Exhibit 10.34

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UMBRELLA
LIABILITY QUOTA SHARE
REINSURANCE AGREEMENT
NO. POR327548

EFFECTIVE JANUARY 1, 2006

between

SAFETY INSURANCE COMPANY
SAFETY INDEMNITY INSURANCE COMPANY
both of Boston, Massachusetts

and

SWISS REINSURANCE AMERICA CORPORATION
Armonk, New York

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UMBRELLA LIABILITY QUOTA SHARE REINSURANCE AGREEMENT NO. POR327548

ARTICLE

 

CONTENTS

 

PAGE

 

 

 

 

 

 

 

PREAMBLE

 

1

I

 

BUSINESS COVERED

 

1

II

 

EFFECTIVE DATE AND TERMINATION

 

2

III

 

TERRITORY

 

3

IV

 

DEFINITION OF ULTIMATE NET LIABILITY

 

3

V

 

EXCESS REINSURANCE

 

3

VI

 

RETENTION

 

3

VII

 

DEFINITION OF LOSS OCCURRENCE

 

3

VIII

 

LOSS IN EXCESS OF POLICY LIMITS

 

3

IX

 

EXTRA CONTRACTUAL OBLIGATIONS

 

4

X

 

EXCLUSIONS

 

5

XI

 

SPECIAL ACCEPTANCE

 

7

XII

 

UNDERLYING INSURANCE

 

7

XIII

 

REINSURANCE PREMIUM

 

8

XIV

 

COMMISSION

 

8

XV

 

LOSSES, LOSS ADJUSTMENT EXPENSES AND SALVAGES

 

8

XVI

 

REPORTS AND REMITTANCES

 

9

XVII

 

CLAIMS

 

11

XVIII

 

POLICY FORM

 

12

XIX

 

ACCESS TO RECORDS

 

12

XX

 

TAXES

 

12

XXI

 

CURRENCY

 

12

XXII

 

OFFSET

 

12

XXIII

 

ERRORS OR OMISSIONS

 

13

XXIV

 

DISPUTE RESOLUTION

 

13

XXV

 

INSOLVENCY

 

15

XXVI

 

SPECIAL TERMINATION

 

15

XXVII

 

AMENDMENTS

 

16

 

 

SIGNATURES

 

17

 

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

 

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UMBRELLA
LIABILITY QUOTA SHARE
REINSURANCE AGREEMENT
NO. POR327548
(hereinafter referred to as the “Agreement”)

between

SAFETY INSURANCE COMPANY
SAFETY INDEMNITY INSURANCE COMPANY
both of Boston, Massachusetts

and

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

ARTICLE I - BUSINESS COVERED

A.                      By this Agreement the Company obligates itself to cede
to the Reinsurer and the Reinsurer obligates itself to accept from the Company a
90% Quota Share participation of the Company’s Ultimate Net Liability for new
and renewal Policies becoming effective on or after January 1, 2006, as respects
losses occurring on or after January 1, 2006. This Quota Share is subject to a
maximum cession limit of $4,500,000 each Policy (90% share of the Company’s
Ultimate Net Liability of $5,000,000).

B                           Notwithstanding the provisions of paragraph A.
above, the Company shall retain an annual aggregate deductible of $75,000 as
respects Ultimate Net Liability otherwise subject to cession under this
Agreement. Thereafter, the cession and limit set forth in paragraph A. above
shall apply.

C                           Any loss arising under this Agreement with respect
to 80% of Extra Contractual Obligations and 80% of Loss In Excess of Policy
Limits as defined herein shall be recovered in the same proportion as the
contractual loss recoverable hereunder provided such contractual loss plus Extra
Contractual Obligations and Loss In Excess of Policy Limits shall never exceed
the maximum cession limit set forth under paragraph A. above.

D                          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.

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E.                         The performance of obligations by both parties under
this Agreement shall be in accordance with a fiduciary standard of good faith
and fair dealing.

F                            The term “Policies” shall mean each of the
Company’s binders, policies and contracts of insurance on the business covered
hereunder.

G                           Under this Agreement, the indemnity for reinsured
loss applies only to Personal and Commercial Umbrella Liability Policies, except
as excluded under Article X - Exclusions of this Agreement.

ARTICLE II - EFFECTIVE DATE AND TERMINATION

A.                      This Agreement shall become effective 12:01 a.m.,
Eastern Standard Time on January 1, 2006, and shall remain in force until
terminated. This Agreement may be terminated at the close of any calendar
quarter by either party giving to the other not less than 90 days prior written
notice by certified mail of its intention to do so.

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                           In the event of termination of this Agreement, the
Company shall have the option of continuing or terminating the liability in
force at the date of termination as set forth below. The Company may exercise
such option provided written notice of the Company’s election is given by
certified mail to the Reinsurer prior to the date of termination. If the Company
does not choose to exercise its option prior to the date of termination, such
option shall revert to the Reinsurer.

The Reinsurer shall be liable for losses occurring subsequent to the date of
termination for all policies covered hereunder and in force at the date of
termination of this Agreement until their natural expiry, cancellation or next
anniversary of such business, whichever first occurs; but in no case shall this
reinsurance be extended for longer than 12 months, after the termination date.
At such time, the Reinsurer shall return to the Company the unearned premiums,
less commissions applicable, for the unexpired periods.

2                            All reinsurance hereunder shall be automatically
cancelled as of the date of termination and the Reinsurer shall be released of
all liability as respects losses occurring subsequent to the date of
termination. The Reinsurer shall return to the Company the unearned premiums on
the business in force hereunder at the date of termination, less the commission
allowed thereon.

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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.

ARTICLE IV - DEFINITION OF ULTIMATE NET LIABILITY

The term “Ultimate Net Liability” shall mean the remaining portion of the
Company’s gross liability on each Policy reinsured under this Agreement after
deducting recoveries from all other reinsurance, whether specific or general and
whether collectible or not, other than the reinsurance provided in Article VI -
Excess Reinsurance.

ARTICLE V - EXCESS REINSURANCE

The Company has the right to maintain excess reinsurance as provided for in the
Casualty Excess of Loss Reinsurance Agreement No. POR327454 on that portion of
its Ultimate Net Liability which it retains net for its own account and
recoveries under such excess reinsurance shall inure solely to the benefit of
the Company.

ARTICLE VI - RETENTION

The Company warrants that it shall retain net for its own account and not
reinsure in any way 10% of its Ultimate Net Liability.

ARTICLE VII - DEFINITION OF LOSS OCCURRENCE

A                         The term “Loss Occurrence” as used herein shall be the
definition of ‘occurrence’ as set forth in the Company’s Policy, provided,
however, in the event said term is not defined in any Policy covered hereunder,
then as respects such Policy the term “each Loss Occurrence” as used herein
shall be understood to mean each accident or occurrence or series of accidents
or occurrences arising out of one event and happening within the term and scope
of this Agreement.

B.                        If the date of loss, accident or occurrence cannot be
specifically determined, the date of loss, accident or occurrence shall be the
inception date of the original Policy (i.e., the Policy reinsured hereunder),
such Policy period shall be deemed not to exceed 12 calendar months.

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

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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, whether
collectible or not, 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.

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                          Extra Contractual Obligations shall not include loss
arising out of engineering or other services or any other non-claims related
activity provided to the insured by the Company.

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E                            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,
whether collectible or not, 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.

F                            The provisions of this Article shall apply only if
the Company also writes the underlying primary Policy.

G                           If any provision of this Article shall be rendered
illegal or unenforceable by the laws, regulations or public policy of any state,
such provision shall be considered void in such state, but this shall not affect
the validity or enforceability of any other provision of this Article or the
enforceability of such provision in any other jurisdiction.

ARTICLE X - EXCLUSIONS

THIS AGREEMENT DOES NOT COVER:

A.                      THE FOLLOWING GENERAL CATEGORIES

1.                         All business not specifically classified and covered
as set forth under Article I - Business Covered.

2                            Ex-gratia payments

3.                         Risks subject to a deductible or a self-insured
retention excess of $25,000.

4.                         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.

5.                         Reinsurance assumed by the Company.

6                            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.

Pollution Liability as per the attached Pollution Liability Exclusion Clause -
Reinsurance

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8                            Insolvency Funds as per the attached Insolvency
Funds Exclusion Clause.

9                            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.

10                      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.

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.                         Malpractice or Professional Liability except
incidental Malpractice Liability.

7                            Directors’ and Officers’ Liability and Errors and
Omissions Liability, except with respect to volunteer non-remunerative work in
church, school and civil organizations.

8.                         Advertisers’, Broadcasters’ and Telecasters Liability
as respects Personal Injury Liability

9                            Liquor Law Liability except Host Liquor Law
Liability

10.                   Kidnap, Extortion and Ransom Liability

11.                   Boiler and Machinery Insurance

12                      Protection and Indemnity (Ocean Marine).

C                           THE FOLLOWING RISKS

1.                         Politicians, labor leaders or law-enforcement
officials

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2                            Newspapers or magazine reporters editors,
columnists or publishers

3                            Authors journalists or writers

4                            Radio and television broadcasters

5                            Public lecturers

6                            Celebrities and professional entertainers including
athletes actors or other individuals who maintain a high public profile.

7                            Any person who represents a moral hazard or who has
been sued for libel or slander.

8                            Automobile drivers:

a.                          In Assigned Risk, Excess Market or Non-Standard
Plans

b.                         With more than one moving violation or chargeable
accident within the last 36 months.

c                             With any convictions for reckless driving or
driving while intoxicated.

D                          Business specifically excluded by the Company’s
Personal and Commercial Umbrella Liability Policy.

E.                         In the event the Company is inadvertently bound on
any risk which is excluded under Sections C. or D. above, 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.

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.

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ARTICLE XII - UNDERLYING INSURANCE

A                         It is understood that underlying limits hereunder is
required and shall be maintained in accordance with the Company’s Agent
Procedures for Personal Umbrella dated September 15, 2003 and Commercial
Umbrella Agent Procedures dated June 1, 2004, on file with the Reinsurer.

B                           Other underlying limits may be required for certain
classes of risks and shall be so stated in the Company’s Umbrella Underwriting
Guidelines.

ARTICLE XIII - REINSURANCE PREMIUM

A                         The Company shall cede to the Reinsurer that portion
of the Company’s Net Premiums Written applicable to the Policies reinsured
hereunder which corresponds to the Reinsurer’s Quota Share participation in such
Policies.

B                           The term “Net Premiums Written” shall mean gross and
additional premiums less return premiums and less premiums ceded on all other
reinsurance.

ARTICLE XIV - COMMISSION

A                         The Reinsurer shall make a commission allowance of
31.5% to the Company’s Net Premiums Written ceded hereunder. The Company shall
debit the Reinsurer with the commission allowance in the monthly accounts.

B                           Such commission allowance includes provision for all
brokerage and commission, premium taxes of all kinds, all board, bureau and
exchange assessments and any other expenses whatsoever except Loss Adjustment
Expenses.

ARTICLE XV - LOSSES, LOSS ADJUSTMENT EXPENSES AND SALVAGES

A.                      The Reinsurer shall pay its pro rata share of losses
including prejudgment interest paid by the Company arising under Policies
covered under this Agreement, and the Reinsurer shall benefit proportionately in
all recoveries, including salvage and subrogation.

B.                        The Reinsurer shall pay its pro rata share of Loss
Adjustment Expenses paid by the Company in connection with the investigation,
settlement, defense or litigation including court costs and postjudgment
interest of any claim or loss which is the subject matter of Policies covered
under this Agreement. The term “Loss Adjustment Expenses” shall include all
claim or loss expenses including Declaratory Judgment Expenses, but shall
exclude the

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salaries and expenses of Company employees, office expenses and other overhead
expenses

C                           Declaratory Judgment Expenses are defined below and
the Reinsurer shall be liable for such expenses in accordance with the
following:

1                            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.

2                            Declaratory Judgment Expenses shall be recovered in
accordance with the provisions set forth in Paragraph B. of this Article,
provided such Declaratory Judgment Expense shall be limited to no more than
$2,700,000, each applicable Policy in any one Loss Occurrence.

D                          The Company shall promptly notify the Reinsurer of
each claim which may involve the reinsurance provided hereunder and of all
subsequent developments relating thereto.

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

ARTICLE XVI - REPORTS AND REMITTANCES

A                         The Company shall provide the Reinsurer with a
quarterly account as well as quarterly and annual reports in accordance with the
provisions set forth in Paragraphs C., E. and F. below.

B                           Quarterly Account - Within 30 days after the close
of each quarter the Company shall forward a quarterly account summarizing the
following transactions under this Agreement during such quarter:

1                            Net Premiums Written ceded segregated by Line of
Business

2                            Commissions

Loss and Loss Adjustment Expenses paid less recoveries, including salvage and
subrogation, segregated by Line of Business, by year of loss.

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The balance due either party shall be paid within 60 days after the close of
each quarter for the transactions during each quarter.

C.                        In respect of Paragraph B. above:

1.                         All Monthly Account Statements shall be sent to the
Reinsurer at:

a                         E-Mail/XML or KDI Formats:
reaccount_armonk@swissre.com, or

b                        Standard Mail

Swiss Reinsurance America Corporation
Accounting Department
175 King Street
Armonk, NY 10504
Telephone: 914-828-8000
Facsimile: 914-828-5919

2                            All checks and supporting documentation shall be
sent 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
l 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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D                          The Company may make a request for immediate payment
by the Reinsurer for any individual gross loss covered hereunder in excess of
$90,000 (i.e., 90% of $100,000, and the Reinsurer will be credited with amounts
so paid in the subsequent monthly account.

E.                         Quarterly Report - The Company shall furnish the
Reinsurer within 60 days after the close of each calendar quarter the following
information as respects the business ceded hereunder:

1                            Unearned premium reserves segregated by Line of
Business at the end of the calendar quarter and calculated on the actual daily
basis or in accordance with the Company’s methodology, as agreed.

2                            Estimated loss and Loss Adjustment Expense reserves
outstanding at the end of the calendar quarter segregated by Line of Business,
by year of loss.

H                          Annual Report - The Company shall furnish the
Reinsurer within 60 days after the close of each calendar year a summary of the
business ceded hereunder:

1                            Net Premiums Written ceded during the year
segregated by Line of Business;

2.                         Unearned premium reserves segregated by Line of
Business;

3                            Losses and Loss Adjustment Expenses paid, less
recoveries, including salvage and subrogation, during the year segregated by
Line of Business, by year of loss;

4.                         Losses and Loss Adjustment Expenses outstanding at
the end of the year segregated by Line of Business, by year of loss.

ARTICLE XVII - 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 Allocated 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 the underlying Policy limit;

2                            Originate from fatal injuries

3                            Originate from the following kinds of bodily
injury:

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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.

ARTICLE XVIII - POLICY FORM

The Company and the Reinsurer have agreed on the Company’s form as respects the
Policies covered under this Agreement and the Company shall advise the Reinsurer
of any change in such Policy form, 90 days prior to its implementation.

ARTICLE XIX - 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 XX - 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 XXI - CURRENCY

Wherever the word “dollars” or the “$” symbol in 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

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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 XXII - 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.

ARTICLE XXIII - 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 XXIV - DISPUTE RESOLUTION

Part I - Choice of Law And Forum

Any dispute arising under this Agreement shall be resolved in the State of New
York, and the laws of the State of New York 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.

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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 disinterested persons with at least 10
years experience 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 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.

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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. In no event, however, will the panel be authorized to award
punitive, exemplary or consequential damages of whatsoever nature in connection
with any arbitration proceeding concerning this Agreement.

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 XXV - 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.

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.

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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 XXVI - 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                             Any transfer of control of either party by change
in ownership or otherwise;

d                            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.

2                            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.2., 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 provisions set
forth in Paragraph A.2. 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.

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C                           In the event of termination, the Reinsurer shall not
be liable for losses occurring subsequent to the date of termination and the
Reinsurer shall return to the Company the unearned premiums, if any, on the
business in force at the date of termination, less any commission allowed
thereon.

ARTICLE XXVII - 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 Boston, MA, this 5th day of September, 2006.

ATTEST

 

 

 

SAFETY INSURANCE COMPANY
SAFETY INDEMNITY INSURANCE COMPANY

 

 

 

 

 

 

 

 

 

 

/s/ Illegible

 

 

 

/s/ Illegible

 

 

 

 

 

 

 

 

 

 

Illegible

 

 

 

Illegible

Name

 

 

 

Name

 

 

And in Armonk, New York this 2nd day of March 2006

ATTEST

 

 

 

SWISS REINSURANCE AMERICA CORPORATION

 

 

 

 

 

 

 

 

 

 

/s/ Illegible

 

 

 

/s/ Illegible

 

 

 

 

 

 

 

 

 

 

Illegible

 

 

 

Illegible

Name

 

 

 

Name

 

 

 

 

 

 

 

 

 

 

Vice President
Member of Management

 

 

 

Vice President
Member of Senior Management

Title

 

 

 

Title

 

18

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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

2

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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 question 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.

3

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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.

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

4

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(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.

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* 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.

*

5

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NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - RElNSURANCE - CANADA

N.M.A. 1979a

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 3lst 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:

1

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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;

2

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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

3

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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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