Exhibit 10.12

 

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****** indicates material that has been omitted pursuant to a request for
confidential treatment. The omitted material has been filed separately with the
U.S. Securities and Exchange Commission

CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2012

ISSUED TO

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA

Including any and all companies that are or may hereafter become affiliated
therewith

 

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CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

TABLE OF CONTENTS

 

ARTICLE 1

  

BUSINESS COVERED

     1   

ARTICLE 2

  

TERM

     1   

ARTICLE 3

  

EXCLUSIONS

     2   

ARTICLE 4

  

RETENTION AND LIMIT

     4   

ARTICLE 5

  

REINSTATEMENT

     5   

ARTICLE 6

  

FLORIDA HURRICANE CATASTROPHE FUND

     6   

ARTICLE 7

  

RATE AND PREMIUM

     7   

ARTICLE 8

  

DEFINITIONS

     9   

ARTICLE 9

  

LOSS OCCURRENCE DEFINITION

     12   

ARTICLE 10

  

ACCESS TO RECORDS

     13   

ARTICLE 11

  

AGENCY

     13   

ARTICLE 12

  

ARBITRATION

     14   

ARTICLE 13

  

CASH CALL

     15   

ARTICLE 14

  

COLLATERAL

     15   

ARTICLE 15

  

COLLATERAL RELEASE

     16   

ARTICLE 16

  

CONFIDENTIALITY

     18   

ARTICLE 17

  

CURRENCY

     19   

ARTICLE 18

  

ENTIRE AGREEMENT

     19   

 

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ARTICLE 19

  

ERROR AND OMISSIONS

     20   

ARTICLE 20

  

FEDERAL EXCISE TAX

     20   

ARTICLE 21

  

GOVERNING LAW

     20   

ARTICLE 22

  

INSOLVENCY

     20   

ARTICLE 23

  

LATE PAYMENTS

     22   

ARTICLE 24

  

LIABILITY OF THE REINSURER

     23   

ARTICLE 25

  

LIMITED RECOURSE AND BERMUDA REGULATIONS

     23   

ARTICLE 26

  

LOSS NOTICES AND SETTLEMENTS

     24   

ARTICLE 27

  

NET RETAINED LINES

     25   

ARTICLE 28

  

NON-WAIVER

     25   

ARTICLE 29

  

NOTICES AND AGREEMENT EXECUTION

     26   

ARTICLE 30

  

OFFSET

     26   

ARTICLE 31

  

OTHER REINSURANCE

     27   

ARTICLE 32

  

SALVAGE AND SUBROGATION

     27   

ARTICLE 33

  

SERVICE OF SUIT

     27   

ARTICLE 34

  

SEVERABILITY

     28   

ARTICLE 35

  

TAXES

     28   

ARTICLE 36

  

TERRITORY

     29   

ARTICLE 37

  

INTERMEDIARY

     29   

 

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ATTACHMENTS

Schedule A

Collateral Collection Table

Nuclear Incident Exclusion Clause - Physical Damage – Reinsurance U.S.A.

Trust Agreement

 

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CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

(hereinafter called the “Contract”)

EFFECTIVE: JUNE 1, 2012

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA

Including any and/or all companies that are or may hereafter become affiliated
therewith

(hereinafter called the “Reinsured”)

by

THE SUBSCRIBING REINSURER(S) SPECIFIED IN THE INTERESTS AND LIABLITIES AGREEMENT
ATTACHED TO THIS CONTRACT

(hereinafter called, with other participants, the “Reinsurer(s)”)

ARTICLE 1

BUSINESS COVERED

This Contract is to indemnify the Reinsured in respect of its net excess
liability as a result of any loss or losses which may occur during the Term of
this Contract under any policies, contracts and binders of insurance or
reinsurance (hereinafter called “Policies”) in force at the effective date
hereof or issued or renewed on or after that date, covering direct and assumed
business classified by the Reinsured as the property perils of Homeowners and
Dwelling, subject to the terms, conditions and limitations set forth herein and
in Schedule A attached to and forming part of this Contract.

ARTICLE 2

TERM

 

1. This Contract shall become effective at 12:01 a.m., Local Standard Time,
June 1, 2012, with respect to losses arising out of Loss Occurrences commencing
at or after that time and date, and shall remain in force until 12:01 a.m.,
Local Standard Time, June 1, 2013. “Local Standard Time” as used herein shall
mean local standard time at the location where the Loss Occurrence commences.

 

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2. If this Contract is terminated or expires while a Loss Occurrence covered
hereunder is in progress, the Reinsurer’s liability hereunder shall, subject to
the other terms and conditions of this Contract, be determined as if the entire
Loss Occurrence had occurred prior to the termination or expiration of this
Contract, provided that no part of such Loss Occurrence is claimed against any
renewal or replacement of this Contract.

 

3. Notwithstanding the provisions of paragraph (1) above, the Reinsured may
reduce or terminate a Reinsurer’s percentage share in this Contract at any time
by giving written notice to the Reinsurer in the event any of the following
circumstances occur. The effective date of reduction or termination shall be the
date selected by the Reinsured, which may be a date that is retroactively
applied to the date of public announcement for subparagraph (a) below or upon
discovery for subparagraph (b) below, subject to the condition that such
selected date must be the last day of a calendar month.

 

  a. A State Insurance Department or other legal authority has ordered the
Reinsurer to cease writing business; or

 

  b. The Reinsurer has reinsured its entire liability under this Contract
without the Reinsured’s prior written consent, except that this provision shall
not apply to any intercompany reinsurance or intercompany pooling arrangements
entered into by the Reinsurer.

ARTICLE 3

EXCLUSIONS

 

1. This Contract does not apply to and specifically excludes the following:

 

  a. All excess of loss reinsurance assumed by the Reinsured.

 

  b. Reinsurance assumed by the Reinsured under obligatory reinsurance
agreements, except intercompany reinsurance between the Reinsured and its
affiliates and agency reinsurance where the policies involved are to be
re-underwritten in accordance with the underwriting standards of the Reinsured
and reissued as policies of the Reinsured at the next anniversary or expiration
date.

 

  c. Financial guarantee and insolvency.

 

  d. Insurance policies classified by the Reinsured as Accident and Health,
Fidelity and Surety, Boiler and Machinery, Workers’ Compensation, and Credit
business.

 

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  e. Flood and/or earthquake when written as such for standalone policies where
flood and/or earthquake is the only named peril.

 

  f. Nuclear risks as defined in the “Nuclear Incident Exclusion Clause -
Physical Damage - Reinsurance U.S.A.” attached to and forming part of this
Contract.

 

  g. Loss or damage caused by or resulting from war, invasion, hostilities, acts
of foreign enemies, civil war, rebellion, insurrection, military or usurped
power, or martial law or confiscation by order of any government or public
authority, but this exclusion shall not apply to loss or damage covered under a
standard policy with a standard War Exclusion Clause.

 

  h. Loss or liability from any Pool, Association or Syndicate and any
assessment or similar demand for payment related to the Florida Hurricane
Catastrophe Fund or Citizens Property Insurance Corporation.

 

  i. All liability of the Reinsured arising by contract, operation of law, or
otherwise, from its participation or membership, whether voluntary or
involuntary, in any insolvency fund. “Insolvency Fund” includes any guaranty
fund, insolvency fund, plan, pool, association, fund or other arrangement,
however denominated, established or governed, which provides for any assessment
of or payment or assumption by the Reinsured 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.

 

  j. Loss and/or damage and/or costs and/or expenses arising from seepage and/or
pollution and/or contamination, other than contamination from smoke.
Nevertheless, this exclusion does not preclude payment of the cost of removing
debris of property damaged by a loss otherwise covered hereunder, subject always
to a limit of 25% of the Reinsured’s property loss under the applicable original
policy.

 

  k. Loss, damage, cost or expense arising out of an act of terrorism involving
the use of any biological, chemical, nuclear or radioactive agent, material,
device or weapon.

 

  l. All liability arising out of mold, spores and/or fungus, but this exclusion
shall not apply to those losses which follow as a direct result of a loss caused
by a peril otherwise covered hereunder.

 

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2. With the exception of subparagraphs (c), (f), (g) and (k) of paragraph
(1) above, should any judicial, regulatory or legislative entity having legal
jurisdiction invalidate any exclusion on the Reinsured’s policy, any amount of
loss for which the Reinsured is liable because of such invalidation will not be
excluded hereunder.

 

3. The Reinsured may submit to the Reinsurer, for special acceptance hereunder,
business not covered by this Contract. Within seven days of receipt of such
request, each Reinsurer shall accept such request, ask for additional
information, or reject the request. If a Reinsurer fails to respond to a special
acceptance request within seven days, the Reinsurer shall be deemed to have
agreed to the special acceptance. If said business is accepted by the Reinsurer,
it will be subject to the terms of this Contract, except as such terms are
modified by such acceptance. Any special acceptance business covered under the
reinsurance agreement being replaced by this Contract will be automatically
covered hereunder. Further, in the event a Reinsurer becomes a party to this
Contract subsequent to the special acceptance of any business not normally
covered hereunder, the Reinsurer shall automatically accept the same as being a
part of this Contract.

ARTICLE 4

RETENTION AND LIMIT

 

1. As respects each excess layer of reinsurance coverage provided by this
Contract, the Reinsured shall retain and be liable for the first amount of
Ultimate Net Loss, shown as “Reinsured’s Retention” for that excess layer in
Schedule A attached hereto, arising out of each Loss Occurrence. The Reinsurer
shall then be liable, as respects each excess layer, for the amount by which
such Ultimate Net Loss exceeds the Reinsured’s applicable retention, but the
liability of the Reinsurer under each excess layer shall not exceed the amount,
shown as “Reinsurer’s Per Occurrence Limit” for that excess layer in Schedule A
attached hereto, as respects any one Loss Occurrence, nor shall it exceed the
amount, shown as “Reinsurer’s Contract Limit” for that excess layer in Schedule
A attached hereto as respects all loss or losses arising out of Loss Occurrences
commencing during the Term of this Contract.

 

2. Notwithstanding the provisions above, no claim shall be made under any excess
layer as respects losses arising out of Loss Occurrences commencing during the
Term of this Contract unless at least two risks insured or reinsured by the
Reinsured are involved in such Loss Occurrence. For purposes hereof, the
Reinsured shall be the sole judge of what constitutes “one risk.”

 

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ARTICLE 5

REINSTATEMENT

 

1. In the event all or any portion of the reinsurance under the second excess
layer of reinsurance coverage provided by this Contract is exhausted by loss,
the amount so exhausted shall be reinstated immediately from the time the Loss
Occurrence commences hereon. For each amount so reinstated the Reinsured agrees
to pay additional premium equal to the product of the following:

 

  a. The percentage of the loss occurrence limit for the second excess layer
reinstated (based on the loss paid by the Reinsurer under that excess layer);
times

 

  b. The earned reinsurance premium for the second excess layer reinstated for
the Term of this Contract (exclusive of reinstatement premium).

 

2. Whenever the Reinsured requests payment by the Reinsurer of any loss under
the second excess layer hereunder, the Reinsured shall submit a statement to the
Reinsurer of reinstatement premium due the Reinsurer for that excess layer. If
the earned reinsurance premium for the second excess layer for the Term of this
Contract has not been finally determined as of the date of any such statement,
the calculation of reinstatement premium due for that excess layer shall be
based on the deposit premium for that excess layer and shall be readjusted when
the earned reinsurance premium for that excess layer for the Term of this
Contract has been finally determined. Any reinstatement premium shown to be due
the Reinsurer for the second excess layer as reflected by any such statement
(less prior payments, if any, for that excess layer) shall be payable by the
Reinsured concurrently with payment by the Reinsurer of the requested loss for
that excess layer. Any return reinstatement premium shown to be due the
Reinsured shall be remitted by the Reinsurer as promptly as possible after
receipt and verification of the Reinsured’s statement.

 

3. Notwithstanding anything stated herein, the liability of the Reinsurer under
the second excess layer of reinsurance coverage provided by this Contract shall
not exceed either of the following:

 

  a. The amount, shown as “Reinsurer’s Per Occurrence Limit” for the second
excess layer in Schedule A attached hereto, as respects loss or losses arising
out of any one Loss Occurrence; or

 

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  b. The amount, shown as “Reinsurer’s Contract Limit” for the second excess
layer in Schedule A attached hereto, in all during the Term of this Contract.

ARTICLE 6

FLORIDA HURRICANE CATASTROPHE FUND

 

1. The Reinsured shall provisionally purchase mandatory coverage from the
Florida Hurricane Catastrophe Fund (FHCF) with the following limit and
retention:

 

  a. 90% of $277,000,000 excess of $108,000,000 (mandatory layer).

The provisional limits and retentions above may increase or decrease in
accordance with the provisions of the reimbursement contract between the
Reinsured and the State Board of Administration of the State of Florida (SBA).

 

2. Any loss reimbursement paid or payable to the Reinsured for the mandatory
coverage layer provided by the FHCF, (“FHCF loss reimbursement”) and resulting
from Loss Occurrences commencing during the Term of this Contract, shall inure
to the benefit of this Contract. Further, any FHCF loss reimbursement shall be
deemed paid to the Reinsured in accordance with the reimbursement contract
between the Reinsured and the SBA at the full payout level set forth therein. It
is further deemed that any loss reimbursement shall not be reduced by any
reduction or exhaustion of the actual claims paying capacity of the FHCF and
that the FHCF fund balance is deemed funded to the fullest extent allowable by
Florida statute.

 

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3. Prior to final calculation of the Reinsured’s FHCF retention and payout for
the mandatory layer provided by the reimbursement contract between the Reinsured
and the SBA, the Reinsurer’s liability hereunder will provisionally be
calculated based on the projected FHCF payout and in accordance with paragraph
(2) above. Following the FHCF’s final calculation of the payout for the coverage
layer provided by the reimbursement contract, the Ultimate Net Loss under this
Contract will be recalculated. If, as a result of such calculation, the loss to
the Reinsurer hereunder in any one Loss Occurrence is less than the amount
previously paid by the Reinsurer hereunder, the Reinsured shall promptly remit
the difference to the Reinsurer. If the loss to the Reinsurer in any one Loss
Occurrence hereunder is greater than the amount previously paid by the
Reinsurer, the Reinsurer shall promptly remit the difference to the Reinsured.
For purposes of both the provisional and final calculation of Reinsurer
liability referenced above, it is deemed that any FHCF loss reimbursement shall
not be reduced by any reduction or exhaustion of the actual claims paying
capacity of the FHCF and that the FHCF fund balance is deemed funded to the
fullest extent allowable by Florida statute.

 

4. If an FHCF reimbursement amount is based on the Reinsured’s losses in more
than one Loss Occurrence commencing during the Term of this Contract, and the
FHCF does not designate the amount allocable to each Loss Occurrence, the FHCF
reimbursement amount shall be prorated in the proportion that the Reinsured’s
losses in each Loss Occurrence bear to the Reinsured’s total losses arising out
of all Loss Occurrences to which the FHCF reimbursement applies.

ARTICLE 7

RATE AND PREMIUM

 

1. As premium for each excess layer of reinsurance coverage provided by this
Contract, the Reinsured shall pay the Reinsurer the greater of the following:

 

  a. The amount, shown as “Minimum Premium” for that excess layer in Schedule A
attached hereto; or

 

  b. The percentage, shown as “Exposure Rate” for that excess layer in Schedule
A attached hereto, of ****% of the Reinsured’s Total Insured Value as of
September 30, 2012 (the “adjusted premium”), subject to the provisions of
paragraph (5) below.

 

2. “Total Insured Value” means the sum of Coverage A, B, C and D for Business
Covered as defined in the Business Covered Article.

 

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3. The Reinsured shall pay the Reinsurer a deposit premium for each excess layer
of the amount, shown as “Deposit Premium” for that excess layer in Schedule A
attached hereto, payable in installment amounts and at the dates set forth in in
the “Deposit Payment Schedule” for each excess layer in Schedule A attached
hereto. No deposit premium installments shall be due to a Reinsurer hereunder
until that Reinsurer has executed its Interests and Liabilities Agreement
attached to and forming part of this Contract. Further, if this Contract is
terminated, no deposit premium installments shall be due after the effective
date of termination.

 

4. As respects any excess layer hereunder, if the Reinsured elects to reduce or
terminate a Reinsurer’s participation percentage in accordance with paragraph
(3) of the Term Article, the “Minimum Premium” as respects such excess layer
shall not apply. Further, the earned reinsurance premium as otherwise determined
in accordance with the provisions of subparagraph (b) of paragraph (1) above as
respects each excess layer shall be replaced with the following:

 

  a. In the event a loss occurs prior to the effective date of reduction or
termination and the Reinsurer’s liability for such Loss Occurrence exceeds the
“Deposit Premium” for such excess layer, the reinsurance premium for the Term of
this Contract for such excess layer shall equal the “Deposit Premium” for such
excess layer times the ratio the loss recoverable under such excess layer bears
to the “Reinsurer’s Per Occurrence Limit” for such excess layer.

 

  b. In the event no loss occurs prior to the effective date of reduction or
termination or a loss occurs whereby the Reinsurer’s liability for such Loss
Occurrence is less than the “Deposit Premium” applicable to such excess layer,
the reinsurance premium for the Term of this Contract for such excess layer
shall equal the pro rata portion of the reinsurance premium otherwise due
hereunder for such excess layer based on the proportion the Term of this
Contract bears to the original 12-month term of this Contract.

 

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5. No later than January 1, 2013 (or the effective date of termination in the
event this Contract is terminated prior to January 1, 2013), the Reinsured shall
provide a report to the Reinsurer setting forth the premium due under each
excess layer hereunder, computed in accordance with paragraph (1) or (4) (as
applicable) above, and any amounts due either party shall be remitted promptly.
However, no return premium shall be due the Reinsured or additional premium due
the Reinsurer as respects any excess layer hereunder unless the difference
between the adjusted premium for such excess layer and the “Deposit Premium” for
such excess layer is greater than ****%. In the event the adjusted premium for
any excess layer hereunder is greater than the “Deposit Premium” for such excess
layer by more than ***%, the premium due hereunder for such excess layer shall
be equal to the deposit premium for such excess layer plus the difference
between the adjusted premium for such excess layer and ****% of the deposit
premium for such excess layer. Further, in the event the adjusted premium for
any excess layer hereunder is less than the deposit premium for such excess
layer by more than***%, the premium due hereunder for such excess layer shall be
equal to the “Deposit Premium” for such excess layer less the difference between
***% of the deposit premium for such excess layer and the adjusted premium for
such excess layer.

ARTICLE 8

DEFINITIONS

ULTIMATE NET LOSS

The term “Ultimate Net Loss” as used herein shall be defined as the sum or sums
(including Loss in Excess of Policy Limits, Extra Contractual Obligations and
Loss Adjustment Expense, as hereinafter defined) paid or payable by the
Reinsured in settlement of claims and in satisfaction of judgments rendered on
account of such claims after deduction of all salvage, all recoveries, and all
claims on inuring insurance or reinsurance, whether collectible or not. Nothing
herein shall be construed to mean that losses under this Contract are not
recoverable until the Reinsured’s Ultimate Net Loss has been ascertained.

LOSS IN EXCESS OF POLICY LIMITS AND EXTRA CONTRACTUAL OBLIGATIONS

The terms “Loss in Excess of Policy Limits” and “Extra Contractual Obligations”
as used herein shall be defined as follows:

 

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  a. “Loss in Excess of Policy Limits” shall mean 90% of any amount paid or
payable by the Reinsured in excess of its Policy limits, but otherwise within
the terms of its Policy, such loss in excess of the Reinsured’s Policy limits
having been incurred because of, but not limited to, failure by the Reinsured to
settle within the Policy limits or by reason of the Reinsured’s 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 an action against its insured
or reinsured or in the preparation or prosecution of an appeal consequent upon
such an action.

 

  b. “Extra Contractual Obligations” shall mean 90% of any punitive, exemplary,
compensatory or consequential damages paid or payable by the Reinsured, not
covered by any other provision of this Contract and which arise from the
handling of any claim on business subject to this Contract, such liabilities
arising because of, but not limited to, failure by the Reinsured to settle
within the Policy limits or by reason of the Reinsured’s 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 an action against its insured or
reinsured or in the preparation or prosecution of an appeal consequent upon such
an action. An Extra Contractual Obligation shall be deemed, in all
circumstances, to have occurred on the same date as the loss covered or alleged
to be covered under the Policy.

Notwithstanding anything stated herein, this Contract shall not apply to any
Loss in Excess of Policy Limits or any Extra Contractual Obligation incurred by
the Reinsured as a result of any fraudulent and/or criminal act by any officer
or director of the Reinsured 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.

Further, any Loss in Excess of Policy Limits and/or Extra Contractual
Obligations that are made in connection with this Contract shall not exceed 25%
of the contractual loss under all Policies involved in the Loss Occurrence as
respects each excess layer hereunder.

Savings Clause (Applicable only if the Reinsurer is domiciled in the State of
New York): In no event shall coverage be provided to the extent that such
coverage is not permitted under New York law.

 

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LOSS ADJUSTMENT EXPENSE

The term “Loss Adjustment Expense” as used herein shall be defined as expenses
assignable to the investigation, appraisal, adjustment, settlement, litigation,
defense, and/or appeal of claims, regardless of how such expenses are classified
for statutory reporting purposes. Loss Adjustment Expense shall include, but not
be limited to, interest on judgments, expenses of outside adjusters, expenses
and a pro rata share of salaries of the Reinsured’s field employees and expenses
of other employees of the Reinsured who have been temporarily diverted from
their normal and customary duties and assigned to the adjustment of losses
covered by this Contract, expenses of the Reinsured’s officials incurred in
connection with losses covered by this Contract, and Declaratory Judgment
Expenses or other legal expenses and costs incurred in connection with coverage
questions and legal actions connected thereto. Loss Adjustment Expense shall not
include normal office expenses or salaries of the Reinsured’s employees or
officials.

DECLARATORY JUDGMENT EXPENSE

The term “Declaratory Judgment Expense” as used herein shall be defined as the
Reinsured’s own costs and legal expense incurred in direct connection with
declaratory judgment actions brought to determine the Reinsured’s defense and/or
indemnification obligations that are assignable to specific claims arising out
of Policies reinsured by this Contract, regardless of whether the declaratory
judgment action is successful or unsuccessful. Any Declaratory Judgment Expense
shall be deemed to have been fully incurred by the Reinsured on the same date as
the original loss (if any) giving rise to the action.

TERM OF THIS CONTRACT

“Term of this Contract” as used herein shall be defined as the period from 12:01
a.m., Local Standard Time, June 1, 2012 through 12:01 a.m., Local Standard Time,
June 1, 2013. However, if this Contract is terminated, “Term of this Contract”
as used herein shall mean the period from 12:01 a.m., Local Standard Time,
June 1, 2012 until the effective time and date of termination.

 

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ARTICLE 9

LOSS OCCURRENCE DEFINITION

LOSS OCCURRENCE

 

1. The term “Loss Occurrence” shall mean the sum of all individual losses
directly occasioned by any one disaster, accident or loss or series of
disasters, accidents or losses arising out of one event which occurs within the
area of one state of the United States or province of Canada and states or
provinces contiguous thereto and to one another. However, the duration and
extent of any one Loss Occurrence shall be limited to all individual losses
sustained by the Reinsured occurring during any period of 168 consecutive hours
arising out of and directly occasioned by the same event except that the term
Loss Occurrence shall be further defined as follows:

 

  a. As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing
collapse and water damage, all individual losses sustained by the Reinsured
occurring during any period of 96 consecutive hours arising out of and directly
occasioned by the same event. However, the event need not be limited to one
state or province or states or provinces contiguous thereto.

 

  b. As regards riot, riot attending a strike, civil commotion, vandalism and
malicious mischief, all individual losses sustained by the Reinsured occurring
during any period of 96 consecutive hours within the area of one municipality or
county and the municipalities or counties contiguous thereto arising out of and
directly occasioned by the same event. The maximum duration of 96 consecutive
hours may be extended in respect of individual losses which occur beyond such 96
consecutive hours during the continued occupation of an assured’s premises by
strikers, provided such occupation commenced during the aforesaid period.

 

  c. As regards earthquake (the epicenter of which need not necessarily be
within the territorial confines referred to in the opening paragraph of this
Article) and fire following directly occasioned by the earthquake, only those
individual fire losses which commence during the period of 168 consecutive hours
may be included in the Reinsured’s Loss Occurrence.

 

  d. As regards freeze, only individual losses directly occasioned by collapse,
breakage of glass and water damage (caused by bursting of frozen pipes and
tanks) may be included in the Reinsured’s Loss Occurrence.

 

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  e. As regards firestorms, brush fires and any other fires or series of fires,
irrespective of origin (except as provided in subparagraphs (b) and (c) above),
which spread through trees, grassland or other vegetation, all individual losses
sustained by the Reinsured which occur during any period of 168 consecutive
hours within the area of one state of the United States or province of Canada
and states or provinces contiguous thereto and to one another may be included in
the Reinsured’s Loss Occurrence.

 

2. For all Loss Occurrences the Reinsured may choose the date and time when any
such period of consecutive hours commences provided that it is not earlier than
the date and time of the occurrence of the first recorded individual loss
sustained by the Reinsured arising out of that disaster, accident or loss and
provided that only one such period of 168 consecutive hours shall apply with
respect to one event, except for any Loss Occurrence referred to in subparagraph
(a) or (b) of paragraph (1) above where only one such period of 96 consecutive
hours shall apply with respect to one event, regardless of the duration of the
event.

 

3. No individual losses occasioned by an event that would be covered by the 96
hours clauses may be included in any Loss Occurrence claimed under the 168 hours
provision.

ARTICLE 10

ACCESS TO RECORDS

The Reinsurer or its designated representatives shall have access to the books
and records of the Reinsured on matters relating to this reinsurance at all
reasonable times, and at the location where such books and records are
maintained in the ordinary course of business, for the purpose of obtaining
information concerning this Contract or the subject matter thereof. Notification
of a request for inspection of records shall be sent to the Reinsured by the
Reinsurer in written form, and shall normally be given four weeks in advance.
Notwithstanding the above, the Reinsurer shall not have any right of access to
the records of the Reinsured if it is not current in all undisputed payments due
the Reinsured.

ARTICLE 11

AGENCY

If more than one reinsured company is named as a party to this Contract, the
first named company shall be deemed the agent of the other reinsured companies
for purposes of sending or receiving notices required by the terms and
conditions of this Contract, and for purposes of remitting or receiving any
monies due any party.

 

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ARTICLE 12

ARBITRATION

 

1. As a condition precedent to any right of action hereunder, in the event of
any dispute or difference of opinion hereafter arising with respect to this
Contract, it is hereby mutually agreed that such dispute or difference of
opinion shall be submitted to arbitration. One Arbiter shall be chosen by the
Reinsured, the other by the Reinsurer, and an Umpire shall be chosen by the two
Arbiters before they enter upon arbitration, all of whom shall be active or
retired disinterested executive officers of insurance or reinsurance companies
or Underwriters at Lloyd’s. In the event that either party should fail to choose
an Arbiter within 30 days following a written request by the other party to do
so, the requesting party may choose two Arbiters who shall in turn choose an
Umpire before entering upon arbitration. If the two Arbiters fail to agree upon
the selection of an Umpire within 30 days following their appointment, the two
Arbiters shall request the American Arbitration Association to appoint the
Umpire. If the American Arbitration Association fails to appoint the Umpire
within 30 days after it has been requested to do so, either party may request a
justice of a Court of general jurisdiction of the state in which the arbitration
is to be held to appoint the Umpire.

 

2. Each party shall present its case to the Arbiters within 30 days following
the date of appointment of the Umpire. The Arbiters shall consider this Contract
as an honorable engagement rather than merely as a legal obligation and they are
relieved of all judicial formalities and may abstain from following the strict
rules of law. The decision of the Arbiters shall be final and binding on both
parties; but failing to agree, they shall call in the Umpire and the decision of
the majority shall be final and binding upon both parties. Judgment upon the
final decision of the Arbiters may be entered in any court of competent
jurisdiction.

 

3. If more than one reinsurer is involved in the same dispute, all such
reinsurers shall constitute and act as one party for purposes of this Article
and communications shall be made by the Reinsured to each of the reinsurers
constituting one party, provided, however, that nothing herein shall impair the
rights of such reinsurers to assert several, rather than joint, defenses or
claims, nor be construed as changing the liability of the reinsurers
participating under the terms of this Contract from several to joint.

 

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4. Each party shall bear the expense of its own Arbiter, and shall jointly and
equally bear with the other the expense of the Umpire and of the arbitration. In
the event that the two Arbiters are chosen by one party, as above provided, the
expense of the Arbiters, the Umpire and the arbitration shall be equally divided
between the two parties.

 

5. Any arbitration proceedings shall take place in Tampa, Florida; however, the
location may be changed if mutually agreed upon by the parties of this Contract.
Notwithstanding the location of arbitration, all proceedings pursuant hereto
shall be governed by the law of the State of Florida.

ARTICLE 13

CASH CALL

In the event that at any time the Reinsured becomes obligated to make a payment
or series of payments for losses which exceed the Reinsured’s retention, the
Reinsured shall present to the Reinsurer an itemized statement of the amounts
payable hereunder. The Reinsurer shall be obligated (subject to the terms and
conditions of this Contract) to make a payment to the Reinsured of the amount
requested within 10 days of receipt of the statement from the Reinsured.

ARTICLE 14

COLLATERAL

 

1. As promptly as possible following execution of this Contract, the Reinsurer
(as Grantor) shall enter into a Trust Agreement (the “Trust Agreement”) with the
Reinsured (as Beneficiary) and the trustee, pursuant to which the Reinsurer
shall provide collateral in the form of eligible Assets deposited and held in a
Trust Account, with such Assets having a market value greater than or equal to
$6,525,000 (the “Collateral”) less earned premium (net of brokerage and
applicable Federal Excise Tax). It is understood that deposit premium paid in
accordance with the Rate and Premium Article shall be deposited into the Trust
Account.

 

2. The Reinsured agrees that if the Reinsurer makes indemnity payment(s) to the
Reinsured under this Contract, the Reinsurer may withdraw Assets from the Trust
Account, reducing the market value of Assets in the Trust Account to an amount
at least equal to the unused Reinsurance Limit, in accordance with the
provisions of the Trust Agreement.

 

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3. The Trust Fund may be drawn upon by the Reinsured at any time and the Assets
may be used at the Reinsured’s option in accordance with the provisions of
Section 5 of the Trust Agreement.

 

4. At any time prior to expiration or termination of this Contract, if the value
of the Assets in the Trust Account are less than the Reinsurer’s Obligations
hereunder, the Reinsurer shall promptly deposit the difference into the Trust
Account.

 

5. Except as provided in the Collateral Release Article, the Reinsured agrees to
release the Assets in the Trust Account required under this Article as promptly
as provided in the Trust Agreement.

ARTICLE 15

COLLATERAL RELEASE

 

1. At the expiration or termination of this Contract, if the Trust has not yet
been terminated, the Reinsured shall calculate on a monthly basis, how much, if
any, of the collateral shall be released from the Trust, as follows:

 

  a. For each potentially covered Loss Occurrence, the Reinsured shall multiply
the Loss Amount (being equal to the sum of losses and Loss Adjustment Expenses
paid plus reserves for losses and Loss Adjustment Expense outstanding plus
reserves for losses incurred but not yet reported) by the appropriate Buffer
Loss Factor from the table below, based upon the type of Loss Occurrence and the
number of months which have elapsed since the event. The product of this
calculation shall be defined as the Buffered Loss Amount (“BLA”).

 

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Buffer Loss Factor Table

 

Number of Calendar Months Since Date of Loss Occurrence

   Windstorm*/Bru
shfire     Earthquake and
Fire Following     Other  

0 to 3

     200 %      300 %      250 % 

> 3 to 6

     150 %      200 %      175 % 

> 6 to 9

     125 %      175 %      150 % 

> 9 to 12

     110 %      150 %      130 % 

> 12 to 15

     105 %      125 %      115 % 

> 15 to 18

     100 %      120 %      110 % 

Thereafter

     100 %      100 %      100 % 

 

* For the purpose of this Article, the term “Windstorm” shall include Hurricane,
Rainstorm, Storm, Tempest, Tornado, Cyclone, Typhoon and Hail.

 

  b. The BLA will be reduced by the $27,500,000 retention and any inuring
reinsurance recoveries to compute the Presumed Ultimate Net Loss. The Presumed
Ceded Loss will be defined as the lesser of 29% of the Presumed Ultimate Net
Loss and the limit of 29% of $22,500,000.

 

  c. The Presumed Total Ceded Loss will equal the lesser of the limit of 29% of
$22,500,000 and the Presumed Ceded Loss. An amount equal to the Presumed Total
Ceded Loss less losses paid by the Reinsurer under this Contract shall be
retained in the Trust and any excess in the Trust shall be released to the
Reinsurer.

 

  d. Notwithstanding the aforementioned, at December 31, 2012, the parties agree
to consider the release of collateral. The intention is to release collateral
for all limits for which there is essentially no possibility of loss from past
or future events before the expiration of this Contract. All collateral securing
what the parties agree are unreachable limits will be released within three
business days.

 

  e. Thirty-six months following the expiration of this Contract, the Reinsurer
shall have the option to commute this Contract by sending the Reinsured written
notice thereof. In such event, the Reinsurer shall pay to the Reinsured an
amount equal to the loss and loss adjustment expense reserves hereunder,
including reserves for incurred but not reported losses, as estimated by the
Reinsured, which would be recoverable hereunder. Upon the Reinsurer’s payment of
such amount, both parties shall be completely released from all liability under
this Contract, whether known or unknown.

 

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2. So long as there is any security on deposit in the Trust, the Reinsured shall
perform the calculation set forth above within 10 business days after the end of
each month and deliver a report substantially in the form of the Collateral
Calculation Table attached to this Contract to the Reinsurer and the Trustee
named in the Trust Agreement. Collateral will be adjusted monthly based on this
calculation. To the extent the calculation indicates that collateral may be
reduced, the delivery of the report to the Trustee will constitute a directive
to return excess collateral to the Reinsurer. In the event the calculation
indicates additional collateral is required, the Reinsurer will have 10 business
days from receipt of the report to deposit the required collateral into the
Trust.

ARTICLE 16

CONFIDENTIALITY

 

1. The Reinsurer hereby acknowledges that the terms and conditions of this
Contract, any materials provided in the course of audit or inspection and any
documents, information and data provided to it by the Reinsured, whether
directly or through an authorized agent, in connection with the placement and
execution of this Contract (hereinafter referred to as “confidential
information”) are proprietary and confidential to the Reinsured. Confidential
information shall not include documents, information or data that the Reinsurer
can show:

 

  a. Are publicly available or have become publicly available through no
unauthorized act of the Reinsurer;

 

  b. Have been rightfully received from a third person without obligation of
confidentiality; or

 

  c. Were known by the Reinsurer prior to the placement of this Contract without
an obligation of confidentiality.

 

2. Absent the written consent of the Reinsured, the Reinsurer shall not disclose
any confidential information to any third parties, including any affiliated
companies, except:

 

  a. When required by retrocessionaires subject to the business ceded to this
Contract;

 

  b. When required by regulators performing an audit of the Reinsurer’s records
and/or financial condition;

 

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  c. When required by external auditors performing an audit of the Reinsurer’s
records in the normal course of business; or

 

  d. When required by attorneys or arbitrators in connection with an actual or
potential dispute hereunder.

Further, the Reinsurer agrees not to use any confidential information for any
purpose not related to the performance of its obligations or enforcement of its
rights under this Contract.

 

3. Notwithstanding the above, in the event the Reinsurer is required by court
order, other legal process or any regulatory authority to release or disclose
any or all of the confidential information, the Reinsurer agrees to provide the
Reinsured with written notice of same at least 10 days prior to such release or
disclosure and to use its best efforts to assist the Reinsured in maintaining
the confidentiality provided for in this Article.

 

4. The provisions of this Article shall extend to the officers, directors and
employees of the Reinsurer and its affiliates, and shall be binding upon their
successors and assigns.

ARTICLE 17

CURRENCY

 

1. Whenever the word “Dollars” or the “$” sign appears in this Contract, they
shall be construed to mean United States Dollars and all transactions under this
Contract shall be in United States Dollars.

 

2. Amounts paid or received by the Reinsured in any other currency shall be
converted to United States Dollars at the rate of exchange at the date such
transaction is entered on the books of the Reinsured.

ARTICLE 18

ENTIRE AGREEMENT

 

1. This Contract and any related trust agreement, Letter of Credit and/or
special acceptance, shall constitute the entire agreement between the parties
hereto with respect to the business being reinsured hereunder, and there are no
understandings between the parties hereto other than as expressed in this
Contract.

 

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2. Any change or modification to this Contract shall be null and void unless
made by an addendum and signed by the parties hereto.

ARTICLE 19

ERROR AND OMISSIONS

Inadvertent delays, errors or omissions made in connection with this Contract or
any transaction hereunder shall not relieve either party from any liability
which would have attached had such delay, error or omission not occurred,
provided always that such error or omission is rectified as soon as possible
after discovery.

ARTICLE 20

FEDERAL EXCISE TAX

 

1. The Reinsurer has agreed to allow for the purpose of paying the Federal
Excise Tax the applicable percentage of the premium payable hereon (as imposed
under Section 4371 of the Internal Revenue Code) to the extent such premium is
subject to the Federal Excise Tax.

 

2. In the event of any return of premium becoming due hereunder, the Reinsurer
will deduct the applicable percentage from the return premium payable hereon and
the Reinsured or its agent should take steps to recover the tax from the United
States Government.

ARTICLE 21

GOVERNING LAW

This Contract shall be governed as to performance, administration and
interpretation in accordance with the laws of the State of Florida, exclusive of
the rules with respect to conflicts of law; however, with respect to credit for
reinsurance, the applicable rules of all states shall apply.

ARTICLE 22

INSOLVENCY

 

1. If more than one reinsured company is included within the definition of
“Reinsured” hereunder, this Article shall apply individually to each such
company.

 

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2. In the event of the insolvency of one or more of the reinsured companies,
this reinsurance shall be payable directly to the Reinsured or to its
liquidator, receiver, conservator or statutory successor, with reasonable
provision for verification, on the basis of the liability of the Reinsured or on
the basis of claims files and allowed in the liquidation proceeding, whichever
may be required by applicable stature, without diminution because of the
insolvency of the Reinsured or because the liquidator, receiver, conservator or
statutory successor of the Reinsured has failed to pay all or a portion of any
claim. It is agreed, however, that the liquidator, receiver, conservator or
statutory successor of the Reinsured shall give written notice to the Reinsurer
of the pendency of a claim against the Reinsured indicating the policy or bond
reinsured which claim would involve a possible liability on the part of the
Reinsurer within a reasonable time after such claim is filed in the conservation
or liquidation proceeding or in the receivership, and that during the pendency
of such claim, the Reinsurer may investigate such claim and interpose, at its
own expense, in the proceeding where such claim is to be adjudicated, any
defense or defenses that it may deem available to the Reinsured or its
liquidator, receiver, conservator or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to the approval of the
court, against the Reinsured as part of the expense of conservation or
liquidation to the extent of a pro rata share of the benefit which may accrue to
the Reinsured solely as a result of the defense undertaken by the Reinsurer.

 

3. Where two or more Reinsurers are involved in the same claim and a majority in
interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of this Contract as though such expense
had been incurred by the Reinsured.

 

4. It is further understood and agreed that, in the event of the insolvency of
one or more of the reinsured companies, the reinsurance under this Contract
shall be payable directly by the Reinsurer to the Reinsured or to its
liquidator, receiver or statutory successor, except as provided by
Section 4118(a) of the New York Insurance Law or except (1) where this Contract
specifically provides another payee or other party as more specifically limited
by any statute or regulation applicable hereto, of such reinsurance in the event
of the insolvency of the Reinsured or (2) where the Reinsurer with the consent
of the direct insured or insureds has assumed such Policy obligations of the
Reinsured as direct obligations of the Reinsurer to the payees under such
Policies and in substitution for the obligations of the Reinsured to such
payees. However, the exceptions provided in (1) and (2) above shall apply only
to the extent that applicable statutes or regulations specifically permit such
exceptions.

 

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ARTICLE 23

LATE PAYMENTS

 

1. The interest penalties provided for in this Article shall apply to the
Reinsurer or to the Reinsured in the following circumstances:

 

  a. With the exception of payments due from the Reinsurer in accordance with
the Cash Call Article, payments due from the Reinsurer to the Reinsured shall
have as a due date the date on which the agreed proof of loss is received by the
Reinsurer, and shall be overdue 30 days thereafter. Payment to the Intermediary
is deemed to be payment to the Reinsured for purposes of this Article.

 

  b. Payments due from the Reinsured to the Reinsurer shall have as a due date
the date specified in this Contract. Payments shall be overdue 30 days
thereafter. Premium adjustments shall be overdue 30 days following the due date
set forth under the terms of this Contract.

 

  c. The Reinsured shall provide a copy of the original insured’s proof of loss,
and a copy of the claim adjuster’s report(s) or other evidence of
indemnification for losses exceeding the excess limit on an incurred basis. If,
subsequent to receipt of this evidence, the information contained therein is
insufficient or not in accordance with the contractual conditions, then the
payment due date as defined in subparagraph (a) shall be deemed to be the date
upon which the Reinsurer received additional information necessary to approve
payment of the claim or the claim is presented in an acceptable manner. Interest
as stipulated in subparagraph (d) shall be payable should a disputed claim be
ultimately settled and if the period set out in subparagraph (a) is exceeded,
but only to the extent that the final loss payment exactly tracks with the
original proof of loss.

 

  d. Overdue amounts shall bear simple interest from the overdue date at the
90-day United States Treasury Bill rate set forth by the Federal Reserve Board
for the first Monday of the calendar month in which the amount becomes overdue,
as published in the Federal Reserve Statistical Release. If the interest
generated for 100% in respect of any overdue payment as outlined in subparagraph
(a) or (b) is $500 or less, then the interest penalty shall be waived.

 

  e. For the purposes of this Article, reinsuring Underwriters at Lloyd’s shall
be viewed as one entity. The provisions set forth herein shall not be applicable
until the creditor party shall have manifested to the debtor party its intent to
invoke the terms of this Article.

 

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ARTICLE 24

LIABILITY OF THE REINSURER

 

1. The liability of the Reinsurer shall follow that of the Reinsured in every
case and be subject in all respects to all the general and specific
stipulations, clauses, waivers, interpretations and modifications of the
Reinsured’s Policies and any endorsements thereon. However, in no event shall
this be construed in any way to provide coverage outside the terms and
conditions set forth in this Contract.

 

2. Nothing herein shall in any manner create any obligations or establish any
rights against the Reinsurer in favor of any third party or any persons not
parties to this Contract.

ARTICLE 25

LIMITED RECOURSE AND BERMUDA REGULATIONS

 

1. The Reinsured understands and accepts that the Segregated Accounts set forth
in the Reinsurer’s Interests and Liabilities Agreement attached to this Contract
(for purposes of this Article, individually the “Segregated Account” and
collectively the “Segregated Accounts”), and that all corporate matters relating
to the creation of the Segregated Accounts, including, but not limited to,
capacity of each Segregated Account, the segregated nature of the Segregated
Accounts and Aeolus Re Ltd., and the operation and liquidation of the Segregated
Accounts shall be governed by, and construed in accordance with, the laws of
Bermuda. The Reinsured has had the opportunity to take advice and to obtain all
such additional information that it considers necessary to evaluate the terms,
conditions and risks of entering into this Contract with Aeolus Re Ltd., on
behalf of its Segregated Accounts.

 

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2. Notwithstanding any other provision of this Contract to the contrary, the
liability of each Segregated Account for the performance and discharge of all of
its obligations, however they may arise, in relation to this Contract (together
the “SA Obligations”) shall be limited to and payable solely from the assets
linked to the Segregated Account. Accordingly there shall be no recourse to any
other assets of Aeolus Re Ltd. (including for the avoidance of doubt, any assets
linked to any other segregated account of Aeolus Re Ltd. or to its general
account). In the event that the assets linked to the Segregated Accounts are
insufficient to meet all SA Obligations, any SA Obligations remaining after the
application of such assets linked to the Segregated Accounts shall be
extinguished, and the Reinsured undertakes in such circumstances to take no
further action against the Segregated Accounts, Aeolus Re Ltd. or any other
segregated accounts of Aeolus Re Ltd. in respect of any such Obligations. In
particular, neither the Reinsured nor any party acting on its behalf shall
petition or take any steps for the winding up or receivership of any of the
Segregated Accounts, Aeolus Re Ltd. or any other segregated accounts of Aeolus
Re Ltd.

 

3. The Reinsured also understands and accepts that two of the Reinsurers as set
forth on the Reinsurer’s Interests and Liabilities Agreement are Aeolus Re J12
SPI Ltd. and Pendulum Re II Ltd. (for purposes of this Article, each referred to
as an “SPI Reinsurer”). Notwithstanding any other provision of this Contract to
the contrary, the liability of each SPI Reinsurer for the performance and
discharge of all of its obligations, however they may arise, in relation to this
Contract (together the “SPI Obligation”) shall be limited to and payable solely
from the assets of each SPI Reinsurer. In the event that the assets available to
each SPI Reinsurer are insufficient to meet all the SPI Obligations, any SPI
Obligations remaining after the application of such assets available to each SPI
Reinsurer shall be extinguished, and the Reinsured undertakes in such
circumstances to take no further action against each SPI Reinsurer in respect of
any such SPI Obligations. In particular, neither the Reinsured nor any party
acting on its behalf shall petition or take any steps for the winding up or
receivership of each SPI Reinsurer.

ARTICLE 26

LOSS NOTICES AND SETTLEMENTS

 

1. Whenever losses sustained by the Reinsured appear likely to result in a claim
hereunder, the Reinsured shall notify the Reinsurer, and the Reinsurer shall
have the right to participate in the adjustment of such losses at its own
expense.

 

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2. All loss settlements made by the Reinsured, provided they are within the
terms of this Contract, shall be binding upon the Reinsurer, and the Reinsurer
agrees to pay all amounts for which it may be liable upon receipt of reasonable
evidence of the amount paid (or scheduled to be paid within 14 days) by the
Reinsured. Notwithstanding the foregoing, and subject to the provisions set
forth under paragraph (2) of the Exclusions Article, should any judicial,
regulatory, or legislative entity having legal jurisdiction require that the
Reinsured be liable for any amounts that are otherwise outside the terms of the
Reinsured’s original Policies, the Reinsurer agrees that such amounts shall be
subject always to the terms and conditions of this Contract.

ARTICLE 27

NET RETAINED LINES

 

1. This Contract applies only to that portion of any Policy which the Reinsured
retains net for its own account (prior to deduction of any underlying
reinsurance specifically permitted in this Contract), and in calculating the
amount of any loss hereunder and also in computing the amount or amounts in
excess of which this Contract attaches, only loss or losses in respect of that
portion of any Policy which the Reinsured retains net for its own account shall
be included.

 

2. The amount of the Reinsurer’s liability hereunder in respect of any loss or
losses shall not be increased by reason of the inability of the Reinsured to
collect from any other reinsurer(s), whether specific or general, any amounts
which may have become due from such reinsurer(s), whether such inability arises
from the insolvency of such other reinsurer(s) or otherwise.

ARTICLE 28

NON-WAIVER

The failure of the Reinsured or the Reinsurer to insist on compliance with this
Contract or to exercise any right or remedy hereunder shall not constitute a
waiver of any rights or remedies contained herein nor stop either party from
thereafter demanding full and complete compliance nor prevent either party from
exercising such rights or remedies in the future.

 

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ARTICLE 29

NOTICES AND AGREEMENT EXECUTION

 

1. Whenever a notice, statement, report or any other written communication is
required by this Contract, unless otherwise specified, such notice, statement,
report or other written communication may be transmitted by certified or
registered mail, nationally or internationally recognized express delivery
service, personal delivery, electronic mail, or facsimile. With the exception of
notices of termination, first class mail is also acceptable.

 

2. The use of any of the following shall constitute a valid execution of this
Contract or any amendments thereto:

 

  a. Paper documents with an original ink signature;

 

  b. Facsimile or electronic copies of paper documents showing an original ink
signature; and/or

 

  c. Electronic records with an electronic signature made via an electronic
agent. For the purposes of this Contract, the terms “electronic record,”
“electronic signature” and “electronic agent” shall have the meanings set forth
in the Electronic Signatures in Global and National Commerce Act of 2000 or any
amendments thereto.

 

3. This Contract may be executed in one or more counterparts, each of which,
when duly executed, shall be deemed an original.

ARTICLE 30

OFFSET

The Reinsured and the Reinsurer, each at its option, may offset any balance or
balances, whether on account of premiums, claims and losses, Loss Adjustment
Expenses or salvages due from one party to the other under this Contract or
under any other reinsurance agreement heretofore or hereafter entered into
between the Reinsured and the Reinsurer, whether acting as assuming reinsurer or
as ceding company; provided, however, that in the event of the insolvency of a
party hereto, offsets shall only be allowed in accordance with applicable
statutes and regulations.

 

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ARTICLE 31

OTHER REINSURANCE

The Reinsured shall be permitted to carry other reinsurance, recoveries under
which shall inure solely to the benefit of the Reinsured and be entirely
disregarded in applying all of the provisions of this Contract.

ARTICLE 32

SALVAGE AND SUBROGATION

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or
recovery made by the Reinsured, less the actual cost, excluding salaries of
officials and employees of the Reinsured and sums paid to attorneys as a
retainer, of obtaining such reimbursement or making such recovery) on account of
claims and settlements involving reinsurance hereunder. Salvage thereon shall
always be used to reimburse the excess carriers in the reverse order of their
priority according to their participation before being used in any way to
reimburse the Reinsured for its primary loss. The Reinsured hereby agrees to
enforce its rights to salvage and subrogation relating to any loss, a part of
which loss was sustained by the Reinsurer, and to prosecute all claims arising
out of such rights if, in the Reinsured’s opinion, it is economically reasonable
to do so. Should the Reinsured neglect or refuse to enforce such rights, the
Reinsurer is hereby empowered and authorized to institute the appropriate action
in the name of the Reinsured, at the Reinsurer’s expense.

ARTICLE 33

SERVICE OF SUIT

(Applicable if the Reinsurer is not domiciled in the United States of America,
and/or is not authorized in any State, Territory, or District of the United
States where authorization is required by insurance regulatory authorities.)

 

1. This Article will not be read to conflict with or override the obligations of
the parties to arbitrate their disputes as provided for in the Arbitration
Article. This Article is intended as an aid to compelling arbitration or
enforcing such arbitration or arbitral award, not as an alternative to the
Arbitration Article for resolving disputes arising out of this Contract.

 

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2. In the event the Reinsurer fails to pay any amount claimed to be due
hereunder or fails to otherwise perform its obligations hereunder, the
Reinsurer, at the request of the Reinsured, will submit to the jurisdiction of a
court of competent jurisdiction within the United States. Nothing in this
Article constitutes or should be understood to constitute a waiver of the
Reinsurer’s rights to commence an action in any court of competent jurisdiction
in the United States, to remove an action to a United States District Court, or
to seek a transfer of a case to another court as permitted by the laws of the
United States or of any state in the United States. The Reinsurer, once the
appropriate court is accepted by the Reinsurer or is determined by removal,
transfer or otherwise, as provided for above, will comply with all requirements
necessary to give said court jurisdiction and, in any suit instituted against
any of the Reinsurers upon this Contract, will abide by the final decision of
such court or of any Appellate Court in the event of an appeal.

 

3. Further, pursuant to any statute of any state, territory or district of the
United States which makes provision therefor, the Reinsurer hereby designates
the party named in its Interests and Liabilities Agreement, or if no party is
named therein, the Superintendent, Commissioner or Director of Insurance or
other officer specified for that purpose in the statute, or his or her successor
or successors in office, as its true and lawful attorney upon whom may be served
any lawful process in any action, suit or proceeding instituted by or on behalf
of the Reinsured or any beneficiary hereunder arising out of this Contract.

ARTICLE 34

SEVERABILITY

If any provision of this Contract 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 Contract or the enforceability of
such provision in any other jurisdiction.

ARTICLE 35

TAXES

In consideration of the terms under which this Contract is issued, the Reinsured
will not claim a deduction in respect of the premium hereon when making tax
returns, other than income or profits tax returns, to any state or territory of
the United States of America or the District of Columbia.

 

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ARTICLE 36

TERRITORY

The liability of the Reinsurer shall be limited to losses under Policies
covering property located within the territorial limits of the State of Florida;
but this limitation shall not apply to moveable property if the Reinsured’s
Policies provide coverage when said moveable property is outside the
aforementioned territorial limits.

ARTICLE 37

INTERMEDIARY

Advocate Reinsurance Partners, LLC is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All communications
(including, but not limited to, notices, statements, premium, return premium,
commissions, taxes, losses, Loss Adjustment Expense, salvages and loss
settlements) relating thereto shall be transmitted to the Reinsured or the
Reinsurer through Advocate Reinsurance Partners, LLC, 2501 North Harwood Street,
Suite 1250, Dallas, TX 75201. Payments by the Reinsured to the Intermediary
shall be deemed to constitute payment to the Reinsurer. Payments by the
Reinsurer to the Intermediary shall be deemed to constitute payment to the
Reinsured only to the extent that such payments are actually received by the
Reinsured.

 

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SCHEDULE A

CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2012

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA

 

     Excess
Layer 1   Excess
Layer 2     Excess
Layer 3  

Reinsured’s Retention

   $27,500,000   $ 50,000,000      $ 135,700,000   

Reinsurer’s Per Occurrence Limit

   29% of $22,500,000   $ 58,000,000      $ 155,000,000   

Reinsurer’s Contract Limit

   29% of $22,500,000   $ 116,000,000      $ 155,000,000   

Exposure Rate

   *****%     *****%        ******%   

Minimum Premium

   ***% of $*****    

Deposit Premium

   **% of $*******    

Deposit Payment Schedule:

      

Installment Due June 1, 2012

   **% of $******    

Installment Due January 1, 2013

   **% of $**** *    

 

* plus applicable adjustment per Rate and Premium Article

The figures listed above for each excess layer shall apply to each Reinsurer in
the percentage share for that excess layer expressed in its Interests and
Liabilities Agreement attached hereto.

 

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ARP-HCI-02-CAT-004-12          Schedule A  

DOC: June 1, 2012

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COLLATERAL COLLECTION TABLE

CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE: JUNE 1, 2012

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

TAMPA, FLORIDA

 

Collateral Release Calculation as of [            ]

Line No.

   Col. 1    Col. 2    Col. 3    Col. 4    Col. 5    Col. 6    Col. 7    Col. 8
   Col. 9      Date of Loss Event    Description    Loss Amount   
Buffer Loss Factor    Buffer Loss
Amount
(Col. 3 x Col. 4)    Inuring
Reinsurance
Coverage    Buffered Loss
Amount net of
Inuring
Reinsurance
(Col. 5 -  Col. 6)    Less
$[            ]
Retention    Balance
(Col. 7 - Col.8)                                                               
                                            

1A

                          

1B

                          

1C

                          

1D

                          

1E

                          

1F

                          

 

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ARP-HCI-02-CAT-004-12          Collateral Collection Table   

DOC: June 1, 2012

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NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE – REINSURANCE U.S.A.

 

1. This Reinsurance does not cover any loss or liability accruing to the
Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any
Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or
Nuclear Energy risks.

 

2. Without in any way restricting the operation of paragraph (1) of this clause,
this Reinsurance does not cover any loss or liability accruing to the Reinsured,
directly or indirectly and whether as Insurer or Reinsurer, from any insurance
against Physical Damage (including business interruption or consequential loss
arising out of such Physical Damage) to:

 

  I. Nuclear reactor power plants including all auxiliary property on the site,
or

 

  II. Any other nuclear reactor installation, including laboratories handling
radioactive materials in connection with reactor installations, and “critical
facilities” as such, or

 

  III. Installations for fabricating complete fuel elements or for processing
substantial quantities of “special nuclear material”, and for reprocessing,
salvaging, chemically separating, storing or disposing of “spent” nuclear fuel
or waste materials, or

 

  IV. Installations other than those listed in paragraph (2) III above using
substantial quantities of radioactive isotopes or other products of nuclear
fission.

 

3. Without in any way restricting the operations of paragraphs (1) and
(2) hereof, this Reinsurance does not cover any loss or liability by radioactive
contamination accruing to the Reinsured, directly or indirectly, and whether as
Insurer or Reinsurer, from any insurance on property which is on the same site
as a nuclear reactor power plant or other nuclear installation and which
normally would be insured therewith except that this paragraph (3) shall not
operate

 

  (a) where Reinsured does not have knowledge of such nuclear reactor power
plant or nuclear installation, or

 

  (b) where said insurance contains a provision excluding coverage for damage to
property caused by or resulting from radioactive contamination, however caused.
However on and after 1st January 1960 this sub-paragraph (b) shall only apply
provided the said radioactive contamination exclusion provision has been
approved by the Governmental Authority having jurisdiction thereof.

 

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ARP-HCI-02-CAT-004-12          ARP 35B  

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4. Without in any way restricting the operations of paragraphs (1), (2) and
(3) hereof, this Reinsurance does not cover any loss or liability by radioactive
contamination accruing to the Reinsured, directly or indirectly, and whether as
Insurer or Reinsurer, when such radioactive contamination is a named hazard
specifically insured against.

 

5. It is understood and agreed that this clause shall not extend to risks using
radioactive isotopes in any form where the nuclear exposure is not considered by
the Reinsured to be the primary hazard.

 

6. The term “special nuclear material” shall have the meaning given it in the
Atomic Energy Act of 1954 or by any law amendatory thereof.

 

7. Reinsured to be sole judge of what constitutes:

 

  (a) substantial quantities, and

 

  (b) the extent of installation, plant or site.

Note: Without in any way restricting the operation of paragraph (1) hereof, it
is understood and agreed that

 

  (a) all Policies issued by the Reinsured on or before 31st December 1957 shall
be free from the application of the other provisions of this Clause until expiry
date or 31st December 1960 whichever first occurs whereupon all the provisions
of this Clause shall apply.

 

  (b) with respect to any risk located in Canada Policies issued by the
Reinsured on or before 31st December 1958 shall be free from the application of
the other provisions of this Clause until expiry date or 31st December 1960
whichever first occurs whereupon all the provisions of this Clause shall apply.

 

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ARP-HCI-02-CAT-004-12          ARP 35B  

DOC: June 1, 2012

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TRUST AGREEMENT

(copy to be included)

 

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ARP-HCI-02-CAT-004-12          Trust Agreement  

DOC: June 1, 2012