Exhibit 10.2

 

UNDERWRITING AND INSURANCE MANAGEMENT AGREEMENT

 

among

 

BLUE CAPITAL REINSURANCE HOLDINGS LTD.,

 

BLUE CAPITAL RE LTD.

 

and

 

BLUE CAPITAL INSURANCE MANAGERS LTD.

 

Dated as of November 12, 2013

 

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TABLE OF CONTENTS

 

ARTICLE I

 

Defined Terms

 

SECTION 1.01.

Definitions

1

 

 

 

ARTICLE II

 

 

 

The Reinsurance Manager

 

 

 

SECTION 2.01.

Appointment and Acceptance of Reinsurance Manager

5

SECTION 2.02.

Services to Be Rendered by the Reinsurance Manager

5

SECTION 2.03.

Powers of the Reinsurance Manager

6

SECTION 2.04.

Bank Accounts

7

 

 

 

ARTICLE III

 

 

 

 

Covenants

 

 

 

 

SECTION 3.01.

Covenants of Parent

7

SECTION 3.02.

Covenants of the Reinsurance Manager

8

SECTION 3.03.

Regulatory Matters

9

SECTION 3.04.

Cooperation

9

 

 

 

ARTICLE IV

 

 

 

Limits of the Reinsurance Manager

 

 

 

SECTION 4.01.

Limits of the Reinsurance Manager’s Responsibilities

9

 

 

 

ARTICLE V

 

 

 

Representations and Warranties

 

 

 

SECTION 5.01.

Representations and Warranties

9

 

 

 

ARTICLE VI

 

 

 

 

Fees and Expenses

 

 

 

 

SECTION 6.01.

Performance Fees

10

SECTION 6.02.

Reinsurance Manager’s Expenses

11

SECTION 6.03.

Parent’s Expenses

12

 

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ARTICLE VII

 

 

 

 

Term and Termination

 

 

 

SECTION 7.01.

Term

12

SECTION 7.02.

Termination of the Agreement

13

SECTION 7.03.

Non-Renewal

14

SECTION 7.04.

Termination Fee

14

SECTION 7.05.

Management of Blue Capital Re Upon Termination

14

 

 

 

ARTICLE VIII

 

 

 

 

Indemnification

 

 

 

 

SECTION 8.01.

Indemnification of the Reinsurance Manager

14

SECTION 8.02.

Indemnification of Parent

15

SECTION 8.03.

Indemnification Procedure

15

SECTION 8.04.

Payment of Indemnified Amounts

16

SECTION 8.05.

Limit of Liability

16

 

 

 

ARTICLE IX

 

 

 

Conflicts of Interest and Exclusivity

 

 

 

SECTION 9.01.

Non-Exclusivity of Services Rendered by the Reinsurance Manager

16

SECTION 9.02.

Conflicts of Interest

17

 

 

 

ARTICLE X

 

 

 

Miscellaneous

 

 

 

SECTION 10.01.

Confidentiality

17

SECTION 10.02.

Non-Exclusivity

18

SECTION 10.03.

Specific Performance

18

SECTION 10.04.

Amendment

18

SECTION 10.05.

Delegation

18

SECTION 10.06.

Assignment

19

SECTION 10.07.

Counterparts

19

SECTION 10.08.

Entire Agreement; No Third-Party Beneficiaries

19

SECTION 10.09.

Arbitration

19

SECTION 10.10.

Governing Law

20

SECTION 10.11.

WAIVER OF JURY TRIAL

20

SECTION 10.12.

Notices

21

SECTION 10.13.

Severability

21

SECTION 10.14.

No Waiver/Cumulative Remedies

21

SECTION 10.15.

Relationship of Parties

22

SECTION 10.16.

Interpretation

22

 

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UNDERWRITING AND INSURANCE MANAGEMENT AGREEMENT (this “Agreement”), dated as of
November 12, 2013, among BLUE CAPITAL REINSURANCE HOLDINGS LTD., an exempted
company incorporated in Bermuda (registered number 47855) whose registered
office is at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda
(“Parent”), BLUE CAPITAL RE LTD., an exempted company incorporated in Bermuda
(registered number 47922) whose registered office is at Canon’s Court, 22
Victoria Street, Hamilton HM 12, Bermuda (“Blue Capital Re”), and BLUE CAPITAL
INSURANCE MANAGERS LTD., an exempted company incorporated in Bermuda (registered
number 35606) whose registered office is at Canon’s Court, 22 Victoria Street,
Hamilton HM 12, Bermuda (the “Reinsurance Manager”).

 

WHEREAS Blue Capital Re is organized and existing under the laws of Bermuda and
under such laws Blue Capital Re is permitted to engage in Insurance Business (as
defined in the Bermuda Insurance Act of 1978) and desires to purchase
underwriting and other services in connection with such Insurance Business;

 

WHEREAS the Reinsurance Manager is authorized under Bermuda law to provide
underwriting and other services as manager and agent for companies engaged in
Insurance Business; and

 

WHEREAS Parent and Blue Capital Re desire that the Reinsurance Manager provide
certain underwriting, management and administrative services with respect to
Blue Capital Re’s business activities, and the Reinsurance Manager is willing to
provide such services on the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Parent, Blue Capital Re and the Reinsurance
Manager (collectively, the “Parties” and each individually a “Party”) agree as
follows:

 

ARTICLE I

 

Defined Terms

 

SECTION 1.01.  Definitions.  As used in this Agreement, the following terms have
the meanings ascribed thereto below.

 

“Accounts” has the meaning ascribed thereto in Section 2.02(c).

 

“Affiliate” means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person.  For

 

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this purpose, “control” (including, with its correlative meanings, “controlled
by” and “under common control with”) shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of securities or partnership
or other ownership interests, by contract or otherwise.

 

“Applicable Quarterly Growth Amount” has the meaning ascribed thereto in
Section 6.01(d).

 

“Applicable Requirements” means, with respect to any Person, all applicable
laws, rules, regulations and requirements, including applicable laws, rules,
regulations, requirements and binding requests of any Competent Regulatory
Authority, and all applicable orders and decrees.

 

“Blue Capital Re ILS” means Blue Capital Re ILS Ltd., a wholly owned direct
subsidiary of Blue Capital Re and an exempted company incorporated in Bermuda
(registered number 47964) whose registered office is at Canon’s Court, 22
Victoria Street, Hamilton HM 12, Bermuda.

 

“Business Day” means a day other than a Saturday, Sunday or other day on which
the SEC or banks in the City of New York or Bermuda are authorized or required
by law to be closed.

 

“Change of Control” means the first of the following events to occur:

 

(a)                                 the consummation of (i) a merger,
amalgamation, consolidation, scheme of arrangement, statutory share exchange or
similar form of corporate transaction involving Parent (a “Reorganization”) or
(ii) the sale or other disposition of all or substantially all the assets of
Parent (determined on a consolidated basis) to another “person” (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act, except that, for purposes
of this definition, such term shall exclude Montpelier Re Holdings Ltd. and its
subsidiaries) (a “Sale”), unless, immediately following such Reorganization or
Sale, (1) individuals and entities who were the “beneficial owners” (as such
term is defined in Rules 13d-3 and 13d-5 under the Exchange Act) of the
securities eligible to vote for the election of the board of directors of Parent
(“Voting Securities”) outstanding immediately prior to the consummation of such
Reorganization or Sale continue to beneficially own, directly or indirectly,
more than 50% of the combined voting power of the then-outstanding voting
securities of the corporation or other entity resulting from such Reorganization
or Sale (including a corporation that, as a result of such transaction, owns
Parent or all or substantially all the assets of Parent either directly or
through one or more subsidiaries) (the “Continuing Parent”) and (2) no “person”
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
(excluding any employee benefit plan (or related trust) sponsored or maintained
by the Continuing Parent or any corporation controlled by the Continuing Parent)
beneficially owns, directly or indirectly, 35% or more

 

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of the combined voting power of the then-outstanding voting securities of the
Continuing Parent; or

 

(b)                                 any “person” (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act, except that, for purposes of this
definition, such term shall exclude Montpelier Re Holdings Ltd. and its
subsidiaries) is or becomes the beneficial owner (as defined in clause
(a) above, except that for purposes of this clause (b) such person shall be
deemed to have “beneficial ownership” of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 35% of the total
voting securities of Parent.

 

“Common Shares” means the common shares, par value $1.00 per share, of Parent.

 

“Competent Regulatory Authority” means, with respect to any Person, any
regulatory authority or analogous Person responsible for regulating, or having
jurisdiction over, that Person.

 

“Confidential Information” means information that:

 

(a)                                 has been disclosed to a Party, or that a
Party has or may become aware of in connection with this Agreement, in both
cases before or during the term of this Agreement; and

 

(b)                                 is marked as or otherwise indicated as
confidential, or derives value to a Party from being confidential, or would be
regarded as confidential by a reasonable business person,

 

except to the extent that such information is in the public domain (otherwise
than by a breach of the confidentiality provisions of this Agreement).

 

“Current Period” has the meaning ascribed thereto in Section 6.01(b).

 

“Distributable Income” has the meaning ascribed thereto in Section 6.01(c).

 

“Exchange Act” means the Securities Exchange Act of 1934 and the rules and
regulations thereunder.

 

“Force Majeure” means any cause preventing any Party from performing any or all
of its obligations hereunder that arises from or is attributable to acts,
events, omissions or accidents beyond the reasonable control of the Party so
prevented, including strikes, lockouts or other industrial disputes (whether
involving the workforce of the Party so prevented or of the other Parties), act
of God, war, riot, civil commotion, malicious damage, compliance with any law or
governmental order, rule, regulation or direction, accident, breakdown of plant,
machinery or software, fire, flood, storm or default of suppliers or
subcontractors.

 

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“Hurdle Amount” has the meaning ascribed thereto in Section 6.01(b).

 

“Indemnified Person” has the meaning ascribed thereto in Section 8.03.

 

“Indemnifying Party” has the meaning ascribed thereto in Section 8.03.

 

“Interested Party” has the meaning ascribed thereto in Section 9.01.

 

“Investment Management Agreement” means the investment management agreement
entered into on the date hereof between Parent and the Investment Manager.

 

“Investment Manager” means Blue Capital Management Ltd., a company incorporated
in Bermuda (registered number 38829) whose registered office is at Canon’s
Court, 22 Victoria Street, Hamilton HM 12, Bermuda.

 

“NYSE” means the New York Stock Exchange.

 

“Offering” means the initial public offering of the Common Shares.

 

“Parent Indemnitees” has the meaning ascribed thereto in Section 8.02.

 

“Person” means any individual, corporation, estate, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or any other entity.

 

“Reinsurance Manager Indemnitees” has the meaning ascribed thereto in
Section 8.01.

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933 and the rules and regulations
thereunder.

 

“Shareholders’ Equity” means, as of the end of any fiscal quarter, Parent’s
shareholders’ equity, on a consolidated basis, as reported in Parent’s financial
statements prepared in accordance with U.S. GAAP.

 

“Termination Fee” has the meaning ascribed thereto in Section 7.04.

 

“Underwriting Guidelines” means the underwriting guidelines of Parent and its
subsidiaries, as the same may be modified by the board of directors of Parent
from time to time.

 

“U.S. GAAP” means the generally accepted accounting principles used in the
United States of America.

 

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ARTICLE II

 

The Reinsurance Manager

 

SECTION 2.01.  Appointment and Acceptance of Reinsurance Manager.  Parent, on
behalf of itself and its subsidiaries, hereby appoints the Reinsurance Manager
to undertake the duties normally performed by a reinsurance manager with full
power and authority (subject to the Underwriting Guidelines, the terms and
conditions of this Agreement, the oversight of the boards of directors of Parent
and its subsidiaries and the Applicable Requirements) to act as reinsurance
manager for Blue Capital Re, and the Reinsurance Manager hereby accepts such
appointment.

 

SECTION 2.02.  Services to Be Rendered by the Reinsurance Manager.  Subject to
the Underwriting Guidelines, the terms and conditions of this Agreement, the
oversight of the boards of directors of Parent and its subsidiaries and the
Applicable Requirements, the Reinsurance Manager shall perform, or shall cause
to be performed, the following services:

 

(a)                                 providing general insurance management
services to Blue Capital Re, including making underwriting decisions in
accordance with the Underwriting Guidelines;

 

(b)                                 preparing all financial reports and other
filings required by any Competent Regulatory Authority;

 

(c)                                  depositing and maintaining Blue Capital
Re’s funds in one or more accounts established solely in the name and on behalf
of Blue Capital Re at such financial institutions as may be approved by the
board of directors of Blue Capital Re (the “Accounts”), and depositing,
investing and reinvesting those funds in collateral arrangements in respect of
risks being ceded or retroceded to, or otherwise assumed by, Blue Capital Re;

 

(d)                                 coordinating with such third party
administrators as may be appointed to perform administrative services in
connection with the risks being ceded or retroceded to, or otherwise assumed by,
Blue Capital Re;

 

(e)                                  keeping such books, records and statements,
separate from the Reinsurance Manager’s other clients and the Reinsurance
Manager’s own books and records, as may be required:

 

(i)                                     to give a true, complete and current
record of the reinsurance results, assets and liabilities of Blue Capital Re at
all times in accordance with generally accepted accounting principles applicable
to the businesses of insurance and reinsurance;

 

(ii)                                  to enable Parent to publish or provide
consolidated reports and accounts of Parent and its subsidiaries (including any
financial reports, SEC filings and reports or information required by the
Bermuda

 

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Monetary Authority); and

 

(iii)                               by any Competent Regulatory Authority from
time to time;

 

(f)                                   using commercially reasonable efforts to
ensure that the services rendered by the Reinsurance Manager pursuant to this
Agreement are not disrupted or suspended due to an event of Force Majeure, and
that any such disruption or suspension is mitigated and brought to an end as
soon as practicable, including:

 

(i)                                     taking reasonable care, where
applicable, in its selection, use and monitoring of service providers,
contractors, counterparties, agents and delegates; and

 

(ii)                                  maintaining a business continuity plan to
provide for the prompt and efficient handling of any incident that would be
likely to impair its ability to perform its obligations under this Agreement,
and testing that plan at appropriate intervals;

 

(g)                                  performing the duties normally performed by
a reinsurance manager of a reinsurer of the type and nature of Blue Capital Re;
and

 

(h)                                 for such time as the Common Shares are
registered under the Exchange Act or listed on the NYSE, providing all necessary
assistance to Parent and its subsidiaries in complying with their obligations
under the Securities Act, the Exchange Act or any rules of the NYSE, except that
the Reinsurance Manager shall not be in breach of its obligations under this
Section 2.02(h) if it is unable to comply with such obligations because, after
due and careful inquiry, it has not been given the relevant information or
relevant assistance from any third party.

 

SECTION 2.03.  Powers of the Reinsurance Manager.  Without limiting the
generality of Section 2.02, but subject to the Underwriting Guidelines, the
terms and conditions of this Agreement, the oversight of the boards of directors
of Parent and its subsidiaries and any Applicable Requirement, the Reinsurance
Manager shall have the full discretionary authority, power and right, for the
account of Blue Capital Re, to:

 

(a)                                 prepare and negotiate all agreements and
related documents for the risks being ceded or retroceded to or from, or
otherwise assumed or ceded by, Blue Capital Re;

 

(b)                                 determine premium rates and other
underwriting terms and conditions with respect to the underwriting of such risks
being ceded or retroceded to or from, or otherwise assumed by, Blue Capital Re;

 

(c)                                  execute, in the name and on behalf of Blue
Capital Re, all financial reports and other filings required by any Competent
Regulatory Authority, such execution to be binding upon Blue Capital Re;

 

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(d)                                 establish, determine and agree upon
commissions and fees to be paid to producers, intermediaries and brokers;

 

(e)                                  manage the administrative functions and
day-to-day reinsurance operations of Blue Capital Re including:

 

(i)                                     invoicing and collecting amounts due to
Blue Capital Re;

 

(ii)                                  paying brokerage fees, Federal excise
taxes and other reinsurance-related obligations of Blue Capital Re;

 

(iii)                               reviewing and paying claims on behalf of
Blue Capital Re and conducting any claims audits on behalf of Blue Capital Re;
and

 

(iv)                              depositing into the Accounts amounts paid to
Blue Capital Re, including reinsurance premiums, interest and fees, and
withdrawing from the Accounts funds for the payment of liabilities of Blue
Capital Re, including claims, payments, regulatory licensing and filing fees,
acquisition and claims-related expenses, accounting and audit fees and expenses,
and administrative and management expenses; and

 

(f)                                   provide any administrative and managerial
services necessary to the conduct of the day-to-day affairs of Blue Capital Re,
including service as Blue Capital Re’s principal representative and such other
functions as may be required under Applicable Requirements.

 

SECTION 2.04.  Bank Accounts.  As, when and on terms reasonably requested by the
Reinsurance Manager, Blue Capital Re shall open, modify or close, and make
available for use by the Reinsurance Manager for the payment of amounts to be
paid by the Reinsurance Manager on behalf of Blue Capital Re hereunder, one or
more Accounts of Blue Capital Re.  Blue Capital Re shall adopt such resolutions
and execute such documents as required to designate officers of the Reinsurance
Manager (by title) as signatories on such accounts and authorize the Reinsurance
Manager to certify to such financial institutions, from time to time, the names
of such officers.  The Reinsurance Manager’s access to and use of Blue Capital
Re’s Accounts is strictly limited to actions taken by the Reinsurance Manager as
required to perform its obligations under this Agreement.

 

ARTICLE III

 

Covenants

 

SECTION 3.01.  Covenants of Parent.  During the term of this Agreement, Parent,
on behalf of itself and its subsidiaries, agrees that Parent and its
subsidiaries shall:

 

(a)                                 observe and comply with any Applicable
Requirement;

 

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(b)                                 not, directly or indirectly (including
through any of its Affiliates), enter into any other underwriting and insurance
management agreement (or similar agreement) with any other entity;

 

(c)                                  provide the Reinsurance Manager with access
to the books and records of Parent and its subsidiaries in respect of the
services rendered and to be rendered pursuant to this Agreement (such access to
be upon reasonable prior notice and during regular business hours), and
otherwise take such action as is reasonably required to allow the Reinsurance
Manager to fulfill its obligations hereunder, in each case in a manner that does
not unreasonably interfere with the business operations of Parent and its
subsidiaries;

 

(d)                                 notify the Reinsurance Manager in a timely
manner of any amendment to the Underwriting Guidelines; and

 

(e)                                  compensate and reimburse the Reinsurance
Manager for its expenses as provided in Article VI hereof.

 

SECTION 3.02.  Covenants of the Reinsurance Manager.  During the term of this
Agreement, the Reinsurance Manager agrees that it shall:

 

(a)                                 observe and comply with any Applicable
Requirement and the organizational documents and known contractual obligations
of Blue Capital Re;

 

(b)                                 act in good faith and with reasonable skill
and care in respect of the services rendered or to be rendered pursuant to this
Agreement;

 

(c)                                  comply with the Underwriting Guidelines (as
the same may be amended from time to time) and take prompt corrective action if
the Underwriting Guidelines are breached;

 

(d)                                 take into account the liquidity needs of
Parent and its subsidiaries solely to the extent Parent and its subsidiaries
communicate such needs to the Reinsurance Manager;

 

(e)                                  have regard to any matter to which a
prudent reinsurance manager should reasonably pay regard in accordance with
customary industry standards for the provision of such services as those to be
rendered pursuant to this Agreement;

 

(f)                                   not carry on any business if by doing so
the Reinsurance Manager shall knowingly cause Parent and its subsidiaries to
become liable to pay any taxes that they would not otherwise be liable to pay;

 

(g)                                  maintain its registrations as an insurance
agent and as an insurance manager under the Insurance Act of 1978 under the laws
of Bermuda; and

 

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(h)                                 not knowingly take any action that, in its
sole judgment, would cause Parent or any of its subsidiaries to become an
investment company under the Investment Company Act of 1940.

 

SECTION 3.03.  Regulatory Matters.  Each Party agrees promptly to notify the
other Parties in writing upon receipt of any written or oral communication from
any Competent Regulatory Authority pertaining to the services rendered or to be
rendered pursuant to this Agreement.  The Parties agree to cooperate with each
other and to use their commercially reasonable efforts in jointly resolving any
issue or matter raised by any Competent Regulatory Authority.

 

SECTION 3.04.  Cooperation.  The Parties shall cooperate with each other as may
be reasonably necessary or appropriate to enable the Parties to carry out their
respective responsibilities in full and to effectuate the purposes of this
Agreement.  Each Party shall do and perform or cause to be done and performed
all further acts and shall execute and deliver all other agreements,
certificates, instruments and documents as the other Parties may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated by this
Agreement.

 

ARTICLE IV

 

Limits of the Reinsurance Manager

 

SECTION 4.01.  Limits of the Reinsurance Manager’s Responsibilities.  The
Reinsurance Manager shall not be responsible for and shall have no duty to
provide legal counsel, investment management or advice (other than with respect
to cash and collateral accounts), tax advice or independent auditing services
under this Agreement.  Except as provided herein, the Reinsurance Manager shall
not have any other or further obligations or responsibilities to Parent and its
subsidiaries, including any liability for the uncollectibility of any insurance
or reinsurance premiums; provided, however, that the Reinsurance Manager shall
use its commercially reasonable efforts to collect such premiums.

 

ARTICLE V

 

Representations and Warranties

 

SECTION 5.01.  Representations and Warranties.  Each Party hereby represents and
warrants to the other Parties that (in respect of itself):

 

(a)                                 it is duly incorporated and validly existing
under applicable laws, with full power and authority to conduct its business,
and it has full power and authority to enter into, perform its duties under and
exercise its rights under this Agreement;

 

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(b)                                 assuming the due authorization, execution
and delivery of the other Parties, this Agreement constitutes its valid, lawful
and binding obligations enforceable against itself in accordance with its terms
(except insofar as enforceability may be limited by any bankruptcy laws or
principles, or any similar laws or principles);

 

(c)                                  the execution and delivery of this
Agreement and the performance of its obligations under this Agreement do not and
shall not constitute a breach of or default under (i) its organizational
documents, (ii) any agreement or instrument by which it is bound or (iii) any
Applicable Requirement;

 

(d)                                 no material consent, approval, waiver,
license, permit, order or authorization of, or registration, declaration or
filing with, any Competent Regulatory Authority is required to be obtained or
made by it in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated by this
Agreement, other than, in the case of each Party, notification to the Bermuda
Monetary Authority; and

 

(e)                                  no step, application, order, proceeding or
appointment has been taken or made by or in respect of it for a distress,
execution, composition or arrangement with creditors, winding-up, dissolution,
administration, receivership (administrative or otherwise) or bankruptcy, and it
is able to pay its debts.

 

The representations and warranties in this Section 5.01 are made on a continuing
basis, and shall remain in full force and effect throughout the duration of this
Agreement.  If any Party becomes aware that any of the representations and
warranties made by it in this Section 5.01 has ceased to be true, then it shall
notify the other Parties promptly.

 

ARTICLE VI

 

Fees and Expenses

 

SECTION 6.01.  Performance Fees.  (a)  With respect to each fiscal quarter that
this Agreement is in effect, commencing with the quarter in which this Agreement
is executed, the Reinsurance Manager shall receive the Performance Fee (as
defined below).  Within 45 calendar days following the last day of each fiscal
quarter, the Reinsurance Manager shall make available the quarterly calculation
of the Management Fee to Parent with respect to such quarter, and Parent shall
pay the Reinsurance Manager the Performance Fee for such quarter in cash within
15 Business Days thereafter.

 

(b)                                 The “Performance Fee” means, with respect to
any fiscal quarter, 20% multiplied by

 

(A)                               the pre-tax Distributable Income, prior to the
calculation of the Performance Fee, of Parent as of the end of such fiscal
quarter; minus

 

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(B)                               a hurdle amount (the “Hurdle Amount”)
calculated as the product of:

 

(1)                                 (a) the product of (i) the weighted average
of the issue price per Common Share of every public or private offering
conducted by Parent since its inception, multiplied by (ii) the weighted average
number of all Common Shares outstanding as of the end of such fiscal quarter,
including any restricted share units, any restricted Common Shares and other
Common Shares underlying awards granted under any of Parent’s equity incentive
plans minus (b) the amount, if any, by which Parent’s inception-to-date
dividends to holders of Common Shares exceeds Parent’s inception-to-date U.S.
GAAP net income to holders of Common Shares; multiplied by

 

(2)                                 2% (equivalent to an 8% annualized hurdle
rate);

 

provided, however, that the Performance Fee shall be (x) in an amount that is
not less than zero and (y) subject to a rolling three-year high water mark, such
that no Performance Fee will be payable in any quarterly period (the “Current
Period”) except, and only, to the extent that (i) 20% of the sum of the
Applicable Quarterly Growth Amount for the Current Period plus the Applicable
Quarterly Growth Amount for each of the 11 preceding quarterly periods exceeds
(ii) the aggregate Performance Fees actually paid for the 11 preceding quarterly
periods.  Prior to the completion of the three-year period beginning upon
completion of the Offering, calculation of the high water mark will be based
upon the inception-to-date period, as applicable.  The Performance Fee shall be
pro-rated for partial quarterly periods based on the number of days in such
partial period compared to a 90-calendar day period.

 

(c)                                  “Distributable Income” means the U.S. GAAP
net income of Parent available to holders of Common Shares excluding any
non-cash compensation expense, unrealized gains and losses and other non-cash
items recorded in net income for such period.

 

(d)                                 “Applicable Quarterly Growth Amount” means,
with respect to any quarter, the pre-tax, pre-Performance Fee Distributable
Income for such quarter less the Hurdle Amount with respect to such quarter.

 

SECTION 6.02.  Reinsurance Manager’s Expenses.  The Reinsurance Manager will
provide at its own expense:

 

(a)                                 such staff as may be necessary for the due
performance of its duties; and

 

(b)                                 such office and other accommodation and
relevant utilities as may be necessary for the due performance of its duties.

 

11

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SECTION 6.03.  Parent’s Expenses.  Parent, on behalf of itself and its
subsidiaries, is responsible and, to the extent that the Reinsurance Manager has
paid the same on behalf of Parent and its subsidiaries, will reimburse the
Reinsurance Manager for all reasonable out-of-pocket expenses (but not overhead
costs) incurred by the Reinsurance Manager in connection with the performance of
its obligations under this Agreement, including:

 

(a)                                 fees and expenses in respect of transactions
carried out for Parent and its subsidiaries;

 

(b)                                 all bank charges and expenses of any kind
incurred in connection with, or incidental to, deposits of cash;

 

(c)                                  any costs, including all travel,
accommodation and other reasonable costs, incurred by the Reinsurance Manager at
the express request of Parent;

 

(d)                                 the cost of faxes and telephone calls
properly incurred in the course of carrying out its duties hereunder;

 

(e)                                  all legal and professional expenses
incurred by the Reinsurance Manager in the furtherance of its duties under this
Agreement and all legal and other professional expenses properly incurred, or to
be incurred, in the preparation of any documents amending the terms and
conditions of this Agreement; and

 

(f)                                   any costs and expenses properly incurred
by Parent and its subsidiaries in the course of its business and not expressly
the responsibility of the Reinsurance Manager (to the extent that such amounts
have not already been paid).

 

ARTICLE VII

 

Term and Termination

 

SECTION 7.01.  Term.  This Agreement shall remain in full force and effect until
terminated or not renewed by Parent or the Reinsurance Manager in accordance
with this Article VII, except that Sections 7.01, 7.04, Article VIII and
Article X shall survive such termination or non-renewal.  This Agreement shall
renew automatically on the fifth anniversary of the completion of the Offering
and upon every third anniversary thereafter, unless otherwise terminated or not
renewed in accordance with this Article VII.

 

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SECTION 7.02.  Termination of the Agreement.  (a)  Termination by Parent or the
Reinsurance Manager.

 

(i)                                     If the Investment Management Agreement
is terminated or not renewed in accordance with its terms, this Agreement may be
terminated by Parent or the Reinsurance Manager upon 30 Business Days’ prior
written notice.

 

(ii)                                  If Parent becomes regulated as an
investment company under the U.S. Investment Company Act of 1940, this Agreement
shall terminate automatically, with such termination deemed to occur immediately
prior to such event.

 

(b)                                 Termination by the Reinsurance Manager.

 

(i)                                     If (A) there is a Change of Control of
Parent, (B) Blue Capital Re ceases to be an Affiliate of Parent or (C) Blue
Capital Re ILS ceases to be an Affiliate of Parent, this Agreement may be
terminated by the Reinsurance Manager upon 30 Business Days’ prior written
notice.

 

(ii)                                  If either Parent or Blue Capital Re
breaches or fails to perform in any material respect any of its representations,
warranties or covenants contained in this Agreement, which breach or failure to
perform has not been cured within 30 Business Days after giving written notice
to Parent of such breach or failure, this Agreement may be terminated by the
Reinsurance Manager (provided that the Reinsurance Manager is not then in
material breach of any representations, warranties or covenants contained in
this Agreement).

 

(iii)                               If the Reinsurance Manager’s performance of
its services under this Agreement would result in a breach of Applicable
Requirements, this Agreement may be terminated by the Reinsurance Manager upon
30 Business Days’ notice (provided that the Reinsurance Manager has used
commercially reasonable efforts to obtain an approval, waiver or consent, as
applicable, to remedy such breach).

 

(iv)                              If (A) any step, application, order,
proceeding or appointment has been taken or made by or in respect of Parent or
Blue Capital Re for a distress, execution, composition or arrangement with
creditors, winding up, dissolution, administration, receivership (administrative
or otherwise) or bankruptcy or (B) Parent or Blue Capital Re is unable to pay
its debts as they become due, this Agreement may be terminated by the
Reinsurance Manager upon 30 Business Days’ notice.

 

(c)                                  Termination by Parent.

 

(i)                                     If the Reinsurance Manager breaches or
fails to perform in any material respect any of its representations, warranties
or covenants contained in this Agreement, which breach or failure to perform has
not been cured within 60 Business Days after giving written notice to the
Reinsurance Manager of such

 

13

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breach or failure, this Agreement may be terminated by Parent (provided that
neither Parent nor Blue Capital Re is then in material breach of any
representations, warranties or covenants contained in this Agreement).

 

(ii)                                  If the Reinsurance Manager’s performance
of its services under this Agreement would result in a breach of Applicable
Requirements, which breach has not been cured within 60 Business Days after
giving written notice to the Reinsurance Manager of such breach, this Agreement
may be terminated by Parent.

 

(iii)                               If (A) any step, application, order,
proceeding or appointment has been taken or made by or in respect of the
Reinsurance Manager for a distress, execution, composition or arrangement with
creditors, winding up, dissolution, administration, receivership (administrative
or otherwise) or bankruptcy or (B) the Reinsurance Manager is unable to pay its
debts as they become due, this Agreement may be terminated by Parent upon 60
Business Days’ notice.

 

SECTION 7.03.  Non-Renewal.  The Reinsurance Manager or Parent may elect not to
renew this Agreement at the expiration of the initial term or any renewal term
for any or no reason, upon not less than nine, but not more than 12, months’
written notice to the other prior to the end of such initial term or renewal
term, as applicable.

 

SECTION 7.04.  Termination Fee.  Upon any termination or non-renewal of this
Agreement, Parent will pay a one-time termination fee (the “Termination Fee”)
equal to 5.0% of the Shareholders’ Equity, calculated as of the most recently
completed fiscal quarter prior to the date of termination.  The Termination Fee
shall not be payable if this Agreement is terminated pursuant to
Section 7.02(c)(i) or 7.02(c)(iii). In the event that this Agreement is
terminated pursuant to Section 7.02(a)(i), the Termination Fee is payable only
under the terms of the Investment Management Agreement and shall not be payable
under the terms of this Agreement, it being understood that in no event shall
Parent be required to pay the Termination Fee on more than one occasion.

 

SECTION 7.05.  Management of Blue Capital Re Upon Termination.  The Parties
agree that if the Reinsurance Manager is requested by Parent or Blue Capital Re
to continue to manage Blue Capital Re upon the termination of this Agreement,
the Reinsurance Manager will continue to be compensated in accordance with the
terms of Article VI hereof for the provision of run-off management services by
the Reinsurance Manager following the termination of this Agreement.

 

ARTICLE VIII

 

Indemnification

 

SECTION 8.01.  Indemnification of the Reinsurance Manager.  Subject to
Section 8.05 hereof, Parent, on behalf of itself and its subsidiaries,
unconditionally agrees to indemnify, defend and hold harmless the Reinsurance
Manager and its Affiliates, directors, officers, employees, agents, successors
and permitted assigns (the “Reinsurance

 

14

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Manager Indemnitees”) from and against, and pay or reimburse such parties for,
any losses, claims, liabilities, damages, deficiencies, costs or expenses of any
type which they may incur (i) on account of any third-party claim or proceeding
arising out of the performance of this Agreement or (ii) from any breach of, or
failure to perform, any covenant or obligation of Parent or Blue Capital Re
contained in this Agreement (unless caused by the Reinsurance Manager’s breach
of, or failure to perform, its covenants or obligations under this Agreement),
in each case, unless (a) a court or arbitral panel with appropriate jurisdiction
shall have determined by a final judgment which is not subject to appeal such
losses, claims, liabilities, damages, costs or expenses are as a result of
fraud, dishonesty, gross negligence or wilful misconduct of any of the
Reinsurance Manager Indemnitees or (b) such Reinsurance Manager Indemnitees
shall have settled such losses, claims, liabilities, damages, costs or expenses
without the consent of Parent (such consent not to be unreasonably withheld or
delayed).

 

SECTION 8.02.  Indemnification of Parent.  The Reinsurance Manager
unconditionally agrees to indemnify, defend and hold harmless Parent and its
subsidiaries and their Affiliates, directors, officers, employees, agents,
successors and permitted assigns (the “Parent Indemnitees”), from and against,
and pay or reimburse such parties for, any losses, claims, liabilities, damages,
deficiencies, costs or expenses of any type which they may incur from any breach
of, or failure to perform, any covenant or obligation of the Reinsurance Manager
contained in this Agreement, unless (i) a court or arbitral panel of appropriate
jurisdiction shall have determined by a final judgment that is not subject to
appeal such losses, claims, liabilities, damages, costs or expenses are as a
result of fraud, dishonesty, gross negligence or wilful misconduct of any of the
Parent Indemnitees or (ii) such Parent Indemnitees shall have settled such
losses, claims, liabilities, damages, costs or expenses without the consent of
the Reinsurance Manager (such consent not to be unreasonably withheld or
delayed).

 

SECTION 8.03.  Indemnification Procedure.  Any person who is claiming
indemnification from Parent pursuant to the provisions of Section 8.01, or from
the Reinsurance Manager pursuant to the provisions of Section 8.02 (the
“Indemnified Person”) shall promptly deliver a written notification of each
claim for indemnification, accompanied by a copy of all papers served, if any,
and specifying in detail the nature of, basis for and estimated amount of the
claim for indemnification to Parent or the Reinsurance Manager, as applicable
(the “Indemnifying Party”).  If an Indemnified Person fails to promptly notify
the Indemnifying Party, then the obligation to indemnify shall be reduced by the
amount of liability that is attributable to or becomes definite as a result of
the delay in notification, if the delay in notification has resulted in a
material increase in liability or actual prejudice to the Indemnifying Party. 
The Indemnifying Party shall have the right to assume the defense of any matter
for which a claim of indemnification is made against it with counsel it selects,
at its own expense.  The Indemnifying Party in its sole discretion shall have
the right to settle, compromise or defend until final adjudication any dispute
or alleged liability for which a claim for indemnification has been made; 
provided, however, that the Indemnifying Party shall not, except with the
consent of each Indemnified Person, which consent shall not be unreasonably
withheld or delayed, consent to the entry of any judgment, or enter into any
settlement, that does not include the giving by the claimant or plaintiff to the
Indemnified

 

15

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Person of a release from all liability with respect to the claim or litigation. 
Each Indemnified Person shall cooperate in providing information, formulating a
defense or as otherwise reasonably requested by the Indemnifying Party.

 

SECTION 8.04.  Payment of Indemnified Amounts.  Each Indemnified Person shall
provide written, detailed statements to the Indemnifying Party on a monthly
basis, of any expenses, costs or other liabilities for which indemnification is
claimed.  The Indemnifying Party shall reimburse such amounts within ten
Business Days of receiving any such statement, or shall notify in writing the
Indemnified Person claiming indemnification if it denies liability, and provide
the reasons for the denial.

 

SECTION 8.05.  Limit of Liability.  Notwithstanding anything else in this
Agreement to the contrary, the Reinsurance Manager’s aggregate liability during
the term of this Agreement with respect to, arising from, or arising out of or
attributable to this Agreement, or from all services rendered or omitted to be
rendered under this Agreement, whether in contract, or in tort, or otherwise, is
limited to, and shall not exceed, the highest amount actually paid as
Performance Fees in any single calendar year during the term of this Agreement.

 

ARTICLE IX

 

Conflicts of Interest and Exclusivity

 

SECTION 9.01.  Non-Exclusivity of Services Rendered by the Reinsurance Manager. 
The services provided by the Reinsurance Manager under this Agreement are not
exclusive.  None of the services to be provided under this Agreement nor any
other matter shall give rise to any fiduciary or equitable duties (to the
fullest extent permitted by Applicable Requirements) which would prevent or
hinder the Reinsurance Manager, its Affiliates or their respective directors,
officers, employees and agents (each an “Interested Party”) from providing
services to or entering into transactions with or for Parent and its
subsidiaries.  An Interested Party may, without prior notice to Parent and its
subsidiaries, recommend, effect or enter into transactions or provide services
(whether or not similar to the services provided under this Agreement) where an
Interested Party has, directly or indirectly, a material interest or a
relationship with another person which may involve a conflict with the
Reinsurance Manager’s duty to Parent and its subsidiaries.

 

16

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SECTION 9.02.  Conflicts of Interest.  The Reinsurance Manager shall take
reasonable steps to ensure fair treatment for Parent and its subsidiaries, and
shall ensure that any such transactions are effected on terms which are not
materially less favorable to Parent and its subsidiaries than if the potential
conflict had not existed.  However, neither the Reinsurance Manager nor any
other Interested Party shall be liable to Parent and its subsidiaries for any
profit, commission or remuneration made or received from or by reason of such
transactions or any related transactions.  The Reinsurance Manager hereby
notifies Parent and its subsidiaries, and Parent and its subsidiaries hereby
acknowledge, that such potential conflicting interests or duties may arise as a
result of, among other things:

 

(a)                                 an Interested Party undertakes investment or
other business for other clients;

 

(b)                                 the transaction relates to an Investment in
respect of which an Interested Party may benefit from a commission, fee, mark-up
or mark-down payable otherwise than by Parent or its subsidiaries, or the
Interested Party may also be remunerated by the counterparty to any such
transaction;

 

(c)                                  the Reinsurance Manager deals on behalf of
Parent and its subsidiaries with or through another Interested Party; or

 

(d)                                 the Reinsurance Manager may act as agent for
Parent and its subsidiaries in relation to transactions in which it is also
acting as agent for the account of other clients or Interested Parties.

 

ARTICLE X

 

Miscellaneous

 

SECTION 10.01.  Confidentiality.  (a)  No Party shall at any time use, divulge
or communicate to any Person any Confidential Information, except:

 

(i)                                     as agreed by the other Parties;

 

(ii)                                  where required to perform its duties or
exercise its rights under this Agreement (including to its delegates or agents,
if applicable);

 

(iii)                               to its professional representatives or
advisers, or to insurance companies, insurance brokers or insurance agents, to
the extent required by them to perform their duties, and provided that they are
or agree to be bound by a duty of confidentiality;

 

(iv)                              (when the Reinsurance Manager is transacting
business for Parent or its subsidiaries with a counterparty or broker) the
identity of Parent and its subsidiaries and such details about Parent and its
subsidiaries as the counterparty or broker may reasonably request (in

 

17

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accordance with market practice); or

 

(v)                                 to the extent required by Applicable
Requirements or by any Competent Regulatory Authority (including for the purpose
of filing tax returns),

 

and each Party shall use commercially reasonable efforts to prevent the
publication or disclosure of any Confidential Information in breach of this
Agreement.

 

(b)                                 The Reinsurance Manager is not required to
disclose to Parent and its subsidiaries, or to take into account when performing
its obligations under this agreement any information:

 

(i)                                     the disclosure of which to Parent and
its subsidiaries would or might be a breach of duty or confidence to any other
Person; or

 

(ii)                                  which comes to the notice of an employee
or agent of the Reinsurance Manager.

 

SECTION 10.02.  Non-Exclusivity.  This Agreement shall not restrict the rights
or ability of the Reinsurance Manager to offer services similar to those
contemplated hereby to third parties, including its own Affiliates, or of Parent
and its subsidiaries to receive services not contemplated hereby from third
party vendors.  Parent and its subsidiaries waive any claim based on any
conflict of interest on the part of the Reinsurance Manager or its employees
arising from any Affiliate of the Reinsurance Manager carrying on business
similar to that of Parent and its subsidiaries or providing similar services to
any other Persons, including competitors of Parent or its subsidiaries.

 

SECTION 10.03.  Specific Performance.  Each of the Parties acknowledges and
agrees that in the event of a breach of this Agreement, each non-breaching Party
would be irreparably and immediately harmed and could not be made whole by
monetary damages.  It is accordingly agreed that the Parties (a) will waive, in
any action for specific performance, the defense of adequacy of a remedy at law,
(b) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement
in any action instituted in respect thereof and (c) will waive, for purposes of
this Section 10.03 only, the requirement to submit any dispute arising out of,
or related in any way to, this Agreement or the transactions hereunder to
arbitration pursuant to Section 10.09.

 

SECTION 10.04.  Amendment.  This Agreement may be amended by the Parties at any
time by an instrument in writing executed by each Party.

 

SECTION 10.05.  Delegation.  The Reinsurance Manager may, subject to any
Applicable Requirement, delegate or sub-contract any of its functions under this
Agreement, but any such delegation or sub-contracting shall not affect the
Reinsurance Manager’s liability under this Agreement.

 

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SECTION 10.06.  Assignment.  Subject to Section 10.05, neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned, in
whole or in part, by operation of law or otherwise, by any of the Parties hereto
without the prior written consent of the other Parties hereto. No assignment by
any Party shall relieve such Party of any of its obligations hereunder.  Subject
to the immediately preceding two sentences, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the Parties hereto and their
respective successors and permitted assigns.  Any purported assignment not
permitted under this Section 10.06 shall be null and void.  All such assignments
shall be subject to all necessary regulatory approvals.

 

SECTION 10.07.  Counterparts.  This Agreement may be executed in one or more
counterparts (including by facsimile or e-mail), each of which shall be deemed
to be an original but all of which taken together shall constitute one and the
same agreement, and shall become effective when one or more counterparts have
been signed by each Party hereto and delivered to the other Parties hereto.

 

SECTION 10.08.  Entire Agreement; No Third-Party Beneficiaries.  This Agreement
constitutes the entire agreement, and supersedes all other prior agreements and
understandings, both written and oral, among the Parties and their Affiliates,
or any of them, with respect to the subject matter hereof and thereof and is not
intended to confer upon any Person other than the Parties any rights or
remedies.  Each Party acknowledges and agrees that (i) it has not relied on or
been induced to enter into this Agreement by any undertaking, promise,
assurance, statement, representation, warranty, undertaking or understanding
which is not expressly included in this Agreement and (ii) it shall have no
claim or remedy in respect of any undertaking, promise, assurance, statement,
representation, warranty, undertaking or understanding which is not expressly
included in this Agreement.  Nothing in the immediately preceding sentence shall
operate to limit or exclude any liability for fraud.

 

SECTION 10.09.  Arbitration.  (a) Any dispute arising out of, or related in any
way to, this Agreement or the transactions hereunder, including its formation
and validity, shall be determined by arbitration in accordance with Bermuda law.
The dispute shall be submitted to a panel of arbitrators and the seat of
arbitration shall be in Bermuda.  The panel shall be composed of three
arbitrators, one arbitrator shall be chosen by Parent, one arbitrator shall be
chosen by the Reinsurance Manager and one arbitrator shall be chosen by the
mutual agreement of the two arbitrators selected by each of Parent and the
Reinsurance Manager.  The arbitrators shall be disinterested, active or retired
executive officers of property or casualty insurance or reinsurance companies,
not under the control or management of any Party to this Agreement.

 

(b)                                 Any Party requesting arbitration shall
provide the other Parties with a written notice that includes reasonable detail
of the dispute such Party intends to submit for arbitration.  During the 45 days
following receipt of such notice, the Parties shall use their respective
commercially reasonable efforts to negotiate an amicable resolution of such
dispute (provided that the use of commercially reasonable efforts shall not be
deemed to require the Parties to agree to any resolution).  If the Parties have
not resolved such dispute in writing within 45 days of receipt of such written
notice by the

 

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other Parties, Parent and the Reinsurance Manager shall each select an
arbitrator within 30 days after the expiration of such 45-day period.  If either
Parent or the Reinsurance Manager fails to appoint its arbitrator within such
30-day period, Parent or the Reinsurance Manager, as applicable, shall also
appoint such Party’s arbitrator.

 

(c)                                  The panel shall make its decision in the
context of the custom and usage of the insurance and reinsurance industry.  They
shall interpret this Agreement as an honorable engagement, and shall settle any
dispute under this Agreement according to an equitable, rather than strictly
legal, interpretation of its terms with a view to effecting the general purpose
of this Agreement.  The panel is relieved of all judicial formality and may
abstain from following the strict rules of law.  The panel shall have the power
to fix all procedural rules for the arbitration, including the discretionary
power to make orders regarding any matters which it may consider proper under
the circumstances of the case relating to pleadings, discovery, inspection of
documents and examination of witnesses.  The panel shall have the power to
receive and act upon such evidence, whether oral or written, as it in its sole
discretion shall deem relevant to the dispute.

 

(d)                                 The panel shall render a decision in writing
within 60 days after the matter is finally submitted to it unless the Parties
agree to an extension.  Any decision by a majority of the panel members shall be
final and binding on the Parties.  If any Party fails to comply with the panel’s
decision, the other Parties may apply for its enforcement to a court of
competent jurisdiction.

 

(e)                                  Unless ordered differently by the panel,
each of Parent and the Reinsurance Manager shall bear the expenses of its own
arbitrator, and shall jointly and equally bear with the other the expenses of
the third arbitrator.  In the event two or more arbitrators are chosen by either
Parent or the Reinsurance Manager, the fees of all three arbitrators shall be
equally divided between Parent and the Reinsurance Manager.  The remaining costs
of the arbitration proceeding shall be allocated by the panel as part of its
award.

 

SECTION 10.10.  Governing Law.  This Agreement shall be governed by, and
construed in accordance with, the laws of Bermuda applicable to contracts and
made and performed entirely within Bermuda.

 

SECTION 10.11.  WAIVER OF JURY TRIAL.  EACH PARTY ACKNOWLEDGES AND AGREES THAT
ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO

 

20

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ENFORCE THE FOREGOING WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVER, (C) IT MAKES SUCH WAIVER VOLUNTARILY AND (D) IT HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVER AND CERTIFICATIONS IN THIS SECTION 10.11.

 

SECTION 10.12.  Notices.  All notices, requests and other communications to
either Party hereunder shall be in writing and shall be deemed given if
delivered personally, facsimiled (which is confirmed) or sent by overnight
courier (providing proof of delivery) to the Parties at the following addresses:

 

If to Parent or Blue Capital Re, to:

 

Address:                                                 Canon’s Court, 22
Victoria Street, Hamilton HM 12,
Bermuda.

Facsimile:                                         (441) 296-5551

 

If to the Reinsurance Manager, to:

 

Address:                                                 Canon’s Court, 22
Victoria Street, Hamilton HM 12,
Bermuda.

Facsimile:                                         (441) 296-5551

 

or such other address or facsimile number as such Party may hereafter specify by
like notice to the other Parties hereto.  All such notices, requests and other
communications shall be deemed received on the date of actual receipt by the
recipient thereof if received prior to 5:00 p.m. local time in the place of
receipt and such day is a business day in the place of receipt.  Otherwise, any
such notice, request or communication shall be deemed not to have been received
until the next succeeding Business Day in the place of receipt.

 

SECTION 10.13.  Severability.  If any term, condition or other provision of this
Agreement is determined by a court of competent jurisdiction to be invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other terms, provisions and conditions of this Agreement shall nevertheless
remain in full force and effect.  Upon such determination that any term,
condition or other provision is invalid, illegal or incapable of being enforced,
the Parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the Parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the terms of this Agreement are fulfilled to the extent possible.

 

SECTION 10.14.  No Waiver/Cumulative Remedies.  Any waiver of a breach of any of
the terms of this Agreement or of any default under this Agreement shall not be
deemed a waiver of any subsequent breach or default and shall in no way affect
the other terms of this Agreement.  No failure on the part of a Party to
exercise, and no delay on its part in exercising, any right or remedy under this
Agreement shall operate as a waiver of that right or remedy, nor shall any
single or partial exercise of any right or remedy preclude any other or further
exercise of that right or remedy or the exercise of

 

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any other right or remedy.  The rights and remedies provided in this Agreement
are cumulative and not exclusive of any rights or remedies provided by law.

 

SECTION 10.15.  Relationship of Parties.  The Reinsurance Manager shall perform
its duties hereunder as an independent contractor.  Nothing in this Agreement
shall be construed to create the relationship of employer or employee,
partnership or any type of joint venture relationship, between Parent and its
subsidiaries, on the one hand, and the Reinsurance Manager, on the other hand.

 

SECTION 10.16.  Interpretation.  (a)  When a reference is made in this Agreement
to an Article, Section, Exhibit or Schedule, such reference shall be to an
Article of, a Section of, or an Exhibit or Schedule to, this Agreement unless
otherwise indicated.  The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.  Whenever the words “include”,
“includes” or “including” are used in this Agreement, they shall be deemed to be
followed by the words “without limitation”.  The words “hereof”, “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement.  The words “date hereof” when used in this Agreement shall refer to
the date of this Agreement.  The terms “or”, “any” and “either” are not
exclusive.  The word “extent” in the phrase “to the extent” shall mean the
degree to which a subject or other thing extends, and such phrase shall not mean
simply “if”.  The word “will” shall be construed to have the same meaning and
effect as the word “shall”.  The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such term.  Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein. 
Unless otherwise specifically indicated, all references to “dollars” or “$”
shall refer to the lawful money of the United States.  References to a Person
are also to its permitted assigns and successors.

 

(b)                                 The Parties hereto have participated jointly
in the negotiation and drafting of this Agreement and, in the event an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as jointly drafted by the Parties hereto and no presumption or burden
of proof shall arise favoring or disfavoring either Party hereto by virtue of
the authorship of any provision of this Agreement.

 

[signature page follows]

 

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IN WITNESS WHEREOF, this Agreement has been entered into by the duly authorized
representatives of the Parties on the day and year first above written.

 

 

BLUE CAPITAL REINSURANCE HOLDINGS LTD.,

 

 

 

 

 

 

 

by

/s/ Michael S. Paquette

 

 

 

Name:

Michael S. Paquette

 

 

 

Title:

Interim Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

BLUE CAPITAL RE LTD.,

 

 

 

 

 

 

 

by

/s/ Christopher L. Harris

 

 

 

Name:

Christopher L. Harris

 

 

 

Title:

Chairman, Director

 

 

 

 

 

 

 

 

 

 

 

BLUE CAPITAL INSURANCE MANAGERS LTD.,

 

 

 

 

 

 

by

/s/ William Pollett

 

 

Name:

William Pollett

 

 

Title:

Chief Executive Officer and President

 

[Signature Page to Underwriting and Insurance Management Agreement]

 

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