured hereunder, and shall include any Loss Adjustment Expenses, as
hereinafter defined, after making proper deductions for all salvages
and recoveries. The Reinsurer's liability hereunder shall not be
increased by reason of the inability of the Company to collect from any
other Reinsurer or Insurer, for any reason, any amount that may be due
from such Reinsurer or Insurer.
B. Except as specifically provided for or excluded under this Article, the
term "Loss Adjustment Expenses" shall mean all expenses which have been
paid by the Company in the investigation, adjustment, settlement or
defense of specific claims covered under original policies of the
Company reinsured hereunder, (also including salaries and expenses of
salaried adjusters associated therewith), but not including office
expenses of the Company, salaries and expenses of its officials and
employees, or any other administrative or overhead expenses.
C. In the event of the insolvency of the Company, "Ultimate Net Loss"
shall mean that amount which the Company has incurred or for which it
is liable, and payment by the Reinsurer shall be made to the
liquidator, receiver or statutory successor of the Company in
accordance with the provisions of ARTICLE XXII - INSOLVENCY.
D. The Reinsurer shall be paid or credited with its proportion of salvages
or recoveries (i.e. reimbursements made or obtained by the Company)
less the cost involved in obtaining such salvage or recovery, excluding
the office expenses of the Company and the salaries and expenses of all
employees of the Company.
E. The Company has the right to carry catastrophe excess of loss
reinsurance on that portion of its Ultimate Net Loss which it retains
net for its own account and any recoveries thereunder shall inure
solely to the benefit of the Company.
F. The term "Subject Net Premiums Written" as used herein means gross
premiums and additional premiums on business covered hereunder less
return premiums.
G. The term "occurrence" as used herein means each occurrence, disaster or
casualty or series of occurrences, disasters or casualties arising out
of one event.
ARTICLE VII - EXCLUSIONS
This Agreement does not apply to and specifically excludes:
A. All risks, lines or classes of business, perils and exposures
specifically excluded under the Policies reinsured hereunder.
B. All lines and coverages of insurance not classified as Private
Passenger Auto Physical Damage Insurance in the Company's statutory
annual statement.
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C. All insurance classified as Private Passenger Auto Physical Damage
Insurance in the Company's statutory annual statement produced on a
direct to consumer basis.
D. Reinsurance Assumed, except reinsurance of the Great Texas County
Mutual Insurance Company, Transport Insurance Company, Republic
Indemnity Company of California and reinsurance of subject business, as
outlined in ARTICLE I - APPLICATION OF AGREEMENT, underwritten by
carriers affiliated with the Company by and on behalf of the Company.
E. All liability beyond circumscribed policy provisions, including but not
limited to extra contractual obligations, excess of policy limits
judgments, punitive, exemplary or consequential damages or compensatory
damages, any expenses related thereto, resulting from a claim of an
insured or assignee against the Company.
F. Declaratory Judgment Expenses. "Declaratory Judgment Expenses" as used
in this Agreement shall mean legal expenses paid by the Company in the
investigation, analysis, evaluation, resolution or litigation of
coverage issues by the Company, under policies reinsured hereunder for
a specific loss tendered under such policies. Declaratory Judgment
Expenses shall not include any expenses deriving from coverage issues
raised between the Company and any Reinsurer.
G. Unallocated Loss Adjustment Expenses.
H. Business derived from any Pool, Association, Syndicate, Exchange, Plan,
Fund or other facility directly as a member, subscriber or participant,
or indirectly by way of reinsurance or assessments.
I. Liability of the Company arising from its participation or membership,
whether voluntary or involuntary, in any insolvency fund, including any
guarantee fund, association, pool, plan or other facility which
provides for the assessment of, payment by, or assumption by the
Company of a part or the whole of any claim, debt, charge, fee or other
obligations of an insurer, or its successors or assigns, which has been
declared insolvent by any authority having jurisdiction.
J. Liability excluded by the provisions of the following clauses attached
hereto. The word "Reassured" used therein means "Company."
Nuclear Incident Exclusion Clauses - Physical Damage -
Reinsurance - No. 2
Nuclear Incident Exclusion Clause - Reinsurance - No. 4
K. War risk, bombardment, invasion, insurrection, rebellion, revolution,
military or usurped power, or confiscation by order of any government
or public authority, as excluded under a standard policy containing a
standard war exclusion clause.
L. Terrorist Activity, as per the attached "Terrorism Exclusion."
M. Ultimate Net Loss for Class Action Lawsuits for which the Company is
liable. Ultimate Net Loss shall include Loss Adjustment Expense
incurred for defense of a Class Action Lawsuit whether or not the class
of two or more claimants is certified as one class.
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ARTICLE VIII - LOSSES AND LOSS ADJUSTMENT EXPENSES
A. The Reinsurer, in proportion to its participation, shall pay to the
Company a pro rata share of sums actually paid by the Company in
settlement of losses under its policies, provided, however, that in the
event of the insolvency of the Company, payment of loss for which the
Company is liable shall be made by the Reinsurer to the liquidator,
receiver or statutory successor of the Company in accordance with the
provisions of ARTICLE XXII - INSOLVENCY of this Agreement.
B. The Reinsurer shall bear its pro rata share of all Loss Adjustment
Expenses in accordance with ARTICLE VI- DEFINITIONS, Paragraph B.
ARTICLE IX - PREMIUM AND COMMISSION
A. The Company shall pay to the Reinsurer the elected cession percentage
of the Company's Subject Net Premiums Written, less a ceding commission
as hereinafter described, during each calendar month this Agreement is
in effect. The Reinsurer shall refund to the Company its pro rata share
of each return premium, less applicable ceding commission.
B. Payment of premiums due hereunder shall be effected as follows:
1. Upon execution of this Agreement, the Company shall pay to the
Reinsurer a non-refundable margin equaling 2.50% of the premium ceded
hereunder, subject to a minimum margin of $1,200,000. In the event that
2.50% of the premium ceded to this Agreement exceeds the minimum margin
of $1,200,000, the Company shall, on May 1, 2005, and monthly
thereafter, pay to the Reinsurer the difference between those amounts
plus interest calculated at 5.00% as from the effective date of this
Agreement.
2. The Company shall retain, on a funds withheld basis, the
remaining 97.50% of premiums ceded hereunder as provided for in ARTICLE
X - FUNDS WITHHELD ACCOUNT.
C. The Reinsurer shall make a provisional commission allowance of 33.70%
to the Company on the premiums ceded under this Agreement. The Company
shall debit the Reinsurer with the provisional commission allowance in
the monthly accounts, but said provisional commission shall be subject
to adjustment as provided hereinafter. On all return premiums the
Company shall return to the Reinsurer the provisional commission
allowance of 33.70%.
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D. The commission allowance shall be in accordance with the following plan
and shall be computed on premiums earned under this Agreement:
Ratio of losses incurred
Commission Ratio Sliding to premiums earned
- ------------------ ------- -------------------------
Provisional: 33.70% 63.80%
1:1
Minimum: 18.00%* 79.50%*
* It is specifically understood and agreed that this adjustment will slide to
actual acquisition expense (defined as commission and brokerage, taxes, licenses
and fees, other acquisition, field supervision and collection expenses but
excluding general expenses), but for the purposes of calculations under this
Agreement, actual acquisition expense shall be deemed never to exceed 18.00 %.
E. The word "period" means the actual time covered by each adjustment of
commission.
F. The term "losses incurred" means losses and loss adjustment expenses
paid less salvages recovered during the current period for which
computation is being made plus the reserve for losses outstanding at
the end of the current period (including incurred but not reported
reserves, as mutually agreed by the parties hereto) less losses
outstanding at the end of the preceding period.
G. The term "premiums earned" means the total of the net premiums ceded
during the current period for which computation is being made plus the
unearned premiums at the beginning of the current period as reported in
the commission adjustment calculation for the preceding period less the
unearned premium at the close of the current period. Unearned premiums
shall be calculated on a daily basis.
H. The calculation of the adjustment to the commission shall be made
within 30 days after the end of each month, with the first report due
on or before May 1, 2005. Calculations to include incurred but not
reported losses as mutually agreed by the parties.
I. If the ceding commission calculated in accordance with the foregoing
should be less than the provisional ceding commission, then the ceding
commission, including interest thereon, shall be adjusted monthly with
the first adjustment effective at March 31, 2005. Monthly interest
shall be calculated at the same interest rate as set forth in ARTICLE X
- FUNDS WITHHELD ACCOUNT. Each calculation shall be on a cumulative
basis as from the effective date of this Agreement through the end of
the calendar month for which the computation is being made.
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ARTICLE X - FUNDS WITHHELD ACCOUNT
A. The Company shall maintain a Funds Withheld Account, which shall be
calculated in accordance with the following formula, it being
understood that the Funds Withheld Account balance shall never be less
than zero (0):
1. 97.50 % of premiums ceded hereunder; less
2. Ceding commissions due to the Company, including any
adjustments thereto (as provided for in ARTICLE IX - PREMIUM
AND COMMISSION); less
3. Ultimate Net Loss paid subject to this Agreement, plus
4. Interest.
B. Premium cessions shall be credited to the Funds Withheld Account on a
monthly basis as of the last day of each calendar month.
C. Losses and the Provisional Ceding Commission shall be debited from the
Funds Withheld Account as of the last day of each calendar month.
D. Adjustments to the Ceding Commission (as provided for in ARTICLE IX -
PREMIUM AND COMMISSION) shall be made as of the last day of each
calendar month.
E. Interest shall be credited as of the last day of each calendar month,
based on the average monthly balance, when the average monthly balance
results in a positive amount. Monthly interest calculations shall be on
a compound basis using a rate of 0.4074%.
F. The Company shall provide the Reinsurer with a statement of the Funds
Withheld Account balance when submitting other reports required under
this Agreement.
G. Monthly calculation of the Funds Withheld Account shall continue until
the Agreement is commuted (as provided for in paragraph D. of ARTICLE
XI - PROFIT SHARING) or the Funds Withheld Account balance is
exhausted. In the event of a commutation, the positive Funds Withheld
Account balance shall be released to the Company.
ARTICLE XI - PROFIT SHARING
A. The Reinsurer shall maintain a notional Profit Sharing Account for the
Term of this Agreement, which shall be calculated in accordance with
the following formula, it being understood that the Profit Sharing
Account balance shall never be less than zero (0):
1. Premiums earned during the Term; less
2. Reinsurer's non-refundable margin; less
3. Ceding commission allowed the Company on premiums earned for
the Term; less
4. Loss and loss adjustment expense incurred for the Term; plus
5. Interest for the Term calculated in accordance with paragraph
E of ARTICLE X - FUNDS WITHHELD ACCOUNT.
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B. Within ninety (90) days from the end of the Term, and monthly
thereafter, the Company shall calculate and report to the Reinsurer the
Profit Sharing Account balance until all losses subject hereto have
been finally settled. Each such calculation shall be based on
cumulative transactions hereunder from the beginning of the Term
through the date of calculation.
C. The Company may request that the Reinsurer release 100% of the Profit
Sharing Account balance to the Company at any time on or after March
31, 2005 provided that the Profit Sharing Account balance is positive
at the time of the request. Notwithstanding the above, the Company must
request that the Reinsurer release 100% of the Profit Sharing Account
balance to the Company no later than December 31, 2005.
D. Such release of the Profit Sharing Account balance to the Company by
the Reinsurer shall result in a commutation of this Agreement and shall
release both the Company and the Reinsurer from any and all future
obligations and liabilities under this Agreement whether such
obligations and liabilities were known by either party at the time of
such release of the Profit Sharing Account balance.
ARTICLE XII - REPORTS AND REMITTANCES
A. The Company will provide the Reinsurer with all necessary data
respecting premiums and losses, including reserves thereon, as at dates
and on forms mutually acceptable to the Company and the Reinsurer.
B. Within 30 days after the end of each calendar month during the Term
hereof, and monthly thereafter until all subject premiums have been
collected and all losses have been settled, the Company shall render
its reports to the Reinsurer. Such reports shall include details of the
Funds Withheld Account calculation and Profit Sharing Account balance,
as applicable.
C. Promptly upon the Reinsurer's receipt of the Company's monthly report,
the Reinsurer shall remit any balances due to the Company. Loss
payments due to the Company shall first be debited from the Funds
Withheld Account balance. In the event that the Funds Withheld Account
is exhausted, loss payments due to the Company shall then be made
directly by the Reinsurer to the Company.
ARTICLE XIII - ASSIGNMENT
Subject to the provisions of this Article, no party shall assign, transfer or
dispose of its rights and obligations under this Agreement without the prior
written consent of the other.
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ARTICLE XIV - CHANGES IN CONDITIONS
A. If at any time during the continuance of this Agreement any of the
following events occur with respect to the Company:
1. The financial strength rating assigned by A.M. Best
("Best's") for the following entities is reduced
below the financial strength ratings outlined as
follows, and / or the financial strength rating
assigned by Standard and Poors ("S&P") for the
following entities is reduced below the financial
strength ratings outlined as follows:
- Leader Insurance Company's Best's Rating:
"B++"
- Infinity Insurance Company's Best's
Rating: "B++"
- Windsor Insurance Company's Best's Rating:
"B++"
- Leader Insurance Company's S&P Rating:
"A-"
- Infinity Insurance Company's S&P Rating:
"A-"
- Windsor Insurance Company's S&P Rating:
"A-"
2. The Company or its Parent undergoes a Change of
Control. "Change of Control" shall mean (i) a merger
of the Company or its Parent with another entity or
entities unless the Company or its Parent is the
surviving corporation following such a merger, (ii)
the acquisition of voting control (directly or
indirectly) of the Company or its Parent by another
entity or entities, or (iii) the entry by the Company
or its Parent into a legally binding agreement (or
the entry by any other person or entities into an
agreement that would be legally binding on or in
respect of the Company or its Parent or all or
substantially all of the Company's or its Parent's
properties or assets), which agreement shall be
deemed legally binding for purposes hereof
notwithstanding that it may be conditioned upon the
occurrence of certain events, such as obtaining
shareholder approval, which would result in a Change
of Control under clauses (i) or (ii) of this
definition in respect of the Company or its Parent.
3. The Company fails to achieve an effective rate
increase during the Term of 3.00%;
the parties agree, with regard to Changes in Conditions described in
A.1. and A.2. above, that the Reinsurer shall have the right to
terminate, on a cut-off basis, this Agreement as of the effective date
of the Changes in Conditions. In the event that the Reinsurer exercises
its right to terminate this Agreement as provided for above, the
Reinsurer, shall return to the Company the unearned portion of the
Reinsurer's Margin subject to a maximum of 50.00%.
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The parties further agree, with regard to Changes in Conditions
described in A.3. above, the minimum Commission Ratio shall be adjusted
based upon the effective rate change for underwriting year 2004
calculated as follows:
SIGMA(s) SIGMA(c)W(s,c)R(s,c) T(s,c)/ SIGMA(s) SIGMA(c)W(s,c)
Where
SIGMA(s) = sum over each state
SIGMA(c) = sum over each company
W(s,c) = 2003 written premium for a given state and company
R(s,c) = 2004 filed rate change percentage
T(s,c) = 2004 filed rate change time remaining =
(Days between 12/31/04 and effective date) / 365
Resulting in the adjusted minimum Commission Ratio
calculated as follows:
1 - 1.50% - {(1 - 1.50% - 18.00%) x 1.03 / [1 +
(lesser of 3.00% or Effective Rate Change)]}
B. With regard to paragraph A.2. above, the Company agrees to give the
Reinsurer written notice of any Change in Control within three (3)
business days of the occurrence thereof (or, with respect to a Change
of Control referred to in clause A.2. (iii) of the definition hereof,
within three (3) business days after execution of any such agreement.
ARTICLE XV - CURRENCY
Whenever the word "Dollars" or the "$" sign appears in this Agreement, they
shall be construed to mean United States Dollars and all transactions under this
Agreement shall be in United States Dollars.
ARTICLE XVI - ORIGINAL CONDITIONS
All amounts ceded hereunder shall be subject to the same gross rates and to the
same conditions and pre-loss modifications of the Company's Policies and the
Reinsurer shall pay losses as may be paid thereon and shall follow the
settlements of the Company, subject always to the terms and conditions of the
Company's original Policies reinsured hereunder and the limits, terms and
conditions of this Agreement.
ARTICLE XVII - TAXES (BRMA 50B)
In consideration of the terms under which this Agreement 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 or the District of Columbia.
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ARTICLE XVIII - DELAYS, ERRORS AND OMISSIONS
Any inadvertent delays, omissions or errors shall not be held to relieve either
party hereto from any liability which would attach to it hereunder if such
delay, omission or error had not been made, provided such delay, omission or
error is rectified upon discovery.
ARTICLE XIX - ACCESS TO RECORDS
Upon reasonable notice being given to the Company, the Reinsurer or its
designated representatives shall have free access, at any reasonable time during
the Term of this Agreement and subsequent to its termination, to all records of
the Company which pertain in any way to this Agreement.
ARTICLE XX - INSOLVENCY
In the event of the insolvency of the Company and the appointment of a
conservator, liquidator or statutory successor, the reinsurance provided by this
Agreement shall be payable by the Reinsurer directly to the Company or to its
liquidator, receiver or statutory successor on the basis of the liability of the
Company under the contract or contracts reinsured. Subject to the right of
offset and the verification of coverage, the Reinsurer shall pay its share of
the loss without diminution because of the insolvency of the Company. The
liquidator, receiver or statutory successor of the Company shall give written
notice of the pendency of each claim against the Company on a policy or bond
reinsured within a reasonable time after such claim is filed in the insolvency
proceeding. During the pendency of such claim, the Reinsurer may, at its own
expense, investigate such claim and interpose in the proceeding where such claim
is to be adjudicated any defense or defenses which it may deem available to the
Company, its liquidator or receiver or statutory successor. Subject to court
approval, any expense thus incurred by the Reinsurer shall be chargeable against
the Company as part of the expense of liquidation to the extent of such
proportionate share of the benefit as shall accrue to the Company solely as a
result of the defense undertaken by the Reinsurer. The reinsurance shall be
payable as set forth above except where (i) the Agreement specifies another
payee of such reinsurance in the event of the insolvency of the Company and (ii)
the Reinsurer with the consent of the direct insureds has assumed such policy
obligations of the Company as its direct obligations to the payees under such
policies, in substitution for the obligations of the Company to such payees; or
where the Reinsurer has guaranteed performance of a contract insuring against
physical damage to property for the benefit of mortgagees or other loss payees
named in this Agreement in accordance with Section 1114(c) of the New York
Insurance Law.
ARTICLE XXI - OFFSET
The Company and the Reinsurer may offset any balance or amount due from one
party to the other under this Agreement. In the event of the insolvency of a
party hereto, offsets shall only be allowed in accordance with the laws of the
insolvent party's domicile.
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ARTICLE XXII - GOVERNING LAW
This Agreement shall be governed as to performance, administration and
interpretation by the laws of the state of New York, U.S.A., exclusive of its
rules with respect to conflicts of law, except as to rules with respect to
credit for reinsurance in which case the rules of all applicable states shall
apply.
ARTICLE XXIII - AMENDMENTS AND ALTERATIONS
This Agreement may be changed, altered and amended as the parties may agree,
provided such change, alteration and amendment is evidenced in writing or by
Addendum to this Agreement, executed by the Company and the Reinsurer.
*****
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SIGNATURE PAGE
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed
in duplicate by their duly authorized representatives.
LEADER INSURANCE COMPANY
By: /s/ ROGER SMITH
-----------------------
Title: SVP & CFO
Date:______________________
Attested:__________________
INFINITY INSURANCE COMPANY
By: /s/ ROGER SMITH
-----------------------
Title: SVP & CFO
Date:______________________
Attested:__________________
WINDSOR INSURANCE COMPANY
By: /s/ ROGER SMITH
- ---------------------------
Title: SVP & CFO
Date:______________________
Attested:__________________
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AMERICAN RE-INSURANCE COMPANY
By: /s/ RUSSELL WENITSKY
- ---------------------------
Title: SVP
Date: 1/30/04
Attested: RICHARD KACHRUN
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EXHIBIT A
INFINITY PROPERTY AND A CASUALTY GROUP
2004 PY
Expected State Maximum State
State Abrev Code Mix Mix
- -------------- ----- ---- -------------- -------------
Alabama AL 01 1.8% 6.8%
Alaska AK 54 1.6% 6.6%
Arizona AZ 02 1.7% 6.7%
California CA 04 55.3% 60.3%
Connecticut CT 06 3.4% 8.4%
Florida FL 09 7.4% 12.4%
Georgia GA 10 6.9% 11.9%
Indiana IN 13 0.4% 5.4%
Kentucky KY 16 0.0% 5.0%
Louisiana LA 17 0.2% 5.2%
Maine ME 18 0.0% 5.0%
Minnesota MN 22 0.1% 5.1%
Mississippi MS 23 1.4% 6.4%
Missouri MO 24 1.1% 6.1%
Nevada NV 27 0.0% 5.0%
New Mexico NM 30 0.0% 5.0%
New York NY 31 2.1% 7.1%
North Carolina NC 32 0.0% 5.0%
Ohio OH 34 0.7% 5.7%
Oklahoma OK 35 0.3% 5.3%
Oregon OR 36 0.0% 5.0%
Pennsylvania PA 37 6.1% 11.1%
Rhode Island Rl 38 0.0% 5.0%
South Carolina SC 39 2.6% 7.6%
South Dakota SD 40 0.0% 5.0%
Tennessee TN 41 1.7% 6.7%
Texas TX 42 4.0% 9.0%
Utah UT 43 0.1% 5.1%
Virginia VA 45 0.5% 5.5%
Washington WA 46 0.0% 5.0%
Wisconsin Wl 48 0.7% 5.7%
100.0%
-16-
NUCLEAR INCIDENT EXCLUSION CLAUSE--PHYSICAL DAMAGE-REINSURANCE--NO. 2
(1) This Reinsurance does not cover any loss or liability accruing to
the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from
any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or
Nuclear Energy risks.
(2) Without in any way restricting the operation of paragraph (1) of
this Clause, this Reinsurance does not cover any loss or liability accruing to
the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from
any insurance against Physical Damage (including business interruption or
consequential loss arising out of such Physical Damage) to:
I. Nuclear reactor power plants including all auxiliary property
on the site, or
II. Any other nuclear reactor installation, including laboratories
handling radioactive materials in connection with reactor
installations, and "critical facilities" as such, or
III. Installations for fabricating complete fuel elements or for
processing substantial quantities of "special nuclear
material," and for reprocessing, salvaging, chemically
separating, storing or disposing of "spent" nuclear fuel or
waste materials, or
IV. Installations other than those listed in paragraph (2)III
above using substantial quantities of radioactive isotopes or
other products of nuclear fission.
(3) Without in any way restricting the operations of paragraphs (1) and
(2) hereof, this Reinsurance does not cover any loss or liability by radioactive
contamination accruing to the Reassured, directly or indirectly, and whether as
Insurer or Reinsurer, from any insurance on property which is on the same site
as a nuclear reactor power plant or other nuclear installation and which
normally would be insured therewith except that this paragraph (3) shall not
operate:
(a) where Reassured does not have knowledge of such nuclear
reactor power plant or nuclear installation, or
(b) where said insurance contains a provision excluding
coverage for damage to property caused by or resulting from
radioactive contamination, however caused. However on and
after 1st January 1960 this sub-paragraph (b) shall only apply
provided the said radioactive contamination exclusion
provision has been approved by the Governmental Authority
having jurisdiction thereof.
(4) Without in any way restricting the operations of paragraphs (1),
(2) and (3) hereof, this Reinsurance does not cover any loss or liability by
radioactive contamination accruing to the Reassured, directly or indirectly, and
whether as Insurer or Reinsurer, when such radioactive contamination is a named
hazard specifically insured against.
(5) It is understood and agreed that this Clause shall not extend to
risks using radioactive isotopes in any form where the nuclear exposure is not
considered by the Reassured to be the primary hazard.
(6) The term "special nuclear material" shall have the meaning given it
in the Atomic Energy Act of 1954 or by any law amendatory thereof.
(7) Reassured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
-17-
Note.--Without in any way restricting the operation of paragraph (1)
hereof, it is understood and agreed that:
(a) all policies issued by the Reassured on or before 31st December
1957 shall be free from the application of the other provisions of this
Clause until expiry date or 31st December 1960 whichever first occurs
whereupon all the provisions of this Clause shall apply,
(b) With respect to any risk located in Canada policies issued by the
Reassured on or before 31st December 1958 shall be free from the
application of the other provisions of this Clause until expiry date or
31st December 1960 whichever first occurs whereupon all the provisions
of this Clause shall
-18-
NUCLEAR INCIDENT EXCLUSION CLAUSE - REINSURANCE - NO. 4
(1) This reinsurance does not cover any loss or liability accruing to the
Reassured as a member of, or subscriber to, any association of insurers formed
for the purpose of covering nuclear energy risks or as a direct or indirect
reinsurer of any such member, subscriber or association.
(2) Without in any way restricting the operations of Nuclear Incident
Exclusion Clause No. 1B - Liability, No. 2 - Physical Damage, No. 3 - Boiler and
Machinery and paragraph (1) of this clause, it is understood and agreed that for
all purposes as respects the reinsurance assumed by the Reinsurer from the
Reassured, all original insurance policies or contracts of the Reassured (new,
renewal and replacement) shall be deemed to include the applicable existing
Nuclear Clause and/or Nuclear Exclusion Clause(s) in effect at the time and any
subsequent revisions thereto as agreed upon and approved by the Insurance
Industry and/or a qualified Advisory or Rating Bureau.
-19-
TERRORISM EXCLUSION
All loss, cost or expense arising out of or related to, either directly or
indirectly, any "Terrorist Activity," as defined herein, and any action taken to
hinder, defend against or respond to any such activity. This exclusion applies
regardless of any other cause or event that in any way contributes concurrently
or in any sequence to the loss, cost or expense.
A. "Terrorist Activity" shall mean any deliberate, unlawful act that:
1. is declared by any authorized governmental official to be or
to involve terrorism, terrorist activity or acts of terrorism;
or
2. includes, involves, or is associated with the use or
threatened use of force, violence or harm against any person,
tangible or intangible property, the environment, or any
natural resources, where the act or threatened act is
intended, in whole or in part, to
(a) promote, further or express opposition to any
political, ideological, philosophical, racial,
ethnic, social or religious cause or objective; or
(b) influence, disrupt or interfere with any government
related operations, activities or policies; or
(c) intimidate, coerce or frighten the general public or
any segment of the general public; or
(d) disrupt or interfere with a national economy or any
segment of a national economy; or
3. includes, involves, or is associated with, in whole or in
part, any of the following activities, or the threat thereof:
(a) hijacking or sabotage of any form of transportation
or conveyance, including but not limited to
spacecraft, satellite, aircraft, train, vessel, or
motor vehicle;
(b) hostage taking or kidnapping;
(c) the use or threatened use of, or release or
threatened release of any nuclear, biological,
chemical or radioactive agent, material, device or
weapon;
(d) the use of any bomb, incendiary device, explosive or
firearm;
(e) the interference with or disruption of basic public
or commercial services and systems, including but not
limited to the following services or systems:
electricity, natural gas, power, postal,
communications, telecommunications, information,
public transportation, water, fuel, sewer or waste
disposal;
(f) the injuring or assassination of any elected or
appointed government official or any government
employee;
-20-
(g) the seizure, blockage, interference with, disruption
of, or damage to any government buildings,
institutions, functions, events, tangible or
intangible property or other assets; or
(h) the seizure, blockage, interference with, disruption
of, or damage to tunnels, roads, streets, highways,
or other places of public transportation or
conveyance.
B. Any of the activities listed in section A(3) above shall be considered
Terrorist Activity except where the Company can demonstrate to the
Reinsurer that the foregoing activities or threats thereof were
motivated solely by personal objectives of the perpetrator that are
unrelated, in whole or in part, to any intention to
1. promote, further or express opposition to any political,
ideological, philosophical, racial, ethnic, social or
religious cause or objective; or
2. influence, disrupt or interfere with any government related
operations, activities or policies; or
3. intimidate, coerce or frighten the general public or any
segment of the general public; or
4. disrupt or interfere with a national economy or any segment of
a national economy.
-21-