Exhibit 10.22

 

REINSURANCE AGREEMENT

 

between

 

FINANCIAL INSURANCE COMPANY LIMITED

 

and

 

VIKING INSURANCE COMPANY, LIMITED

 

Dated as of 21 April 2004

 

 

 

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TABLE OF CONTENTS

 

ARTICLE I  DEFINITIONS

 

 

 

ARTICLE II  COVERAGE

 

 

 

ARTICLE III  ADMINISTRATION: GENERAL PROVISIONS

 

 

 

ARTICLE IV  CEDING COMMISSION

 

 

 

ARTICLE V  ACCOUNTING AND SETTLEMENT: RESERVE ADJUSTMENT

 

 

 

ARTICLE VI  DURATION AND TERMINATION

 

 

 

ARTICLE VII  INSOLVENCY

 

 

 

ARTICLE VIII  DISPUTE RESOLUTION

 

 

 

ARTICLE IX  MISCELLANEOUS PROVISIONS

 

 

 

SCHEDULE A – Part I  CEDING COMMISSION

 

 

 

SCHEDULE A– Part II  ESTIMATED CEDING COMMISSION

 

 

 

SCHEDULE A - PART III  ESTIMATED CEDING COMMISSION FOR FIRST 12 ACCOUNTING
PERIODS

 

 

 

SCHEDULE B  ACCOUNTING PERIOD REPORTS

 

 

 

SCHEDULE C  LIST OF REINSURANCE ARRANGEMENTS

 

 

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REINSURANCE AGREEMENT

 

 

This Agreement, dated as of 21 April, 2004 (this “Agreement”) is made and
entered into by and between Financial Insurance Company Limited, an insurance
company organised under the laws of England (the “Company”), and Viking
Insurance Company, Limited, an insurance company organised under the laws of
Bermuda (the “Reinsurer”).  Defined terms used herein are defined below.

 

The Company and the Reinsurer mutually agree to reinsure under the terms and
conditions stated herein.  This Agreement is solely between the Company and the
Reinsurer, and the performance of the obligations of each party under this
Agreement shall be rendered solely to the other party.  In no instance, except
as set forth in Article VII of this Agreement, shall anyone other than the
Company or the Reinsurer have any rights under this Agreement. The Company shall
be and shall remain the only party that is liable to any insured, policyholder,
claimant or beneficiary under any insurance policy or contract reinsured
hereunder.

 

ARTICLE I

 

DEFINITIONS

 

1.1                                DEFINITIONS.  AS USED IN THIS AGREEMENT, THE
FOLLOWING TERMS SHALL HAVE THE FOLLOWING MEANINGS (DEFINITIONS ARE APPLICABLE TO
BOTH THE SINGULAR AND THE PLURAL FORMS OF EACH TERM DEFINED IN THIS ARTICLE):

 

“Accounting Period” means each period of a calendar month the first such period
commencing at 00.01 Bermuda local time (Atlantic Standard Time) on 1 January
2004 and the last such period commencing on the first day of the calendar month
in which the Termination Date falls and ending on the Termination Date.

 

“Affiliate” means any other Person that directly or indirectly controls, is
controlled by, or is under common control with, the first Person.  “Control”
(including the terms, “controlled by” and “under common control with”) means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or credit arrangement, as trustee or
executor, or otherwise.

 

“Agreement” shall have the meaning specified in the first paragraph of this
Agreement.

 

“Applicable Law” means any law (including common law), statute, ordinance, rule,
regulation, order, writ, injunction, judgment, permit, governmental agreement or
decree applicable to a Person or any of such Person’s subsidiaries, properties,
assets, or to such Person’s officers, directors, managing directors, employees
or agents in their capacity as such.

 

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“Business Day” means any day other than a Saturday, Sunday or other day on which
banks in London are closed for trading.

 

“Ceded Reinsurance” means all reinsurance ceded by the Company pursuant to
contracts, binders, certificates, treaties or other evidence of reinsurance
relating to the Relevant Risks in effect on or prior to the Inception Date, or,
in accordance with Section 2.5, following the Inception Date, except the
reinsurance provided pursuant to this Agreement.

 

“Ceded Reinsurance Agreements” means all of the contracts, binders,
certificates, treaties or other evidence for Ceded Reinsurance.

 

“Ceding Commissions” shall have the meaning specified in Schedule A – Part I.

 

“Commutation” means, with respect to any portion of the Ceded Reinsurance, a
commutation or other similar transaction that results in the termination of such
Ceded Reinsurance with respect to the Relevant Risks.

 

“Distributor Agreements” means all distributor, agency or profit sharing
agreements or arrangements with third parties (each, a “Distributor”) relating
to the Relevant Risks whether entered into before, on or after the Inception
Date.

 

“Estimated Ceding Commission” shall have the meaning specified in Section 4.1.

 

“Extra Contractual Liabilities” means all liabilities of the Company for damages
(including compensatory, consequential, exemplary, punitive, bad faith or
similar or other damages) which relate to the marketing, sale, underwriting,
issuance, delivery, cancellation or administration of contracts under which the
Company assumes Relevant Risks, including liability arising out of or relating
to any alleged or actual act, error or omission by the Company or its agents,
whether intentional or otherwise, with respect to any of such contracts,
including (A) any alleged or actual reckless conduct or bad faith in connection
with the handling of any claim arising out of or under such contracts, or (B)
the marketing, sale, underwriting, issuance, delivery, cancellation or
administration of any of such contracts.

 

 “FSA” means the Financial Services Authority of the United Kingdom.

 

 “Governmental Authority” means any national government, any state or other
political subdivision thereof or any self-regulatory authority, and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

 

“Inception Date” shall have the meaning specified in Section 2.1.

 

“Insolvency Fund” means any guarantee fund, insolvency fund, plan, pool,
association, or other arrangement, however denominated, established or governed,
which provides for the payment by the Company of any levy, amount or charge in
respect of, or assumption by the Company of part or all of any claims, debts,
charges, fees or other

 

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obligations of an insurer or reinsurer, or its successors or assigns, as a
result of its having been declared by any competent authority to be insolvent,
or as a result of its having otherwise been deemed unable to meet any such
claims, debts, charges, fees or other obligations in whole or in part.

 

“Monthly Report” shall have the meaning specified in Section 5.1.

 

“Negative Settlement Amount” means, with respect to each Accounting Period, the
amount of any net deficit set forth in Line 11 of the Monthly Report for such
Accounting Period as calculated in accordance with Section 5.3(a).

 

“Person” means any natural person, firm, limited liability company, general
partnership, limited partnership, joint venture, association, corporation,
trust, Governmental Authority or other entity.

 

“Positive Settlement Amount” means, with respect to each Accounting Period, the
amount of any net surplus set forth in Line 11 of the Monthly Report for such
Accounting Period as calculated in accordance with Section 5.3(a).

 

“Relevant Liabilities” means all insurance liabilities and obligations arising
under the Relevant Risks including, without limitation (i) benefits, surrender
amounts and other amounts payable to policyholders under the terms of the
Relevant Risks, (ii) other consideration paid on or after the Inception Date
with respect to the Relevant Risks, (iii) Insolvency Fund or premium based
assessments based on premiums and other consideration paid on or after the
Inception Date with respect to the Relevant Risks, (iv) all amounts payable on
or after the Inception Date for returns or refunds of premiums under the
Relevant Risks, (v) all liability for commission or profit sharing payments and
other fees or compensation payable, including under Distributor Agreements, with
respect to the Relevant Risks in respect of premiums and other consideration
paid on or after the Inception Date, (vi) all Extra Contractual Liabilities and
(vii) compensation paid in respect of, or in relation to changes to, Distributor
Agreements on or after the Inception Date, unless otherwise agreed to in writing
by the Reinsurer.

 

“Relevant Risks” means the whole or, as the case may be, such part of the
insurance or reinsurance risks as are assumed or borne by the Company under or
in connection with any and all insurance and reinsurance policies and contracts
to which it is a party and which are in force at any time on or prior to the
Termination Date.  Where the Company is a co-insurer with any other company or
companies under any such insurance or reinsurance policy or contract, the
insurance or reinsurance risks which are to be treated as assumed or borne by
the Company for these purposes are:-

 

(i)                                     those risks which the Company has agreed
with its co-insurer or co-insurers are to be assumed or borne by the Company;
and

 

(ii)                                  those other risks (if any) which the
Company has agreed with its co-insurer or co-insurers are to be assumed or borne
by such co-insurer or co-insurers, but only to the extent that such co-insurer
or co-insurers shall have defaulted in

 

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meeting its or their obligations in respect of those risks and the Company
incurs a liability in respect of those risks as a result.

 

“RIR” means the investment return in respect of an Accounting Period calculated
in accordance with Section 5.3(c).

 

“Statutory Format” means the profit and loss account format set out in Chapter I
of Part I of Schedule 9A of the Companies Act 1985.

 

“Technical Provisions” means, as of any given date, the technical provisions of
the Company calculated in accordance with the Valuation and Accounting
Principles.

 

“Termination Date” means the effective date of any termination of this Agreement
as provided in Article VI.

 

“Valuation and Accounting Principles” means the valuation rules for determining
the amount of the assets and liabilities of the Company in accordance with the
Interim Prudential Sourcebook for Insurers issued by the FSA (as amended or
replaced from time to time) under the powers conferred on the FSA pursuant to
the Financial Services and Markets Act 2000, as such rules are required to be
applied by the Company in the preparation of its annual returns to the FSA
(taking into account any waivers or modifications of such valuation rules as are
approved by the FSA from time to time in respect of the Company) and, to the
extent not inconsistent therewith, the accounting principles and practices
hitherto adopted by the Company in preparing its annual audited accounts.

 

“3 Month LIBOR” means the British Bankers Association Interest Settlement Rate
for sterling quoted for a three month period as displayed on the appropriate
Telerate screen page at 11.00 a.m. (London time) on the day on which such
Interest Settlement Rate is required to be computed pursuant to this Agreement.

 

ARTICLE II

 

COVERAGE

 

2.1                                COVERAGE.  UPON THE TERMS AND SUBJECT TO THE
CONDITIONS AND OTHER PROVISIONS OF THIS AGREEMENT, AS OF 00.01. BERMUDA LOCAL
TIME (ATLANTIC STANDARD TIME) ON 1 JANUARY 2004 (THE “INCEPTION DATE”), THE
REINSURER AGREES TO REINSURE THE RELEVANT LIABILITIES BY WAY OF THE REINSURER
INDEMNIFYING THE COMPANY IN RESPECT OF EACH NEGATIVE SETTLEMENT AMOUNT.  AS
CONSIDERATION FOR THE REINSURANCE BY THE REINSURER UNDER THIS AGREEMENT, THE
COMPANY SHALL PAY TO THE REINSURER EACH POSITIVE SETTLEMENT AMOUNT.  THE PARTIES
SHALL ALSO PAY CEDING COMMISSION AND ESTIMATED CEDING COMMISSION IN ACCORDANCE
WITH THE PROVISIONS OF THIS AGREEMENT.

 

2.2                                CONDITIONS.  EXCEPT AS OTHERWISE SET FORTH OR
CONTEMPLATED HEREIN, NO CHANGES, AMENDMENTS OR MODIFICATIONS MADE ON OR AFTER
THE INCEPTION DATE IN THE TERMS AND CONDITIONS OF THE RELEVANT RISKS IN-FORCE AS
OF THE INCEPTION DATE WHICH ADVERSELY AFFECT

 

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THE LIABILITY OF THE REINSURER HEREUNDER SHALL BE COVERED HEREUNDER WITHOUT THE
PRIOR WRITTEN APPROVAL OF SUCH CHANGES, AMENDMENTS OR MODIFICATIONS BY THE
REINSURER, WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED.  IN THE
EVENT THAT ANY SUCH CHANGES, AMENDMENTS OR MODIFICATIONS ARE MADE IN ANY SUCH
RELEVANT RISK WITHOUT THE PRIOR WRITTEN APPROVAL OF THE REINSURER, THIS
AGREEMENT WILL COVER LIABILITY INCURRED BY THE COMPANY FOR RELEVANT RISKS AS IF
THE UNAPPROVED CHANGES, AMENDMENTS OR MODIFICATIONS HAD NOT BEEN MADE.

 

2.3                                TERRITORY.  THE TERRITORIAL LIMITS OF THE
AGREEMENT SHALL BE IDENTICAL TO THOSE OF THE RELEVANT LIABILITIES.

 

2.4                                COMMUTATION OF CEDED REINSURANCE.  THE
COMPANY SHALL NOT, WITHOUT THE REINSURER’S PRIOR WRITTEN APPROVAL, IN ITS SOLE
DISCRETION, TAKE ANY ACTION TO AMEND OR TERMINATE ANY CEDED REINSURANCE UNDER
ANY CEDED REINSURANCE AGREEMENT OR ENTER INTO ANY COMMUTATION OF CEDED
REINSURANCE.

 

2.5                                NEW REINSURANCE COVERS.  SUBSEQUENT TO THE
INCEPTION DATE, THE COMPANY SHALL NOT ENTER INTO ANY REINSURANCE ARRANGEMENTS
WITH RESPECT TO THE RELEVANT LIABILITIES WITHOUT THE PRIOR WRITTEN CONSENT OF
THE REINSURER, IN ITS SOLE DISCRETION.  FOR THESE PURPOSES, THE REINSURER
CONSENTS TO THE COMPANY HAVING ENTERED INTO THE REINSURANCE ARRANGEMENTS
SPECIFIED IN SCHEDULE C.

 

ARTICLE III

 

ADMINISTRATION: GENERAL PROVISIONS

 

3.1                                CONTRACT ADMINISTRATION.  THE COMPANY SHALL
PROCURE THAT THE RELEVANT RISKS ARE ADMINISTERED IN ACCORDANCE WITH THEIR TERMS
AND THE TERMS OF ANY APPLICABLE DISTRIBUTOR AGREEMENT, INCLUDING, BUT NOT
LIMITED TO, THE COLLECTION OF PREMIUMS AND OTHER AMOUNTS DUE FROM POLICYHOLDERS,
THE PAYMENT OF ALL RELEVANT LIABILITIES AND THE ADMINISTRATION OF CLAIMS AND
DISBURSEMENTS.  ALL BENEFITS UNDER THE CONTRACTS AND POLICIES CONSTITUTING THE
RELEVANT RISKS PAID BY THE COMPANY SHALL BE BINDING UPON THE REINSURER,
PROVIDED, HOWEVER, THAT SUCH PAYMENTS ARE WITHIN THE TERMS, CONDITIONS AND
LIMITATIONS OF THE CONTRACTS AND POLICIES CONSTITUTING THE RELEVANT RISKS.  THE
COMPANY SHALL PROCURE THAT THE RELEVANT RISKS ARE ADMINISTERED IN GOOD FAITH AND
WITH THE CARE, SKILL, PRUDENCE, AND DILIGENCE OF A PERSON EXPERIENCED IN
ADMINISTERING PAYMENT PROTECTION INSURANCE BUSINESS, PERSONAL ACCIDENT INSURANCE
BUSINESS AND TRAVEL INSURANCE BUSINESS.  THE COMPANY SHALL PROCURE THAT THE
RELEVANT RISKS ARE ADMINISTERED IN COMPLIANCE WITH APPLICABLE LAW AND THE
CURRENT SERVICE PROVIDER’S ADMINISTRATIVE PERFORMANCE STANDARDS IN EFFECT ON THE
DATE HEREOF, WITH SUCH REVISIONS TO SUCH STANDARDS AS ARE NO LESS FAVOURABLE TO
THE REINSURER THAN SUCH STANDARDS.  NOTWITHSTANDING THE FOREGOING, THE PARTIES
MAY, FROM TIME TO TIME, MUTUALLY DEVELOP SPECIFIC AND/OR DIFFERENT STANDARDS FOR
THE ADMINISTRATION OF THE RELEVANT RISKS.

 

3.2                                SUB-CONTRACTING OF CONTRACT ADMINISTRATION. 
THE COMPANY MAY SUBCONTRACT THE PERFORMANCE OF ANY SERVICE OR SERVICES WHICH THE
COMPANY IS REQUIRED TO PROCURE IN CONNECTION WITH THE ADMINISTRATION OF THE
RELEVANT RISKS TO (I) AN AFFILIATE, (II) A SERVICE

 

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PROVIDER UTILISED BY THE COMPANY WITH RESPECT TO THE RELEVANT RISKS OR ITS OTHER
BUSINESS AS OF THE DATE HEREOF, (III) ANY PERSON TO WHOM SUCH SUBCONTRACTING IS
REQUIRED TO BE EFFECTED UNDER THE TERMS OF ANY DISTRIBUTOR AGREEMENT OR (IV)
WITH THE PRIOR WRITTEN CONSENT OF THE REINSURER, ANY OTHER PERSON, SUCH CONSENT
NOT TO BE UNREASONABLY WITHHELD; PROVIDED, THAT NO SUCH SUBCONTRACTING SHALL
RELIEVE THE COMPANY FROM ANY OF ITS OBLIGATIONS OR LIABILITIES HEREUNDER, AND
THE COMPANY SHALL REMAIN RESPONSIBLE FOR ALL OBLIGATIONS OR LIABILITIES OF SUCH
SUBCONTRACTOR WITH REGARD TO THE PROVISION OF SUCH ADVICE OR SERVICES AS IF
PROVIDED BY THE COMPANY.

 

3.3                                CEDED REINSURANCE AGREEMENTS AND DISTRIBUTOR
AGREEMENTS.  THE COMPANY SHALL MANAGE AND ADMINISTER THE CEDED REINSURANCE
AGREEMENTS AND THE DISTRIBUTOR AGREEMENTS, INCLUDING:-

 

(i)                                     providing all reports and notices
required with regard to the Ceded Reinsurance Agreements and the Distributor
Agreements to the reinsurers or other third parties, as applicable, within the
time required by the applicable Ceded Reinsurance Agreement or Distributor
Agreements; and

 

(ii)                                  doing all other things necessary to comply
with the terms and conditions of the Ceded Reinsurance Agreements and the
Distributor Agreements.

 

Without limiting the foregoing, the Company shall:-

 

(i)                                   promptly pay when due all reinsurance
premiums due to reinsurers under the Ceded Reinsurance Agreements and use all
commercially reasonable efforts to collect from such reinsurers all amounts due
under Ceded Reinsurance; and

 

(ii)                                promptly pay when due all profit sharing,
commissions or other compensation due to third parties under the Distributor
Agreement and use all commercially reasonable efforts to collect from such third
parties all amounts due thereunder.  Notwithstanding the obligation of the
Company under this Section 3.3 to use all commercially reasonable efforts to
collect such reinsurance recoverables, the risk of the Company not collecting or
being unable to collect (for whatever reason) any amount due under Ceded
Reinsurance shall be borne by the Reinsurer in accordance with Line 2 of
Schedule B of this Agreement.

 

3.4                                REINSURED POLICY TERMS.  THE COMPANY SHALL
SET ALL INSURANCE RATES AND UNDERWRITING CRITERIA IN RESPECT OF THE RELEVANT
RISKS FROM AND AFTER THE INCEPTION DATE CONSISTENTLY WITH THE MANNER IN WHICH IT
HAS DONE SO IN THE PAST, CONSULTING WITH THE REINSURER ON ANY ISSUE WHICH IS
EXPECTED TO HAVE A MATERIAL ADVERSE IMPACT ON ANY AMOUNTS WHICH THE REINSURER
REASONABLY EXPECTS TO BECOME PAYABLE TO IT UNDER THE TERMS OF THIS AGREEMENT.

 

3.5                                CLAIMS SETTLEMENTS.  THE COMPANY AGREES THAT
IF SO REQUESTED BY THE REINSURER IT WILL PROVIDE NOTICE TO THE REINSURER AS SOON
AS IS REASONABLY PRACTICABLE OF ITS INTENTION TO COMMENCE LITIGATION PROCEEDINGS
IN RESPECT OF A CLAIM IN EXCESS OF £100,000 WITH RESPECT TO A REINSURED POLICY
ALONG WITH (IF REQUESTED BY THE REINSURER) COPIES OF ALL

 

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PLEADINGS AND REPORTS OF INVESTIGATION WITH RESPECT TO THAT CLAIM.  THE
REINSURER SHALL HAVE THE RIGHT, AT ITS OWN EXPENSE, TO PARTICIPATE JOINTLY WITH
THE COMPANY IN THE INVESTIGATION, ADJUSTMENT OR DEFENCE OF SUCH CLAIMS.

 

3.6                                INSPECTION.  THE COMPANY SHALL KEEP ACCURATE
AND COMPLETE RECORDS, FILES AND ACCOUNTS OF ALL TRANSACTIONS AND MATTERS WITH
RESPECT TO THE RELEVANT RISKS IN ACCORDANCE WITH ITS RECORD MANAGEMENT PRACTICES
IN EFFECT FROM TIME TO TIME.  THE REINSURER OR ITS DESIGNATED REPRESENTATIVE (OR
PERSON APPOINTED OR CHARGED WITH THE DUTY TO EXAMINE OR INVESTIGATE THE
REINSURER UNDER APPLICABLE LAW) MAY UPON REASONABLE NOTICE INSPECT AND COPY (AND
TAKE AWAY SUCH COPIES), AT THE OFFICES OF THE COMPANY WHERE SUCH RECORDS ARE
LOCATED, THE PAPERS AND ANY AND ALL OTHER BOOKS OR DOCUMENTS OF THE COMPANY
REASONABLY RELATING TO THE RELEVANT RISKS AND THE ADMINISTRATION THEREOF
(INCLUDING COMPLIANCE WITH THE PROVISIONS OF SECTION 3.1), DURING NORMAL
BUSINESS HOURS FOR SUCH PERIOD AS THIS AGREEMENT IS IN EFFECT OR FOR AS LONG
THEREAFTER AS THE COMPANY SEEKS PERFORMANCE BY THE REINSURER PURSUANT TO THE
TERMS OF THIS AGREEMENT OR THE REINSURER REASONABLY NEEDS ACCESS TO SUCH RECORDS
FOR REGULATORY, TAX OR SIMILAR PURPOSES.  WHERE ANY PAPERS, BOOKS OR DOCUMENTS
RELATING TO THE RELEVANT RISKS AND THE ADMINISTRATION THEREOF ARE THOSE OF ANY
SUB-CONTRACTOR OF THE COMPANY, THE COMPANY SHALL PROCURE AT THE REINSURER’S
EXPENSE, TO THE EXTENT THAT THE COMPANY IS ENTITLED AND ABLE TO DO SO, THAT THE
REINSURER MAY UPON REASONABLE NOTICE INSPECT AND COPY SUCH PAPERS, BOOKS OR
DOCUMENTS (AND TAKE AWAY SUCH COPIES) AT THE OFFICE OF THE SUB-CONTRACTOR WHERE
SUCH PAPERS, BOOKS OR DOCUMENTS ARE LOCATED.  THE INFORMATION OBTAINED SHALL BE
USED ONLY FOR PURPOSES RELATING TO REINSURANCE UNDER THIS AGREEMENT AND AS
PERMITTED UNDER SECTION 3.7.

 

3.7                                CO-OPERATION.  EACH PARTY HERETO SHALL
CO-OPERATE FULLY WITH THE OTHER IN ALL REASONABLE RESPECTS IN ORDER TO
ACCOMPLISH THE OBJECTIVES OF THIS AGREEMENT INCLUDING MAKING AVAILABLE TO EACH
THEIR RESPECTIVE OFFICERS AND EMPLOYEES FOR INTERVIEW AND MEETINGS WITH
GOVERNMENTAL AUTHORITIES AND FURNISHING ANY ADDITIONAL ASSISTANCE, INFORMATION
AND DOCUMENTS AS MAY BE REASONABLY REQUESTED BY EITHER PARTY FROM TIME TO TIME. 
EACH PARTY IS PERMITTED TO FURNISH SUCH DOCUMENTS AND INFORMATION CONCERNING
THIS AGREEMENT, THE REINSURANCE UNDER THIS AGREEMENT AND THE OBJECTIVES OF THIS
AGREEMENT (I) TO ITS ADVISORS, INSURANCE MANAGERS AND AUDITORS AS MAY BE
DESIRABLE IN CONNECTION WITH SERVICING THE BUSINESS OF THE PARTY CONCERNED OR
SUCH PARTY COMPLYING WITH APPLICABLE LAW AND (II) AS REQUIRED UNDER APPLICABLE
LAW.

 

3.8                                ERRORS AND OMISSIONS.  IF ANY DELAY,
OMISSION, ERROR OR FAILURE TO PAY AMOUNTS DUE OR TO PERFORM ANY OTHER ACT
REQUIRED BY THIS AGREEMENT IS UNINTENTIONAL AND CAUSED BY MISUNDERSTANDING OR
OVERSIGHT, THE COMPANY AND THE REINSURER WILL ADJUST THE SITUATION TO WHAT IT
WOULD HAVE BEEN HAD THE MISUNDERSTANDING OR OVERSIGHT NOT OCCURRED.  THE PARTY
FIRST DISCOVERING SUCH MISUNDERSTANDING OR OVERSIGHT, OR AN ACT RESULTING FROM
SUCH MISUNDERSTANDING OR OVERSIGHT, WILL NOTIFY THE OTHER PARTY IN WRITING
PROMPTLY UPON DISCOVERY THEREOF, AND THE PARTIES SHALL ACT TO CORRECT SUCH
MISUNDERSTANDING OR OVERSIGHT WITHIN TWENTY (20) BUSINESS DAYS OF SUCH OTHER
PARTY’S RECEIPT OF SUCH NOTICE.  HOWEVER, THIS SECTION SHALL NOT BE CONSTRUED AS
A WAIVER BY EITHER PARTY OF ITS RIGHT TO ENFORCE STRICTLY THE TERMS OF THIS
AGREEMENT.

 

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3.9                                AGE, SEX AND OTHER ADJUSTMENTS.  THE
LIABILITY OF THE REINSURER SHALL FOLLOW THAT OF THE COMPANY INCLUDING IN
CIRCUMSTANCES WHERE THE COMPANY’S LIABILITY UNDER ANY OF THE RELEVANT RISKS IS
CHANGED BECAUSE OF A MISSTATEMENT OF AGE OR SEX OR ANY OTHER MATERIAL FACT, AND
THE COMPANY AND THE REINSURER WILL MAKE ALL APPROPRIATE ADJUSTMENTS TO AMOUNTS
DUE TO EACH OTHER UNDER THIS AGREEMENT IN SUCH CIRCUMSTANCES.

 

3.10                          SETOFF.  ANY DEBTS OR CREDITS, MATURED OR
UNMATURED, LIQUIDATED OR UNLIQUIDATED, REGARDLESS OF WHEN THEY AROSE OR WERE
INCURRED, IN FAVOUR OF OR AGAINST EITHER THE COMPANY OR THE REINSURER WITH
RESPECT TO THIS AGREEMENT ARE DEEMED MUTUAL DEBTS OR CREDITS, AS THE CASE MAY
BE, AND SHALL BE SETOFF FROM ANY AMOUNTS DUE TO THE COMPANY OR THE REINSURER
HEREUNDER, AS THE CASE MAY BE, AND ONLY THE NET BALANCE SHALL BE ALLOWED OR
PAID.

 

ARTICLE IV

 

CEDING COMMISSION

 

4.1                                CEDING COMMISSION.  ON AND SUBJECT TO THE
TERMS OF THIS AGREEMENT, THE REINSURER SHALL PAY TO THE COMPANY (OR, AS THE CASE
MAY BE, THE COMPANY SHALL PAY TO THE REINSURER), AN ESTIMATE OF THE CEDING
COMMISSION (THE “ESTIMATED CEDING COMMISSION”) PAYABLE IN RESPECT OF THAT
ACCOUNTING PERIOD IN AN AMOUNT DETERMINED IN ACCORDANCE WITH SCHEDULE A PART
II.  THE AMOUNT OF THE ESTIMATED CEDING COMMISSION IN RESPECT OF EACH ACCOUNTING
PERIOD SHALL, SUBJECT TO SECTION 4.2 BELOW, BE CALCULATED BY THE REINSURER IN
GOOD FAITH ON THE BASIS OF INFORMATION PROVIDED BY THE COMPANY AND SHALL BE
PAID, BY THE REINSURER OR THE COMPANY AS THE CASE MAY BE, AT THE SAME TIME AS
ANY NEGATIVE OR POSITIVE SETTLEMENT AMOUNT REQUIRED TO BE PAID IN RESPECT OF THE
PREVIOUS ACCOUNTING PERIOD BECOMES DUE IN ACCORDANCE WITH THE ARRANGEMENTS SET
OUT IN SECTION 5.4 BELOW. THE ESTIMATED CEDING COMMISSION IN RESPECT OF ANY
ACCOUNTING PERIOD IS, FOR THE AVOIDANCE OF DOUBT, AN ESTIMATE OF THE ACTUAL
CEDING COMMISSION DUE IN RESPECT OF THAT ACCOUNTING PERIOD AND THE ADJUSTMENT TO
SUCH ESTIMATE SHALL BE EFFECTED THROUGH THE CEDING COMMISSION ADJUSTMENTS
REFERRED TO IN SCHEDULE B AND SECTION 5.5.

 

4.2                                ESTIMATED CEDING COMMISSION INITIALLY DUE. 
NOTWITHSTANDING SECTION 4.1, THE AMOUNTS OF THE ESTIMATED CEDING COMMISSION IN
RESPECT OF EACH OF THE FIRST 12 ACCOUNTING PERIODS SHALL BE IN THE RESPECTIVE
AMOUNTS SET OUT IN SCHEDULE A PART III.  THE REINSURER SHALL PAY TO THE COMPANY
AN AMOUNT EQUAL TO THE ESTIMATED CEDING COMMISSION AMOUNTS IN RESPECT OF ALL
ACCOUNTING PERIODS COMMENCING PRIOR TO THE EXECUTION AND DELIVERY OF THIS
AGREEMENT AS SET OUT IN SCHEDULE A PART III AND, FOR THE AVOIDANCE OF DOUBT, THE
COMPANY SHALL TAKE ACCOUNT OF SUCH AMOUNT PAYABLE WHEN PRODUCING THE FIRST
MONTHLY REPORT IN ACCORDANCE WITH SECTION 5.4(B) BELOW.  SUBSEQUENT AMOUNTS DUE
AS ESTIMATED CEDING COMMISSION UNDER SCHEDULE A PART III SHALL BE PAID IN
ACCORDANCE WITH SECTION 5.4 BELOW.

 

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ARTICLE V

 

ACCOUNTING AND SETTLEMENT: RESERVE ADJUSTMENT

 

5.1                                MONTHLY REPORTS.  SUBJECT AS SET OUT IN
SECTION 5.4(B), NO LATER THAN 3 BUSINESS DAYS BEFORE THE END OF EACH ACCOUNTING
PERIOD (OR MORE FREQUENTLY AS MUTUALLY AGREED BY THE PARTIES) THE COMPANY SHALL
SUPPLY THE REINSURER WITH A REPORT THAT SHALL PROVIDE AN ESTIMATE OF THE
FINANCIAL DATA FOR SUCH ACCOUNTING PERIOD REQUIRED IN SCHEDULE B TOGETHER WITH
DETAILS OF THE CEDING COMMISSION ESTIMATED TO BE PAYABLE IN RESPECT OF THE
FOLLOWING ACCOUNTING PERIOD (THE “MONTHLY REPORT”).

 

5.2                                COMPUTATIONS. AT THE END OF EACH ACCOUNTING
PERIOD THE COMPANY SHALL COMPUTE:

 

(i)                                    the amount (being “X” in the formula set
out in Section 5.3 below) shown in Line 3 in the table contained in Schedule B;
and

 

(ii)                                 the amount (being “Y” in the formula set
out in Section 5.3 below) shown in Line 7 in the table contained in Schedule B,

 

in each case in accordance with the notes set out in Schedule B and insofar as
not inconsistent with such notes otherwise in accordance with the Valuation and
Accounting Principles.

 

5.3                                POSITIVE AND NEGATIVE SETTLEMENT AMOUNTS.

 

(a)                                 In respect of each Accounting Period, if the
formula:

 

(X – Y + RIR – A + B)

 

shall produce a positive amount, that shall be the Positive Settlement Amount
for that Accounting Period, and if it shall produce a negative amount, that
shall be the Negative Settlement Amount for that Accounting Period, and that
Positive Settlement Amount or Negative Settlement Amount, as the case may be,
shall be the amount set out in Line 11 of Schedule B.

 

(b)                                 For the purposes of the formula set out in
Section 5.3(a):

 

(i)                                    “A” shall be the Reinsurer’s Ceding
Commission Adjustment shown in Line 9 in the table contained in Schedule B; and

 

(ii)                                 “B” shall be the Company’s Ceding
Commission Adjustment shown in Line 10 in the table contained in Schedule B.

 

(c)                                  The amount of RIR in respect of any
Accounting Period shall be determined by multiplying an amount equal to:

 

(i)                                    the Technical Provisions as at the
opening of business on the first day of the Accounting Period; less

 

(ii)                                 the amount of the Company’s provision for
deferred acquisition costs as at the opening of business on the first day of the
Accounting Period,

 

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by a rate equal to:

 

C
D

 

where:

 

(A)                             “C” is the amount of investment income
receivable by the Company in respect of the Accounting Period; and

 

(B)                               “D” is the total market value of the Company’s
investments (other than any investment of the Company in its subsidiary
undertakings) as at the opening of business on the first day of the Accounting
Period.

 

For the purposes of this Section 5.3(c), “investment income” shall mean all
amounts derived from the holding of investments (other than any investment of
the Company in its subsidiary undertakings) which are treated, in accordance
with the Company’s normal accounting policies, as being of an income nature,
including any gains on the realisation of those investments and having taken
account of any losses on the realisation of those investments.  For the
avoidance of doubt, “investment income” shall not include any unrealised gains
or unrealised losses attributable to such investments.

 

5.4                                PAYMENTS.

 

(a)                                   Subject as provided in Section 5.4(b)
below:-

 

(i)                                  For each Accounting Period in respect of
which there is a Negative Settlement Amount, the Reinsurer shall pay to the
Company by telegraphic transfer within 5 Business Days of the delivery of the
Monthly Report by the Company an amount equal to the absolute value of such
Negative Settlement Amount together with the Estimated Ceding Commission (if
any) payable by the Reinsurer to the Company in respect of the following
Accounting Period.

 

(ii)                                 For each Accounting Period in respect of
which there is a Positive Settlement Amount the Company shall pay to the
Reinsurer by telegraphic transfer within 5 Business Days of the delivery of the
Monthly Report by the Company an amount equal to the absolute value of such
Positive Settlement Amount together with the Estimated Ceding Commission (if
any) payable by the Company to the Reinsurer in respect of the following
Accounting Period.

 

(iii)                              If there is a Negative Settlement Amount for
any Accounting Period and the Company is required to pay the Estimated Ceding
Commission to the Reinsurer in respect of the following Accounting Period, a net

 

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payment shall be made by the Company or the Reinsurer as appropriate.

 

(iv)                             If there is a Positive Settlement Amount for
any Accounting Period and the Reinsurer is required to pay the Estimated Ceding
Commission to the Company in respect of the following Accounting Period, a net
payment shall be made by the Company or the Reinsurer as appropriate.

 

(b)                                In relation to all Accounting Periods
commencing prior to the execution and delivery of this Agreement, the Company
shall calculate and deliver a report (“the First Monthly Report”) to the
Reinsurer as to the total aggregate net amount payable by the Company (or as the
case may be the Reinsurer) to place the Company and the Reinsurer in the
respective financial positions in which they would have been under this
Agreement on the date of such payment, disregarding for this purpose the time
cost of money, had this Agreement been executed and delivered at the
commencement of the first Accounting Period.  Such payment shall be made by
telegraphic transfer within 5 Business Days of the delivery of the First Monthly
Report.

 

5.5                                ACTUAL DATA.  IN PREPARING ALL REPORTS
REQUIRED UNDER THIS AGREEMENT, THE COMPANY SHALL USE ALL COMMERCIALLY REASONABLE
EFFORTS TO SUPPLY THE ACTUAL DATA.  IF THE ACTUAL DATA CANNOT BE SUPPLIED WITH
THE APPROPRIATE REPORT, THE COMPANY SHALL PRODUCE BEST ESTIMATES AND SHALL
PROVIDE AMENDED REPORTS BASED ON ACTUAL DATA NO MORE THAN TEN (10) BUSINESS DAYS
AFTER THE ACTUAL DATA BECOMES AVAILABLE AND THE PARTIES WILL SETTLE ANY
ADDITIONAL AMOUNTS DUE WITHIN FIVE (5) BUSINESS DAYS THEREAFTER, TOGETHER WITH
INTEREST AS PROVIDED IN SECTION 5.7 HEREOF.

 

5.6                                ADDITIONAL REPORTS AND INFORMATION.  FOR SO
LONG AS THIS AGREEMENT REMAINS IN EFFECT AND FOR A PERIOD OF 7 YEARS AFTER ITS
TERMINATION, EACH OF THE PARTIES SHALL PERIODICALLY FURNISH TO THE OTHER SUCH
OTHER REPORTS AND INFORMATION AS IS REASONABLY AVAILABLE TO IT AND AS MAY BE
REASONABLY REQUESTED BY SUCH OTHER PARTY FOR REGULATORY, TAX OR SIMILAR
PURPOSES.

 

5.7                                DELAYED PAYMENTS.  IN THE EVENT THAT ALL OR
ANY PORTION OF ANY PAYMENT DUE TO EITHER PARTY PURSUANT TO THIS AGREEMENT
BECOMES OVERDUE THE PORTION OF THE AMOUNT OVERDUE SHALL BEAR INTEREST AT AN
ANNUAL RATE EQUAL TO 3 MONTH LIBOR ON THE DATE THAT THE PAYMENT BECOMES OVERDUE
PLUS 200 BASIS POINTS PER ANNUM, FOR THE PERIOD THAT THE AMOUNT IS OVERDUE.

 

5.8                                CERTIFICATE OF THE CHIEF FINANCIAL OFFICER OF
THE COMPANY. THE CERTIFICATE OF THE CHIEF FINANCIAL OFFICER OF THE COMPANY AS TO
ANY MATTER ARISING IN RESPECT OF THE AMOUNT OF ANY PAYMENT FALLING TO BE MADE
UNDER THIS AGREEMENT SHALL, IN THE ABSENCE OF MANIFEST ERROR, BE FINAL AND
BINDING ON THE PARTIES.

 

5.10                          Breach of Required Minimum Margin of Solvency. No
payment required to be made by the Company to the Reinsurer at a relevant time
under the terms of this Agreement shall

 

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be required to be made at that time if that payment would cause the Company to
breach the “Required Minimum Margin” required to be maintained by the Company in
accordance with the FSA’s Interim Prudential Sourcebook for Insurers (as amended
or replaced from time to time).  Any payment not made by the Company to the
Reinsurer for this reason shall be paid by the Company to the Reinsurer as soon
as the making of the payment would not cause that “Required Minimum Margin” to
be breached.

 

ARTICLE VI

 

DURATION AND TERMINATION

 

6.1                                DURATION.  EXCEPT AS OTHERWISE PROVIDED
HEREIN, THIS AGREEMENT SHALL BE UNLIMITED IN DURATION.

 

6.2                                REINSURER’S LIABILITY.  THE REINSURER’S
LIABILITY WITH RESPECT TO THE RELEVANT LIABILITIES WILL TERMINATE ON THE DATE
THAT TERMINATION TAKES EFFECT AS A RESULT OF ANY NOTICE GIVEN AT THE OPTION OF
THE REINSURER OR THE COMPANY IN ACCORDANCE WITH SECTION 6.3 OR SECTION 6.4 AND
OTHERWISE ON THE DATE THIS AGREEMENT IS TERMINATED UPON THE WRITTEN AGREEMENT OF
THE PARTIES.

 

6.3                                TERMINATION ON INSOLVENCY.  IN THE EVENT OF
THE INSOLVENCY OF THE REINSURER, THE COMPANY SHALL HAVE THE RIGHT TO TERMINATE
THIS AGREEMENT AND THE REINSURANCE HEREUNDER, SUCH TERMINATION TO BE EFFECTIVE
AS SOON AS NOTICE OF THE TERMINATION IS GIVEN BY THE COMPANY TO THE REINSURER. 
WITH EFFECT FROM THE DATE THAT THE NOTICE OF TERMINATION IS GIVEN UNDER THIS
SECTION 6.3, ANY AMOUNTS WHICH ARE OR BECOME OWING BY THE COMPANY TO THE
REINSURER UNDER THIS AGREEMENT, WHETHER PRIOR TO, ON OR AFTER THE DATE OF THAT
NOTICE OF TERMINATION, SHALL CEASE TO BE PAYABLE BY THE COMPANY TO THE
REINSURER.

 

6.4                                OPTIONAL TERMINATION.  EITHER THE REINSURER
OR THE COMPANY MAY TERMINATE THIS AGREEMENT AND THE REINSURANCE HEREUNDER UPON
PRIOR WRITTEN NOTICE GIVEN AT ANY TIME TO EXPIRE ON THE LAST DAY OF THE
ACCOUNTING PERIOD IN WHICH SUCH NOTICE IS GIVEN, AT ANY TIME AFTER THE REINSURER
AND THE COMPANY HAVE BOTH BECOME WHOLLY OWNED SUBSIDIARIES OF GENWORTH
FINANCIAL, INC.

 

For the purposes of this Section, a company shall be a wholly owned subsidiary
of Genworth Financial, Inc. if all of its ordinary shares are owned:-

 

(i)                                      by Genworth Financial, Inc., or

 

(ii)                                 by any other company the ordinary shares of
which are owned directly by Genworth Financial, Inc. or by another wholly owned
subsidiary of Genworth Financial, Inc.

 

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6.5                                CONSEQUENCE OF TERMINATION

 

(A)                                  IN THE EVENT THAT THIS AGREEMENT IS
TERMINATED PURSUANT TO SECTION 6.4, THIS AGREEMENT SHALL TERMINATE AS OF THE END
OF THE APPLICABLE ACCOUNTING PERIOD IN WHICH THE NOTICE OF TERMINATION PURSUANT
TO SECTION 6.4 IS RECEIVED BY THE NON-TERMINATING PARTY AND A NET ACCOUNTING AND
SETTLEMENT AS TO ANY BALANCE DUE UNDER THIS AGREEMENT SHALL BE UNDERTAKEN BY THE
PARTIES FOR SUCH ACCOUNTING PERIOD AND IN RESPECT OF ADJUSTMENTS REQUIRED FOR
ANY EARLIER ACCOUNTING PERIOD (THE “FINAL SETTLEMENT”).

 

(B)                                 IN THE EVENT THAT, SUBSEQUENT TO THE FINAL
SETTLEMENT, THE COMPANY RECEIVES ANY AMOUNT, OR IS REQUIRED TO PAY ANY AMOUNT,
OR ACTUAL DATA BECOMES AVAILABLE TO THE COMPANY, WHICH IN ANY SUCH CASE WAS NOT
TAKEN INTO ACCOUNT IN CALCULATING ANY POSITIVE OR NEGATIVE SETTLEMENT AMOUNT BUT
WHICH WOULD HAVE BEEN SO TAKEN INTO ACCOUNT HAD IT BEEN RECEIVED OR PAID OR
BECOME AVAILABLE PRIOR TO THE TERMINATION DATE OR THE FINAL SETTLEMENT, THE
COMPANY OR (AS THE CASE MAY BE) THE REINSURER SHALL MAKE SUCH PAYMENT OR
PAYMENTS TO THE OTHER AS IS REQUIRED TO REFLECT AS NEARLY AS POSSIBLE THE
POSITION THAT WOULD HAVE PREVAILED HAD SUCH AMOUNT OR DATA BEEN SO TAKEN INTO
ACCOUNT, PROVIDED, HOWEVER, THAT THE OBLIGATIONS UNDER THIS SECTION 6.5(B) TO
MAKE ANY SUCH PAYMENT SHALL TERMINATE 18 MONTHS AFTER THE DATE ON WHICH ANY
NOTICE IS SERVED UNDER SECTION 6.4.

 

ARTICLE VII

 

INSOLVENCY

 

7.1                                PAYMENTS.  IN THE EVENT OF THE INSOLVENCY OF
THE COMPANY, PAYMENT DUE TO THE COMPANY UNDER THIS AGREEMENT SHALL BE PAYABLE BY
THE REINSURER DIRECTLY TO THE COMPANY OR TO ITS LIQUIDATOR, RECEIVER, OR
STATUTORY SUCCESSOR ON THE BASIS OF THE LIABILITY OF THE COMPANY UNDER THE
CONTRACT OR CONTRACTS REINSURED, WITHOUT DIMINUTION BECAUSE OF THE INSOLVENCY OF
THE COMPANY.  IT IS AGREED AND UNDERSTOOD, HOWEVER, THAT (I) IN THE EVENT OF THE
INSOLVENCY OF THE COMPANY, THE COMPANY SHALL GIVE TO THE REINSURER WRITTEN
NOTICE OF THE PENDENCY OF A CLAIM AGAINST THE INSOLVENT COMPANY ON A REINSURED
POLICY WITHIN A REASONABLE TIME AFTER SUCH CLAIM IS FILED IN THE INSOLVENCY
PROCEEDING AND (II) 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 DEFENCES WHICH IT MAY DEEM AVAILABLE
TO THE COMPANY OR ITS LIQUIDATOR, RECEIVER OR STATUTORY SUCCESSOR.

 

7.2                                EXPENSES.  IT IS FURTHER UNDERSTOOD THAT ANY
EXPENSE THUS INCURRED BY THE REINSURER PURSUANT TO SECTION 7.1 SHALL BE
CHARGEABLE, SUBJECT TO COURT APPROVAL, AGAINST THE INSOLVENT COMPANY AS PART OF
THE EXPENSE OF LIQUIDATION TO THE EXTENT OF A PROPORTIONATE SHARE OF THE BENEFIT
WHICH MAY ACCRUE TO THE COMPANY SOLELY AS A RESULT OF THE DEFENCE UNDERTAKEN BY
THE REINSURER.

 

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ARTICLE VIII

 

DISPUTE RESOLUTION

 

8.1                                GENERAL PROVISIONS.

 

(a)                                  Any dispute, controversy or claim arising
out of or relating to this Agreement or the validity, interpretation, breach or
termination thereof (a “Dispute”), shall be resolved in accordance with the
procedures set forth in this Article VIII, which shall be the sole and exclusive
procedure for the resolution of any such Dispute.

 

(b)                                 Commencing with the request contemplated by
Section 8.2, all communications between the parties or their representatives in
connection with the attempted resolution of any Dispute, including any
mediator’s evaluation referred to in Section 8.3, shall be deemed to be without
prejudice communications and to have been delivered in furtherance of a Dispute
settlement and shall be exempt from inspection, and shall not be admissible in
evidence for any reason (whether as an admission or otherwise).

 

(c)                                  In connection with any Dispute, the parties
expressly waive and forego any right to (i) punitive, exemplary,
statutorily-enhanced or similar damages in excess of compensatory damages, and
(ii) trial by jury.

 

(d)                                 The specific procedures set forth below,
including but not limited to the time limits referenced therein, may be modified
by agreement of the parties in writing.

 

(e)                                  The running of time shall be suspended in
respect of any Dispute for the purposes of any defences based upon the passage
of time (whether under the Limitation Act 1980 (in its present form or as
subsequently amended or replaced) or otherwise) while the procedures specified
in this Article VIII are pending. The parties will take such action, if any,
required to effectuate this suspension.

 

8.2                                CONSIDERATION BY SENIOR EXECUTIVES.  IF A
DISPUTE IS NOT RESOLVED IN THE NORMAL COURSE OF BUSINESS AT THE OPERATIONAL
LEVEL, THE PARTIES SHALL ATTEMPT IN GOOD FAITH TO RESOLVE ANY DISPUTE BY
NEGOTIATION BETWEEN EXECUTIVES WHO HOLD, IN RESPECT OF EACH OF THE BUSINESS
ENTITIES INVOLVED IN THE DISPUTE, AT A MINIMUM, THE OFFICE OF PRESIDENT, CHIEF
EXECUTIVE OFFICER OR CHIEF FINANCIAL OFFICER.  EITHER PARTY MAY INITIATE THE
EXECUTIVE NEGOTIATION PROCESS BY WRITTEN NOTICE TO THE OTHER.  FIFTEEN (15) DAYS
AFTER DELIVERY OF THE NOTICE, THE RECEIVING PARTY SHALL SUBMIT TO THE OTHER A
WRITTEN RESPONSE. THE NOTICE AND RESPONSE SHALL INCLUDE (I) A STATEMENT OF THE
DISPUTE AND OF EACH PARTY’S POSITION, AND (II) THE NAME AND TITLE OF THE
EXECUTIVE WHO WILL REPRESENT THAT PARTY AND OF ANY OTHER PERSON WHO WILL
ACCOMPANY THE EXECUTIVE.  SUCH EXECUTIVES WILL MEET IN PERSON OR BY TELEPHONE
WITHIN 30 DAYS OF THE INITIAL NOTICE TO SEEK A RESOLUTION.

 

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8.3                                MEDIATION.  IF A DISPUTE IS NOT RESOLVED BY
NEGOTIATION AS PROVIDED IN SECTION 8.2 WITHIN FORTY-FIVE (45) DAYS FROM THE
INITIAL NOTICE, THEN EITHER PARTY MAY SUBMIT THE DISPUTE FOR RESOLUTION BY
MEDIATION PURSUANT TO THE CENTER FOR PUBLIC RESOURCES (“CPR”) MODEL MEDIATION
PROCEDURE AS THEN IN EFFECT.  THE PARTIES WILL SELECT A MEDIATOR FROM THE CPR
PANELS OF DISTINGUISHED NEUTRALS, BUT SUCH MEDIATOR MUST HAVE PRIOR REINSURANCE
EXPERIENCE EITHER AS A LAWYER OR AS A PRESENT OR FORMER OFFICER OR MANAGEMENT
EMPLOYEE OF A REINSURANCE COMPANY, BUT NOT OF THE COMPANY, OR THE REINSURER, OR
ANY OF THEIR RESPECTIVE AFFILIATES.  EITHER PARTY AT COMMENCEMENT OF THE
MEDIATION MAY ASK THE MEDIATOR TO PROVIDE AN EVALUATION OF THE DISPUTE AND THE
PARTIES’ RELATIVE POSITIONS.

 

8.4                                ARBITRATION.  IF A DISPUTE IS NOT RESOLVED BY
MEDIATION AS PROVIDED IN SECTION 8.3 WITHIN THIRTY (30) DAYS OF THE SELECTION OF
A MEDIATOR (UNLESS THE MEDIATOR CHOOSES TO WITHDRAW SOONER), EITHER PARTY MAY
SUBMIT THE DISPUTE TO BE FINALLY RESOLVED BY ARBITRATION PURSUANT TO THE CPR
RULES FOR NON-ADMINISTERED ARBITRATION AS THEN IN EFFECT.  THE PARTIES CONSENT
TO A SINGLE, CONSOLIDATED ARBITRATION FOR ALL KNOWN DISPUTES EXISTING AT THE
TIME OF THE ARBITRATION AND FOR WHICH ARBITRATION IS PERMITTED.

 

(a)                                  The neutral organisation for purposes of
the CPR rules will be the CPR.  the arbitral tribunal shall be composed of three
arbitrators who are each experienced in the reinsurance business, of whom each
party shall appoint one in accordance with the “screened” appointment procedure
provided in Rule 5.4 of the CPR rules.  The non-party appointed arbitrator must
have prior U.S. reinsurance experience as a present or former officer or
management employee of a reinsurance company, but not of the Company, or the
Reinsurer, or any of their respective affiliates.  The arbitration shall be
conducted in New York. Each party shall be permitted to present its case,
witnesses and evidence, if any, in the presence of the other party.  A written
transcript of the proceedings shall be made and furnished to the parties.  The
arbitrators shall determine the dispute in accordance with English law, without
giving effect to any conflict of law rules or other rules that might render such
law inapplicable or unavailable, and shall apply this Agreement according to its
terms, provided that the provisions relating to arbitration shall be governed by
the Federal Arbitration Act, 9 U.S.C. § 1 et seq.

 

(b)                                 The parties agree to be bound by any award
or order resulting from any arbitration conducted hereunder and further agree
that judgment on any award or order resulting from an arbitration conducted
under this Section may be entered and enforced in any court having jurisdiction
thereof.

 

(c)                                  Except as expressly permitted by this
Agreement, no party will commence or voluntarily participate in any court action
or proceeding concerning a Dispute, except (i) for enforcement as contemplated
by Section 8.4(c) above, (ii) to restrict or vacate an arbitral decision based
on the grounds specified under Applicable Law, or (iii) for interim relief as
provided in paragraph (e) below.  For the purposes of the foregoing the parties
hereto submit to the non-exclusive jurisdiction of the courts of England.

 

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(d)                                 In addition to the authority otherwise
conferred on the arbitral tribunal, the tribunal shall have the authority to
make such orders for interim relief, including injunctive relief, as it may deem
just and equitable.  Notwithstanding paragraph (d) above, each party
acknowledges that in the event of any actual or threatened breach of certain of
the provisions of this Agreement, the remedy at law may not be adequate, and
therefore injunctive or other interim relief may be sought immediately to
restrain such breach.  If the tribunal shall not have been appointed, either
party may seek interim relief from a court having jurisdiction if the award to
which the applicant may be entitled may be rendered ineffectual without such
interim relief.  Upon appointment of the tribunal following any grant of interim
relief by a court, the tribunal may affirm or disaffirm such relief, and the
parties will seek modification or rescission of the court action as necessary to
accord with the tribunal’s decision.

 

(e)                                  Each of the parties will bear its own legal
costs in relation to any arbitration proceedings considered under this Section.

 

8.5                                AGREEMENT TO AN ALTERNATIVE PROCEDURE.  IF
THE PARTIES TO THIS AGREEMENT MUTUALLY AGREE THAT THE ALTERNATE PROCEDURE SET
OUT IN SECTION 8.6 AND 8.7 BELOW SHALL APPLY TO A PARTICULAR DISPUTE, THEN THE
PARTIES SHALL RESOLVE THAT DISPUTE IN ACCORDANCE WITH SECTIONS 8.6 AND 8.7 BELOW
RATHER THAN IN ACCORDANCE WITH SECTIONS 8.3 AND 8.4 ABOVE.

 

8.6                                ALTERNATIVE MEDIATION PROCEDURE.  IF THE
PARTIES HAVE MUTUALLY AGREED UNDER SECTION 8.5 THAT THIS SECTION SHALL APPLY TO
A DISPUTE AND SUCH DISPUTE IS NOT RESOLVED BY NEGOTIATION AS PROVIDED IN SECTION
8.2 WITHIN 45 DAYS FROM THE INITIAL NOTICE (OR SUCH LONGER PERIOD AS THE PARTIES
MAY AGREE)  THEN THE PARTIES WILL ATTEMPT TO SETTLE THAT DISPUTE BY MEDIATION IN
ACCORDANCE WITH THE CENTRE FOR EFFECTIVE DISPUTE RESOLUTION (CEDR SOLVE) MODEL
MEDIATION PROCEDURE (THE “MODEL PROCEDURE”).  TO INITIATE A MEDIATION, EITHER
PARTY SHALL GIVE NOTICE IN WRITING (“ADR NOTICE”) TO THE OTHER PARTY IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 9, REQUESTING MEDIATION IN ACCORDANCE
WITH THE PROVISIONS OF THE MODEL PROCEDURE.  A COPY OF THE ADR NOTICE SHOULD
ALSO BE SENT TO CEDR SOLVE.

 

8.7                                ALTERNATIVE ARBITRATION PROCEDURE.  IF THE
PARTIES HAVE MUTUALLY AGREED UNDER SECTION 8.5 THAT THIS SECTION SHALL APPLY TO
A DISPUTE AND SUCH DISPUTE IS NOT RESOLVED WITHIN 42 DAYS (OR SUCH LONGER PERIOD
AS THE PARTIES MAY AGREE) OF THE GIVING OF THE ADR NOTICE, OR IF ONE OF THE
PARTIES REFUSES TO PARTICIPATE IN MEDIATION, THE DISPUTE SHALL BE REFERRED TO
AND FINALLY RESOLVED UNDER THE RULES OF ARBITRATION OF THE INTERNATIONAL CHAMBER
OF COMMERCE (THE “RULES”) BY 3 ARBITRATORS APPOINTED IN ACCORDANCE WITH THE
RULES, AND SO THAT:

 

(a)                                 The Tribunal shall consist of three
arbitrators to be appointed in accordance with the Rules.

 

(b)                                   The place of arbitration shall be London.

 

(c)                                    The language to be used in the arbitral
proceedings shall be English.

 

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ARTICLE IX

 

MISCELLANEOUS PROVISIONS

 

9.1                                HEADINGS AND SCHEDULES.  HEADINGS USED HEREIN
ARE NOT A PART OF THIS AGREEMENT AND SHALL NOT AFFECT THE TERMS HEREOF.  THE
ATTACHED SCHEDULES ARE A PART OF THIS AGREEMENT.

 

9.2                                NOTICES.  ALL NOTICES, REQUESTS, DEMANDS AND
OTHER COMMUNICATIONS UNDER THIS AGREEMENT MUST BE IN WRITING AND WILL BE DEEMED
TO HAVE BEEN DULY GIVEN OR MADE AS FOLLOWS: (A) IF SENT BY REGISTERED OR
CERTIFIED MAIL WITH A RETURN RECEIPT REQUESTED, UPON RECEIPT; (B) IF SENT BY
REPUTABLE OVERNIGHT AIR COURIER, FOUR BUSINESS DAYS AFTER MAILING; (C) IF SENT
BY FACSIMILE TRANSMISSION, WITH A COPY MAILED ON THE SAME DAY IN THE MANNER
PROVIDED IN (A) OR (B) ABOVE, WHEN TRANSMITTED AND RECEIPT IS CONFIRMED BY
TELEPHONE; OR (D) IF OTHERWISE ACTUALLY PERSONALLY DELIVERED, WHEN DELIVERED,
AND SHALL BE DELIVERED AS FOLLOWS:

 

If to the Company:

 

Vantage West,
Great West Road,
Brentford,
Middlesex TW8 9AG

 

Facsimile: +44 (0) 20 8380 3065
Attention:  Company Secretary

 

If to the Reinsurer:

 

Craig Appin House,
8 Wesley Street,
Hamilton,
Bermuda,

 

Facsimile: +441 292 4910
Attention: Iain Lever (Aon Insurance Managers (Bermuda) Limited),

 

or to such other address or to such other Person as either party may have last
designated by notice to the other party.

 

9.3                                SUCCESSORS AND ASSIGNS.  THIS AGREEMENT SHALL
BE BINDING UPON AND INURE TO THE BENEFIT OF THE PARTIES HERETO AND THEIR
RESPECTIVE SUCCESSORS, PERMITTED ASSIGNS AND LEGAL REPRESENTATIVES.  NEITHER
THIS AGREEMENT, NOR ANY RIGHT OR OBLIGATION HEREUNDER, MAY BE ASSIGNED BY ANY
PARTY WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER PARTY HERETO.  ANY
ASSIGNMENT IN VIOLATION OF THIS SECTION 9.3 SHALL BE VOID AND SHALL HAVE NO
FORCE AND EFFECT.  NOTHING IN THIS SECTION 9.3 SHALL BE CONSTRUED TO PROHIBIT
THE REINSURER FROM RETROCEDING ALL OR ANY PORTION OF THE BUSINESS REINSURED
HEREUNDER.

 

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9.4                                EXECUTION IN COUNTERPART.  THIS AGREEMENT MAY
BE EXECUTED BY THE PARTIES HERETO IN ANY NUMBER OF COUNTERPARTS, AND BY EACH OF
THE PARTIES HERETO IN SEPARATE COUNTERPARTS, EACH OF WHICH COUNTERPARTS, WHEN SO
EXECUTED AND DELIVERED, SHALL BE DEEMED TO BE AN ORIGINAL, BUT ALL SUCH
COUNTERPARTS SHALL TOGETHER CONSTITUTE BUT ONE AND THE SAME INSTRUMENT.

 

9.5                                CURRENCY.  WHENEVER THE ACRONYM “GBP” OR THE
“£” SIGN APPEARS IN THIS AGREEMENT, THEY SHALL BE CONSTRUED TO MEAN BRITISH
POUNDS STERLING AND ALL TRANSACTIONS UNDER THIS AGREEMENT SHALL BE IN BRITISH
POUNDS STERLING.

 

9.6                                AMENDMENTS.  THIS AGREEMENT MAY NOT BE
CHANGED, ALTERED OR MODIFIED UNLESS THE SAME SHALL BE IN WRITING EXECUTED BY THE
COMPANY AND THE REINSURER.

 

9.7                                GOVERNING LAW.  THIS AGREEMENT WILL BE
CONSTRUED, PERFORMED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF ENGLAND WITHOUT
GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS THEREOF TO THE
EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION.

 

9.8                                ENTIRE AGREEMENT: SEVERABILITY.  THIS
AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO RELATING
TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ALL PRIOR AND CONTEMPORANEOUS
AGREEMENTS, UNDERTAKINGS, STATEMENTS, REPRESENTATIONS AND WARRANTIES,
NEGOTIATIONS AND DISCUSSIONS, WHETHER ORAL OR WRITTEN OF THE PARTIES AND THERE
ARE NO GENERAL OR SPECIFIC WARRANTIES, REPRESENTATIONS OR OTHER AGREEMENTS BY OR
AMONG THE PARTIES IN CONNECTION WITH THE ENTERING INTO OF THIS AGREEMENT OR THE
SUBJECT MATTER HEREOF EXCEPT AS SPECIFICALLY SET FORTH OR CONTEMPLATED HEREIN.

 

9.9                                ENFORCEABILITY.  IF ANY PROVISION OF THIS
AGREEMENT IS HELD TO BE VOID OR UNENFORCEABLE, IN WHOLE OR IN PART, (I) SUCH
HOLDING SHALL NOT AFFECT THE VALIDITY AND ENFORCEABILITY OF THE REMAINDER OF
THIS AGREEMENT, INCLUDING ANY OTHER PROVISION, PARAGRAPH OR SUBPARAGRAPH, AND
(II) THE PARTIES AGREE TO ATTEMPT IN GOOD FAITH TO REFORM SUCH VOID OR
UNENFORCEABLE PROVISION TO THE EXTENT NECESSARY TO RENDER SUCH PROVISION
ENFORCEABLE AND TO CARRY OUT ITS ORIGINAL INTENT.

 

9.10                          NO WAIVER: PRESERVATION OF REMEDIES.  NO CONSENT
OR WAIVER, EXPRESS OR IMPLIED, BY ANY PARTY TO OR OF ANY BREACH OR DEFAULT BY
ANY OTHER PARTY IN THE PERFORMANCE BY SUCH OTHER PARTY OF ITS OBLIGATIONS
HEREUNDER SHALL BE DEEMED OR CONSTRUED TO BE A CONSENT OR WAIVER TO OR OF ANY
OTHER BREACH OR DEFAULT IN THE PERFORMANCE OF OBLIGATIONS HEREUNDER BY SUCH
OTHER PARTY HEREUNDER.  FAILURE ON THE PART OF ANY PARTY TO COMPLAIN OF ANY ACT
OR FAILURE TO ACT OF ANY OTHER PARTY OR TO DECLARE ANY OTHER PARTY IN DEFAULT,
IRRESPECTIVE OF HOW LONG SUCH FAILURE CONTINUES, SHALL NOT CONSTITUTE A WAIVER
BY SUCH FIRST PARTY OF ANY OF ITS RIGHTS HEREUNDER.  THE RIGHTS AND REMEDIES
PROVIDED ARE CUMULATIVE AND ARE NOT EXCLUSIVE OF ANY RIGHTS OR REMEDIES THAT ANY
PARTY MAY OTHERWISE HAVE AT LAW OR EQUITY.

 

9.11                          THIRD PARTY BENEFICIARY.  NOTHING IN THIS
AGREEMENT SHALL CONFER ANY RIGHTS UPON ANY PERSON THAT IS NOT A PARTY OR A
SUCCESSOR OR PERMITTED ASSIGNEE OF A PARTY TO THIS AGREEMENT.

 

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9.12                          INTERPRETATION.  WHENEVER THE WORDS “INCLUDE”,
“INCLUDES” OR “INCLUDING” ARE USED IN THIS AGREEMENT, THEY SHALL BE DEEMED TO BE
FOLLOWED BY THE WORDS “WITHOUT LIMITATION”.

 

9.13                          SURVIVAL.  ARTICLES VIII AND IX SHALL SURVIVE THE
TERMINATION OF THIS AGREEMENT AND SECTION 6.5(B) SHALL REMAIN IN FORCE FOR A
PERIOD OF 18 MONTHS AFTER THE DATE ON WHICH ANY NOTICE IS SERVED UNDER SECTION
6.4.

 

9.14                          NEGOTIATED AGREEMENT. THIS AGREEMENT HAS BEEN
NEGOTIATED BY THE PARTIES AND THE FACT THAT THE INITIAL AND FINAL DRAFT WILL
HAVE BEEN PREPARED BY EITHER PARTY OR AN INTERMEDIARY WILL NOT GIVE RISE TO ANY
PRESUMPTION FOR OR AGAINST ANY PARTY TO THIS AGREEMENT OR BE USED IN ANY RESPECT
OR FORUM IN THE CONSTRUCTION OR INTERPRETATION OF THIS AGREEMENT OR ANY OF ITS
PROVISIONS.

 

19

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorised representatives.

 

 

 

FINANCIAL INSURANCE COMPANY LIMITED

 

 

 

By

/s/ William C. Goings

 

 

 

Name: William C. Goings

 

 

Title: Chief Executive

 

 

 

 

 

 

 

VIKING INSURANCE COMPANY, LIMITED

 

 

 

By

/s/ Victor C. Moses

 

 

 

Name: Victor C. Moses

 

 

Title: President

 

20

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SCHEDULE A – Part I

 

CEDING COMMISSION

 

The Company shall calculate in respect of each Accounting Period the amount by
which the deferred acquisition costs of the Company shall have increased or
decreased over such Accounting Period (the “Ceding Commission”).  The Ceding
Commission in respect of such Accounting Period for the purposes of Article IV
of this Agreement:-

 

(i)                                    shall be payable by the Reinsurer to the
Company in an amount equal to the amount, if any, by which the deferred
acquisition costs of the Company shall have decreased over that Accounting
Period; and

 

(ii)                                 shall be payable by the Company to the
Reinsurer in an amount equal to the amount, if any, by which the deferred
acquisition costs of the Company shall have increased over that Accounting
Period.

 

For the avoidance of doubt, the amount of deferred acquisition costs at any
relevant time shall be calculated in accordance with the Valuation and
Accounting Principles.

 

In calculating the Ceding Commission for the first Accounting Period, the
deferred acquisition costs of the Company shall at the commencement of such
Accounting Period be taken as £152,210,000.

 

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SCHEDULE A – Part II

 

ESTIMATED CEDING COMMISSION

 

Subject as provided in Schedule A - Part III below, the Reinsurer shall produce
at the end of each Accounting Period on the basis of information provided by the
Company a best estimate of the Ceding Commission for the next following
Accounting Period.

 

 

SCHEDULE A - PART III

 

ESTIMATED CEDING COMMISSION FOR FIRST 12 ACCOUNTING PERIODS

 

For the first 12 Accounting Periods the Estimated Ceding Commission shall, in
the case of each amount, be payable by the Reinsurer and shall be as follows,
provided that the parties acknowledge that such amounts are estimates only and
shall be the subject of the Reinsurer’s Ceding Commission Adjustment and the
Company’s Ceding Commission Adjustment, as appropriate, in accordance with Lines
9 and 10 of Schedule B of this Agreement and Section 5.5:-

 

Accounting Period ending on:-

 

Amount of Ceding Commission:-

 

 

 

 

 

31st January 2004

 

£

3,167,000

 

29th February 2004

 

£

3,167,000

 

31st March 2004

 

£

3,167,000

 

30th April 2004

 

£

3,167,000

 

31st May 2004

 

£

3,167,000

 

30th June 2004

 

£

3,167,000

 

31st July 2004

 

£

3,167,000

 

31st August 2004

 

£

3,167,000

 

30th September 2004

 

£

3,167,000

 

31st October 2004

 

£

3,167,000

 

30th November 2004

 

£

3,167,000

 

31st December 2004

 

£

3,167,000

 

 

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SCHEDULE B

 

ACCOUNTING PERIOD REPORTS

 

Note: All amounts paid or payable by the Company in respect of insurance premium
tax or any other tax assessed by reference to the premium payable under any
policy are to be netted off all amounts paid or payable to the Company in
respect of such insurance premium tax or other tax in calculating any of the
items listed below.  No account shall be taken in any of the items listed below
of any amount payable or receivable under this Agreement or of any change in the
Company’s provision for deferred acquisition costs provided that this shall not
affect the requirement to include the Reinsurer’s Ceding Commission Adjustment
or the Company’s Ceding Commission Adjustment as the case may be.

 

Line no.

 

Item

 

 

 

1.

 

Earned Premiums

 

£

 

 

2.

 

Other Income

 

£

 

 

3.

 

Total Income (Lines 1 to 2)

 

£

 

 

4.

 

Claims Incurred

 

£

 

 

5.

 

Expenses Payable

 

£

 

 

6.

 

Other Changes In Technical Provisions

 

£

 

 

7.

 

Total Expenditure (Lines 4 to 6)

 

£

 

 

8.

 

RIR

 

£

 

 

9.

 

Reinsurer’s Ceding Commission Adjustment

 

£

 

 

10.

 

Company’s Ceding Commission Adjustment

 

£

 

 

11.

 

Positive / (Negative) Settlement Amount (Line 3 – Line 7 + Line 8 – Line 9 +
Line 10)

 

£

 

 

 

where, in respect of each Accounting Period:

 

Line 1:                               “Earned Premiums” shall mean gross
premiums written in such Accounting Period plus any decrease or minus any
increase in the provision for unearned premiums over such Accounting Period, as
described in item I.1 of the Statutory Format and the notes thereto.  In
calculating the gross premiums written in any Accounting Period there shall be
deducted the outward reinsurance premiums paid in such Accounting Period.  To
the amount of any increase in the provision for unearned premiums over such
Accounting Period there shall be added any decrease or there shall be subtracted
any increase, over such Accounting Period, in the amount of the unearned
reinsurance premiums paid by the Company.  To the amount of any decrease in the
provision for unearned premiums over such Accounting Period, there shall be
added any increase, or there shall be subtracted any decrease, over such
Accounting Period, in the amount of the unearned reinsurance premiums paid by
the Company.  In calculating the gross premiums written, full account shall be
taken of

 

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the effect of cancellations notified in such Accounting Period and of any other
arrangement under which a policy is terminated in such Accounting Period;

 

Line 2:                               “Other Income” shall mean all other income
becoming due to the Company in the relevant Accounting Period, excluding any
income from investments and any realised or unrealised gains on investments and
excluding any amount received or becoming due under Ceded Reinsurance;

 

Line 3:                               “Total Income” shall mean the sum of
Earned Premiums and Other Income;

 

Line 4:                               “Claims Incurred” shall mean claims paid
in respect of the Relevant Liabilities less reinsurance recoveries received in
respect of the Relevant Liabilities in the relevant Accounting Period plus any
increase (or minus any decrease) over such Accounting Period in the provision
for claims.  For these purposes, such provision for claims shall be calculated,
at the beginning and end of each Accounting Period, net of any available credit
for reinsurance, not being a credit in respect of any reinsurance claim which is
due but unpaid, and otherwise in accordance with the manner in which such
provision for claims would be calculated for the purposes of item I.4(b) of the
Statutory Format;

 

Line 5:                               “Expenses Payable” shall mean operating
expenses incurred in the relevant Accounting Period including without
limitation:-

 

(a)                bonuses and rebates, net of reinsurance, as described in item
I.6 of the Statutory Format;

 

(b)               acquisition costs, administrative expenses, reinsurance
commissions and profit participation, as described in item I.7 of the Statutory
Format and the notes thereto; and

 

(c)                the charges described in items I.8 and III.8 of the Statutory
Format,

 

but, for the avoidance of doubt, shall exclude investment expenses and charges,
realised or unrealised losses on investments, and income and corporation tax;

 

Line 6:                               “Other Changes in Technical Provisions”
shall mean the increase in technical provisions (or the decrease in technical
provisions in which event such decrease shall be expressed as a negative amount)
not accounted for in any other line of this Schedule B, as described in item I.5
and I.9 of the Statutory Format and any other increases in reserves (or
decreases in reserves, in which event such decreases shall be expressed as
negative amounts) required to be taken into account for the purposes of the
returns made to the FSA but not required to be so taken into account under
Schedule 9A of the Companies Act 1985 in respect of the Company including any
change required as a result of the Company not having received any amount due in
respect of Ceded Reinsurance;

 

23

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Line 7:                               “Total Expenditure” shall mean the sum of
Claims Incurred, Expenses Payable and Other Changes in Technical Provisions;

 

Line 8:                               “RIR” shall mean the amount calculated
pursuant to Section 5.3(c) of this Agreement; and

 

Line 9:                               “Reinsurer’s Ceding Commission Adjustment”
shall mean the amount (if any) due from the Reinsurer as a result of the actual
Ceding Commission for such Accounting Period calculated in accordance with
Schedule A - Part I being different from the Estimated Ceding Commission for
that Accounting Period;

 

Line 10:                         “Company’s Ceding Commission Adjustment” shall
mean any amount due from the Company as a result of the actual Ceding Commission
for such Accounting Period calculated in accordance with Schedule A - Part I
being different from the Estimated Ceding Commission for that Accounting Period;

 

Line 11:                         the “Positive Settlement Amount” and the
“Negative Settlement Amount” shall mean the amounts calculated pursuant to
Section 5.3(a) of this Agreement.

 

Any amounts included in any of the items listed above shall be included in the
calculation set out in this Schedule B only to the extent that such amounts have
not been accounted for in any Monthly Report relating to any previous Accounting
Period.  Any amount specifically excluded from any line item shall be treated as
though it were excluded from all other line items unless the context shall
expressly require otherwise.  No amount shall be included in more than one line
item.  In the event of any conflict between the application of any express
provision in these notes or this Agreement, and the application of any statutory
or regulatory rule under this Schedule, in each case for the purposes of
determining the amount of any line item in this Schedule, the express provisions
in these notes and this Agreement shall prevail.

 

In calculating the Positive or Negative Settlement Amount (as the case may be)
for the first Accounting Period:-

 

(i)                                    the provision for unearned premiums shall
at the commencement of such Accounting Period be taken as £316,410,000;

 

(ii)                                 the amount of the unearned reinsurance
premiums shall at the commencement of such Accounting Period be taken as
£16,059,000;

 

(iii)                              the claims provision net of any available
credit for reinsurance, not being a credit in respect of any reinsurance claim
which is due but unpaid at the commencement of such Accounting Period shall at
such commencement be taken as £73,222,000; and

 

(iv)                             the technical provisions and reserves referred
to in Line 6 above shall at the commencement of such Accounting Period be taken
as £0.

 

24

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SCHEDULE C

 

LIST OF REINSURANCE ARRANGEMENTS

 

 

1.                                      An agreement to extend (to 31 December
2004) a 95% quota share agreement with Financial Insurance Guernsey PCC Limited
relating to the Company’s travel insurance business.

 

2.                                      An agreement to renew (to 31 December
2004) travel catastrophe cover with a syndicate including Everest Reinsurance
Company (UK branch), Odyssey America Re, Brit Insurance Limited, Sirius
International Insurance Corporation (UK branch), Transatlantic Reinsurance
Company, Converium Limited, Lloyds Syndicates No. 510, 557 and 570, relating to
the Company’s travel insurance business.

 

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