1
10(KK)
Reinsurance Pooling Agreement
Amended and Restated
as of January 1, 1999
by and among
State Automobile Mutual Insurance Company
State Auto Property and Casualty Insurance Company
Milbank Insurance Company and
Farmers Casualty Insurance Company
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REINSURANCE POOLING AGREEMENT
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AMENDED AND RESTATED
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AS OF JANUARY 1, 1999
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This Reinsurance Pooling Agreement Amended and Restated effective as of 12:01
a.m., Eastern Standard Time, January 1, 1999 is by and among State Automobile
Mutual Insurance Company, 518 East Broad Street, Columbus, Ohio (hereinafter
referred to as "State Auto Mutual"), State Auto Property and Casualty Insurance
Company, 112 Main Street, Greer, South Carolina (hereinafter referred to as
"State Auto P&C"), Milbank Insurance Company, East Highway 12, Milbank, South
Dakota (hereinafter referred to as "Milbank"), Midwest Security Insurance
Company, 2700 Midwest Drive, Onalaska, Wisconsin (hereinafter referred to as
"Midwest Security") and Farmers Casualty Insurance Company, 1300 Woodland Drive
West Des Moines, Iowa (hereinafter referred to as "Farmers Casualty"). (State
Auto Mutual, State Auto P&C, Milbank, Midwest Security, and Farmers Casualty are
herein collectively referred to as the "State Auto Insurance Companies" or
"Group").
BACKGROUND INFORMATION
----------------------
The members of the Group have determined that the underwriting operations
of the Group should be conducted by State Auto Mutual on behalf of the Group
which has been effected through the Amended and Restated Management Agreement
dated April 1, 1994 (the "4/1/94 Management Agreement"), as to Midwest Security
through the Management Agreement dated March 11, 1997 (the "Midwest Management
Agreement"), as to Farmers Casualty through the Management Agreement dated
effective January 1, 1999 (the "Farmers Casualty Management Agreement") and by
means of mutual reinsurance on a percentage basis as herein provided.
State Auto Mutual and State Auto P&C originally entered into an
intercompany Reinsurance Agreement effective as of 12:01 a.m., January 1, 1987
(the "Reinsurance Agreement").
The Reinsurance Agreement has since been amended by an Addendum effective
January 1, 1987, adding insolvency and arbitration provisions; by Amendment
Number 1 effective as of January 1, 1992 amending the pooling percentages from
20% State Auto P&C - 80% State Auto Mutual to 30% and 70% respectively; by
Amendment Number 2 effective as of January 1, 1991 excluding post retirement
health care benefits as a pooled expense and as of January 1, 1994 excluding
post employment benefits liability as a pooled expense; and by Amendment Number
3 effective as of January 1, 1995 adding Milbank as a party and adjusting the
pooling percentages as follows: State Auto P&C 35%, State Auto Mutual 55% and
Milbank 10% and by an Amended and Restated Reinsurance Pooling Agreement dated
July 1, 1996 (the "7/1/96 Reinsurance Agreement"), which excluded from the
Reinsurance Agreement catastrophic loss claims and loss adjustment expenses
incurred by State Auto Mutual, State Auto P&C and Milbank in the amount of
$100,000,000 in excess of $120,000,000 of such losses and loss adjustment
expense and the premiums for such exposure; and by an Amended and Restated
Reinsurance Pooling Agreement effective January 1, 1998 (the "'98 Pooling
Agreement") which added Midwest Security as a party and adjusted the Respective
Percentages (as defined below) to State Auto P&C 37%, State Auto Mutual 52%,
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Milbank 10%, and Midwest Security 1%. The parties now desire to execute a
Reinsurance Pooling Agreement Amended and Restated as of January 1, 1999
(hereafter referred to as the "'99 Pooling Agreement") to add Farmers Casualty
as a party and to adjust the Respective Percentages as set forth herein.
The parties desire to amend and restate the '98 Pooling Agreement as set
forth herein to provide for the continuation of the pooling arrangement it
effects, including the above-described previous amendments and the additional
amendment.
STATEMENT OF AGREEMENT
----------------------
In consideration of the mutual covenants set forth herein and INTENDING
TO BE LEGALLY BOUND HEREBY, the parties hereto hereby agree as follows:
1. DEFINITIONS: As used in this Agreement:
a. "Net Liabilities" shall mean all direct liabilities plus
reinsurance assumed minus reinsurance ceded, except as otherwise
expressly excluded below.
b. "Net Premiums" shall mean all direct premiums plus reinsurance
assumed minus reinsurance ceded, except as otherwise expressly
excluded below.
c. "Respective Percentage" shall be:
As to Farmers Casualty 3%
As to Midwest Security 1%
As to Milbank 10%
As to State Auto P&C 37%
As to State Auto Mutual 49%
2. CESSION:
(a) State Auto P&C Cession: State Auto Mutual hereby
reinsures and assumes and State Auto P&C hereby cedes and
transfers to State Auto Mutual all Net Liabilities incurred under
or in connection with all contracts and policies of insurance
issued by State Auto P&C outstanding and in force as of and
subsequent to 12:01 a.m. Eastern Standard Time, January 1, 1999.
Such liabilities shall include State Auto P&C's reserves for
unearned premiums, outstanding losses and loss expenses (including
unreported losses) and all other outstanding underwriting and
administrative expenses as evidenced by State Auto P&C's books and
records at the close of business on December 31, 1998, but shall
not include intercompany balances, liabilities incurred in
connection with the investment transactions of State Auto P&C,
liabilities for dividends to stockholders
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declared and unpaid, other liabilities not incurred in connection
with underwriting operations, post retirement health care benefits
liability, and post employment benefits liability. It is further
agreed State Auto Mutual shall receive the Net Premiums for said
contracts and policies.
(b) Milbank Cession: State Auto Mutual hereby reinsures and
assumes and Milbank hereby cedes and transfers to State Auto
Mutual all Net Liabilities incurred under or in connection with
all contracts and policies of insurance issued by Milbank
outstanding and in force as of and subsequent to 12:01 a.m. EST,
January 1, 1999. Such liabilities shall include Milbank's reserves
for unearned premiums, outstanding losses and loss expenses
(including unreported losses) and all other outstanding
underwriting and administrative expenses as evidenced by Milbank's
books and records at the close of business on December 31, 1998,
but shall not include intercompany balances, liabilities incurred
in connection with the investment transactions of Milbank,
liabilities for dividends to stockholders declared and unpaid,
other liabilities not incurred in connection with underwriting
operations, post retirement health care benefits liability, and
post employment benefits liability. It is further agreed that
State Auto Mutual shall receive the Net Premiums for said
contracts and policies.
(c) Midwest Security Cession: State Auto Mutual hereby reinsures
and assumes and Midwest Security hereby cedes and transfers to
State Auto Mutual all Net Liabilities incurred under or in
connection with all contracts and policies of insurance issued by
Midwest Security outstanding and in force as of and subsequent to
12:01 a.m. EST, January 1, 1999. Such liabilities shall include
Midwest Security's reserves for unearned premiums, outstanding
losses and loss expenses (including unreported losses) and all
other outstanding underwriting and administrative expenses as
evidenced by Midwest Security's books and records at the close of
business on December 31, 1998, but shall not include intercompany
balances, liabilities incurred in connection with the investment
transactions of Midwest Security, liabilities for dividends to
stockholders declared and unpaid, other liabilities not incurred
in connection with underwriting operations, post retirement health
care benefits liability, and post employment benefits liability.
It is further agreed that State Auto Mutual shall receive the Net
Premiums for said contracts and policies.
(d) Farmers Casualty Cession: State Auto Mutual hereby reinsures
and assumes and Farmers Casualty hereby cedes and transfers to
State Auto Mutual all Net Liabilities incurred
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under or in connection with all contracts and policies of
insurance issued by Farmers Casualty outstanding and in force as
of and subsequent to 12:01 a.m. EST, January 1, 1999. Such
liabilities shall include Farmers Casualty's reserves for unearned
premiums, outstanding losses and loss expenses (including
unreported losses) and all other outstanding underwriting and
administrative expenses as evidenced by Farmers Casualty's books
and records at the close of business on December 31, 1998, but
shall not include intercompany balances, liabilities incurred in
connection with the investment transactions of Farmers Casualty,
liabilities for dividends to stockholders declared and unpaid,
other liabilities not incurred in connection with underwriting
operations, post retirement health care benefits liability, and
post employment benefits liability. It is further agreed that
State Auto Mutual shall receive the Net Premiums for said
contracts and policies.
3. ASSETS TRANSFER TO STATE AUTO MUTUAL:
(a) State Auto P&C: In consideration of the agreements herein
contained, State Auto P&C hereby agrees that there has been or
will be assigned and transferred to State Auto Mutual an amount,
in cash or other assets, equal to the aggregate of all liabilities
of State Auto P&C assumed by State Auto Mutual under paragraph
2(a) hereof, less a ceding commission equal to the sum of the
acquisition expenses associated with the unearned premium reserves
which are transferred as provided herein. There have been included
among the assets assigned and transferred to State Auto Mutual by
State Auto P&C all of the right, title and interest of State Auto
P&C in and to all assets relative to the underwriting operations
of State Auto P&C, due or that became due, as evidenced by its
books and records at the close of business on December 31, 1998,
not including investments, accrued investment income, intercompany
balances and bank deposits.
(b) Milbank: In consideration of the agreements herein contained,
Milbank hereby agrees that there has been or will be assigned and
transferred to State Auto Mutual an amount, in cash or other
assets, equal to the aggregate of all liabilities of Milbank
assumed by State Auto Mutual under paragraph 2(b) hereof, less a
ceding commission equal to the sum of the acquisition expenses
associated with the unearned premium reserves which are
transferred as provided herein. There shall be included among the
assets assigned and transferred to State Auto Mutual by Milbank
all of the right, title and interest of Milbank in and to all
assets relative to the underwriting operations of Milbank due or
that
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may become due as evidenced by its books and records at the close
of business on December 31, 1998 not including investments,
accrued investment income, intercompany balances and bank
deposits.
(c) Midwest Security: In consideration of the agreements herein
contained, Midwest Security hereby agrees that there has been or
will be assigned and transferred to State Auto Mutual an amount,
in cash or other assets, equal to the aggregate of all liabilities
of Midwest Security assumed by State Auto Mutual under paragraph
2(c) hereof, less a ceding commission equal to the sum of the
acquisition expenses associated with the unearned premium reserves
which are transferred as provided herein. There shall be included
among the assets assigned and transferred to State Auto Mutual by
Midwest Security all of the right, title and interest of Midwest
Security in and to all assets relative to the underwriting
operations of Midwest Security due or that may become due as
evidenced by its books and records at the close of business on
December 31, 1998, not including investments, accrued investment
income, intercompany balances and bank deposits.
(d) Farmers Casualty: In consideration of the agreements herein
contained, Farmers Casualty hereby agrees that there has been or
will be assigned and transferred to State Auto Mutual an amount,
in cash or other assets, equal to the aggregate of all liabilities
of Farmers Casualty assumed by State Auto Mutual under paragraph
2(d) hereof, less a ceding commission equal to the sum of the
acquisition expenses associated with the unearned premium reserves
which are transferred as provided herein. There shall be included
among the assets assigned and transferred to State Auto Mutual by
Farmers Casualty all of the right, title and interest of Farmers
Casualty in and to all assets relative to the underwriting
operations of Farmers Casualty due or that may become due as
evidenced by its books and records at the close of business on
December 31, 1998, not including investments, accrued investment
income, intercompany balances and bank deposits.
4. ASSUMPTION OF REINSURANCE:
(a) State Auto P&C: State Auto P&C hereby reinsures and assumes
and State Auto Mutual hereby cedes and transfers to State Auto P&C
its Respective Percentage of all Net Liabilities under all
contracts and policies of insurance, (including those ceded by
State Auto P&C and reinsured by State Auto Mutual as provided in
paragraph 2(a)), on which
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State Auto Mutual is subject to liability and which are
outstanding and in force on or after the effective date hereof.
Such liabilities shall include reserves for unearned premiums,
outstanding losses (including unreported losses) and loss expenses and
all other underwriting and administrative expenses, but shall not include
intercompany balances, liabilities for federal income taxes, liabilities
incurred in connection with investment transactions, liabilities for
dividends to stockholders declared and unpaid, other liabilities not
incurred in connection with underwriting operations, post retirement
health care benefits liability and post employment benefits liability.
(b) Milbank: Milbank hereby reinsures and assumes and State
Auto Mutual hereby cedes and transfers to Milbank its Respective
Percentage of all Net Liabilities under all contracts and policies
of insurance, (including those ceded by Milbank and reinsured by
State Auto Mutual as provided in paragraph 2(b)), on which State
Auto Mutual is subject to liability and which are outstanding and
in force on or after the effective date hereof.
Such liabilities shall include reserves for unearned premiums,
outstanding losses (including unreported losses) and loss expenses and
all other underwriting and administrative expenses, but shall not include
intercompany balances, liabilities for federal income taxes, liabilities
incurred in connection with investment transactions, liabilities for
dividends to stockholders declared and unpaid, other liabilities not
incurred in connection with underwriting operations, post retirement
health care benefits liability and post employment benefits liability.
(c) Midwest Security: Midwest Security hereby reinsures and
assumes and State Auto Mutual hereby cedes and transfers to
Midwest Security its Respective Percentage of all Net Liabilities
under all contracts and policies of insurance, (including those
ceded by Midwest Security and reinsured by State Auto Mutual as
provided in paragraph 2(c), on which State Auto Mutual is subject
to liability and which are outstanding and in force on or after
the effective date hereof.
Such liabilities shall include reserves for unearned premiums,
outstanding losses (including unreported losses) and loss expenses and
all other underwriting and administrative expenses, but shall not include
intercompany balances, liabilities for federal income taxes, liabilities
incurred in connection with investment transactions, liabilities for
dividends to stockholders declared and unpaid, other liabilities not
incurred in connection with underwriting operations, post retirement
health care benefits liability and post employment benefits liability.
(d) Farmers Casualty: Farmers Casualty hereby reinsures and
assumes and State Auto Mutual hereby cedes and
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transfers to Farmers Casualty its Respective Percentage of all Net
Liabilities under all contracts and policies of insurance,
(including those ceded by Farmers Casualty and reinsured by State
Auto Mutual as provided in paragraph 2(d), on which State Auto
Mutual is subject to liability and which are outstanding and in
force on or after the effective date hereof.
Such liabilities shall include reserves for unearned premiums,
outstanding losses (including unreported losses) and loss expenses and
all other underwriting and administrative expenses, but shall not include
intercompany balances, liabilities for federal income taxes, liabilities
incurred in connection with investment transactions, liabilities for
dividends to stockholders declared and unpaid, other liabilities not
incurred in connection with underwriting operations, post retirement
health care benefits liability and post employment benefits liability.
5. ASSET TRANSFER BY STATE AUTO MUTUAL:
(a) State Auto P&C: In consideration of the agreements herein
contained, State Auto Mutual hereby agrees that there has been or
will be assigned and transferred to State Auto P&C an amount, in
cash or other assets, equal to the aggregate of all liabilities of
State Auto Mutual assumed by State Auto P&C under paragraph 4(a)
hereof, less a ceding commission equal to the sum of the
acquisition expenses associated with the unearned premium reserves
which are transferred as provided herein. There shall be included
among the assets assigned and transferred to State Auto P&C by
State Auto Mutual all of the right, title and interest of State
Auto Mutual in and to all assets relative to the underwriting
operations of State Auto Mutual, due or that may become due, as
evidenced by its books and records at the close of business on
December 31, 1998, not including investments, accrued investment
income, intercompany balances and bank deposits.
(b) Milbank: In consideration of the agreements herein contained,
State Auto Mutual hereby agrees that there has been or will be
assigned and transferred to Milbank an amount, in cash or other
assets, equal to the aggregate of all liabilities of State Auto
Mutual assumed by Milbank under paragraph 4(b) hereof, less a
ceding commission equal to the sum of the acquisition expenses
associated with the unearned premium reserves which are
transferred as provided herein. There shall be included among the
assets assigned and transferred to Milbank by State Auto Mutual
all of the right, title and interest of State Auto Mutual in and
to all assets relative to the underwriting operations of State
Auto Mutual, due or that may become due, as evidenced by its books
and records at the close of business on December
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31, 1998, not including investments, accrued investment income,
intercompany balances and bank deposits.
(c) Midwest Security: In consideration of the agreements herein
contained, State Auto Mutual hereby agrees that there has been or
will be assigned and transferred to Midwest Security an amount, in
cash or other assets, equal to the aggregate of all liabilities of
State Auto Mutual assumed by Midwest Security under paragraph 4(c)
hereof, less a ceding commission equal to the sum of the
acquisition expenses associated with the unearned premium reserves
which are transferred as provided herein. There shall be included
among the assets assigned and transferred to Midwest Security by
State Auto Mutual all of the right, title and interest of State
Auto Mutual in and to all assets relative to the underwriting
operations of State Auto Mutual, due or that may become due, as
evidenced by its books and records at the close of business on
December 31, 1998, not including investments, accrued investment
income, intercompany balances and bank deposits.
(d) Farmers Casualty: In consideration of the agreements herein
contained, State Auto Mutual hereby agrees that there has been or
will be assigned and transferred to Farmers Casualty an amount, in
cash or other assets, equal to the aggregate of all liabilities of
State Auto Mutual assumed by Farmers Casualty under paragraph 4(d)
hereof, less a ceding commission equal to the sum of the
acquisition expenses associated with the unearned premium reserves
which are transferred as provided herein. There shall be included
among the assets assigned and transferred to Farmers Casualty by
State Auto Mutual all of the right, title and interest of State
Auto Mutual in and to all assets relative to the underwriting
operations of State Auto Mutual, due or that may become due, as
evidenced by its books and records at the close of business on
December 31, 1998, not including investments, accrued investment
income, intercompany balances and bank deposits.
6. PREMIUM COLLECTION AND PAYMENT OF LOSSES:
As of the effective date of this Agreement and pursuant to the
terms of the 4/1/94 Management Agreement as amended from time to time,
the Midwest Management Agreement, as amended from time to time, and the
Farmers Casualty Management Agreement, as amended from time to time,
State Auto P&C, Milbank, Midwest Security and Farmers Casualty hereby
authorize and empower State Auto Mutual to collect and receive all
premiums and to take charge of, adjust and administer the payment of all
losses with respect to any and all contracts and policies of insurance
previously or thereafter issued by State Auto P&C, Milbank, Midwest
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Security and Farmers Casualty and to reinsure or terminate all such
contracts and policies, and in all respects to act as though said
contracts and policies were issued by State Auto Mutual. State Auto
Mutual agrees to administer the payment of all losses and loss adjustment
expenses in connection with such contracts and policies. None of the
foregoing is intended to affect or impair the direct obligation of State
Auto P&C, Milbank, Midwest Security and Farmers Casualty to their
insureds under policies issued by State Auto P&C, Milbank, Midwest
Security and Farmers Casualty, respectively.
7. PREMIUM PAYABLE BY STATE AUTO MUTUAL:
(a) State Auto P&C: Commencing with the effective date of this
Agreement, State Auto Mutual hereby agrees to pay to State Auto
P&C its Respective Percentage of the Net Premiums written by the
parties hereto. Similarly, commencing with the effective date of
this Agreement, all losses, loss expenses, underwriting expenses,
and administrative expenses chargeable to underwriting of the
parties hereto, including the policyholder dividends, less all
losses and expenses recovered and recoverable under reinsurance
ceded to reinsurers other than the parties hereto, (except for
catastrophe reinsurance ceded by State Auto Mutual and Milbank to
State Auto P&C pursuant to a Property Catastrophe Overlying Excess
of Loss Reinsurance Contract dated as of July 1, 1996 in which
State Auto P&C provides catastrophe coverage for State Auto Mutual
and Milbank for $100,000,000 of catastrophe losses and loss
expenses in excess of $120,000,000 of such losses and loss
expenses incurred by the Group) (the "State Auto P&C Catastrophe
Assumption Agreement") shall be prorated between the parties on
the basis of the Respective Percentage of each. Accounts shall be
rendered at quarterly intervals and shall be settled within 60
days thereafter.
(b) Milbank: Commencing with the effective date of this Agreement,
State Auto hereby agrees to pay Milbank its Respective Percentage
of the Net Premiums written by the parties hereto. Similarly,
commencing with the effective date of this Agreement, all losses,
loss expenses, underwriting expenses, and administrative expenses
chargeable to underwriting of the parties hereto, including
policyholder dividends, less all losses and expenses recovered and
recoverable under reinsurance ceded to reinsurers other than the
parties hereto, (except for the State Auto P&C Catastrophe
Assumption Agreement) shall be prorated between the parties on the
basis of the Respective Percentage of each. Accounts shall be
rendered at quarterly intervals and shall be settled within sixty
(60) days thereafter.
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(c) Midwest Security: Commencing with the effective date of this
Agreement, State Auto hereby agrees to pay Midwest Security its
Respective Percentage of the Net Premiums written by the parties
hereto. Similarly, commencing with the effective date of this
Agreement, all losses, loss expenses, underwriting expenses, and
administrative expenses chargeable to underwriting of the parties
hereto, including policyholder dividends, less all losses and
expenses recovered and recoverable under reinsurance ceded to
reinsurers other than the parties hereto, (except for the State
Auto P&C Catastrophe Assumption Agreement) shall be prorated
between the parties on the basis of the Respective Percentage of
each. Accounts shall be rendered at quarterly intervals and shall
be settled within sixty (60) days thereafter.
(d) Farmers Casualty: Commencing with the effective date of this
Agreement, State Auto hereby agrees to pay Farmers Casualty its
Respective Percentage of the Net Premiums written by the parties
hereto. Similarly, commencing with the effective date of this
Agreement, all losses, loss expenses, underwriting expenses, and
administrative expenses chargeable to underwriting of the parties
hereto, including policyholder dividends, less all losses and
expenses recovered and recoverable under reinsurance ceded to
reinsurers other than the parties hereto, (except for the State
Auto P&C Catastrophe Assumption Agreement) shall be prorated
between the parties on the basis of the Respective Percentage of
each. Accounts shall be rendered at quarterly intervals and shall
be settled within sixty (60) days thereafter.
8. OFFSET: It is understood and agreed that, insofar as is practicable
and consistent with the purposes and intentions of this Agreement, the
obligations of each company under this Agreement to transfer assets to
the other company may, in whole or in part, be offset against the
reciprocal reinsurance obligations of each company to the other company
so that each company shall deliver hereunder only a net amount of assets
required under such offset.
9. GENERAL STATEMENT OF INTENT: It is the purpose and intent of this
Agreement that:
(a) State Auto Mutual shall be liable as a reinsurer to State Auto
P&C, Milbank, Midwest Security and Farmers Casualty on the
policies and contracts of insurance of State Auto P&C, Milbank,
Midwest Security and Farmers Casualty respectively, issued and in
force at 12:01 a.m., EST, January 1, 1999, or on which there were,
at that time, unsettled
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claims or losses, and on policies and contracts thereafter issued
by State Auto P&C, Milbank, Midwest Security and Farmers Casualty
to the extent of State Auto Mutual's Respective Percentage.
(b) State Auto P&C shall be liable as a reinsurer to State Auto
Mutual, Milbank, Midwest Security and Farmers Casualty on the
policies and contracts of insurance of State Auto Mutual, Milbank,
Midwest Security and Farmers Casualty, respectively, issued and in
force at 12:01 a.m., EST, January 1, 1999, or on which there were,
at that time, unsettled claims or losses, and on policies and
contracts thereafter issued by State Auto Mutual, Milbank, Midwest
Security and Farmers Casualty to the extent of State Auto P&C's
Respective Percentage.
(c) Milbank shall be liable as a reinsurer to State Auto Mutual,
State Auto P&C, Midwest Security and Farmers Casualty on the
policies and contracts of State Auto Mutual, State Auto P&C,
Midwest Security and Farmers Casualty, respectively, issued and in
force at 12:01 a.m., EST, on January 1, 1999 or on which there
were, at that time, unsettled claims or losses and on policies
thereafter issued by State Auto Mutual, State Auto P&C, Midwest
Security and Farmers Casualty to the extent of Milbank's
Respective Percentage.
(d) Midwest Security shall be liable as a reinsurer to State Auto
Mutual, State Auto P&C, Milbank and Farmers Casualty on the
policies and contracts of State Auto Mutual, State Auto P&C,
Milbank and Farmers Casualty, respectively, issued and in force at
12:01 a.m., EST, on January 1, 1999 or on which there were, at
that time, unsettled claims or losses and on policies thereafter
issued by State Auto Mutual, State Auto P&C, Milbank and Farmers
Casualty to the extent of Midwest Security's Respective
Percentage.
(e) Farmers Casualty shall be liable as a reinsurer to State Auto
Mutual, State Auto P&C, Milbank and Midwest Security on the
policies and contracts of State Auto Mutual, State Auto P&C,
Milbank and Midwest Security, respectively, issued and in force at
12:01am., EST, January 1, 1999 or on which there were, at that
time, unsettled claims or losses, and on policies and contracts
thereafter issued by State Auto Mutual, State Auto P&C, Milbank
and Midwest Security to the extent of Farmers Casualty's
Respective Percentage.
(f) The parties hereto shall, on and after 12:01 a.m., EST,
January 1, 1999, participate on the basis of 49% for State Auto,
37% for State Auto P&C, 10% for Milbank, 1%
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for Midwest Security and 3% for Farmers Casualty in all of the
underwriting operations of each of the five parties hereto.
10. LOSSES EXCLUDED: Notwithstanding any of the foregoing, the parties
hereto understand and agree that this Amended and Restated Reinsurance
Pooling Agreement shall not apply to catastrophe losses and loss expenses
for residential and commercial property to the extent such losses and
loss expenses are covered by the State Auto P&C Catastrophe Assumption
Agreement. Once the aforesaid $100,000,000 of coverage is exhausted by
loss expenses and loss payments on behalf of any party hereto, under
either the State Auto P&C Catastrophe Assumption Agreement or directly,
all parties understand and agree that catastrophe losses and loss
expenses in excess of $220,000,000 shall once again be ceded and assumed
under the terms of the `99 Pooling Agreement. All premiums attributable
to the State Auto P&C Catastrophe Assumption Agreement are to be paid to
State Auto P&C outside of the `99 Pooling Agreement.
11. LIABILITIES EXCLUDED: In addition to the liabilities set forth in
paragraphs 2(a), 2(b), 2(c), 2(d) and 10 above, this Agreement shall not
apply to the investment operation or liabilities for federal income tax
or other liabilities excluded by this Agreement.
12. "FOLLOW THE FORTUNES": The reinsurance provided by the terms of this
Agreement shall be subject to the same terms and conditions under which
the original insurance was concluded, or which may be or may have been
agreed to during the term of the original insurance contract.
13. METHODS AND PROCEDURES: The president of State Auto Mutual, State
Auto P&C, Milbank, Midwest Security and Farmers Casualty, or any officer
of any of these companies designated by said president, shall determine
the methods and procedures, including accounting transactions, by which
the terms of this Agreement shall be performed by and on behalf of the
parties hereto.
14. AMENDMENTS: This Agreement may be modified from time to time, so as
to adapt its provisions to the varying conditions of the business of the
Group, by a mutual agreement in writing of the parties hereto, subject to
ratification by the Board of Directors of each party and with the
approval of the insurance officials from the State of Ohio, the State of
South Carolina, the State of South Dakota, the State of Wisconsin, and
the State of Iowa as required by law.
15. TERM: This Agreement shall remain in full force and effect until
canceled by agreement of the parties or by the giving of ninety (90) days
notice by one of the parties to the other parties and to the respective
domiciliary insurance department of each of the parties.
16. INTERPRETATION: Wherever required to give the correct meaning
throughout this Agreement, the singular shall be interpreted in the
plural. Clerical errors or errors of involuntary or inadvertent omission
or
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commission shall not be interpreted as a discharge of liability on behalf
of any of the parties to this contract. Such errors shall be rectified at
the time of discovery or as soon as practicable thereafter. Caption
headings are for convenience only and are not intended to affect the
construction of the terms hereof.
17. INSOLVENCY: The reinsurance made under this Agreement shall be
payable by the assuming reinsurer on the basis of the liability of the
ceding insurer under the contract or contracts reinsured without
diminution because of the insolvency of the ceding insurer. In the event
of insolvency of the ceding insurer, the liquidator or receiver or
statutory successor of such insurer shall give written notice to the
assuming reinsurer of the pendency of a claim against the insolvent
ceding insurer on the policy or bond reinsured within a reasonable time
after such claim is filed in the insolvency proceeding; that during the
pendency of such claim the assuming reinsurer may investigate such claim
and interpose, at its own expense, in the proceeding where such claim is
to be adjudicated any defense or defenses which it may deem available to
the ceding insurer or its liquidator or receiver or statutory successors;
that the expense thus incurred by the assuming reinsurer shall be
chargeable, subject to court approval, against the insolvent ceding
insurer as part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to the ceding insurer
solely as a result of the defense undertaken by the assuming reinsurer.
The reinsurance made effective under this Agreement shall be payable by
the assuming reinsurer to the ceding insurer or to the liquidator,
receiver or statutory successor of the ceding insurer.
18. ARBITRATION: In the event of any dispute hereafter arising with
respect to this Agreement, State Auto Mutual, State Auto P&C, Milbank,
Midwest Security and Farmers Casualty hereby agree that such dispute
shall, upon the request of the one of the parties, be submitted to
arbitration. One arbitrator shall be chosen by each party and those
arbitrators shall then select an umpire who shall hear and decide the
issues to be arbitrated. If one party fails to name an arbitrator within
thirty (30) days after receipt of a written request to do so, the party
initiating the arbitration may choose the arbitrators. The decision of
the umpire shall be final and binding on the parties. Each party shall
bear the expense of its arbitrator and the cost of the umpire shall be
shared equally. The arbitration shall take place at Columbus, Ohio or
such other location upon which the parties may mutually agree.
19. COUNTERPARTS: The `99 Pooling Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of
which shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date and the year first above written.
Attest State Automobile Mutual
Insurance Company
/s/John R. Lowther By /s/Robert H. Moone
- ------------------------------- -------------------------------
Secretary President
State Auto Property and
Casualty Insurance Company
/s/John R. Lowther By /s/Robert H. Moone
- ------------------------------- -------------------------------
Secretary President
Milbank Insurance Company
/s/John R. Lowther By /s/Robert H. Moone
- ------------------------------- -------------------------------
Secretary President
Midwest Security
Insurance Company
/s/John R. Lowther By /s/Robert H. Moone
- ------------------------------- -------------------------------
Secretary President
Farmers Casualty
Insurance Company
/s/John R. Lowther By /s/Marion D. Houk
- ------------------------------- -------------------------------
Assistant Secretary President