EXHIBIT 10.6

Swiss Re

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CASUALTY EXCESS OF LOSS
REINSURANCE AGREEMENT
NO. TC1573A,B,C-R05

EFFECTIVE: January 1, 2005

between
PHILADELPHIA CONSOLIDATED HOLDING CORPORATION’S
following member Companies:
PHILADELPHIA INDEMNITY INSURANCE COMPANY
PHILADELPHIA INSURANCE COMPANY
both of Bala Cynwyd, Pennsylvania

and

SWISS REINSURANCE AMERICA CORPORATION
Armonk, New York

 

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Swiss Re

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CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT NO. TC1573A,B,C-R05

              ARTICLE  
CONTENTS
  PAGE      
PREAMBLE
    1  
 
            I  
BUSINESS COVERED
    1  
 
            II  
EFFECTIVE DATE AND TERMINATION
    2  
 
            III  
TERRITORY
    2  
 
            IV  
LIMIT AND RETENTION
    3  
 
            V  
WARRANTY
    4  
 
            VI  
REINSTATEMENT
    4  
 
            VII  
ULTIMATE NET LOSS
    5  
 
            VIII  
LOSS IN EXCESS OF POLICY LIMITS
    6  
 
            IX  
EXTRA CONTRACTUAL OBLIGATIONS
    6  
 
            X  
EXCLUSIONS
    7  
 
            XI  
SPECIAL ACCEPTANCE
    12  
 
            XII  
LOSS OCCURRENCE
    12  
 
            XIII  
REINSURANCE PREMIUM
    13  
 
            XIV  
REPORTS AND REMITTANCES
    14  
 
            XV  
CLAIMS
    15  
 
            XVI  
SALVAGE AND SUBROGATION
    16  
 
            XVII  
TERRORISM EXCESS RECOVERY
    16  
 
            XVIII  
ACCESS TO RECORDS
    18  
 
            XIX  
TAXES
    18  
 
            XX  
CURRENCY
    18  
 
            XXI  
OFFSET
    18  
 
            XXII  
ERRORS OR OMISSIONS
    19  
 
            XXIII  
DISPUTE RESOLUTION
    19  
 
            XXIV  
INSOLVENCY
    20  
 
            XXV  
SPECIAL TERMINATION
    21  
 
            XXVI  
AMENDMENTS
    22  
 
               
SIGNATURES
    23  
 
            ATTACHMENTS:  
POLLUTION LIABILITY EXCLUSION CLAUSE — REINSURANCE
           
INSOLVENCY FUNDS EXCLUSION CLAUSE
           
NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY - REINSURANCE — U.S.A.
           
NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY - REINSURANCE — CANADA
           
NUCLEAR INCIDENT EXCLUSION CLAUSE - REINSURANCE — NO. 4
           
PHARMACEUTICAL / MEDICAL COMPANY EXCLUSION LISTING
       

 

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Swiss Re

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CASUALTY EXCESS OF LOSS
REINSURANCE AGREEMENT
NO. TC1573A,B,C-R05
(hereinafter referred to as the “Agreement”)

between
PHILADELPHIA CONSOLIDATED HOLDING CORPORATION’S
following member Companies:
PHILADELPHIA INDEMNITY INSURANCE COMPANY
PHILADELPHIA INSURANCE COMPANY
both of Bala Cynwyd, Pennsylvania
(hereinafter referred to as the “Company”)

and

SWISS REINSURANCE AMERICA CORPORATION
Armonk, New York
(hereinafter referred to as the “Reinsurer”)

ARTICLE I — BUSINESS COVERED

A.   The Reinsurer shall indemnify the Company on an excess of loss basis in
respect of the Company’s Ultimate Net Loss paid by the Company as a result of
losses occurring during the term of this Agreement, for Policies in force as of
January 1, 2005, and new and renewal Policies becoming effective on or after
said date, subject to the terms and conditions contained herein.   B.   This
Agreement is solely between the Company and the Reinsurer, and nothing contained
in this Agreement shall create any obligations or establish any rights against
the Reinsurer in favor of any person or entity not a party hereto.   C.   The
performance of obligations by both parties under this Agreement shall be in
accordance with a fiduciary standard of good faith and fair dealing.   D.   The
term “Policies” shall mean each of the Company’s binders, policies and contracts
of insurance on the business covered hereunder.   E.   Under this Agreement, the
indemnity for reinsured loss applies only to the following Classes of Insurance,
except as excluded under Article X- Exclusions of this Agreement.

No. TC1573A,B,C-R05

 

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CLASSES OF INSURANCE

  1.   Automobile Liability:         Bodily Injury Liability, Property Damage
Liability, Medical Payments, Uninsured Motorists, Underinsured Motorists and
No-Fault Coverage.     2.   Liability Other Than Automobile:         Bodily
Injury Liability, Property Damage Liability, Personal and Advertising Injury
Liability, and Medical Payments Coverage when written as part of a Commercial or
Personal Package Policy or on a monoline basis. However, Advertising Injury
Liability shall only apply to this Agreement when written as part of a
Commercial Package Policy or a Commercial General Liability Coverage Form.    
3.   Commercial Umbrella Liability.     4.   Professional Liability:        
Director’s and Officers Liability for For Profit and Not for Profit risks,
Miscellaneous Errors and Omissions Liability, Lawyers Professional Liability,
Accountants Professional Liability, Dentists Professional Liability, Insurance
Agents Professional Liability, Miscellaneous Professional Liability, Employment
Practices Liability.

ARTICLE II — EFFECTIVE DATE AND TERMINATION

A.   This Agreement shall apply to losses occurring within the period commencing
12:01 a.m., Eastern Standard Time, January 1, 2005, and ending 12:01 a.m.,
Eastern Standard Time, January 1, 2006.   B.   During the running of such notice
as stipulated in Paragraph A. above, the Reinsurer shall participate in business
coming within the terms of this Agreement until the date of termination of this
Agreement.   C.   Upon termination of this Agreement, the Reinsurer shall be
liable for losses occurring prior to the date of termination; however, the
Reinsurer shall have no liability for losses occurring subsequent to the
termination of this Agreement.

ARTICLE III — TERRITORY

This Agreement applies to Policies issued by the Company within the United
States of America, its territories and possessions, and Canada and shall apply
to losses covered hereunder wherever occurring.

No. TC1573A,B,C-R05

 

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ARTICLE IV — LIMIT AND RETENTION

A.   The limits and retentions provided under this Agreement are set forth in
the following Parts I, II and III:       Part I — First Excess of Loss
(Accounting Code No. TC1573A)       The Company shall retain the first
$2,000,000 of Ultimate Net Loss as respects any one Loss Occurrence. The
Reinsurer shall then be liable for the amount by which the Company’s Ultimate
Net Loss exceeds the Company’s retention of $2,000,000, but the liability of the
Reinsurer shall never exceed $3,000,000 with respect to any one Loss Occurrence.
However, in no event shall the liability of the Reinsurer arising out of Act(s)
of Terrorism exceed $3,000,000 during the term of this Agreement.       Part II
— Second Excess of Loss (Accounting Code No TC1573B)       The Company shall
retain the first $5,000,000 of Ultimate Net Loss as respects any one Loss
Occurrence. The Reinsurer shall then be liable for the amount by which the
Company’s Ultimate Net Loss exceeds the Company’s retention of $5,000,000, but
the liability of the Reinsurer shall never exceed $5,000,000 with respect to any
one Loss Occurrence. However, in no event shall the liability of the Reinsurer
arising out of Act(s) of Terrorism exceed $5,000,000 during the term of this
Agreement.       Part III — Third Excess of Loss (Accounting Code No. TC1573C)  
    The Company shall retain the first $10,000,000 of Ultimate Net Loss as
respects any one Loss Occurrence. The Reinsurer shall then be liable for the
amount by which the Company’s Ultimate Net Loss exceeds the Company’s retention
of $10,000,000, but the liability of the Reinsurer shall never exceed
$10,000,000 with respect to any one Loss Occurrence. However, in no event shall
the liability of the Reinsurer arising out of Act(s) of Terrorism exceed
$10,000,000 during the term of this Agreement.   B.   The Company’s retention
and the Reinsurer’s limit of liability for each Loss Occurrence, set forth in
Parts I, II and III above, shall apply irrespective of the number of Policies
affected or number of hazards in one Policy and regardless of the number of
Classes of Insurance involved.   C.   Reinsurance of the Company’s retention,
set forth above, shall not be deducted in arriving at the Company’s Ultimate Net
Loss herein.   D.   An “Act of Terrorism” for purposes of this Agreement shall
mean:

No. TC1573A,B,C-R05

 

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  1.   Any actual or threatened violent act or act harmful to human life,
tangible or intangible property or infrastructure directed towards or having the
effect of (a) influencing or protesting against any de jure or de facto
government or policy thereof, (b) intimidating, coercing or putting in fear a
civilian population or section thereof for the purpose of establishing or
advancing a specific ideological, religious or political system of thought,
perpetrated by a specific individual or group directly or indirectly through
agents acting on behalf of said individual or group or (c) retaliating against
any country for direct or vicarious support by that country of any other
government or political system.     2.   Any act declared pursuant to the
Terrorism Risk Insurance Act of 2002 shall also be considered an “Act of
Terrorism” for purposes of this Agreement.

ARTICLE V — WARRANTY

A.   It is deemed that inuring Casualty Excess of Loss Reinsurance for limits
greater than $1,000,000 per occurrence/per claim and inuring Corporate Errors
and Omission Insurance coverages that are in effect at the inception of this
agreement shall be maintained without change during the term of this agreement.
  B.   It is further warranted that Policies subject to this Agreement with
inuring coverage as deemed above, shall not exceed a combined limit for both the
Primary Policy and Umbrella Policy of $11,000,000 per occurrence, or so deemed.
  C.   The maximum policy period on business covered by this Agreement is one
year plus odd time, not to exceed 120 days.

ARTICLE VI – REINSTATEMENT

A.   Each claim hereunder reduces the amount of indemnity from the time of
occurrence of the loss by the sum paid, but any amount so exhausted is hereby
reinstated from the time the Loss Occurrence commences hereon.   B.   For each
amount so reinstated the Company agrees to pay an additional premium calculated
at pro rata of the annual premium hereon, being pro rata only as to the fraction
of the limit of liability of this Agreement (i.e., the fraction of $3,000,000 as
respects Part I and $5,000,000 as respects Part II and $10,000,000 as respects
Part III) so reinstated and 100% as to the term.

No. TC1573A,B,C-R05

 

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C.   Nevertheless, the Reinsurer’s liability hereunder shall never exceed
$3,000,000 as respects Part I and $5,000,000 as respects Part II and $10,000,000
as respects Part III in respect of any one Loss Occurrence and shall be further
limited in all during the term of this Agreement to $6,000,000 as respects
Part I and $10,000,000 as respects Part II and $20,000,000 as respects Part III.

ARTICLE VII — ULTIMATE NET LOSS

A.   The term “Ultimate Net Loss” shall mean the actual sum paid by the Company
in settlement of losses or liability including interest accrued prior to
judgment after making deductions for all recoveries, including subrogation,
salvages, and claims upon other reinsurances, whether collectible or not, which
inure to the benefit of the Reinsurer under this Agreement, and shall include
Loss Adjustment Expenses incurred by the Company; provided, however, that in the
event of the insolvency of the Company, Ultimate Net Loss shall mean the amount
of loss and Loss Adjustment Expenses for which the Company is liable, and
payment by the Reinsurer shall be made to the liquidator, receiver, conservator
or statutory successor of the Company in accordance with the provisions of
Article XXIV- Insolvency of this Agreement.   B.   The term “Ultimate Net Loss”
shall include 90% of Loss In Excess of Policy Limits and 90% of Extra
Contractual Obligations, as defined herein, but only as respects business
covered under this Agreement.   C.   The term “Loss Adjustment Expenses” shall
mean all expenses incurred by the Company in connection with the investigation,
settlement, defense or litigation, including court costs and post-judgment
interest, of any claim or loss covered by the Policies reinsured under this
Agreement, and shall include Declaratory Judgment Expenses. However, the term
“Loss Adjustment Expenses” shall not include the salaries and expenses of
Company employees, office expenses and other overhead expenses.   D.   The term
“Declaratory Judgment Expenses” shall mean all legal expenses, incurred in the
representation of the Company in litigation brought to determine the Company’s
defense and/or indemnification obligations, that are allocable to any specific
claim or loss applicable to Policies subject to this Agreement. In addition, the
Company shall promptly notify the Reinsurer of any Declaratory Judgment Expenses
subject to this Agreement.   E.   All recoveries, salvages or payments recovered
or received subsequent to a loss settlement under this Agreement shall be
applied as if recovered or received prior to the aforesaid settlement and all
necessary adjustments to the loss settlement shall be made by the parties
hereto.

No. TC1573A,B,C-R05

 

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F.   Nothing in this Article shall be construed to mean that losses are not
recoverable hereunder until the Ultimate Net Loss of the Company has been
ascertained.

ARTICLE VIII — LOSS IN EXCESS OF POLICY LIMITS

A.   “Loss in Excess of Policy Limits” is defined as loss in excess of the limit
of the original Policy, such loss in excess of the limit having been incurred
because of failure by the Company to settle within the Policy limit or by reason
of alleged or actual negligence, fraud or bad faith in rejecting an offer of
settlement or in the preparation of the defense or in the trial of any action
against its insured or in the preparation or prosecution of an appeal consequent
upon such action.   B.   However, this Article shall not apply where the loss
has been incurred due to fraud by a member of the Board of Directors or a
corporate officer of the Company acting individually or collectively or in
collusion with any individual or corporation or any other organization or party
involved in the presentation, defense or settlement of any claim covered
hereunder.   C.   For the purposes of this Article, the word “loss” shall mean
any amounts which the Company would have been contractually liable to pay had it
not been for the limit of the original Policy.   D.   With respect to coverage
provided under this Article, recoveries from any insurance or reinsurance other
than this Agreement shall be deducted to arrive at the amount of the Company’s
Ultimate Net Loss.

ARTICLE IX — EXTRA CONTRACTUAL OBLIGATIONS

A.   “Extra Contractual Obligations” are defined as those liabilities not
covered under any other provision of this Agreement and which arise from the
handling of any claim on business covered hereunder, such liabilities arising
because of, but not limited to, the following: failure by the Company to settle
within the Policy limit, or by reason of alleged or actual negligence, fraud or
bad faith in rejecting an offer of settlement or in the preparation of the
defense or in the trial of any action against its insured or in the preparation
or prosecution of an appeal consequent upon such action.   B.   The date on
which an Extra Contractual Obligation is incurred by the Company shall be
deemed, in all circumstances, to be the date of the original accident, casualty,
disaster or loss occurrence.

No. TC1573A,B,C-R05

 

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C.   However, coverage hereunder as respects Extra Contractual Obligations shall
not apply where the loss has been incurred due to the fraud of a member of the
Board of Directors or a corporate officer of the Company acting individually or
collectively or in collusion with any individual or corporation or any other
organization or party involved in the presentation, defense or settlement of any
claim covered hereunder.   D.   Recoveries, collectibles or retention from any
other form of insurance or reinsurance including deductibles or self-insured
retention which protect the Company against Extra Contractual Obligations shall
inure to the benefit of the Reinsurer and shall be deducted from the total
amount of Extra Contractual Obligations for purposes of determining the loss
hereunder.

ARTICLE X- EXCLUSIONS

THIS AGREEMENT DOES NOT COVER:

A.   THE FOLLOWING GENERAL CATEGORIES

  1.   Ex-gratia payments.     2.   Risks subject to a deductible or a
self-insured retention excess of $250,000.     3.   Loss or damage caused
directly or indirectly by: (a) enemy attack by armed forces including action
taken by military, naval or air forces in resisting an actual or an immediately
impending enemy attack; (b) invasion; (c) insurrection; (d) rebellion; (e)
revolution; (f) intervention; (g) civil war; and (h) usurped power.     4.  
Reinsurance assumed by the Company.     5.   Business derived from any Pool,
Association, including Joint Underwriting Association, Syndicate, Exchange,
Plan, Fund or other facility directly as a member, subscriber or participant, or
indirectly by way of reinsurance or assessments; provided this exclusion shall
not apply to Automobile or Workers Compensation assigned risks which may be
currently or subsequently covered hereunder.     6.   Pollution Liability as per
the attached Pollution Liability Exclusion Clause - Reinsurance.     7.  
Insolvency Funds as per the attached Insolvency Funds Exclusion Clause.

No. TC1573A,B,C-R05

 

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  8.   Nuclear Incident Exclusion Clauses which are attached and made part of
this Agreement:

  a.   Nuclear Incident Exclusion Clause — Liability — Reinsurance — U.S.A.    
b.   Nuclear Incident Exclusion Clause — Liability — Reinsurance — Canada.    
c.   Nuclear Incident Exclusion Clause — Reinsurance — No. 4.

  9.   Any actual or alleged liability whatsoever for any claim or claims in
respect of loss or losses, directly or indirectly arising out of, resulting
from, or in consequence of asbestos, in whatever form or quantity.     10.   Any
liability, loss, cost or expense of whatsoever nature directly or indirectly
caused by, contributed to by, resulting from, arising out of or in connection
with the use or release, or threat thereof, of any nuclear weapon or device or
chemical or biological agent, regardless of any other cause or event
contributing concurrently or in any other sequence to the loss.     11.  
Policies covering the liability of any original insured whose annual gross
revenue, sales or receipts exceed $5,000,000,000.

B.   THE FOLLOWING INSURANCE COVERAGES

  1.   Fiduciary Liability.     2.   Fidelity and Surety.     3.   Credit and
Financial Guarantee.     4.   Securities and Exchange Liability.     5.  
Retroactive coverage.     6.   Personal Excess or Umbrella Liability.     7.  
Medical Malpractice for Doctors, Physicians, Surgeons, Nurses, Hospitals and
Clinics.     8.   Advertisers,’ Broadcasters’ and Telecasters’ Liability as
respects Personal Injury Liability except as provided under Commercial Package
Policies or Commercial General Liability Coverage Forms.     9.   Liquor Law
Liability except Host Liquor Law Liability.     10.   Kidnap, Extortion and
Ransom Liability.     11.   Boiler and Machinery Insurance.

No. TC1573A,B,C-R05

 

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  12.   Protection and Indemnity (Ocean Marine).     13.   Workers Compensation
and Employers Liability Insurance.     14.   Business classified by the Company
as Primary Rental Liability, Supplemental Liability, Residual Value or GAAP
Liability.     15.   New and Renewal business classified by the Company as
Nursing Home or Assisted Living General Liability or Professional Liability.
However, this exclusion shall not apply if the Company is required by the
applicable regulatory authority(ies) to renew any insured(s) policy.     16.  
Products recall, Products integrity or Products impairment.

C.   THE FOLLOWING RISKS AS RESPECTS AUTOMOBILE LIABILITY AND AUTOMOBILE
COLLISION

  1.   Vehicles used in or while in practice or preparation for, a prearranged
racing, speed, exhibition or demolition contest.     2.   All vehicles
classified as “Public Automobiles” except church buses, social service agency
automobiles, van pools and vehicles used for the transportation of employees.  
  3.   Fire, police, emergency or municipal vehicles.     4.   Motorcycles.    
5.   The rental or leasing of vehicles to others.     6.   Logging trucks.    
7.   Vehicles regularly used to haul property of others and operating beyond a
200 mile radius.     8.   Newspaper delivery trucks.     9.   Vehicles engaged
in the transportation or distribution of fireworks, fuses, explosives,
ammunitions, natural or artificial fuel, gas, or liquefied petroleum gases or
gasoline.

D.   THE FOLLOWING AS RESPECTS LIABILITY OTHER THAN AUTOMOBILE

  1.   Risks involving known exposure to the following substances:

  a.   dioxin.     b.   polychlorinated biphenols.     c.   lead.     d.  
silica.

  2.   Liability as respects Products and Completed Operations:

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  a.   The manufacture, labeling or re-labeling, importation or wholesale
distribution of:

  (i)   Drugs or pharmaceuticals.     (ii)   Cosmetics.     (iii)   Herbicides,
insecticides or pesticides.     (iv)   Petrochemical or electrical equipment
used for heating, lighting or cooking.     (v)   Industrial or toxic chemicals.
    (vi)   Valves, gaskets or seals of a hydraulic, petrochemical or high
pressure nature.     (vii)   Medical supplies.     (viii)   Heavy machinery and
equipment.     (ix)   Power tools.     (x)   Medical equipment used for
diagnostic or life sustaining purposes.

  b.   The manufacture or importing of motorized or self-propelled vehicles and
equipment.     c.   The manufacturing, importing, packing, canning, bottling or
processing of foodstuffs.     d.   The blending, mixing, processing or importing
of animal feed.     e.   The manufacture, sale, distribution, handling,
servicing or maintenance of aircraft, aerospacecraft, missiles, satellites or
any component or components thereof.     f.   Exterior installation finishing
systems (EIFS) or synthetic stucco manufacturing, importation, or installation.
    g.   Any insured contractors’ or developers’ operations which are involved
in the new construction of apartments, condominiums, cooperatives, town houses
or single family dwellings in Arizona, California, Colorado, Hawaii, Nevada,
South Carolina, Utah or Washington.

  3.   Ownership, operation or use of vessels exceeding 50 feet in length.    
4.   All railway operations except sidetrack agreements.     5.   Amusement
parks, carnivals or circuses.     6.   Public assembly exposure in excess of
5,000.     7.   Gas, electric and water utility companies.     8.   Subaqueous
operations.     9.   Mining.     10.   Blasting operations.     11.   Demolition
of buildings or structures in excess of two stories.

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  12.   Shoring, underpinning or moving of buildings or structures.     13.  
Manufacture, sale, rental, lease, erection or repair of scaffolds.     14.  
Construction of bridges, tunnels or dams.     15.   a. Manufacturers or
importers of fireworks, fuses, or any substance, as defined and noted below,
intended for use as an explosive.

  b.   Loading of fireworks, fuses, or any explosive substance defined below
into containers for use as explosive objects, propellant charges or detonation
devices and the storage thereof.     c.   Manufacturers or importers of any
product in which fireworks, fuses, or any explosive substance defined below is
an ingredient.     d.   Handling, storage, transportation or use of fireworks,
fuses, or any explosive substance defined below.

      NOTE: An explosive substance is defined as any substance manufactured for
the express purpose of exploding as differentiated from commodities used
industrially and which are only incidentally explosive.     16.   Manufacture,
production, refining, storage, wholesale distribution or transportation of
natural or artificial fuel, gas, butane, propane or liquefied petroleum gases or
gasoline.     17.   Onshore and offshore gas and oil drilling operations.    
18.   Ownership, maintenance or use of any airport or aircraft, including
fueling, or any device or machine intended for and/or aiding in the achievement
of atmospheric flight, projection or orbit.     19.   Municipalities.     20.  
Liability as respects companies identified in the attached Pharmaceutical /
Medical Company Exclusion Listing, including all affiliates and subsidiaries
thereof.

E.   Those exclusions set forth under Items 5. and 16. of Section D. shall not
apply if the exposure is incidental to the regular operations of the insured
covered hereunder. An exposure shall be considered incidental if it comprises
15% or less of the insured’s exposure base.

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F.   In the event the Company is inadvertently bound on any risk which is
excluded under this Agreement and identified below, the reinsurance provided
under this Agreement shall apply to such risk until discovery by the Company
within its Home Office of the existence of such risk and for 30 days thereafter,
and shall then cease unless within the 30 day period, the Company has received
from the Reinsurer written notice of its approval of such risk:

  1.   As respects Automobile Liability And Collision:         Items 2. through
9. of Section C.     2.   As respects Liability Other Than Automobile:        
Items 2. through 19. of Section D.

ARTICLE XI — SPECIAL ACCEPTANCE

Policies which are beyond the terms, conditions or limitations of this Agreement
may be submitted to the Reinsurer for special acceptance hereunder; and such
Policies, if accepted in writing by the Reinsurer, shall be subject to all of
the terms, conditions and limitations of this Agreement, except as modified by
the special acceptance. Premiums and losses derived from any special acceptance
shall be included with other data for rating purposes under this Agreement.

ARTICLE XII — LOSS OCCURRENCE

The term “Loss Occurrence” shall mean any accident or occurrence or series of
accidents or occurrences arising out of any one event and happening within the
term and scope of this Agreement. Without limiting the generality of the
foregoing, the term “Loss Occurrence” shall be held to include:

A.   As respects Products Bodily Injury and Products Property Damage Liability,
injuries to all persons and all damage to property of others occurring during a
Policy Period and proceeding from or traceable to the same causative agency
shall be deemed to arise out of one Loss Occurrence, and the date of such Loss
Occurrence shall be deemed to be the commencing date of the Policy Period. For
the purpose of this provision, each annual period of a Policy which continues in
force for more than one year shall be deemed to be a separate Policy Period.  
B.   As respects Bodily Injury Liability (other than Automobile and Products),
said term shall also be understood to mean, as regards each original assured,
injuries to one or more than one person resulting from infection, contagion,
poisoning, or contamination proceeding from or traceable to the same causative
agency.

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C.   As respects Property Damage Liability (other than Automobile and Products),
said term shall also, subject to Provisions 1. and 2. below, be understood to
mean loss or losses caused by a series of operations, events, or occurrences
arising out of operations at one specific site and which cannot be attributed to
any single one of such operations, events or occurrences, but rather to the
cumulative effect of the same. In assessing each and every Loss Occurrence
within the foregoing definition, it is understood and agreed that:

  1.   the series of operations, events or occurrences shall not extend over a
period longer than 12 consecutive months; and     2.   the Company may elect the
date on which the period of not exceeding 12 consecutive months shall be deemed
to have commenced.

    In the event that the series of operations, events or occurrences extend
over a period longer than 12 consecutive months, then each consecutive period of
12 months, the first of which commences on the date elected under 2. above,
shall form the basis of claim under this Agreement.   D.   As respects those
Policies of the Company which provide aggregate limits of liability, the total
of all individual losses occurring during any one Policy year which proceed from
or are traceable to the same causative agency.

ARTICLE XIII — REINSURANCE PREMIUM

A.   The Company shall pay to the Reinsurer a premium for the reinsurance
provided under the First, Second and Third Excess of Loss Layers at the rates
set forth in Paragraph B. below. Such rates shall be applied to the Company’s
Subject Earned Premium for the term of this Agreement.   B.   A deposit premium
for each layer set forth below, shall be payable by the Company to the Reinsurer
in four equal installments each due January 1, April 1, July 1 and October 1.
Within 60 days after the termination of this Agreement, the Company shall render
a statement to the Reinsurer showing the actual reinsurance premiums due
hereunder. If such premium calculations differ from the deposit previously paid,
the debtor party shall pay the outstanding balance within 60 days after the
termination of this Agreement. However, in no event shall the adjusted premium
be less than the minimum premium for each layer, set forth below.

                                              Deposit     Minimum     Quarterly
      Rate     Premium     Premium     Deposit  
First Excess Layer
    .061 %   $ 385,000     $ 310,000     $ 96,250  
Second Excess Layer
    .068 %   $ 425,000     $ 340,000     $ 106,250  
Third Excess Layer
    .131 %   $ 825,000     $ 660,000     $ 206,250  

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C.   The term “Subject Earned Premium” as used herein is equal to the sum of the
Net Premiums Written on the business covered hereunder during the period under
consideration, plus the unearned premium reserve as respects premiums in force
at the beginning of such period, less the unearned premium reserve as respects
premiums in force at the end of the period, said unearned premium is to be
calculated on an actual daily basis or in accordance with the Company’s
methodology, as agreed.   D.   The term “Net Premiums Written” shall mean gross
premiums written less returns, allowances and reinsurances which inure to the
benefit of the Reinsurer.

ARTICLE XIV — REPORTS AND REMITTANCES

A.   The Company shall furnish the Reinsurer with all necessary data respecting
premiums and losses for as long as one of the parties hereto has a claim against
the other arising from this Agreement.   B.   All checks and supporting
documentation shall be sent via wire transfer to the Reinsurer through one of
the options set forth below:

  a.   WIRE TRANSFER

  (i)   All wires should be sent to:         The Bank of New York
1 Wall Street
New York, NY 10286
Account Name: Swiss Reinsurance America Corporation
Account Number: 8900489197
ABA Number: 021000018 (SWIFT: IRVTUS3N)     (ii)   All supporting documentation
should be sent to:         Swiss Reinsurance America Corporation
Accounting Department
175 King Street
Armonk, NY 10504

  b.   LOCK BOX         Both checks and supporting documentation shall be sent
to:         Swiss Reinsurance America Corporation

P.O. Box 7247-7281
Philadelphia, PA 19170-7281

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C.   Payment by the Reinsurer of its portion of loss and Loss Adjustment
Expenses paid by the Company shall be made by the Reinsurer to the Company
within 15 days after proof of payment is received by the Reinsurer.

ARTICLE XV — CLAIMS

A.   The Company shall promptly notify the Reinsurer of each claim which may
involve the reinsurance provided hereunder and of all subsequent developments
relating thereto, stating the amount claimed and estimate of the Company’s
Ultimate Net Loss and Loss Adjustment Expenses. Notwithstanding the provisions
set forth in any other Article herein, prompt notification of loss shall be
considered a condition precedent to liability under this Agreement.   B.   The
Company shall advise the Reinsurer of all claims which:

  1.   Are reserved by the Company for an amount in excess of 50% of its
retention;     2.   Originate from fatal injuries;     3.   Originate from the
following kinds of bodily injury:

  a.   Brain injuries resulting in impairment of physical function;     b.  
Spinal injuries resulting in a partial or total paralysis of upper or lower
extremities;     c.   Amputation or permanent loss of use of upper or lower
extremities;     d.   Severe burn injuries;     e.   Loss of sight in one or
both eyes;     f.   All other injuries likely to result in a permanent
disability rate of 50% or more.

  4.   Any action alleging Extra Contractual Obligations against the Company.  
  5.   Any Declaratory Judgment action brought by or against the Company.    
6.   Any judgment against an insured for an amount in excess of the Company’s
policy limit.

C.   The Company shall have the responsibility to investigate, defend or
negotiate settlements of all claims and lawsuits related to Policies written by
the Company and reinsured under this Agreement. The Reinsurer, at its own
expense, may associate with the Company in the defense or control of any claim,
suit or other proceeding which involves or is likely to involve the reinsurance
provided under this

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    Agreement, and the Company shall cooperate in every respect in the defense
of any such claim, suit or proceeding.

ARTICLE XVI — SALVAGE AND SUBROGATION

A.   In the event of the payment of any indemnity by the Reinsurer under this
Agreement, the Reinsurer shall be subrogated, to the extent of such payment, to
all of the rights of the Company against any person or entity legally
responsible for damages of the loss. The Company agrees to enforce such rights;
but, in case the Company refuses or neglects to do so, the Reinsurer is hereby
authorized and empowered to bring any appropriate action in the name of the
Company or their policyholders or otherwise to enforce such rights.   B.   From
any amount recovered by subrogation, salvage or other means, there shall first
be deducted the expenses incurred in effecting the recovery. The balance shall
then be used to reimburse the excess carriers in the inverse order to that in
which their respective liabilities attached, before being used to reimburse the
Company for its primary loss.

ARTICLE XVII — TERRORISM EXCESS RECOVERY

A.   For purposes of this Article:

  1.   “Act” shall mean the Terrorism Risk Insurance Act of 2002, any amendments
thereto and any regulations promulgated thereunder.     2.   “Affiliate,”
“Insured Losses,” and “Program Year” shall have the meanings provided in the
Act.     3.   “Company” shall include the Company and all affiliates.

B.   This reinsurance shall not apply to any fines, civil penalties or
surcharges assessed pursuant to the Act.   C.   To the extent that the Company
allocates Insured Losses and/or federal assistance under the Act among
affiliates, claims, contracts or otherwise in any manner which impacts the
reinsurance provided hereunder, the Company shall apply a reasonable allocation
method acceptable to the Reinsurer.   D.   To the extent that an Insured Loss is
otherwise payable hereunder, the reinsurance provided by this Agreement shall
apply only to the portion of liability, loss, cost and/or expense retained by
the Company net of any federal assistance pursuant to the Act. For each Program
Year, the liability of the Reinsurer for Insured Losses under this Agreement
shall be reduced by the ratio that the financial assistance under the Act
allocated to Policies subject to this Agreement bears to the Company’s total
Insured Losses subject

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    to this Agreement. If the Company does not make such allocation, the
liability of the Reinsurer for Insured Losses in any Program Year under this
Agreement shall be reduced by the ratio that the financial assistance available
to the Company under the Act for that Program Year bears to the Company’s total
Insured Losses for the same Program Year.   E.   The parties recognize that, for
any Program Year, the Reinsurer may without waiver of the foregoing Paragraphs
make payments for Insured Losses which, together with available financial
assistance under the Act and the Company retentions and/or deductibles
hereunder, exceed the Company’s Insured Losses. In such event, the Reinsurer’s
proportional share of all such excess recovery (hereafter “Reinsurer’s Excess
Share”) shall inure to the benefit of the Reinsurer. All excess recovery
described in this Paragraph shall be allocated to the Reinsurer and the Company
in proportion to the respective liability of each for Insured Losses, net of
federal assistance under the Act, salvage, subrogation and other similar
recoveries, as applicable.   F.   In the event of a Reinsurer’s Excess Share,
the Company shall:

  1.   Promptly pay the Reinsurer’s Excess Share to the Reinsurer; or     2.  
Upon request of the Reinsurer at any time and at the Reinsurer’s sole
discretion, instead assign to the Reinsurer its rights to recover directly from
the federal government any portion of Reinsurer’s Excess Share not already paid
to the Reinsurer. The Company shall cooperate with and assist the Reinsurer, at
its own expense, to the extent reasonably necessary for the Reinsurer to
exercise those rights. If the Reinsurer is unable, for any reason, to exercise
any right assigned to it by the Company pursuant to this Article, the Company
shall pay the Reinsurer’s Excess Share to the Reinsurer as if no assignment had
taken place to the extent that the Company has not been deemed to have forfeited
the right to financial assistance under the Act by virtue of the attempted
assignment.

G.   In the event of an Insured Loss, the Company shall provide the Reinsurer
with a monthly report detailing claim settlement activities and financial
assistance under the Act. Calculations for each Program Year shall continue to
be made until the settlement of all Insured Losses covered hereunder.

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ARTICLE XVIII — ACCESS TO RECORDS

The Reinsurer or its duly authorized representatives shall have the right to
examine, at the offices of the Company at a reasonable time, during the currency
of this Agreement or anytime thereafter, all books and records of the Company
relating to business which is the subject of this Agreement.

ARTICLE XIX — TAXES

The Company shall be liable for all taxes on premiums paid to the Reinsurer
under this Agreement, except income or profit taxes of the Reinsurer, and shall
indemnify and hold the Reinsurer harmless for any such taxes which the Reinsurer
may become obligated to pay to any local, state or federal taxing authority.

ARTICLE XX — CURRENCY

Wherever the word “dollars” or the “$” symbol is used in this Agreement, it
shall mean dollars of the United States of America, excepting in those cases
where the Policy is issued by the Company in Canadian dollars, in which case it
shall mean dollars of Canada. In the event the Company is involved in a loss
requiring payment in United States and Canadian currency, the Company’s
retention and the limit of liability of the Reinsurer shall be apportioned
between the two currencies in the same proportion as the amount of net loss in
each currency bears to the total amount of net loss paid by the Company. For the
purposes of this Agreement, where the Company receives premiums or pays losses
in currencies other than United States or Canadian currency, such premiums and
losses shall be converted into United States dollars at the actual rates of
exchange at which the premiums and losses are entered in the Company’s books.

ARTICLE XXI — OFFSET

Each party to this Agreement together with their successors or assigns shall
have and may exercise, at any time, the right to offset any balance or balances
due the other (or, if more than one, any other). Such offset may include
balances due under this Agreement and any other agreements heretofore or
hereafter entered into between the parties regardless of whether such balances
arise from premiums, losses or otherwise, and regardless of capacity of any
party, whether as assuming insurer and/or ceding insurer, under the various
agreements involved, provided however, that in the event of insolvency of a
party hereto, offsets shall only be allowed in accordance with the provisions of
Section 7427 of the Insurance Law of the State of New York to the extent such
statute or any other applicable law, statute or regulation governing such offset
shall apply.

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ARTICLE XXII — ERRORS OR OMISSIONS

Errors or omissions of an administrative nature on the part of the Company shall
not invalidate the reinsurance under this Agreement, provided such errors or
omissions are corrected promptly after discovery thereof; but the liability of
the Reinsurer under this Agreement or any exhibits, addenda, or endorsements
attached hereto shall in no event exceed the limits specified herein nor be
extended to cover any risks, perils, lines of business or classes of insurance
generally or specifically excluded herein.

ARTICLE XXIII — DISPUTE RESOLUTION

Part I — Choice Of Law And Forum

Any dispute arising under this Agreement shall be resolved in the State of
Pennsylvania, and the laws of the State of Pennsylvania shall govern the
interpretation and application of this Agreement.

Part II — Mediation

If a dispute between the Company and the Reinsurer, arising out of the
provisions of this Agreement or concerning its interpretation or validity and
whether arising before or after termination of this Agreement has not been
settled through negotiation, both parties agree to try in good faith to settle
such dispute by nonbinding mediation, before resorting to arbitration.

Part III — Arbitration

A.   Resolution of Disputes — As a condition precedent to any right of action
arising hereunder, any dispute not resolved by mediation between the Company and
the Reinsurer arising out of the provisions of this Agreement or concerning its
interpretation or validity, whether arising before or after termination of this
Agreement, shall be submitted to arbitration in the manner hereinafter set
forth.   B.   Composition of Panel — Unless the parties agree upon a single
arbitrator within 15 days after the receipt of a notice of intention to
arbitrate, all disputes shall be submitted to an arbitration panel composed of
two arbitrators and an umpire chosen in accordance with Paragraph C. hereof.  
C.   Appointment of Arbitrators — The members of the arbitration panel shall be
chosen from persons knowledgeable in the insurance and reinsurance business.
Unless a single arbitrator is agreed upon, the party requesting arbitration
(hereinafter referred to as the “claimant”) shall appoint an arbitrator and give
written notice thereof by certified mail, to the other party (hereinafter
referred to as the “respondent”) together with its notice of intention to

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   arbitrate. Within 30 days after receiving such notice, the respondent shall
also appoint an arbitrator and notify the claimant thereof by certified mail.
Before instituting a hearing, the two arbitrators so appointed shall choose an
umpire. If, within 20 days after the appointment of the arbitrator chosen by the
respondent, the two arbitrators fail to agree upon the appointment of an umpire,
each of them shall nominate three individuals to serve as umpire, of whom the
other shall decline two and the umpire shall be chosen from the remaining two by
drawing lots. The name of the individual first drawn shall be the umpire.   D.  
Failure of Party to Appoint an Arbitrator — If the respondent fails to appoint
an arbitrator within 30 days after receiving a notice of intention to arbitrate,
the claimant’s arbitrator shall appoint an arbitrator on behalf of the
respondent, such arbitrator shall then, together with the claimant’s arbitrator,
choose an umpire as provided in Paragraph C. of Part III of this Article.   E.  
Submission of Dispute to Panel — Unless otherwise extended by the arbitration
panel or agreed to by the parties, each party shall submit its case to the panel
within 30 days after the selection of the umpire.   F.   Procedure Governing
Arbitration — All proceedings before the panel shall be informal and the panel
shall not be bound by the formal rules of evidence. The panel shall have the
power to fix all procedural rules relating to the arbitration proceeding. In
reaching any decision, the panel shall give due consideration to the customs and
usages of the insurance and reinsurance business.   G.   Arbitration Award — The
arbitration panel shall render its decision within 60 days after termination of
the proceeding, which decision shall be in writing, stating the reasons
therefor. The decision of the majority of the panel shall be final and binding
on the parties to the proceeding.   H.   Cost of Arbitration — Unless otherwise
allocated by the panel, each party shall bear the expense of its own arbitrator
and shall jointly and equally bear with the other parties the expense of the
umpire and the arbitration.

ARTICLE XXIV- INSOLVENCY

A.   In the event of insolvency of the Company, the reinsurance provided by this
Agreement shall be payable by the Reinsurer on the basis of the liability of the
Company as respects Policies covered hereunder, without diminution because of
such insolvency, directly to the Company or its liquidator, receiver,
conservator or statutory successor except as provided in Sections 4118(a)(1)(A)
and 1114(c) of the New York Insurance Law.

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B.   The Reinsurer shall be given written notice of the pendency of each claim
or loss which may involve the reinsurance provided by this Agreement within a
reasonable time after such claim or loss is filed in the insolvency proceedings.
The Reinsurer shall have the right to investigate each such claim or loss and
interpose, at its own expense, in the proceedings where the claim or loss is to
be adjudicated, any defense which it may deem available to the Company, its
liquidator, receiver, conservator or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to court approval,
against the insolvent Company as part of the expense of liquidation to the
extent of a proportionate share of the benefit which may accrue to the Company
solely as a result of the defense undertaken by the Reinsurer.   C.   In
addition to the offset provisions set forth in Article XXI- Offset, any debts or
credits, liquidated or unliquidated, in favor of or against either party on the
date of the receivership or liquidation order (except where the obligation was
purchased by or transferred to be used as an offset) are deemed mutual debts or
credits and shall be set off with the balance only to be allowed or paid.
Although such claim on the part of either party against the other may be
unliquidated or undetermined in amount on the date of the entry of the
receivership or liquidation order, such claim will be regarded as being in
existence as of such date and any claims then in existence and held by the other
party may be offset against it.   D.   Nothing contained in this Article is
intended to change the relationship or status of the parties to this Agreement
or to enlarge upon the rights or obligations of either party hereunder except as
provided herein.

ARTICLE XXV — SPECIAL TERMINATION

A.   Notwithstanding the termination provisions set forth in
Article II-Effective Date and Termination, this Agreement shall be:

  1.   Terminated automatically and simultaneously upon the happening of any of
the following events:

  a.   Entry of an order of liquidation, rehabilitation, receivership or
conservatorship with respect to the Company or the Reinsurer by any court or
regulatory authority;     b.   Assignment of this Agreement by either party;    
c.   General reinsurance of any portion of the Company’s business it retains net
for its own account, as determined under the provisions of this Agreement
without prior consent of the Reinsurer.

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  2.   Terminated by either party giving not less than 30 days prior written
notice to the other party upon the happening of the following event:

      Any transfer of control of either party by change in ownership or
otherwise.

  3.   Terminated by the Reinsurer by giving not less than 30 days prior written
notice to the Company upon the happening of the following event:

      Failure of the Company to remit premiums in accordance with the provisions
set forth in this Agreement.

  4.   Terminated in accordance with the provisions set forth in this Paragraph,
upon the discovery of the following event:

      A reduction of 50% or more of the Company’s policyholders surplus during
any calendar year. Such reduction shall be determined by calculating the
difference between the Company’s prior year annual statement and each subsequent
quarterly statutory statement within such current calendar year.         As
respects the event set forth in this Paragraph A.4., the Company shall be
obligated to notify the Reinsurer in writing within 30 days after the filing of
its quarterly statement. Upon receipt of such notification the Reinsurer shall
have the right to terminate this Agreement, by giving not less than 30 days
notice of its intention to do so.

B.   Any notice of termination pursuant to the provisions set forth in
Paragraphs A.2., A.3. and A.4. above shall be sent by certified mail, return
receipt requested. Such notice period shall commence upon the other party’s
receipt of the notice of termination.   C.   In the event of termination, as
provided under the provisions of this Article, the Reinsurer shall not be liable
for losses occurring subsequent to the date of termination.

ARTICLE XXVI — AMENDMENTS

This Agreement may be amended by mutual consent of the parties expressed in an
addendum; and such addendum, when executed by both parties, shall be deemed to
be an integral part of this Agreement and binding on the parties hereto.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate, by their duly authorized representatives as of the following
dates:

In Bala Cynwyd, Pennsylvania, this 21st day of March, 2005

     
Attest:
  PHILADELPHIA CONSOLIDATED HOLDING CORPORATION’S
 
   

  Following member Companies:
 
   

  PHILADELPHIA INDEMNITY INSURANCE COMPANY
 
   

  PHILADELPHIA INSURANCE COMPANY

     
Thomas R. Herendeen
  Christopher J. Maguire
 
   
Vice President
  Exec. VP & Chief U/W Officer

And in Armonk, New York, this 4th day of February, 2005.

          Attest:   SWISS REINSURANCE AMERICA CORPORATION
 
       
Pete Thompson
      M. Taxter
 
       
Vice President
      Senior Vice President

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SUPPLEMENT TO THE ATTACHMENTS

DEFINITION OF IDENTIFICATION TERMS USED WITHIN THE ATTACHMENTS   A.   Wherever
the term “Company” or “Reinsured” or “Reassured” or whatever other term is used
to designate the reinsured company or companies within the various attachments
to the reinsurance agreement, the term shall be understood to mean Company or
Reinsured or Reassured or whatever other term is used in the attached
reinsurance agreement to designate the reinsured company or companies.   B.  
Wherever the term “Agreement” or “Contract” or “Policy” or whatever other term
is used to designate the attached reinsurance agreement within the various
attachments to the reinsurance agreement, the term shall be understood to mean
Agreement or Contract or Policy or whatever other term is used to designate the
attached reinsurance agreement.   C.   Wherever the term “Reinsurer” or
“Reinsurers” or “Underwriters” or whatever other term is used to designate the
reinsurer or reinsurers in the various attachments to the reinsurance agreement,
the term shall be understood to mean Reinsurer or Reinsurers or Underwriters or
whatever other term is used to designate the reinsuring company or companies.

 

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POLLUTION LIABILITY EXCLUSION CLAUSE — REINSURANCE

    This Reinsurance excludes:

  (1)   Any loss occurrence arising out of the actual, alleged or threatened
discharge, dispersal, release or escape of pollutants:

  a)   At or from premises owned, rented or occupied by an original assured; or
    b)   At or from any site or location used for the handling, storage,
disposal, processing or treatment of waste; or     c)   Which are at any time
transported, handled, stored, treated, disposed of, or processed as waste; or  
  d)   At or from any site or location on which any original assured is
performing operations:

  (i)   If the pollutants are brought on or to the site or location in
connection with such operations; or     (ii)   If the operations are to test
for, monitor, clean up, remove, contain, treat, detoxify or neutralize the
pollutants.

  (2)   Any liability, loss, cost or expense arising out of any governmental
direction or request to test for, monitor, clean up, remove, contain, treat,
detoxify or neutralize pollutants.

“Pollutants” means any solid, liquid, gaseous or thermal irritant or
contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and
waste. Waste includes materials to be recycled, reconditioned or reclaimed.

Subparagraphs a) and d)(i) of paragraph (1) of this exclusion do not apply to
loss occurrences caused by heat, smoke or fumes from a hostile fire. As used
herein, “hostile fire” means one which becomes uncontrollable or breaks out from
where it was intended to be.

“Original assured” as used herein means all insureds as defined in the policy
issued by the Company.

 

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INSOLVENCY FUNDS EXCLUSION CLAUSE

This Agreement excludes all liability of the Company arising by contract,
operation of law, or otherwise from its participation or membership, whether
voluntary or involuntary, in any insolvency fund or from reimbursement of any
person for any such liability. “Insolvency fund” includes any guaranty fund,
insolvency fund, plan, pool, association, fund or other arrangement, howsoever
denominated, established or governed, which provides for any assessment of or
payment or assumption by any person of part or all of any claim, debt, charge,
fee, or other obligation of an insurer, or its successors or assigns, which has
been declared by any competent authority to be insolvent or which is otherwise
deemed unable to meet any claim, debt, charge, fee or other obligation in whole
or in part.

 

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    NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — U.S.A.      
N.M.A. 1590   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 or reinsurers 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 operation of paragraph 1.
of this Clause it is understood and agreed that for all purposes of this
reinsurance all the original policies of the Reassured (new, renewal and
replacement) of the classes specified in Clause II. in this paragraph 2. from
the time specified in Clause III. in this paragraph 2. shall be deemed to
include the following provision (specified as the Limited Exclusion Provision):
      LIMITED EXCLUSION PROVISION*

  I.   It is agreed that the policy does not apply under any liability coverage,
to injury, sickness, disease, death or destruction, bodily injury or property
damage with respect to which an insured under the policy is also an insured
under a nuclear energy liability policy issued by Nuclear Energy Liability
Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear
Insurance Association of Canada, or would be an insured under any such policy
but for its termination upon exhaustion of its limit of liability.     II.  
Family Automobile Policies (liability only), Special Automobile Policies
(private passenger automobiles, liability only), Farmers Comprehensive Personal
Liabilities Policies (liability only), Comprehensive Personal Liability Policies
(liability only) or policies of a similar nature; and the liability portion of
combination forms related to the four classes of policies stated above, such as
the Comprehensive Dwelling Policy and the applicable types of Homeowners
Policies.     III.   The inception dates and thereafter of all original policies
as described in II. above, whether new, renewal or replacement, being policies
which either

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  (a)   become effective on or after 1st May, 1960, or     (b)   become
effective before that date and contain the Limited Exclusion Provision set out
above; provided this paragraph 2. shall not be applicable to Family Automobile
Policies, Special Automobile Policies, or policies or combination policies of a
similar nature, issued by the Reassured on New York risks, until 90 days
following approval of the Limited Exclusion Provision by the Governmental
Authority having jurisdiction thereof.

3.   Except for those classes of policies specified in Clause II. of paragraph
2. and without in any way restricting the operation of paragraph 1. of this
Clause, it is understood and agreed that for all purposes of this reinsurance
the original liability policies of the Reassured (new, renewal and replacement)
affording the following coverages:       Owners, Landlords and Tenants
Liability, Contractual Liability, Elevator Liability, Owners or Contractors
(including railroad) Protective Liability, Manufacturers and Contractors
Liability, Product Liability, Professional and Malpractice Liability,
Storekeepers Liability, Garage Liability, Automobile Liability (including
Massachusetts Motor Vehicle or Garage Liability)       shall be deemed to
include with respect to such coverages, from the time specified in Clause V. of
this paragraph 3., the following provision (specified as the Broad Exclusion
Provision):       BROAD EXCLUSION PROVISION*       It is agreed that the policy
does not apply:

  I.   Under any Liability Coverage to injury, sickness, disease, death or
destruction, bodily injury or property damage

  (a)   with respect to which an insured under the policy is also an insured
under nuclear energy liability policy issued by Nuclear Energy Liability
Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear
Insurance Association of Canada, or would be an insured under any such policy
but for its termination upon exhaustion of its limit of liability; or

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  (b)   resulting from the hazardous properties of nuclear material and with
respect to which (1) any person or organization is required to maintain
financial protection pursuant to the Atomic Energy Act of 1954, or any law
amendatory thereof, or (2) the insured is, or had this policy not been issued
would be, entitled to indemnity from the United States of America, or any agency
thereof, under any agreement entered into by the United States of America, or
any agency thereof, with any person or organization.

  II.   Under any Medical Payments Coverage, or under any Supplementary Payments
Provision relating to immediate medical or surgical relief, first aid, to
expenses incurred with respect to bodily injury, sickness, disease or death,
bodily injury resulting from the hazardous properties of nuclear material and
arising out of the operation of a nuclear facility by any person or
organization.     III.   Under any Liability Coverage, to injury, sickness,
disease, death or destruction, bodily injury or property damage resulting from
the hazardous properties of nuclear material, if

  (a)   the nuclear material (1) is at any nuclear facility owned by, or
operated by or on behalf of, an insured or (2) has been discharged or dispersed
therefrom;     (b)   the nuclear material is contained in spent fuel or waste at
any time possessed, handled, used, processed, stored, transported or disposed of
by or on behalf of an insured; or     (c)   the injury, sickness, disease, death
or destruction, bodily injury or property damage arises out of the furnishing by
an insured of services, materials, parts or equipment in connection with the
planning, construction, maintenance, operation or use of any nuclear facility,
but if such facility is located within the United States of America, its
territories, or possessions or Canada, this exclusion (c) applies only to injury
to or destruction of property at such nuclear facility, property damage to such
nuclear facility and any property thereat.

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  IV.   As used in this endorsement:         “hazardous properties” include
radioactive, toxic or explosive properties; “nuclear material” means source
material, special nuclear material or byproduct material; “source material,”
“special nuclear material,” and “byproduct material” have the meanings given
them in the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent
fuel” means any fuel element or fuel component, solid or liquid, which has been
used or exposed to radiation in a nuclear reactor; “waste” means any waste
material (1) containing byproduct material other than the tailings or wastes
produced by the extraction or concentration of uranium or thorium from any ore
processed for its source material content and (2) resulting from the operation
by any person or organization of any nuclear facility included within the
definition of nuclear facility under paragraph (a) or (b) thereof; “nuclear
facility” means

  (a)   any nuclear reactor,     (b)   any equipment or device designed or used
for (1) separating the isotopes of uranium or plutonium, (2) processing or
utilizing spent fuel, or (3) handling, processing or packaging waste,     (c)  
any equipment or device used for the processing, fabricating or alloying of
special nuclear material if at any time the total amount of such material in the
custody of the insured at the premises where such equipment or device is located
consists of or contains more than 25 grams of plutonium or uranium 233 or any
combination thereof, or more than 250 grams of uranium 235,     (d)   any
structure, basin, excavation, premises or place prepared or used for the storage
or disposal of waste

      and includes the site on which any of the foregoing is located, all
operations conducted on such site and all premises used for such operations;
“nuclear reactor” means any apparatus designed or used to sustain nuclear
fission in a self-supporting chain reaction or to contain a critical mass of
fissionable material; with respect to injury to or destruction of property, the
word “injury” or “destruction” includes all forms of radioactive contamination
of property; “property damage” includes all forms of radioactive contamination
of property.

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  V.   The inception dates and thereafter of all original policies affording
coverages specified in this paragraph 3., whether new, renewal or replacement,
being policies which become effective on or after 1st May, 1960, provided this
paragraph 3. shall not be applicable to

  (i)   Garage and Automobile Policies issued by the Reassured on New York
risks, or     (ii)   Statutory liability insurance required under Chapter 90,
General Laws of Massachusetts,

      until 90 days following approval of the Broad Exclusion Provision by the
Governmental Authority having jurisdiction thereof.

4.   Without in any way restricting the operations of paragraph 1. of this
Clause, it is understood and agreed that paragraphs 2. and 3. above are not
applicable to original liability policies of the Reassured in Canada, and that
with respect to such policies, this Clause shall be deemed to include the
Nuclear Energy Liability Exclusion Provisions adopted by the Canadian
Underwriters’ Association or the Independent Insurance Conference of Canada.

*NOTE:  The words printed in BOLD TYPE in the Limited Exclusion Provision and in
the Broad Exclusion Provision shall apply only in relation to original liability
policies which include a Limited Exclusion Provision or a Broad Exclusion
Provision containing those words.

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    NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — CANADA      
N.M.A. 1979a   1.   This Agreement does not cover any loss or liability accruing
to the Company as a member of, or subscriber to, any association of insurers or
reinsurers 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 operation of Paragraph 1. of this
Clause, it is agreed that for all purposes of this Agreement all the original
liability contracts of the Company, whether new, renewal or replacement, of the
following classes, namely,

Personal Liability
Farmers’ Liability
Storekeepers’ Liability

    which become effective on or after 31st December 1992, shall be deemed to
include, from their inception dates and thereafter, the following provision:  
    Limited Exclusion Provision -       This Policy does not apply to bodily
injury or property damage with respect to which the Insured is also insured
under a contract of nuclear energy liability insurance (whether the Insured is
unnamed in such contract and whether or not it is legally enforceable by the
Insured) issued by the Nuclear Insurance Association of Canada or any other
group or pool of insurers or would be an Insured under any such policy but for
its termination upon exhaustion of its limits of liability.       With respect
to property, loss of use of such property shall be deemed to be property damage.
  3.   Without in any way restricting the operation of Paragraph 1. of this
Clause, it is agreed that for all purposes of this Agreement all the original
liability contracts of the Company, whether new, renewal or replacement, of any
class whatsoever (other than Personal Liability, Farmers’ Liability,
Storekeepers’ Liability or Automobile Liability contracts), which become
effective on or after 31st December 1992, shall be deemed to include, from their
inception dates and thereafter, the following provision:

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Broad Exclusion Provision -

It is agreed that this Policy does not apply:

(a)   to liability imposed by or arising from any nuclear liability act, law or
statute or any law amendatory thereof; nor   (b)   to bodily injury or property
damage with respect to which an Insured under this Policy is also insured under
a contract of nuclear energy liability insurance (whether the Insured is unnamed
in such contract and whether or not it is legally enforceable by the Insured)
issued by the Nuclear Insurance Association of Canada or any other insurer or
group or pool of insurers or would be an Insured under any such policy but for
its termination upon exhaustion of its limit of liability; nor   (c)   to bodily
injury or property damage resulting directly or indirectly from the nuclear
energy hazard arising from:

  (i)   the ownership, maintenance, operation or use of a nuclear facility by or
on behalf of an Insured;     (ii)   the furnishing by an Insured of services,
materials, parts or equipment in connection with the planning, construction,
maintenance, operation or use of any nuclear facility; and     (iii)   the
possession, consumption, use, handling, disposal or transportation of
fissionable substances, or of other radioactive material (except radioactive
isotopes, away from a nuclear facility, which have reached the final stage of
fabrication so as to be usable for any scientific, medical, agricultural,
commercial or industrial purpose) used, distributed, handled or sold by an
Insured.

As used in this Policy:

(1)   The term “nuclear energy hazard” means the radioactive, toxic, explosive,
or other hazardous properties of radioactive material;   (2)   The term
“radioactive material” means uranium, thorium, plutonium, neptunium, their
respective derivatives and compounds, radioactive isotopes of other elements and
any other substances which may be designated by or pursuant to any law, act or
statute, or law amendatory thereof as being prescribed substances capable of
releasing atomic energy, or as being requisite for the production, use or
application of atomic energy;

 

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(3)   The term “nuclear facility” means:

  (a)   any apparatus designed or used to sustain nuclear fission in a
self-supporting chain reaction or to contain a critical mass of plutonium,
thorium and uranium or any one or more of them;     (b)   any equipment or
device designed or used for (i) separating the isotopes of plutonium, thorium
and uranium or any one or more of them, (ii) processing or utilizing spent fuel,
or (iii) handling, processing or packaging waste;     (c)   any equipment or
device used for the processing, fabricating or alloying of plutonium, thorium or
uranium enriched in the isotope uranium 233 or in the isotope uranium 235, or
any one or more of them if at any time the total amount of such material in the
custody of the Insured at the premises where such equipment or device is located
consists of or contains more than 25 grams of plutonium or uranium 233 or any
combination thereof, or more than 250 grams of uranium 235;     (d)   any
structure, basin, excavation, premises or place prepared or used for the storage
or disposal of waste radioactive material;

    and includes the site on which any of the foregoing is located, together
with all operations conducted thereon and all premises used for such operations.
  (4)   The term “fissionable substance” means any prescribed substance that is,
or from which can be obtained, a substance capable of releasing atomic energy by
nuclear fission.   (5)   With respect to property, loss of use of such property
shall be deemed to be property damage.

April 1, 1996

 

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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 or
reinsurers 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
Clauses, - Liability, — Physical Damage, — Boiler and Machinery and paragraph 1.
of this Clause, it is understood and agreed that for all purposes of the
reinsurance assumed by the Reinsurer from the Reinsured, all original insurance
policies or contracts of the Reinsured (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.

 

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PHARMACEUTICAL / MEDICAL COMPANY EXCLUSION LISTING

             
ABBOTT LABORATORIES
    NOVARTIS    
AKZO NOBEL
    NOVO NORDISK    
ALLERGAN
    OTSUKA PHARMACEUTICAL    
ALPHARMA
    PFIZER    
ALTANA AG
    PIERRE FABRE    
AMGEN
    PROCTER & GAMBLE    
ASTRAZENECA
    PURDUE FREDERICK / PRA HOLDING    
AVENTIS
    ROCHE    
BARR LABORATORIES
    SANKYO    
BAXTER INTERNATIONAL
    SANOFI-SYNTHELABO    
BAYER
    SCHERING AG    
BEAUFOUR IPSEN
    SCHERING-PLOUGH    
BECTON, DICKINSON AND COMPANY
    SCHWARZ PHARMA    
BIOGEN
    SERONO    
BOEHRINGER INGELHEIM KG
    SHIONOGI    
BOSTON SCIENTIFIC CORPORATION
    SHIRE PHARMACEUTICALS    
BRISTOL-MYERS SQUIBB
    SMITH & NEPHEW    
CELLTECH (former MEDEVA)
    SOLVAY    
CHIRON
    ST. JUDE MEDICAL    
CHUGAI PHARMACEUTICAL
    STRYKER    
CSL (including ZLB Behring [former
    SUMITOMO PHARMACEUTICALS / SUMITOMO    
ZLB and Aventis Behring]
    CHEMICAL    
DAIICHI PHARMACEUTICAL
    SYNTHES-STRATEC    
DAINIPPON PHARMACEUTICAL
    TAKEDA CHEMICAL INDUSTRIES    
EDWARDS LIFESCIENCES
    TANABE    
EISAI
    TAP PHARMACEUTICAL PRODUCTS    
ELAN
    TEVA PHARMACEUTICAL    
FOREST LABORATORIES
    UCB    
GENENTECH
    WATSON PHARMACEUTICAL    
GLAXOSMITHKLINE
    WYETH    
GUIDANT
    YAMANOUCHI PHARMACEUTICAL /FUJISAWA
PHARMACEUTICAL    
HOSPIRA
    ZIMMER    
IVAX
         
JOHNSON & JOHNSON
         
KING PHARMACEUTICALS
         
KYOWA HAKKO KOGYO
         
LABORATOIRE FOURNIER
         
LABORATOIRE SERVIER
         
LILLY (ELI)
         
MEDTRONIC
         
MERCK & CO
         
MERCK KGAA
         
MINNESOTA MINING & MANUFACTURING
         
MITSUBISHI PHARMACEUTICAL
         
MYLAN LABORATORIES
         

GROUP PM CASUALTY/2004 APRIL 30