Exhibit 10.2

 

LOGO [g95347ex102_1logo.jpg]   

STATE BOARD OF ADMINISTRATION

OF FLORIDA

 

1801 HERMITAGE BOULEVARD

TALLAHASSEE, FLORIDA 32308

(850) 488-4406

 

POST OFFICE BOX 13300

32317-3300

  

CHARLIE CRIST

GOVERNOR

AS CHAIRMAN

 

ALEX SINK

CHIEF FINANCIAL OFFICER

AS TREASURER

 

BILL McCOLLUM

ATTORNEY GENERAL

AS SECRETARY

 

ASH WILLIAMS

EXECUTIVE DIRECTOR & CIO

    

REIMBURSEMENT CONTRACT

 

Effective: June 1, 2009

(Contract)

 

between

 

UNITED PROPERTY AND CASUALTY INSURANCE COMPANY

St. Petersburg, FL

(Company)

 

NAIC # 10969

 

and

    

 

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA)

WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

 

PREAMBLE

 

The Legislature of the State of Florida has enacted Section 215.555, Florida
Statutes “Statute”, which directs the SBA to administer the FHCF. This Contract,
consisting of the principal document entitled Reimbursement Contract, addressing
the mandatory FHCF coverage, and Addenda, is subject to the Statute and to any
administrative rule adopted pursuant thereto, and is not intended to be in
conflict therewith. All provisions in the principle document are equally
applicable to each Addenda unless specifically superseded by one of the Addenda.

 

In consideration of the promises set forth in this Contract, the parties agree
as follows:

 

ARTICLE I - SCOPE OF AGREEMENT

 

As a condition precedent to the SBA’s obligations under this Contract, the
Company, an Authorized Insurer or an entity writing Covered Policies under
Section 627.351, Florida Statutes, in the State of Florida, shall report to the
SBA in a specified format the business it writes which is described in this
Contract as Covered Policies.

 

The terms of this Contract shall determine the rights and obligations of the
parties. This Contract provides reimbursement to the Company under certain
circumstances, as described herein, and does not provide or extend insurance or
reinsurance coverage to any person, firm, corporation or other entity. The SBA
shall reimburse the Company for its Ultimate Net Loss on Covered Policies in
excess of the

 

 

  1   FHCF-2009K     Rule 19-8.010 F.A.C.

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Company’s Retention as a result of each Loss Occurrence commencing during the
Contract Year, to the extent funds are available, all as hereinafter defined.

ARTICLE II- PARTIES TO THE CONTRACT

This Contract is solely between the Company and the SBA which administers the
FHCF. In no instance shall any insured of the Company or any claimant against an
insured of the Company, or any other third party, have any rights under this
Contract, except as provided in Article XIV. The SBA will only disburse funds to
the Company, except as provided for in Article XIV of this Contract. The Company
shall not, without the prior approval of the Office of Insurance Regulation,
sell, assign, or transfer to any third party, in return for a fee or other
consideration any sums the FHCF pays under this Contract or the right to receive
such sums.

ARTICLE III - TERM

This Contract shall apply to Loss Occurrences which commence during the period
from 12:00:01 a.m., Eastern Time, June 1, 2009, to 12:00 midnight Eastern Time,
May 31, 2010 (Contract Year).

The Company must designate a coverage level, make the required selections, and
return this fully executed Contract (two originals) to the FHCF Administrator so
that the Contract is received by the FHCF Administrator no later than 5 p.m.,
Central Time, June 1, 2009. Failure to do so may result in a referral to the
Office of Insurance Regulation within the Department of Financial Services for
administrative action. Furthermore, the Company’s coverage level under this
Contract will be deemed as follows:

(1)

For Companies that are a member of a National Association of Insurance
Commissioners (NAIC) group, the same coverage level selected by the other
Companies of the same NAIC group shall be deemed. If executed Contracts for none
of the members of an NAIC group have been received by the FHCF Administrator,
the coverage level from the prior Contract Year shall be deemed.

(2)

For Companies that are not a member of an NAIC group under which other Companies
are active participants in the FHCF, the coverage level from the prior Contract
Year shall be deemed.

(3)

For New Participants, as that term is defined in Article V(21), that are a
member of an NAIC group, the same coverage level selected by the other Companies
of the same NAIC group shall be deemed.

(4)

For New Participants that are not a member of an NAIC group under which other
Companies are active participants in the FHCF, the 45%, 75% or 90% coverage
levels may be selected providing that the FHCF Administrator receives executed
Contracts within 30 calendar days of the effective date of the first Covered
Policy, otherwise, the 45% coverage level shall he deemed.

Pursuant to the terms of this Contract, the SBA shall not be liable for Loss
Occurrences which commence after the effective time and date of expiration or
termination. Should this Contract expire or terminate while a Loss Occurrence
covered hereunder is in progress, the SBA shall be responsible for such Loss
Occurrence in progress in the same manner and to the same extent it would have
been responsible had the Contract expired the day following the conclusion of
the Loss Occurrence in progress.

ARTICLE IV - LIABILITY OF THE FHCF

 

(1)

The SBA shall reimburse the Company, with respect to each Loss Occurrence
commencing during the Contract Year for the “Reimbursement Percentage” elected,
this percentage times the amount of Ultimate Net Loss paid by the Company in
excess of the Company’s Retention, as adjusted pursuant to Article V(28), plus
5% of the reimbursed losses for Loss Adjustment Expense Reimbursement.

(2)

The Reimbursement Percentage will be 45% or 75% or 90%, at the Company’s option
as elected under Article XVIII.

 

  2   FHCF-2009K     Rule 19-8.010 F.A.C.

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(3)

The aggregate liability of the FHCF with respect to all Reimbursement Contracts
covering this Contract Year shall not exceed the limit set forth under
Section 2l5.555(4)(c)1., Florida Statutes. For specifics regarding loss
reimbursement calculations, see section (3)(c) of Article X herein.

(4)

Upon the occurrence of a Covered Event, the SBA shall evaluate the potential
losses to the FHCF and the FHCF’s capacity at the time of the event. The initial
Projected Payout Multiple used to reimburse the Company for its losses shall not
exceed the Projected Payout Multiple as calculated based on the capacity needed
to provide the FHCF’s mandatory coverage. The SBA shall make adjustments to the
Projected Payout Multiple in order to reimburse the optional coverage based on
the SBA’s ongoing evaluation of potential losses and capacity.

(5)

Reimbursement amounts shall not be reduced by reinsurance paid or payable to the
Company from other sources.

(6)

After the end of the calendar year, the SBA shall notify insurers of the
estimated Borrowing Capacity and the Balance of the Fund as of December 31. In
May and October of each year, the SBA shall publish in the Florida
Administrative Weekly a statement of the FHCF’s estimated Borrowing Capacity and
the projected Balance of the Fund as of December 31.

(7)

The obligation of the SBA with respect to all Contracts covering a particular
Contract Year shall not exceed the Balance of the Fund as of December 31 of that
Contract Year, together with the maximum amount the SBA is able to raise through
the issuance of revenue bonds or other means available to the SBA under
Section 215.555, Florida Statutes, up to the limit in accordance with
Section 215.555(4)(c)1., Florida Statutes. The obligations and the liability of
the SBA are more fully described in Rule 19-8.013, Florida Administrative Code
(F.A.C.).

ARTICLE V - DEFINITIONS

 

(1)

Actual Claims-Paying Capacity of the FHCF

This term means the sum of the Balance of the Fund as of December 31 of a
Contract Year, plus any reinsurance purchased by the FHCF, plus the amount the
SBA is able to raise through the issuance of revenue bonds up to the limit in
accordance with Section 215.555(4)(c)1. and (6), Florida Statutes.

(2)

Actuarially Indicated

This term means, with respect to Premiums paid by Companies for reimbursement
provided by the FHCF, an amount determined in accordance with the definition
provided in Section 215.555(2)(a), Florida Statutes.

(3)

Additional Living Expense (ALE)

ALE losses covered by the FHCF are not to exceed 40 percent of the insured value
of a Residential Structure or its contents based on the coverage provided in the
policy. Fair rental value, loss of rents, or business interruption losses are
not covered by the FHCF.

(4)

Administrator

This term means the entity with which the SBA contracts to perform
administrative tasks associated with the operations of the FHCF. The
Administrator is Paragon Strategic Solutions Inc., 8200 Norman Center Drive,
Bloomington, Minnesota 55437. The telephone number is (800) 689-3863, and the
facsimile number is (800) 264-0492.

(5)

Authorized Insurer

This term is defined in Section 624.09(1), Florida Statutes.

(6)

Borrowing Capacity

This term means the amount of funds which are able to be raised by the issuance
of revenue bonds or through other financing mechanisms, less bond issuance
expenses and reserves.

(7)

Citizens Property Insurance Corporation (Citizens)

This term means the entity formed under Section 627.351(6), Florida Statutes and
refers to both Citizens Property Insurance Corporation High Risk Account and
Citizens Property Insurance Corporation Personal Lines and Commercial Lines
Accounts.

 

  3   FHCF-2009K     Rule 19-8.010 F.A.C.

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(8)

Contract

This term means this Reimbursement Contract for the current Contract Year.

(9)

Covered Event

This term means any one storm declared to be a hurricane by the National
Hurricane Center which causes insured losses in Florida. A Covered Event begins
when a hurricane causes damage in Florida while it is a hurricane and continues
throughout any subsequent downgrades in storm status by the National Hurricane
Center regardless of whether the hurricane makes landfall. Any storm, including
a tropical storm, which does not become a hurricane is not a Covered Event.

(10)

Covered Policy or Covered Policies

  (a)

Covered Policy, as defined in Section 215.555(2)(c), Florida Statutes, is
further clarified to mean only that portion of a binder, policy or contract of
insurance that insures real or personal property located in the State of Florida
to the extent such policy insures a Residential Structure, as defined in
definition (27) herein, or the contents of a Residential Structure, located in
the State of Florida.

  (b)

Due to the specialized nature of the definition of Covered Policies, Covered
Policies are not limited to only one line of business in the Company’s annual
statement required to be filed by Section 624.424, Florida Statutes. Instead,
Covered Policies are found in several lines of business on the Company’s annual
statement. Covered Policies will at a minimum be reported in the Company’s
statutory annual statement as:

  1.

Fire

  2.

Allied Lines

  3.

Farmowners Multiple Peril

  4.

Homeowners Multiple Peril

  5.

Commercial Multiple Peril (non liability portion, covering condominiums and
apartments)

  6.

Inland Marine

Note that where particular insurance exposures, e.g. mobile homes, are reported
on an annual statement is not dispositive of whether or not the exposure is a
Covered Policy.

  (c)

This definition applies only to the first-party property section of a policy
pertaining strictly to the structure, its contents, appurtenant structures, or
ALE coverage.

  (d)

Covered Policy also includes any collateral protection insurance policy covering
personal residences which protects both the borrower’s and the lender’s
financial interest, in an amount at least equal to the coverage for the dwelling
in place under the lapsed homeowner’s policy, if such policy can be accurately
reported as required in Section 215.555(5), Florida Statutes. A Company will be
deemed to be able to accurately report data if the required data, as specified
in the Premium Formula adopted in Section 215.555(5), Florida Statutes, is
available.

  (e)

See Article VI of this Contract for specific exclusions.

(11)

Deductible Buy-Back Policies

This term means a specific policy that provides coverage to a policyholder for
some portion of the policyholder’s deductible under a policy issued by another
insurer.

(12)

Estimated Claims-Paying Capacity of the FHCF

This term means the sum of the projected Balance of the Fund as of December 31
of a Contract Year, plus any reinsurance purchased by the FHCF, plus the most
recent estimate of the Borrowing Capacity of the FHCF, determined pursuant to
Section 215.555(4)(c), Florida Statutes.

(13)

Excess Policies

This term, for the purposes of this Contract, means a policy that provides
insurance protection for large commercial property risks that provides a layer
of coverage above a primary layer (which is insured by a different insurer) that
acts much the same as a very large deductible.

 

  4   FHCF-2009K     Rule 19-8.010 F.A.C.

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(14)

Florida Department of Financial Services (Department)

This term means the Florida regulatory agency, created pursuant to
Section 20.121, Florida Statutes, which is charged with regulating the Florida
insurance market and administering the Florida Insurance Code.

(15)

Florida Insurance Code

This term means those chapters identified in Section 624.01, Florida Statutes,
which are designated as the Florida Insurance Code.

(16)

Formula or the Premium Formula

This term means the Formula approved by the SBA for the purpose of determining
the Actuarially Indicated Premium to be paid to the FHCF. The Premium Formula is
defined as an approach or methodology which leads to the creation of premium
rates. The resulting rates are therefore incorporated as part of the Premium
Formula.

(17)

Fund Balance or Balance of the Fund as of December 31

These terms mean the amount of assets available to pay claims, not including any
bonding proceeds, resulting from Covered Events which occurred during the
Contract Year.

(18)

Insurer Group

For purposes of the coverage option election in Section 215.555(4)(b), Florida
Statutes, Insurer Group means the group designation assigned by the National
Association of Insurance Commissioners (NAIC) for purposes of filing
consolidated financial statements. A Company is a member of a group as
designated by the NAIC until such Company is assigned another group designation
or is no longer a member of a group recognized by the NAIC.

(19)

Loss Occurrence

This term means the sum of individual insured losses incurred under Covered
Policies resulting from the same Covered Event. “Losses” means direct incurred
losses under Covered Policies and excludes Loss Adjustment Expenses.

(20)

Loss Adjustment Expense Reimbursement

  (a)

Loss Adjustment Expense Reimbursement shall be 5% of the reimbursed losses under
this Contract as provided in Article IV, pursuant to Section 215.555(4)(b)1,
Florida Statutes.

  (b)

To the extent that loss reimbursements are limited to the Payout Multiple
applied to each Company, the 5% Loss Adjustment Expense is included in the total
Payout Multiple applied to each Company.

(21)

New Participant(s)

This term means all Companies which begin writing Covered Policies on or after
the beginning of the Contract Year. A Company that removes exposure from either
Citizens entity, as that term is defined in (7) above, pursuant to an assumption
agreement effective on or after June 1 and had written no other Covered Policies
before June 1 is also considered a New Participant.

(22)

Office of Insurance Regulation

This term means that office within the Department of Financial Services and
which was created in Section 20.121(3), Florida Statutes.

(23)

Payout Multiple

This term means the multiple as calculated in accordance with
Section 215.555(4)(c), Florida Statutes, which is derived by dividing the single
season Claims-Paying Capacity of the FHCF by the total aggregate industry
Reimbursement Premium for the FHCF for the Contract Year billed as of
December 31 of the Contract Year. The final Payout Multiple is determined once
Reimbursement Premiums have been billed as of December 31 and the amount of bond
proceeds has been determined.

(24)

Premium

This term means the same as Reimbursement Premium.

(25)

Projected Payout Multiple

The Projected Payout Multiple is used to calculate a Company’s projected payout
pursuant to Section 215.555(4)(d)2., Florida Statutes. The Projected Payout
Multiple is derived by dividing the

 

  5   FHCF-2009K     Rule 19-8.010 F.A.C.

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estimated single season Claims-Paying Capacity of the FHCF by the estimated
total aggregate industry Reimbursement Premium for the FHCF for the Contract
Year. The Company’s Reimbursement Premium as paid to the SBA for the Contract
Year is multiplied by the Projected Payout Multiple to estimate the Company’s
coverage from the FHCF for the Contract Year.

(26)

Reimbursement Premium

This term means the Premium determined by multiplying each $1,000 of insured
value reported by the Company in accordance with Section 215.555(5)(b), Florida
Statutes, by the rate as derived from the Premium Formula, as described in Rule
19-8.028, F.A.C.

(27)

Residential Structures

This term means dwelling units used as a home or residence, including the
primary structure and appurtenant structures insured under the same policy and
any other structures covered under endorsements associated with a policy
covering a residential structure, the principal function of which at the time of
loss was as a primary or secondary residence. Covered Residential Structures do
not include any structures listed under Article VI herein.

(28)

Retention

The Company’s Retention means the amount of hurricane losses under Covered
Policies which must be incurred by the Company before it is eligible for
reimbursement from the FHCF.

  (a)

When the Company experiences covered losses from one or two Covered Events
during the Contract Year, the Company’s full Retention shall be applied to each
of the Covered Events.

  (b)

When the Company experiences covered losses from more than two Covered Events
during the Contract Year, the Company’s full Retention shall be applied to each
of the two Covered Events causing the largest covered losses for the Company.
For each other Covered Event resulting in covered losses, the Company’s
Retention shall be reduced to one-third of its full Retention and applied to all
other Covered Events.

  1.

All reimbursement of covered losses for each Covered Event shall be based on the
Company’s full Retention until January 1 of the Contract Year. Adjustments to
reflect a reduction to one-third of the full Retention shall be made as soon as
practicable after January 1 of the Contract Year provided the Company reports
its losses as specified in this Contract.

  2.

Adjustments to the Company’s Retention shall be based upon its paid and
outstanding losses as reported on the Company’s Proof of Loss Reports but shall
not include incurred but not reported losses. The Company’s Proof of Loss
Reports shall be used to determine which Covered Events constitute the Company’s
two largest Covered Events, and the reduction to one-third of the full Retention
shall be applied to all other Covered Events for the Contract Year. After this
initial determination, any subsequent adjustments shall be made by the SBA only
if the quarterly loss reports reveal that loss development patterns have
resulted in a change in the order of Covered Events entitled to the reduction to
one-third of the full Retention.

  (c)

The Company’s full Retention is established in accordance with the provisions of
Section 215.555(2)(e), Florida Statutes, and shall be determined by multiplying
the Retention Multiple by the Company’s Reimbursement Premium for the Contract
Year.

  (d)

Once the Company’s limit of coverage has been exhausted, the Company will not be
entitled to further reimbursements.

(29)

Retention Multiple

  (a)

The Retention Multiple is applied to the Company’s Reimbursement Premium to
determine the Company’s Retention. The Retention Multiple for the 2009/2010
Contract Year shall be equal to $4.5 billion, adjusted based upon the reported
exposure for the 2008/2009 Contract Year to reflect the percentage growth in
exposure to the FHCF since 2004, divided by the estimated total industry
Reimbursement Premium at the 90% reimbursement percentage level for the Contract
Year as determined by the SBA.

  (b)

The Retention Multiple as determined under (29)(a) above shall be adjusted to
reflect the

 

  6   FHCF-2009K     Rule 19-8.010 F.A.C.

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reimbursement percentage elected by the Company under this Contract as follows:

  1.

If the Company elects a 90% reimbursement percentage, the adjusted Retention
Multiple is 100% of the amount determined under (29)(a) above;

  2.

If the Company elects a 75% reimbursement percentage, the adjusted Retention
Multiple is 120% of the amount determined under (29)(a) above; or

  3.

If the Company elects a 45% reimbursement percentage, the adjusted Retention
Multiple is 200% of the amount determined under (29)(a) above.

 

(30)

Ultimate Net Loss

  (a)

This term means all losses of the Company under Covered Policies, prior to the
application of the Company’s FHCF Retention, as defined under (28) above, and
reimbursement percentage, and excluding loss adjustment expense, arising from
each Loss Occurrence during the Contract Year, provided, however, that the
Company’s loss shall be determined in accordance with the deductible level
written under the policy sustaining the loss.

  (b)

Salvages and all other recoveries, excluding reinsurance recoveries, shall be
first deducted from such loss to arrive at the amount of liability attaching
hereunder.

  (c)

All salvages, recoveries or payments recovered or received subsequent to a loss
settlement under this Contract shall be applied as if recovered or received
prior to the aforesaid settlement and all necessary adjustments shall be made by
the parties hereto.

  (d)

Nothing in this clause shall be construed to mean that losses under this
Contract are not recoverable until the Company’s Ultimate Net Loss has been
ascertained.

  (e)

The SBA shall be subrogated to the rights of the Company to the extent of its
reimbursement of the Company. The Company agrees to assist and cooperate with
the SBA in all respects as regards such subrogation. The Company further agrees
to undertake such actions as may be necessary to enforce its rights of salvage
and subrogation, and its rights, if any, against other insurers as respects any
claim, loss, or payment arising out of a Covered Event.

ARTICLE VI - EXCLUSIONS

This Contract does not provide reimbursement for:

(1)

Any losses not defined as being within the scope of a Covered Policy.

(2)

Any policy which excludes wind or hurricane coverage.

(3)

Any Excess Policy or Deductible Buy-Back Policy that requires individual
ratemaking.

(4)

Any policy for Residential Structures, as defined in Article V(27) herein, that
provides a layer of coverage underneath an Excess Policy, as defined in Article
V(13) herein, issued by a different insurer.

(5)

Any liability of the Company attributable to losses for fair rental value, loss
of rent or rental income, or business interruption.

(6)

Any collateral protection policy that does not meet the definition of Covered
Policy as defined in Article V(10)(d) herein.

(7)

Any reinsurance assumed by the Company.

(8)

Any exposure for hotels, motels, timeshares, shelters, camps, retreats, and any
other rental property used solely for commercial purposes.

(9)

Any exposure for homeowner associations if no habitational structures are
insured under the policy.

(10)

Any exposure for homes and condominium structures or units that are non-owner
occupied and rented for six (6) or more rental periods by different parties
during the course of a twelve (12) month period.

(11)

Commercial healthcare facilities and nursing homes; however, a nursing home
which is an integral part of a retirement community consisting primarily of
habitational structures that are not nursing homes will not be subject to this
exclusion.

 

  7   FHCF-2009K     Rule 19-8.010 F.A.C.

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(12)

Any exposure under commercial policies covering only appurtenant structures or
structures that do not function as a habitational structure (e.g. a policy
covering only the pool of an apartment complex).

(13)

Personal contents in a commercial storage facility covered under a policy that
covers only those personal contents.

(14)

Policies covering only Additional Living Expense.

(15)

Any exposure for barns or barns with apartments.

(16)

Any exposure for builders risk coverage or new residential structures still
under construction.

(17)

Any exposure described as a vacant property under a commercial policy.

(18)

Any exposure for recreational vehicles or boats (including boat related
equipment) requiring licensing and written on a separate policy or endorsement.

(19)

Any liability of the Company for extra contractual obligations and excess of
original policy limits liabilities.

(20)

Any losses paid in excess of a policy’s hurricane limit in force at the time of
each Covered Event, including individual coverage limits (i.e., building,
appurtenant structures, contents, and additional living expense). This exclusion
includes overpayments of a specific individual coverage limit even if total
payments under the policy are within the aggregate policy limit.

(21)

Any losses paid under a policy for Additional Living Expense, written as a time
element coverage, in excess of the Additional Living Expense exposure reported
for that policy under the Data Call for the applicable Contract Year (unless
policy limits have changed effective after June 30th of the Contract Year).

(22)

Any losses for which the Company’s claims files do not adequately support. Claim
file support shall be deemed adequate if in compliance with the Records
Retention Requirements outlined on the Form FHCF-L1B (Proof of Loss Report)
applicable to the Contract Year.

(23)

Any losses attributable to loss assessments that are not hurricane-related
expenses.

(24)

Losses in excess of the sum of the Balance of the Fund as of December 31 of the
Contract Year and the amount the SBA is able to raise through the issuance of
revenue bonds or by the use of other financing mechanisms, up to the limit
pursuant to Section 215.555(4)(c), Florida Statutes.

(25)

Any liability assumed by the Company from Pools, Associations, and Syndicates.
Exception: Covered Policies assumed from Citizens under the terms and conditions
of an executed assumption agreement between the Authorized Insurer and Citizens
are covered by this Contract.

(26)

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

(27)

Any liability of the Company for loss or damage caused by or resulting from
nuclear reaction, nuclear radiation, or radioactive contamination from any
cause, whether direct or indirect, proximate or remote, and regardless of any
other cause or event contributing concurrently or in any other sequence to the
loss.

(28)

The FHCF does not provide coverage for water damage which is generally excluded
under property insurance contracts and has been defined to mean flood, surface
water, waves, tidal water, overflow of a body of water, storm surge, or spray
from any of these, whether or not driven by wind.

(29)

Specialized Fine Arts Risks as defined in Rule 19-8.028(4)(d), F.A.C.

(30)

Claims for loss assessment coverage under Covered Policies with an effective
date after the date of the Covered Event for which the loss assessments are
attributed.

 

  8   FHCF-2009K     Rule 19-8.010 F.A.C.

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ARTICLE VII - MANAGEMENT OF CLAIMS AND LOSSES

The Company shall investigate and settle or defend all claims and losses. All
payments of claims or losses by the Company within the terms and limits of the
appropriate coverage parts of Covered Policies shall be binding on the SBA,
subject to the terms of this Contract, including the provisions in Article XIII
relating to inspection of records and examinations.

ARTICLE VIII - LOSS REIMBURSEMENT ADJUSTMENTS

 

(1)

Offsets

The SBA reserves the right to offset amounts payable to the SBA from the
Company, including amounts payable under previous Contract Years, against any
reimbursement or advance amounts due and payable to the Company from the SBA as
a result of the liability of the SBA.

(2)

Reimbursement Adjustments

Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the right
to seek the return of excess loss reimbursements which have been paid to the
Company along with interest thereon. Excess loss reimbursements are those
payments made to the Company by the SBA that are in excess of the Company’s
coverage under the Contract Year. Excess loss reimbursements may result from
adjustments to the Projected Payout Multiple or the Payout Multiple, incorrect
exposure (Data Call) submissions or resubmissions, incorrect calculations of
Reimbursement Premiums or Retentions, incorrect Proof of Loss Reports, incorrect
calculation of reinsurance recoveries, or subsequent readjustment of
policyholder claims, including subrogation and salvage, or any combination of
the foregoing. The Company will be sent an invoice showing the due date for
adjustments along with the interest due thereon through the due date. The
applicable interest rate for interest credits, and for interest charges for
adjustments beyond the Company’s control, will be the average rate earned by the
SBA for the FHCF for the first five months of the Contract Year. The applicable
interest rate for interest charges due to adjustments resulting from incorrect
exposure submissions or Proof of Loss Reports will accrue at this rate plus 5%.
However, in recognition that the SBA’s loss examination process for a particular
Contract Year may span several years, and to eliminate the disparity between
Companies scheduled for loss examinations throughout a multi-year process, the
interest rate applicable to reimbursement adjustments resulting from loss
reimbursement examinations shall not include the additional 5%. All interest
will continue to accrue if not paid by the due date.

ARTICLE IX - REIMBURSEMENT PREMIUM

 

(1)

The Company shall, in a timely manner, pay the SBA its Reimbursement Premium for
the Contract Year. The Reimbursement Premium for the Contract Year shall be
calculated in accordance with Section 215.555, Florida Statutes, with any rules
promulgated thereunder, and with Article X(2).

(2)

Since the calculation of the Actuarially Indicated Premium assumes that the
Companies will pay their Reimbursement Premiums timely, interest charges will
accrue under the following circumstances. A Company may choose to estimate its
own Premium installments. However, if the Company’s estimation is less than the
provisional Premium billed, an interest charge will accrue on the difference
between the estimated Premium and the final Premium. If a Company estimates its
first installment, the Administrator shall bill that estimated Premium as the
second installment as well, which will be considered as an estimate by the
Company. No interest will accrue regarding any provisional Premium if paid as
billed by the FHCF’s Administrator, except in the case of an estimated second
installment as set forth in this Article. Also, if a Company makes an estimation
that is higher than the provisional Premium billed but is less than the final
Premium, interest will not accrue. If the Premium payment is not received from a
Company when it is due, an interest charge will accrue on a daily basis until
the payment is received. Interest will also accrue on Premiums resulting from
submissions or resubmissions finalized after December 1 of the Contract Year. An
interest credit will be applied for any Premium which is overpaid as either an
estimate or as a

 

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provisional Premium. Interest shall not be credited past December 1 of the
Contract Year. The applicable interest rate for interest credits will be the
average rate earned by the SBA for the FHCF for the first five months of the
Contract Year. The applicable interest rate for interest charges will accrue at
this rate plus 5%.

ARTICLE X - REPORTS AND REMITTANCES

 

(1)

Exposures

  (a)

If the Company writes Covered Policies before June 1 of the Contract Year, the
Company shall report to the SBA, unless otherwise provided in Rule 19-8.029,
F.A.C., no later than the statutorily required date of September 1 of the
Contract Year, by ZIP Code or other limited geographical area as specified by
the SBA, its insured values under Covered Policies as of June 30 of the Contract
Year as outlined in the annual reporting of insured values form, FHCF-D1A (Data
Call) adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data
or information in the format specified by the SBA.

  (b)

If the Company first begins writing Covered Policies on or after June 1 but
prior to December 1 of the Contract Year, the Company shall report to the SBA,
no later than March 1 of the Contract Year, by ZIP Code or other limited
geographical area as specified by the SBA, its insured values under Covered
Policies as of December 31 of the Contract Year as outlined in the Supplemental
Instructions for New Participants section of the Data Call adopted for the
Contract Year under Rule 19-8.029, F.A.C., and other data or information in the
format specified by the SBA.

  (c)

If the Company first begins writing Covered Policies on or after December 1 but
through and including May 31 of the Contract Year, the Company shall not report
its exposure data for the Contract Year to the SBA.

  (d)

The requirement that a report is due on a certain date means that the report
shall be in the physical possession of the FHCF’s Administrator in Minneapolis
no later than 5 p.m. on the due date. If the applicable due date is a Saturday,
Sunday or legal holiday, then the actual due date will be the day immediately
following the applicable due date which is not a Saturday, Sunday or legal
holiday. For purposes of the timeliness of the submission, neither the United
States Postal Service postmark nor a postage meter date is in any way
determinative. Reports sent to the SBA in Tallahassee, Florida, will be returned
to the sender. Reports not in the physical possession of the FHCF’s
Administrator by 5 p.m., Central Time, on the applicable due date are late.

  (e)

Pursuant to the provisions of Section 215.557, Florida Statutes, the reports of
insured values under Covered Policies by ZIP Code submitted to the SBA pursuant
to Section 215.555, Florida Statutes, are confidential and exempt from the
provisions of Section 119.07(1), Florida Statutes, and Section 24(a), Art. I of
the State Constitution.

(2)

Reimbursement Premium

  (a)

If the Company writes Covered Policies before June 1 of the Contract Year, the
Company shall pay the FHCF its Reimbursement Premium in installments due on or
before August 1, October 1, and December 1 of the Contract Year in amounts to be
determined by the FHCF. However, if the Company’s Reimbursement Premium for the
prior Contract Year was less than $5,000, the Company’s full provisional
Reimbursement Premium, in an amount equal to the Reimbursement Premium paid in
the prior year, shall be due in full on or before August 1 of the Contract Year.
The Company will be invoiced for amounts due, if any, beyond the provisional
Reimbursement Premium payment, on or before December 1 of the Contract Year. In
addition, if control of the Company has been transferred through any legal or
regulatory proceeding to a state regulator or court appointed receiver or
rehabilitator (referred to in the aggregate as “State action”), the full annual
provisional Reimbursement Premium as billed and any outstanding balances will be
due and payable on August 1, or the date that such State action occurs after

 

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August 1 of the Contract Year. Such acceleration will not apply when the
receiver or rehabilitator provides a letter of assurance to the FHF that the
Company will have the resources to pay the premium in installments in accordance
with the contractual provisions.

  (b)

A New Participant that first begins writing Covered Policies on or after June 1
but prior to December 1 of the Contract Year shall pay the FHCF a provisional
Reimbursement Premium of $1,000 upon execution of this Contract. The
Administrator shall calculate the Company’s actual Reimbursement Premium for the
period based on its actual exposure as of December 31 of the Contract Year, as
reported on or before March 1. To recognize that New Participants have limited
exposure during this period, the actual Premium as determined by processing the
Company’s exposure data shall then be divided in half, the provisional Premium
shall be credited, and the resulting amount shall be the total Premium due for
the Company for the remainder of the Contract Year. However, if that amount is
less than $1,000, then the Company shall pay $1,000. The Premium payment is due
no later than May 1 of the Contract Year. The Company’s Retention and coverage
will be determined based on the total Premium due as calculated above.

  (c)

A New Participant that first begins writing Covered Policies on or after
December 1 but through and including May 31 of the Contract Year shall pay the
FHCF a Reimbursement Premium of $1,000 upon execution of this Contract.

  (d)

The requirement that the Reimbursement Premium is due on a certain date means
that the Premium shall be in the physical possession of the FHCF no later than 5
p.m., Eastern Time, on the due date applicable to the particular installment. If
remitted by check to the FHCF’s Post Office Box, the check shall be physically
in the Post Office Box 550261, Tampa, FL 33655-0261, as set out on the invoice
sent to the Company. If remitted by check by hand delivery, the check shall be
physically on the premises of the FHCF’s bank in Tampa, Florida, as set out on
the invoice sent to the Company. If remitted electronically, the wire transfer
shall have been completed to the FHCF’s account at its bank in Tampa, Florida,
as set out on the invoice sent to the Company. If the applicable due date is a
Saturday, Sunday or legal holiday, then the actual due date will be the day
immediately following the applicable due date which is not a Saturday, Sunday or
legal holiday. For purposes of the timeliness of the remittance, neither the
United States Postal Service postmark nor a postage meter date is in any way
determinative. Premium checks sent to the SBA in Tallahassee, Florida, or to the
FHCF’s Administrator in Minneapolis, Minnesota, will be returned to the sender.
Reimbursement Premiums not in the physical possession of the FHCF by 5 p.m.,
Eastern Time, on the applicable due date are late.

  (e)

Except as required by Section 215.555(7)(c), Florida Statutes, or as described
in the following sentence, Reimbursement Premiums, together with earnings
thereon, received in a given Contract Year will be used only to pay for losses
attributable to Covered Events occurring in that Contract Year or for losses
attributable to Covered Events in subsequent Contract Years and will not be used
to pay for past losses or for debt service on revenue bonds. Pursuant to
Section 215.555(6)(a)1., Florida Statutes, Reimbursement Premiums and earnings
thereon may be used for payments relating to revenue bonds in the event
Emergency Assessments are insufficient. If Reimbursement Premiums or earnings
thereon are used for debt service on revenue bonds, then the amount of the
Reimbursement Premiums or earnings thereon so used shall be returned, without
interest, to the Fund when Emergency Assessments or other legally available
funds remain available after making payment relating to the revenue bonds and
any other purposes for which Emergency Assessments were levied.

(3)

Claims and Losses

  (a)

In General

  1.

Claims and losses resulting from Loss Occurrences commencing during the Contract
Year shall be reported by the Company and reimbursed by the FHCF as provided
herein and in accordance with the Statute, this Contract, and any rules adopted
pursuant to the Statute. For a Company participating in a quota share primary
insurance agreement(s) with Citizens

 

  11   FHCF-2009K     Rule 19-8.010 F.A.C.

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Property Insurance Corporation High Risk Account, Citizens and the Company shall
report only their respective portion of losses under the quota share primary
insurance agreement(s). Pursuant to Section 215.555(4)(c), Florida Statutes, the
SBA is obligated to pay for losses not to exceed the Actual Claims-Paying
Capacity of the FHCF, up to the limit in accordance with
Section 215.555(4)(c)1., Florida Statutes, for any one Contract Year.

  2.

If the Company is in non-compliance with Section 215.555, Florida Statutes for
any Contract Year, including deadlines for sending in Contracts, addendums or
attachments to Contracts, Data Call submissions or resubmissions, loss reports,
or in responding to SBA exam requirements, the SBA reserves the right to
withhold reimbursements or advances until such time the Company becomes
compliant.

(b)

Loss Reports

  1.

At the direction of the SBA, the Company shall report its projected Ultimate Net
Loss from each Loss Occurrence to provide information to the SBA in determining
any potential liability for possible reimbursable losses under the Contract on
the Interim Loss Report, Form FHCF-L1A, adopted for the Contract Year under Rule
19-8.029, F.A.C. Interim Loss Reports (including subsequent Interim Loss Reports
if required by the SBA) will be due in no less than fourteen days from the date
of the notice from the SBA that such a report is required.

  2.

FHCF loss reimbursements will be issued based on Ultimate Net Loss information
reported by the Company on the Proof of Loss Report, Form FHCF-L1B, adopted for
the Contract Year under Rule 19-8.029, F.A.C. To qualify for reimbursement, the
Proof of Loss Report must have the original signatures of two executive officers
authorized by the Company to sign the report. The Company must also submit a
detailed claims listing (as outlined on the Proof of Loss Report) at the same
time it submits its first Proof of Loss Report for a specific Covered Event that
qualifies the Company for reimbursement under that Covered Event, and should be
prepared to supply a detailed claims listing for any subsequent Proof of Loss
Report upon request. While a Company may submit a Proof of Loss Report
requesting reimbursement at any time following a Loss Occurrence, all Companies
shall submit a mandatory Proof of Loss Report for each Loss Occurrence no
earlier than December 1 and no later than December 31 of the Contract Year
during which the Covered Event(s) occurs using the most current data available,
regardless of the amount of Ultimate Net Loss or the amount of loss
reimbursements or advances already received. Reports may be faxed only if the
Company does not qualify for a reimbursement.

  3.

Updated Proof of Loss Reports for each Loss Occurrence are due quarterly
thereafter until all claims and losses resulting from a Loss Occurrence are
fully discharged including any adjustments to such losses due to salvage or
other recoveries, or the Company has received its full coverage under the
Contract Year in which the Loss Occurrence(s) occurred. Guidelines follow:

  a.

Quarterly Proof of Loss Reports are due by March 31 from an insurer whose losses
exceed, or are expected to exceed, 50% of its FHCF Retention for a specific Loss
Occurrence(s).

  b.

Quarterly Proof of Loss Reports are due by June 30 from an insurer whose losses
exceed, or are expected to exceed, 75% of its FHCF Retention for a specific Loss
Occurrence(s).

  c.

Quarterly Proof of Loss Reports are due by September 30 and quarterly thereafter
from an insurer whose losses exceed, or are expected to exceed, its FHCF
Retention for a specific Loss Occurrence(s).

If the Company’s Retention must be recalculated as the result of an exposure
resubmission, and if the recalculated Retention changes the FHCF’s reimbursement
obligations, then the Company shall submit additional Proof of Loss Reports for
recalculation of the FHCF’s obligations.

 

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  4.

Annually after December 31 of the Contract Year, all Companies shall submit a
mandatory year-end Proof of Loss Report for each Loss Occurrence, as applicable,
using the most current data available. This Proof of Loss Report shall be filed
no earlier than December 1 and no later than December 31 of each year and shall
continue until the earlier of the commutation process described in (3)(d) below
or until all claims and losses resulting from the Loss Occurrence are fully
discharged including any adjustments to such losses due to salvage or other
recoveries.

  5.

The SBA, except as noted below, will determine and pay, within 30 days or as
soon as practicable after receiving Proof of Loss Reports, the reimbursement
amount due based on losses paid by the Company to date and adjustments to this
amount based on subsequent quarterly information. The adjustments to
reimbursement amounts shall require the SBA to pay, or the Company to return,
amounts reflecting the most recent determination of losses.

  a.

The SBA shall have the right to consult with all relevant regulatory agencies to
seek all relevant information, and shall consider any other factors deemed
relevant, prior to the issuance of reimbursements.

  b.

The SBA shall require commercial self-insurance funds established under
Section 624.462, Florida Statutes, to submit contractor receipts to support paid
losses reported on a Proof of Loss Report, and the SBA may hire an independent
consultant to confirm losses, prior to the issuance of reimbursements.

  c.

The SBA shall have the right to conduct a claims examination prior to the
issuance of any advances or reimbursements submitted by Companies that have been
placed under regulatory supervision by a State or where control has been
transferred through any legal or regulatory proceeding to a state regulator or
court appointed receiver or rehabilitator.

  6.

If a Covered Event occurs during the Contract Year, but after December 31, at
the direction of the SBA, Companies shall file an Interim Loss Report within 30
days after the Covered Event and Proof of Loss Reports quarterly thereafter.
Subparagraphs 2-5 above regarding Proof of Loss Reports shall apply.

  7.

All Proof of Loss Reports received will be compared with the FHCF’s exposure
data to establish the facial reasonableness of the reports. The SBA may also
review the results of current and prior Contract Year exposure and loss
examinations to determine the reasonableness of the reported losses. Except as
noted in paragraph 4. above, Companies meeting these tests for reasonableness
will be scheduled for reimbursement. Companies not meeting these tests for
reasonableness will be handled on a case-by-case basis and will be contacted to
provide specific information regarding their individual book of business. The
discovery of errors in a Company’s reported exposure under the Data Call may
require a resubmission of the current Contract Year Data Call which, as the Data
Call impacts the Company’s premium, retention, and coverage for the Contract
Year, will be required before the Company’s request for reimbursement or an
advance will be fully processed by the Administrator.

(c)

Loss Reimbursement Calculations

  1.

In general, the Company’s paid Ultimate Net Losses must exceed its full FHCF
Retention for a specific Covered Event before any reimbursement is payable from
the FHCF for that Covered Event. As described in Article V(28)(b), Retention
adjustments will be made after January 1 of the Contract Year. No interest is
payable on additional payments to the Company due to this type of Retention
adjustment. Each Company sustaining reimbursable losses will receive the amount
of reimbursement due under the Contract up to the amount of the Company’s
payout. If more than one Covered Event occurs in any one Contract Year, any
reimbursements due from the FHCF shall take into account the Company’s Retention
for each Covered Event. However, the Company’s reimbursements from the FHCF for
all Covered Events occurring during the Contract Year shall not exceed, in
aggregate, the

 

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Projected Payout Multiple or Payout Multiple, as applicable, times the
individual Company’s Reimbursement Premium for the Contract Year.

  2.

In determining reimbursements under this Contract, the SBA shall reimburse each
of the Companies, including entities created pursuant to Section 627.351(6),
Florida Statutes, for the amount (if any) of reimbursement due under the
individual Company’s Contract, but not to exceed for all Loss Occurrences, an
amount equal to the Projected Payout Multiple or the Payout Multiple, as
applicable, times the individual Company’s Reimbursement Premium for the
Contract Year.

  3.

Reserve established. When a Covered Event occurs in a subsequent Contract Year
when reimbursable losses are still being paid for a Covered Event in a previous
Contract Year, the SBA will establish a reserve for the outstanding reimbursable
losses for the previous Contract Year, based on the length of time the losses
have been outstanding, the amount of losses already paid, the percentage of
incurred losses still unpaid, and any other factors specific to the loss
development of the Covered Events involved.

(d)

Commutation

  1.

Not less than 36 months or more than 60 months after the end of the Contract
Year, the SBA shall initiate the commutation process. While the Company may
request that the SBA consider beginning the commutation process earlier, doing
so shall be at the discretion of the SBA.

  a.

If the Company’s most recently submitted Proof of Loss Report(s) indicate that
it has no losses resulting from a Loss Occurrence(s) during the Contract Year,
the FHCF’s obligations will end 30 days following notice by the SBA of the
intent to close out the Company’s loss reporting for the Contract Year. If the
Company determines that it does have losses to report, the Company must submit
an up-to-date Proof of Loss Report(s), along with an explanation of why the
losses had not been previously reported, within 30 days following the notice by
the SBA. After closure by the FHCF, the company will not be reimbursed for any
losses for the Contract Year regardless of circumstances or information
discovered following such closure.

  b.

If the Company has submitted a Proof of Loss Report(s) indicating that it does
have losses resulting from a Loss Occurrence(s) during the Contract Year, the
SBA shall initiate the commutation process by requiring the Company to submit
within 30 days an updated, current Proof of Loss Report(s) for each Loss
Occurrence during the Contract Year. The Proof of Loss Report(s) must include
all paid losses as well as all outstanding losses, including incurred but not
reported, which are not finally settled and which may be reimbursable losses
under this Contract, and must be accompanied by a copy of a written opinion on
the present value of the outstanding losses by the Company’s certifying actuary.
Failure of the Company to provide an updated current Proof of Loss Report(s) and
an opinion by the date requested by the SBA shall result in referral to the
Office of Insurance Regulation for a violation of the Contract.

  2.

Determining the present value of outstanding claims and losses.

  a.

If the Company exceeds or expects to exceed its Retention, the Company and the
SBA or their respective representatives shall attempt, by mutual agreement, to
agree upon the present value of all outstanding claims and losses, both reported
and incurred but not reported, resulting from Loss Occurrences during the
Contract Year. Payment by the SBA of its portion of any amount or amounts so
mutually agreed and certified by the Company’s certifying actuary shall
constitute a complete and final release of the SBA in respect of all claims and
losses, both reported and unreported, under this Contract.

  b.

If agreement on present value cannot be reached within 60 days, the Company and
the SBA may mutually appoint an actuary or appraiser to investigate and
determine such claims or losses. If both parties then agree, the SBA shall pay
its portion of the amount so determined to be the present value of such claims
or losses.

 

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  c.

If the parties fail to agree, then any difference shall be settled by a panel of
three actuaries, one to be chosen by each party and the third by the two so
chosen. If either party does not appoint an actuary within 30 days, the other
party may appoint two actuaries. If the two actuaries fail to agree on the
selection of a third actuary within 30 days of their appointment, each of them
shall name two, of whom the other shall decline one and the decision shall be
made by drawing lots. All the actuaries shall be regularly engaged in the
valuation of property claims and losses and shall be members of the Casualty
Actuarial Society and of the American Academy of Actuaries. None of the
actuaries shall be under the control of either party to this Contract. Each
party shall submit its case to its actuary within 30 days of the appointment of
the third actuary. The decision in writing of any two actuaries, when filed with
the parties hereto, shall be final and binding on both parties.

  d.

The reasonable and customary expense of the actuaries and of the commutation (as
a result of b. and c. above) shall be equally divided between the two parties.
Said commutation shall take place in Tallahassee, Florida, unless some other
place is mutually agreed upon by the Company and the SBA.

  3.

If at any point during the commutation process information which indicates an
increase in the Company’s reimbursable losses is provided by the Company or
discovered as a result of an examination by the SBA, the SBA may suspend the
time frame for the commutation process. After such suspension, the SBA shall
determine when it is appropriate to resume the commutation process.

(4)

Advances

  (a)

In accordance with Section 215.555(4)(e), Florida Statutes, the SBA may make
advances for loss reimbursements as defined herein, at market interest rates, to
the Company in accordance with Section 215.555(4)(e), Florida Statutes. An
advance is an early reimbursement which allows the Company to continue to pay
claims in a timely manner. Advances will be made based on the Company’s paid and
reported outstanding losses for Covered Policies (excluding all incurred but not
reported [IBNR] losses) as reported on a Proof of Loss Report, and shall include
Loss Adjustment Expense Reimbursement as calculated by the FHCF. In order to be
eligible for an advance, the Company must submit its exposure data for the
Contract Year as required under paragraph (1) of this Article. Except as noted
below, advances, if approved, will be made as soon as practicable after the SBA
receives a written request, signed by two officers of the Company, for an
advance of a specific amount and any other information required for the specific
type of advance under subparagraphs (c) and (e) below. All reimbursements due to
a Company shall be offset against any amount of outstanding advances plus the
interest due thereon.

  (b)

For advances or excess advances, which are advances that are in excess of the
amount to which the Company is entitled, the market interest rate shall be the
prime rate as published in the Wall Street Journal on the first business day of
the Contract Year. This rate will be adjusted annually on the first business day
of each subsequent Contract Year, regardless of whether the Company executes
subsequent Contracts. All interest charged will commence on the date the SBA
issues a check for an advance and will cease on the date upon which the FHCF has
received the Company’s Proof of Loss Report(s) for the Covered Event(s) for
which the Company qualifies for reimbursement(s). If such reimbursement(s) are
less than the amount of outstanding advance(s) issued to the Company, interest
will continue to accrue on the outstanding balance of the advance(s) until
subsequent Proof of Loss Reports qualify the Company for reimbursement under any
Covered Event equal to or exceeding the amount of any outstanding advance(s).
Interest shall be billed on a periodic basis. If it is determined that the
Company received funds in excess of those to which it was entitled, the interest
as to those sums will not cease on the date of the receipt of the Proof of Loss
Report but will continue until the Company reimburses the FHCF for the
overpayment.

 

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  (c)

If the Company has an outstanding advance balance as of December 31 of this or
any other Contract Year, the Company is required to have an actuary certify
outstanding and incurred but not reported losses as reported on the applicable
December Proof of Loss Report.

  (d)

The specific type of advances enumerated in the Section 215.555, Florida
Statutes, follow.

  1.

Advances to Companies to prevent insolvency, as defined under Article XIV of
this Contract.

  a.

Section 215.555(4)(e)1., Florida Statutes, provides that the SBA shall advance
to the Company amounts necessary to maintain the solvency of the Company, up to
50 percent of the SBA’s estimate of the reimbursement due to the Company.

  b.

In addition to the requirements outlined in subparagraph (4)(a) above, the
requirements for an advance to a Company to prevent insolvency are that the
Company demonstrates it is likely to qualify for reimbursement and that the
immediate receipt of moneys from the SBA is likely to prevent the Company from
becoming insolvent, and the Company provides the following information:

i.  

Current assets;

ii.  

Current liabilities other than liabilities due to the Covered Event;

iii.  

Current surplus as to policyholders;

iv.  

Estimate of other expected liabilities not due to the Covered Event; and

v.  

Amount of reinsurance available to pay claims for the Covered Event under other
reinsurance treaties.

  c.

The SBA’s final decision regarding an application for an advance to prevent
insolvency shall be based on whether or not, considering the totality of the
circumstances, including the SBA’s obligations to provide reimbursement for all
Covered Events occurring during the Contract Year, granting an advance is
essential to allowing the entity to continue to pay additional claims for a
Covered Event in a timely manner.

  2.

Advances to entities created pursuant to Section 627.351(6), Florida Statutes.

  a.

Section 2l5.555(4)(e)2., Florida Statutes, provides that the SBA may advance to
an entity created pursuant to Section 627.351(6), Florida Statutes, up to 90% of
the lesser of the SBA’s estimate of the reimbursement due or the entity’s share
of the actual aggregate Reimbursement Premium for that Contract Year, multiplied
by the current available liquid assets of the FHCF.

  b.

In addition to the requirements outlined in subparagraph (4)(a) above, the
requirements for an advance to entities created pursuant to Section 627.351(6),
Florida Statutes are that the entity must demonstrate to the SBA that the
advance is essential to allow the entity to pay claims for a Covered Event.

  3.

Advances to limited apportionment companies.

Section 215.555(4)(e)3., Florida Statutes, provides that the SBA may advance the
amount of estimated reimbursement payable to limited apportionment companies.

  (e)

In determining whether or not to grant an advance and the amount of an advance,
the SBA:

  1.

Shall determine whether its assets available for the payment of obligations are
sufficient and sufficiently liquid to fulfill its obligations to other Companies
prior to granting an advance;

  2.

Shall review and consider all the information submitted by such Companies;

  3.

Shall review such Companies’ compliance with all requirements of
Section 215.555, Florida Statutes;

  4.

Shall consult with all relevant regulatory agencies to seek all relevant
information;

  5.

Shall review the damage caused by the Covered Event and when that Covered Event
occurred;

  6.

Shall consider whether the Company has substantially exhausted amounts
previously advanced; and

  7.

Shall consider any other factors deemed relevant.

 

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  8.

Shall require commercial self-insurance funds established under section 624.462,
Florida Statutes, to submit a copy of written estimates of expenses in support
of the amount of advance requested.

  (f)

Any amount advanced by the SBA shall be used by the Company only to pay claims
of its policyholders for the Covered Event or Covered Events which have
precipitated the immediate need to continue to pay additional claims as they
become due.

(5)

Delinquent Premium Payments

Failure to submit a Premium or Premium installment when due is a violation of
the terms of this Contract and Section 215.555, Florida Statutes. Interest on
late payments shall be due as set forth in Article IX(2) of this Contract.

(6)

Inadequate Data Submissions

If exposure data or other information required to be reported by the Company
under the terms of this Contract is not received by the FHCF in the format
specified by the FHCF and is inadequate to the extent that the FHCF requires
resubmission of data, the Company will be required to pay the FHCF a
resubmission fee of $1,000 for resubmissions that are not a result of an
examination by the SBA. If a resubmission is necessary as a result of an
examination report issued by the SBA, the first resubmission fee will be $2,000.
If the Company’s examination-required resubmission is inadequate and the SBA
requires an additional resubmission(s), the resubmission fee for each subsequent
resubmission shall be $2,000. A resubmission of exposure data may delay the
processing of the Company’s request for reimbursement or an advance.

(7)

Delinquent Submissions

Failure to submit an exposure submission or resubmission, or loss reports, when
due is a violation of the terms of this Contract and Section 215.555, Florida
Statutes.

ARTICLE XI - TAXES

In consideration of the terms under which this Contract is issued, the Company
agrees to make no deduction in respect of the Premium herein when making premium
tax returns to the appropriate authorities. Should any taxes be levied on the
Company in respect of the Premium herein, the Company agrees to make no claim
upon the SBA for reimbursement in respect of such taxes.

ARTICLE XII - ERRORS AND OMISSIONS

Any inadvertent delay, omission, or error on the part of the SBA shall not be
held to relieve the Company from any liability which would attach to it
hereunder if such delay, omission, or error had not been made.

ARTICLE XIII - INSPECTION OF RECORDS

The Company shall allow the SBA to inspect, examine, and verify, at reasonable
times, all records of the Company relating to the Covered Policies under this
Contract, including Company files concerning claims, losses, or legal
proceedings regarding subrogation or claims recoveries which involve this
Contract, including premium, loss records and reports involving exposure data or
losses under Covered Policies. This right by the SBA to inspect, examine, and
verify shall survive the completion and closure of an exposure examination or
loss examination file and the termination of the Contract. The Company shall
have no right to re-open an exposure or loss reimbursement examination once
closed and the findings have been accepted by the Company; any re-opening shall
be at the sole discretion of the SBA. If the FHCF Finance Corporation has issued
revenue bonds and relied upon the exposure and loss data submitted and certified
by the Company as accurate to determine the amount of bonding needed, the SBA
may choose not to require, or accept, a resubmission if the resubmission will
result in additional reimbursements to the Company. The SBA may require any
discovered errors, inadvertent omissions, and typographical errors associated
with the data reporting of insured values, discovered prior to the closing of
the file and acceptance of the examination findings by the Company, to be
corrected to reflect

 

  17   FHCF-2009K     Rule 19-8.010 F.A.C.

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the proper values. The Company shall retain its records in accordance with the
requirements for records retention regarding exposure reports and claims reports
outlined herein, and in any administrative rules adopted pursuant to
Section 215.555, Florida Statutes. Companies writing covered collateral
protection policies, as defined in definition (10)(d) of Article V herein, must
be able to provide documentation that the policy covers personal residences,
protects both the borrower’s and lender’s interest, and that the coverage is in
an amount at least equal to the coverage for the dwelling in place under the
lapsed homeowner’s policy.

(1)

Examination Requirements for Exposure Verification

The Company shall retain complete and accurate records, in policy level detail,
of all exposure data submitted to the SBA in any Contract Year until the SBA has
completed its examination of the Company’s exposure submissions. The Company
shall also retain complete and accurate records of any completed exposure
examination for any Contract Year in which the Company incurred losses until the
completion of the loss reimbursement examination for that Contract Year. The
records to be retained shall include the exam file which supports the exposure
reported to the SBA and any other information which would allow for a complete
examination of the Company’s reported exposure data. The exam file shall be
prepared according to the SBA Exam File Specifications outlined in the Data
Call. The Company must also have available, at the time of the examination, a
copy of its underwriting manual, a copy of its rating manual, and staff to
respond to the questions of the SBA or its agents. The Company is also required
to retain declarations pages and policy applications to support reported
exposure. To meet the requirement that the application must be retained, the
Company may retain either the actual application or may retain the actual
application in an electronic format. A complete list of records to be retained
is set forth in Form FHCF-EAP1, adopted for the Contract Year under Rule
19-8.030, F.A.C.

(2)

Examination Requirements for Loss Reports

The Company shall retain complete and accurate records of all reported losses
and/or advances submitted to the SBA until the SBA has completed its examination
of the Company’s reimbursable losses. The records to be retained are set forth
as part of the Proof of Loss Report, Form FHCF-L1B, adopted for the Contract
Year under Rule 19-8.029, F.A.C., and Form FHCF-LAP1, adopted for the Contract
Year under Rule 19-8.030, F.A.C. The Company must also retain the required
exposure exam file for the Contract Year in which the loss occurred, and must
have available any other information which would allow for a complete
examination of the Company’s losses.

(3)

Examination Procedures

  (a)

The FHCF will send an examination notice to the Company providing the
commencement date of the examination, the site of the examination, any
accommodation requirements of the examiner, and the reports and data which must
be assembled by the Company and forwarded to the FHCF upon request. The Company
shall be prepared to choose one location in which to be examined, unless
otherwise specified by the SBA.

  (b)

The reports and data are required to be forwarded to the FHCF as set forth in an
examination notice letter. The information is then forwarded to the examiner. If
the FHCF receives accurate and complete records as requested, the examiner will
contact the Company to inform the Company as to what policies or other
documentation will be required once the examiner is on site. Any records not
required to be provided to the examiner in advance shall be made available at
the time the examiner arrives on site. Any records to support reported losses
which are provided after the examiner has left the work-site will, at the SBA’s
discretion, result in an additional examination of exposure and/or loss records
or an extension or expansion of the examination already in progress. All costs
associated with such additional examination or with the extension or expansion
of the original examination shall be borne by the Company.

  (c)

At the conclusion of the examiner’s work and the management review of the
examiner’s report, findings, recommendations, and work papers, the FHCF will
forward a preliminary

 

  18   FHCF-2009K     Rule 19-8.010 F.A.C.

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draft of the examination report to the Company and require a response from the
Company by a date certain as to the examination findings and recommendations.

 

(d)

     

If the Company accepts the examination findings and recommendations, and there
is no recommendation for additional information, the examination report will be
finalized and the exam file closed.

 

(e)

     

If the Company disputes the examiner’s findings, the areas in dispute will be
resolved by a meeting or a conference call between the Company and FHCF
management.

 

(f)

   1.     

If the recommendation of the examiner is to resubmit the Company’s exposure data
for the Contract Year in question, then the FHCF will send the Company a letter
outlining the process for resubmission and including a deadline to resubmit. The
resubmission will include a data file to be submitted to the FHCF’s
Administrator and an exam file to be submitted to the offices of the SBA. The
resubmission is also required to be accompanied by a detailed written
description of the specific changes made to the resubmitted data. Once the
resubmission is received by the FHCF’s Administrator, the FHCF’s Administrator
calculates a revised Reimbursement Premium for the Contract Year which has been
examined. The SBA shall then review the resubmission with respect to the
examiner’s findings, and accept the resubmission or contact the Company with any
questions regarding the resubmission. Once the SBA has accepted the resubmission
as a sufficient response to the examiner’s findings, the FHCF’s Administrator
will send the Company an invoice for any Reimbursement Premium and interest due
or to refund Reimbursement Premium, as the case may be. Once the resubmission
has been approved, the exam file is closed.

     2.     

If the recommendation of the examiner is either to resubmit the Company’s
exposure data for the Contract Year in question or giving the option to pay the
estimated Premium difference, then the FHCF will send the Company a letter
outlining the process for resubmission or for paying the estimated Premium
difference and including a deadline for the resubmission or the payment to be
received by the FHCF’s Administrator. If the Company chooses to resubmit, the
same procedures outlined in Article XIII(3)(f)2. apply.

     (g)     

If the recommendation of the examiner is to update the Company’s Proof of Loss
Report(s) for the Contract Year under review, the FHCF will send the Company a
letter outlining the process for submitting the Proof of Loss Report(s) and
including a deadline to file. The updated Proof of Loss Report(s) will be
submitted to the FHCF’s Administrator with a copy of the Proof of Loss Report(s)
and a supporting detailed claims listing to be submitted to the offices of the
SBA. The report is required to be accompanied by a detailed written description
of the specific changes made. Once the Proof of Loss Report(s) is received by
the FHCF Administrator, the FHCF’s Administrator will calculate a revised
reimbursement. The SBA shall then review the submitted Proof of Loss Report(s)
with respect to the examiner’s findings, and accept the Proof of Loss Report(s)
as filed or contact the Company with any questions. Once the SBA has accepted
the corrected Proof of Loss Report(s) as a sufficient response to the examiner’s
findings, the FHCF’s Administrator will send the Company an invoice for any
overpayments and interest due. Once the Proof of Loss Report(s) is approved, the
exam file is closed.

  (h)      

If the Company continues to dispute the examiner’s findings and/or
recommendations and no resolution of the disputed matters is obtained through
discussions between the Company and FHCF management, then the process within the
SBA is at an end and further administrative remedies may be pursued under
Chapter 120, Florida Statutes.

  (i)      

The examiner’s list of errors is made available in the examination report sent
to the Company. Given that the examination was based on a sample of the
Company’s policies or claims rather than the whole universe of the Company’s
Covered Policies or reported claims, the error list is not intended to provide a
complete list of errors but is intended to indicate what information needs to be
reviewed and corrected throughout the Company’s book of Covered Policy business
or claims information to ensure more complete and accurate reporting to the
FHCF.

 

  19   FHCF-2009K     Rule 19-8.010 F.A.C.

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(4)

Costs of the Examinations

The costs of the examinations shall be borne by the SBA. However, in order to
remove any incentive for a Company to delay preparations for an examination, the
SBA shall be reimbursed by the Company for any examination expenses incurred in
addition to the usual and customary costs, which additional expenses were
incurred as a result of the Company’s failure, despite proper notice, to be
prepared for the examination or as a result of a Company’s failure to provide
requested information. All requested information must be complete and accurate.
The Company shall be notified of any administrative remedies which may be
obtained under Chapter 120, Florida Statutes.

ARTICLE XIV - INSOLVENCY OF THE COMPANY

Company shall notify the FHCF immediately upon becoming insolvent. Except as
otherwise provided below, no covered loss reimbursements will be made until the
FHCF has completed and closed its examination of the insolvent Company’s losses,
unless an agreement is entered into by the court appointed receiver specifying
that all data and computer systems required for FHCF exposure and loss
examinations will be maintained until completion of the Company’s exposure and
loss examinations. Except as otherwise provided below, in order to account for
potential erroneous reporting, the SBA shall hold back 25% of requested loss
reimbursements until the exposure and loss examinations for the Company are
completed. Only those losses supported by the examination will be reimbursed.
Pursuant to Section 215.555(4)(g), Florida Statutes, the FHCF is required to pay
the “net amount of all reimbursement moneys” due an insolvent insurer to the
Florida Insurance Guaranty Association (FIGA) for the benefit of Florida
policyholders. For the purpose of this Contract, a Company is insolvent when an
order of liquidation with a finding of insolvency has been entered by a court of
competent jurisdiction. In light of the need for an immediate infusion of funds
to enable policyholders of insolvent companies to be paid for their claims, the
SBA may enter into agreements with FIGA allowing exposure and loss examinations
to take place immediately without the usual notice and response time limitations
and allowing the FHCF to make loss reimbursements (net of any amounts payable to
the SBA from the Company or FIGA) to FIGA before the examinations are completed
and before the response time expires for claims filing by reinsurers and
financial institutions, which have a priority interest in those funds pursuant
to Section 215.555(4)(g), Florida Statutes. Such agreements must ensure the
availability of the necessary records and adequate security must be provided so
that if the FHCF determines that it overpaid FIGA on behalf of the Company, or
if claims are filed by reinsurers or financial institutions having a priority
interest in these funds, that the funds will be repaid to the FHCF by FIGA with
in a reasonable time.

ARTICLE XV - TERMINATION

The FHCF and the obligations of both parties under this Contract can be
terminated only as may be provided by law or applicable rules.

ARTICLE XVI - VIOLATIONS

Pursuant to the provisions of Section 215.555(10), Florida Statutes, any
violation of the terms of this Contract by the Company constitutes a violation
of the Insurance Code of the State of the Florida. Pursuant to the provisions of
Section 215.555(11), Florida Statutes, the SBA is authorized to take any action
necessary to enforce any administrative rules adopted pursuant to
Section 215.555, Florida Statutes, and the provisions and requirements of this
Contract.

 

  20   FHCF-2009K     Rule 19-8.010 F.A.C.

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ARTICLE XVII- APPLICABLE LAW

 

(1)

Applicable Law: This Contract shall be governed by and construed according to
the laws of the State of Florida in respect of any matter relating to or arising
out of this Contract.

(2)

Notice of Rights: Pursuant to Chapter 120, Florida Statutes, and the Uniform
Rules of Procedure, codified as Chapters 28-101 through 28-111, F.A.C., a person
whose substantial interests are affected by a decision of the SBA regarding the
FHCF may request a hearing within 21 days shall have waived his or her right to
a hearing. The hearing may be a formal hearing or an informal hearing pursuant
to the provisions of Sections 120.569 and 120.57, Florida Statutes. The petition
must be filed (received) in the office of the Agency Clerk, General Counsel’s
Office, State Board of Administration of Florida, P.O. Box 13300, Tallahassee,
FL 32317-3300 or 1801 Hermitage Blvd., Suite 100, Tallahassee, FL 32308, within
the 21 day period.

 

  21   FHCF-2009K     Rule 19-8.010 F.A.C.

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ARTICLE XVIII- REIMBURSEMENT CONTRACT ELECTIONS

Reimbursement Percentage

For purposes of determining reimbursement (if any) due the Company under this
Contract and in accordance with the Statute, the Company has the option to elect
a 45% or 75% or 90% reimbursement percentage under this Contract. If the Company
is a member of an NAIC group, all members must elect the same reimbursement
percentage, and the individual executing this Contract on behalf of the Company,
by placing his or her initials in the box under (a) below, affirms that the
Company has elected the same reimbursement percentage as all members of its NAIC
group. If the Company is an entity created pursuant to Section 627.351, Florida
Statutes, the Company must elect the 90% reimbursement percentage. The Company
shall not be permitted to change its reimbursement percentage during the
Contract Year. The Company shall be permitted to change its reimbursement
percentage at the beginning of a new Contract Year, but may not reduce its
reimbursement percentage if a Covered Event required the issuance of revenue
bonds, until the bonds have been fully repaid.

IMPORTANT NOTE: The FHCF issued revenue bonds in July of 2006 as a result of its
liabilities for Covered Events under the Contract Year effective June 1, 2005.
As those bonds have not been fully repaid, the Company may not select a
Reimbursement Percentage that is less than its selection under the prior
Contract Year effective June 1, 2008.

The Reimbursement Percentage elected by the Company for the prior Contract Year
effective June 1, 2008 was as follows: United Property and Casualty Insurance
Company - 90%

 

(a)

NAIC Group Affirmation: Initial the following box if the Company is part of an
NAIC Group:

 

                                                                 

(b)

Reimbursement Percentage Election: The Company hereby elects the following
Reimbursement Percentage for the Contract Year from 12:00:01 a.m., Eastern Time,
June 1, 2009, to 12:00 a.m., Eastern Time, May 31, 2010, (the individual
executing this Contract on behalf of the Company shall place his or her initials
in the box to the left of the percentage elected for the Company):

 

     45%    OR            75%    OR            90%      

Reporting Exposure for a Single Structure, with a Mix of Commercial Habitational
and Commercial Non-Habitational Exposure, Written on a Commercial Policy

This section is applicable to all Companies which either have exposure for
single structures with a mix of commercial habitational and commercial
non-habitational exposure written under a Commercial Policy, or have the
authority to write such policies. If the Company does not have the authority to
write this type of exposure, this section does not apply; initial the N/A box on
the next page, which completes this ARTICLE. If the Company does write, or has
the authority to write, this type of exposure, please read and complete the
remainder of this ARTICLE.

 

  22   FHCF-2009K     Rule 19-8.010 F.A.C.

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Commercial-Residential Class Code

If a single structure is used for both habitational and non-habitational
purposes and the structure has a commercial-residential class code (based on a
classification plan on file with and reviewed by the Administrator), the entire
exposure for the structure should be reported to the FHCF under the Data Call,
and the FHCF will reimburse losses for the entire structure as well.

Commercial Non-Residential/Business Class Code

If a single structure is used for both habitational and non-habitational
purposes and the structure has a commercial non-residential or business class
code (based on a classification plan on file with and reviewed by the
Administrator), the habitational portion of that structure should be identified
and reported to the FHCF under the Data Call.

However, in recognition of the unusual nature of commercial structures with
incidental habitational exposure and the hardship some companies may face in
having to carve out such incidental habitational exposure, as well as the losses
to such structures, the FHCF will accommodate these companies by allowing them
to exclude the entire exposure for the single structure from their Data Call
submission, providing the following two conditions are met:

(1)

The decision to not carve out and report the incidental habitational exposure
shall apply to all such structures insured by the Company; and

(2)

If the incidental habitational exposure is not reported to the FHCF, the Company
agrees it shall not report losses to the structure and the FHCF shall not
reimburse any losses to the structure.

Initial the CARVING box below if the Company is able to carve out and report its
incidental habitational exposure, OR, if this requirement presents a hardship,
the Company must communicate its decision to not carve out and to not report the
incidental exposure by having the individual executing this Contract on behalf
of the Company placing his or her initials in the NOT CARVING box below. If the
Company does not currently write such policies, but has the authority to write
such policies after the start date of this Contract, the decision to carve or
not carve out the incidental habitational exposure must be indicated below.

        

 

OR

 

          

 

OR

 

                  CARVING         

NOT CARVING

         NA      

By initialing the CARVING or NOT CARVING box above, the Company is making an
irrevocable decision for the corresponding Contract Year Data Call submission
and any subsequent resubmissions.

 

Important Note:

 

Since this election will impact your Data Call submission, please share this
decision with the individual(s) responsible for compiling your Data Call
submission.

Additional Living Expense (ALE) Written as Tbne Element Coverage

If your Company writes Covered Policies that provide ALE coverage on a time
element basis (i.e. coverage is based on a specific period of time as opposed to
a stated dollar limit), you must initial the ‘Yes – Time Element ALE’ box below.
If your Company does not write time element ALE coverage, initial ‘No – Time
Element ALE’ box below.

 

          

 

OR

 

                      

Yes – Time

Element ALE

        

No – Time

Element ALE

        

 

  23   FHCF-2009K     Rule 19-8.010 F.A.C.

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ARTICLE XIX – SIGNATURES

 

Approved by:  

Florida Hurricane Catastrophe Fund

   

By:

 

State Board of Administration of the State of Florida

     

By:

 

 

   

 

   

Executive Director

    Date  

Approved as to legality:

By:

 

 

   

 

   

General Counsel

    Date    

United Property and Casualty Insurance Company

       

 

    Typed/Printed Name and Title  

By:

 

 

   

 

    Signature     Date  

 

  24   FHCF-2009K     Rule 19-8.010 F.A.C.

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LOGO [g95347ex102_23logo.jpg]  

STATE BOARD OF ADMINISTRATION

OF FLORIDA

 

1801 HERMITAGE BOULEVARD

TALLAHASSEE, FLORIDA 32308

(850) 488-4406

 

POST OFFICE BOX 13300

32317-3300

  

CHARLIE CRIST

GOVERNOR

AS CHAIRMAN

 

ALEX SINK

CHIEF FINANCIAL OFFICER

AS TREASURER

 

BILL McCOLLUM

ATTORNEY GENERAL

AS SECRETARY

 

ASH WILLIAMS

EXECUTIVE DIRECTOR & CIO

 

ATTENTION:

 

 

THIS ADDENDUM MUST BE COMPLETED, SIGNED, AND RETURNED BY ALL COMPANIES EXECUTING
A REIMBURSEMENT CONTRACT REGARDLESS OF CHOICE TO ACCEPT OR REJECT THIS OPTIONAL
COVERAGE

 

ADDENDUM NO. 1

to

REIMBURSEMENT CONTRACT

Effective: June 1, 2009

(Contract)

 

between

 

UNITED PROPERTY AND CASUALTY INSURANCE COMPANY

St. Petersburg, FL

(Company)

 

NAIC # 10969

 

and

  

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) WHICH
ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

 

It is Hereby Agreed, effective at 12:00:01 a.m., Eastern Time, June 1, 2009,
that this Contract shall be amended as follows:

 

TEMPORARY EMERGENCY OPTIONS FOR ADDITIONAL COVERAGE PURSUANT TO SECTION
215.555(16), FLORIDA STATUTES.

 

Pursuant to Section 215.555(16), Florida Statutes, the Temporary Emergency
Options for Additional Coverage (TEACO) provision allows the Company to select
additional FHCF reimbursement coverage below its mandatory FHCF coverage layer
under the Reimbursement Contract. The optional coverage provided in this
Addendum No. 1 expires on May 31, 2010. Coverage associated with TEACO shall
otherwise be consistent with terms and conditions as relates to the
Reimbursement Contract including, but not limited to, definitions, coverage for
Covered Policies as defined, exclusions, loss reporting, and examination
procedures.

 

To be eligible for this optional coverage, the Company must return a fully
executed Addendum No. 1 (two originals) no later than 5 p.m., Central Time,
June 1, 2009. New Participants, as defined in Article V of the Contract, must
return a fully executed Addendum No. 1 (two

 

  1   FHCF-2009K-1     Rule 19-8.010, F.A.C.

--------------------------------------------------------------------------------

originals) within thirty days of writing its first Covered Policy and prior to a
Loss Occurrence, as both terms are defined in Article V of the Contract, under
which the company would be eligible for reimbursements under the Contract. Any
Company failing to meet the applicable deadline shall not be eligible for
optional coverage under Addendum No. 1.

I. TEACO Coverage

The Company may purchase its mandatory FHCF premium share of coverage underneath
its FHCF retention in excess of one of three industry retention levels, which
are specified as $3 billion, $4 billion, or $5 billion. The price for the layer
of coverage below its mandatory FHCF coverage is 75 cents for each dollar of
coverage for the Company’s share of the layer associated with a $5 billion
industry retention, 80 cents for each dollar of coverage for the Company’s share
of the layer associated with the $4 billion industry retention, or 85 cents for
each dollar of coverage for the Company’s share of the layer of coverage
associated with the $3 billion industry retention. The Company’s TEACO coverage
shall be on an occurrence basis, and the premium for coverage will include one
reinstatement. The Company’s TEACO retention shall replace the Company’s
mandatory FHCF retention when it selects a TEACO option.

The SBA shall reimburse the Company for 45 percent, 75 percent, or 90 percent of
its losses from each Covered Event in excess of the Company’s TEACO retention,
plus 5 percent of the reimbursed losses to cover loss adjustment expense,
limited in total to the amount of TEACO coverage purchased by the Company. The
reimbursement percentage shall be the same as the coverage level selected by the
Company under its Reimbursement Contract. The Company’s maximum reimbursement
under its TEACO option shall be its mandatory FHCF premium share of two times
the difference between the industry retention calculated under
Section 215.555(2)(e), Florida Statutes, and the $3 billion, $4 billion, or $5
billion industry TEACO retention based on the Company’s selection of the TEACO
option.

The full limit of the TEACO coverage purchased shall apply only to each of the
Company’s two largest Covered Events. The TEACO coverage does not apply to other
Covered Events resulting in losses.

II. TEACO Premium

The Company’s TEACO premium shall be calculated based on its share of the
mandatory FHCF reimbursement premium. Total TEACO premium shall be calculated
based on the assumption that all insurers entering into Reimbursement Contracts
also accepted the TEACO option:

 

  A.

The industry TEACO premium associated with the $3 billion retention option would
be equal to 85% of the difference for the coverage between the industry
retention level calculated under Section 2l5.555(2)(e), Florida Statutes, and
the $3 billion industry TEACO retention level.

  B.

The industry TEACO premium associated with the $4 billion retention option would
be equal to 80% of the difference for the coverage between the industry
retention level calculated under Section 215.555(2)(e), Florida Statutes, and
the $4 billion industry TEACO retention level.

  C.

The industry TEACO premium associated with the $5 billion retention option would
be equal to 75% of the difference for the coverage between the industry
retention level calculated under Section 215.555(2)(e), Florida Statutes, and
the $5 billion industry TEACO retention level.

 

  2   FHCF-2009K-1     Rule 19-8.010, F.A.C.

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The TEACO premium shall be due and payable in three installments on August 1,
2009, on October 1, 2009, and on December 1, 2009.

III. TEACO Retention

The TEACO retention is the amount of losses below which a TEACO Company is not
entitled to reimbursement from the FHCF under the TEACO coverage option.

The TEACO retention multiple for each TEACO coverage option shall be calculated
by dividing $3 billion, $4 billion, or $5 billion by the total estimated
mandatory FHCF reimbursement premium assuming all insurers selected the 90%
coverage option. The TEACO retention multiple shall be used for determining an
insurer’s retention if the insurer has selected a TEACO option. The TEACO
retention multiples outlined above shall be adjusted to reflect the coverage
level selected by the Company under its Reimbursement Contract. For insurers
electing the 90 percent coverage level, the adjusted retention multiple is 100
percent of the amount determined under the preceding paragraph. For insurers
electing the 75 percent coverage level, the adjusted retention multiple is 120
percent of the amount determined under the preceding paragraph. For insurers
electing the 45 percent coverage level, the adjusted retention multiple is 200
percent of the amount determined under the preceding paragraph.

IV. Liability of the FHCF

The liability of the FHCF with respect to all TEACO addenda shall not exceed an
amount equal to two times the difference between the industry retention level
calculated under Section 215.555(2)(e), Florida Statutes, and the $3 billion, $4
billion, or $5 billion industry TEACO retention level options actually selected,
but in no event may the FHCF’s obligation exceed the actual claims-paying
capacity of the FHCF plus the additional TEACO capacity provided for under
Section 2l5.555(16)(g), Florida Statutes.

The additional capacity shall apply only to the additional coverage provided by
the TEACO option and shall not otherwise affect any insurer’s reimbursement from
the FHCF.

V. Coordination of Coverage

Reimbursement amounts under TEACO shall not be reduced by reinsurance paid or
payable to the Company from sources other than the FHCF.

The TEACO coverage shall be in addition to all other coverage provided by the
SBA under the Company’s Reimbursement Contract and shall be in addition to the
claims-paying capacity of the FHCF as defined in Section 21 5.555(4)(c) 1.,
Florida Statutes.

The TEACO coverage selected is irrevocable and shall not reduce, overlap, or
duplicate coverage otherwise provided for in the Reimbursement Contract or
offset any co-payments.

 

  3   FHCF-2009K-1     Rule 19-8.010, F.A.C.

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VI. Addendum No. 1 TEACO Coverage Election

ALL COMPANIES EXECUTING A REIMBURSEMENT CONTRACT MUST INDICATE ITS TEACO
COVERAGE PROVIDED BELOW THE FHCF RETENTION BY SELECTING ONE OF THREE TEACO
RETENTION LEVELS OR REJECT ALL SUCH COVERAGE. IF ADDENDUM NO. 1 IS RETURNED
WITHOUT A TEACO RETENTION SELECTED, IT SHALL BE DEEMED BY THE STATE BOARD OF
ADMINISTRATION TO BE A CHOICE TO REJECT TEACO COVERAGE.

If your Company does not want to purchase any TEACO coverage, print “No
Coverage” on the line below and initial the box.

 

             

 

                 

If your company elects to purchase TEACO coverage, select a TEACO retention
level option by initialing the applicable box below.

 

                                         

Company selects $3 billion  

TEACO Retention Option  

    OR       Company selects $4 billion TEACO Retention Option     OR      
Company selects $5 billion TEACO Retention Option

VII. Signatures

 

    

 

        

United Property and Casualty Insurance Company

   

By:

  

 

 

 

       Typed/Printed Name and Title  

Date

   

Approved by:

   

Florida Hurricane Catastrophe Fund

   

By:

  

State Board of Administration of the State of Florida

   

By:

  

 

 

 

       Executive Director  

Date

   

Approved as to legality:

   

By:

  

 

 

 

        

Date

      

General Counsel

   

 

  4   FHCF-2009K-1     Rule 19-8.010, F.A.C.

--------------------------------------------------------------------------------

LOGO [g95347ex102_27logo.jpg]

  

STATE BOARD OF ADMINISTRATION

OF FLORIDA

 

1801 HERMITAGE BOULEVARD

TALLAHASSEE, FLORIDA 32308

(850) 488-4406

 

POST OFFICE BOX 13300

32317-3300

  

CHARLIE CRIST

GOVERNOR

AS CHAIRMAN

 

ALEX SINK

CHIEF FINANCIAL OFFICER

AS TREASURER

 

BILL McCOLLUM

ATTORNEY GENERAL

AS SECRETARY

 

ASH WILLIAMS

EXECUTIVE DIRECTOR & CIO

ATTENTION:    THIS ADDENDUM MUST BE COMPLETED, SIGNED, AND RETURNED BY ALL
COMPANIES EXECUTING A REIMBURSEMENT CONTRACT REGARDLESS OF CHOICE TO ACCEPT OR
REJECT THIS OPTIONAL COVERAGE AMENDED ADDENDUM NO. 2 to REIMBURSEMENT CONTRACT
Effective: June 1, 2009 (Contract) between UNITED PROPERTY AND CASUALTY
INSURANCE COMPANY

  

St. Petersburg, FL

(Company)

 

NAIC#10969

 

and

  

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) WHICH
ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

It is Hereby Agreed, effective at 12:00:01 a.m., Eastern Time, June 1, 2009,
that this Contract shall be amended as follows:

TEMPORARY INCREASE IN COVERAGE LIMIT OPTIONS FOR ADDITIONAL COVERAGE PURSUANT TO
SECTION 215.555(17), FLORIDA STATUTES.

Pursuant to Section 215.555(17), Florida Statutes, the Temporary Increase in
Coverage Limit (TICL) Options provision allows the Company to select additional
FHCF reimbursement coverage above its mandatory FHCF coverage layer under the
Reimbursement Contract. The optional coverage selections provided in this
Amended Addendum No. 2 expires on May 31, 2010. Coverage provided under TICL
shall otherwise be consistent with terms and conditions as relates to the
Reimbursement Contract including, but not limited to, definitions, coverage for
Covered Policies as defined, exclusions, loss reporting, and examination
procedures.

To be eligible for this optional coverage, the Company must return a fully
executed Amended Addendum No. 2 (two originals) no later than 5 p.m., Central
Time, June 30, 2009. If the Company fails to meet this deadline, the optional
coverage layer selected by the Company under the original Addendum No. 2 shall
be deemed to apply, unless the Company had selected the $11

 

  1   FHCF-2009K-2A     Rule 19-8.010, F.A.C.

--------------------------------------------------------------------------------

or $12 billion layers of coverage, in which case the $10 billion layer of
coverage shall be deemed, and the price for such coverage shall be as provided
in this Amended Addendum No. 2.

TICL coverage selected in this Amended Addendum No. 2 shall not be in force for
the Company for losses from any hurricane which occurs or had occurred, prior to
the Company sending the Amended Addendum No. 2 to the Administrator if the
Company did not select TICL coverage in the original Addendum No. 2.

New Participants, as defined in Article V of the Contract, must return a fully
executed Amended Addendum No. 2 (two originals) within thirty days of writing
its first Covered Policy and prior to a Loss Occurrence, as both terms are
defined in Article V of the Contract, under which the company would be eligible
for reimbursements under the Contract. Any New Participant failing to meet the
applicable deadline shall not be eligible for optional coverage under Amended
Addendum No. 2.

I. TICL Coverage

The Company may purchase one of ten optional coverages above its mandatory FHCF
coverage provided for in the FHCF Reimbursement Contract. The TICL options allow
the Company to purchase its mandatory FHCF premium share of one of the ten
optional layers of coverage. The optional layers of coverage above the mandatory
FHCF coverage are $10 billion, $9 billion, $8 billion, $7 billion, $6 billion,
$5 billion, $4 billion, $3 billion, $2 billion, or $1 billion.

The purchase of a TICL option increases the Company’s coverage under the
Reimbursement Contract as calculated pursuant to Section 215.555(4)(d)2.,
Florida Statutes. The Company’s increased coverage shall be the FHCF
reimbursement premium multiplied by the TICL multiple. Each TICL coverage
multiple shall be calculated by dividing $10 billion, $9 billion, $8 billion, $7
billion, $6 billion, $5 billion, $4 billion, $3 billion, $2 billion, or $1
billion by the aggregate mandatory FHCF premium under the Reimbursement Contract
paid by all companies.

In order to determine the Company’s total limit of coverage, the Company’s TICL
coverage multiple is added to its regular Payout Multiple under the
Reimbursement Contract. The total of these two multiples shall represent a
number that, when multiplied by an insurer’s mandatory FHCF reimbursement
premium under the Reimbursement Contract, defines the Company’s total limit of
FHCF reimbursement coverage for the Contract Year under the Reimbursement
Contract and Amended Addendum No. 2. The SBA shall reimburse the Company for 45
percent, 75 percent, or 90 percent of its losses from each Covered Event in
excess of the Company’s FHCF Retention under the Reimbursement Contract, plus 5
percent of the reimbursed losses to cover loss adjustment expense, not to exceed
the Company’s total limit of coverage as defined above. The percentage shall be
the same as the coverage level selected by the Company under its Reimbursement
Contract.

II. TICL Premium

The Company’s TICL premium shall be determined as specified in Sections
215.555(5) and (17), Florida Statutes, as amended, and shall be due and payable
in three installments on August 1, 2009, October 1, 2009, and December 1, 2009.

 

  2   FHCF-2009K-2A     Rule 19-8.010, F.A.C.

--------------------------------------------------------------------------------

III. Liability of the FHCF

Pursuant to Section 215.555(17)(g), Florida Statutes, the liability of the FHCF
with respect to all TICL addenda shall not exceed $10 billion and shall depend
on the number of insurers that select the TICL optional coverage and the TICL
coverage options selected. In no circumstance shall the liability of the FHCF
exceed its actual claims-paying capacity as defined in Section 215.555(2)(m),
Florida Statutes.

The additional TICL capacity shall apply only to the additional coverage
provided under the TICL options and shall not otherwise affect any insurer’s
reimbursement from the FHCF if the insurer chooses not to select a TICL option
to increase its limit of FHCF coverage.

IV. Coordination of Coverage

Reimbursement amounts under TICL shall not be reduced by reinsurance paid or
payable to the Company from sources other than the FHCF.

The TICL coverage shall be in addition to all other coverage provided by the
FHCF under the Company’s Reimbursement Contract or other Addenda to the
Reimbursement Contract, and shall be in addition to the claims-paying capacity
of the FHCF as defined in Section 215.555(4)(c)l., Florida Statutes, but only
with respect to those insurers that select the TICL coverage.

The TICL coverage selected is irrevocable and shall not overlap or duplicate
coverage otherwise provided for in the Reimbursement Contract, or any Addenda to
the Reimbursement Contract, or offset any co-payments or retention amounts.

V. Addendum No. 2 TICL Coverage Election

ALL COMPANIES EXECUTING A REIMBURSEMENT CONTRACT MUST INDICATE BELOW THE LEVEL
OF OPTIONAL TICL COVERAGE SELECTED, IF ANY. IF THE COMPANY FAILS TO MEET THE
JUNE 30, 2009 DEADLINE OR MEETS THIS DEADLINE BUT FAILS TO SELECTE AN OPTIONAL
COVERAGE UNDER THIS AMENDED ADDENDUM, THE OPTIONAL COVERAGE LAYER SELECTED BY
THE COMPANY UNDER THE ORIGINAL ADDENDUM NO. 2 SHALL BE DEEMED TO APPLY, UNLESS
THE COMPANY HAD SELECTED THE $11 OR $12 BILLION LAYERS OF COVERAGE, IN WHICH
CASE THE $10 BILLION LAYER OF COVERAGE SHALL BE DEEMED. IF AMENDED ADDENDUM NO.
2 IS RETURNED WITHOUT A TICL COVERAGE OPTION SELECTED, AND NO COVERAGE WAS
SELECTED UNDER THE ORIGINAL ADDENDUM NO. 2, IT SHALL BE DEEMED BY THE STATE
BOARD OF ADMINISTRATION TO BE A CHOICE TO REJECT TICL COVERAGE.

 

  3   FHCF-2009K-2A     Rule 19-8.010, F.A.C.

--------------------------------------------------------------------------------

If your Company does not want to purchase any TICL coverage, print “No Coverage”
on the line below and initial the box.

 

                

 

                        

By selecting an option below (initial the applicable box), the Company is
selecting its proportionate share based on its mandatory FHCF reimbursement
premium to the total mandatory FHCF reimbursement premiums paid by all companies
of the layer of optional coverage.

 

                                                                

Company selects

$1 billion TICL

Coverage Option

  

OR  

 

Company selects

$2 billion TICL

Coverage Option

  

OR  

 

Company selects

$3 billion TICL

Coverage Option

  

OR  

 

Company selects

$4 billion TICL

Coverage Option

                                                                               
   

Company selects

$5 billion TICL

Coverage Option

  

OR

 

Company selects

$6 billion TICL

Coverage Option

  

OR

 

Company selects

$7 billion TICL

Coverage Option

  

OR

 

Company selects

$8 billion TICL

Coverage Option

                                                                       

Company selects

$9 billion TICL

Coverage Option

  

OR

 

Company selects

$10 billion TICL

Coverage Option

         

 

  4   FHCF-2009K-2A     Rule 19-8.010, F.A.C.

--------------------------------------------------------------------------------

VI. Signatures

 

   

 

           

United Property and Casualty Insurance Company

         

By:

 

 

   

 

        Typed/Printed Name and Title    

                    Date

      Approved by:        

Florida Hurricane Catastrophe Fund

       

By:

 

State Board of Administration of the State of Florida

         

By:

 

 

   

 

       

                    Date

     

Executive Director & CIO

       

Approved as to legality:

       

By:

 

 

   

 

           

                    Date

       

General Counsel

       

 

  5   FHCF-2009K-2A     Rule 19-8.010, F.A.C.

--------------------------------------------------------------------------------

ADDENDUM NO. 3 TO REIMBURSEMENT CONTRACT

This addendum was not applicable to UPCIC.

 

    FHCF-2009K     Rule 19-8.010 F.A.C.

--------------------------------------------------------------------------------

LOGO [g95347ex102_32logo.jpg]   

STATE BOARD OF ADMINISTRATION

OF FLORIDA

 

1801 HERMITAGE BOULEVARD

TALLAHASSEE, FLORIDA 32308

(850) 488-4406

 

POST OFFICE BOX 13300

32317-3300

  

CHARLIE CRIST

GOVERNOR

AS CHAIRMAN

 

ALEX SINK

CHIEF FINANCIAL OFFICER

AS TREASURER

 

BILL McCOLLUM

ATTORNEY GENERAL

AS SECRETARY

 

ASH WILLIAMS

EXECUTIVE DIRECTOR & CIO

ATTENTION:

  

THIS ADDENDUM MUST BE COMPLETED, SIGNED, AND RETURNED BY ALL COMPANIES ELIGIBLE
FOR COVERAGE UNDER THIS ADDENDUM REGARDLESS OF CHOICE TO ACCEPT OR REJECT THIS
OPTIONAL COVERAGE

   ADDENDUM NO. 4       to       REIMBURSEMENT CONTRACT       Effective: June 1,
2009       (Contract)      

 

between

  

 

UNITED PROPERTY AND CASUALTY INSURANCE COMPANY

St. Petersburg, FL

(Company)

 

NAIC # 10969

 

and

  

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA)

WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

It is Hereby Agreed, effective at 12:00:01 a.m., Eastern Time, June 1, 2009,
that this Contract shall be amended as follows:

ADDITIONAL COVERAGE OPTION (up to $10 million) PURSUANT TO SECTION
215.555(4)(b)4., FLORIDA STATUTES.

Pursuant to Section 215.555(4)(b)4., Florida Statutes, certain Companies may
select additional FHCF reimbursement coverage of up to $10 million dollars. The
additional premium to be charged for this additional reimbursement coverage
shall be 50 percent of the additional reimbursement coverage provided, which
shall include one prepaid full reinstatement. The additional premium shall be
due and payable in three equal installments on August 1, 2009, on October 1,
2009, and on December 1, 2009.

The minimum retention level that must be retained associated with this
additional coverage layer is 30 percent of the insurer’s surplus as of
December 31, 2008, for each Covered Event. For an insurer which began writing
property insurance in 2009 and did not have a surplus as of December 31, 2008,
surplus shall be deemed to be the surplus reported to the Office of Insurance

 

  1   FHCF-2009K-4     Rule 19-8.010, F.A.C.

--------------------------------------------------------------------------------

Regulation at the time the insurer received its Certificate of Authority. This
coverage is designed to apply a retention that triggers coverage prior to the
insurer reaching its retention under the mandatory coverage level. The SBA will
determine and pay, within 30 days or as soon as practicable after receiving
Proof of Loss Reports, the reimbursement amount due under this optional coverage
based on losses paid by the Company.

The reimbursement percentage applicable to this additional coverage shall be 100
percent, which includes reimbursement for loss adjustment expense as provided
under the Reimbursement Contract. Once the limit of coverage under this option
is exhausted, the insurer’s retention under the mandatory coverage will apply.

This additional reimbursement coverage shall be in addition to all other
coverage provided by the SBA under the Company’s Reimbursement Contract and
shall be in addition to the claims-paying capacity of the FHCF as defined in
Section 215.555(4)(c)l., Florida Statutes, but only with respect to those
insurers that select the additional coverage option. Coverage provided in this
additional coverage option shall otherwise be consistent with terms and
conditions as relates to the Reimbursement Contract including, but not limited
to, definitions, coverage for Covered Policies as defined, exclusions, loss
reporting, and examination procedures.

While this additional coverage shall not reduce, overlap, or duplicate coverage
otherwise provided for in the Reimbursement Contract or offset any co-payments,
the amount of coverage selected herein is irrevocable. Any amount of additional
coverage selected herein that would in effect overlap FHCF coverage otherwise
provided for in the Reimbursement Contract, or any other Addenda to the
Reimbursement Contract, shall be deemed by the FHCF to shift above the highest
level of coverage otherwise provided by the FHCF.

The claims-paying capacity with respect to all other participating insurers,
including eligible Companies that do not select the additional coverage option,
shall be limited to their reimbursement premium’s proportionate share of the
actual claims-paying capacity as defined in Section 215.555(4)(c)1., Florida
Statutes and as provided for under the terms of the Reimbursement Contract, plus
any coverage provided under any other Addenda to the Reimbursement Contract.

The optional coverage provided in this Addendum expires on May 31, 2010. To be
eligible for this optional coverage, the Company must return a fully executed
Addendum No. 4 (two originals) no later than 5 p.m., Central Time, June 30,
2009. A Company failing to meet the applicable deadline shall not be eligible
for optional coverage under Addendun No. 4 for the 2009 Contract Year.
Furthermore, there shall be no coverage under this Addendum for any Loss
Occurrence, as defined in Article V of the Contract and under which the Company
would be eligible for reimbursements under the Contract, that occurs prior to
the FHCF receiving the fully executed Addendum No.4 (original copies).

New Participants, as defined in Article V of the Contract, must return a fully
executed Addendum No. 4 (two originals) within thirty days of writing its first
Covered Policy and prior to a Loss Occurrence under which the company would be
eligible for reimbursements under the Contract. A Company failing to meet the
applicable deadline shall not be eligible for optional coverage under Addendum
No. 4 for the 2009 Contract Year.

ALL COMPANIES EXECUTING A REIMBURSEMENT CONTRACT AND ELIGIBLE FOR THIS
ADDITIONAL COVERAGE MUST INDICATE BELOW THE AMOUNT OF ADDITIONAL COVERAGE
SELECTED, IF ANY.

 

  2   FHCF-2009 K-4     Rule 19-8.010, F.A.C.

--------------------------------------------------------------------------------

If your Company does not wish to purchase the additional coverage under this
Addendum, print “No Coverage” on the line below and initial the box.

 

                                                                     

If your Company is eligible for the coverage under this Addendum and elects to
purchase this coverage, indicate the amount of additional coverage up to $10
million (there is no additional coverage available in excess of $10 million) on
the line below:

$10 million

IF THIS ADDENDUM NO. 4 IS RETURNED WITHOUT THE BLANK SPACE IMMEDIATELY ABOVE
FILLED IN WITH A DOLLAR AMOUNT, IT SHALL BE DEEMED BY THE STATE BOARD OF
ADMINISTRATION TO BE A CHOICE TO REJECT THE ADDITIONAL COVERAGE.

 

   

 

         United Property and Casualty Insurance Company        By:  

 

  

 

      Name/Title    Date    

Approved by:

  Florida Hurricane Catastrophe Fund   By:   State Board of Administration of
the State of Florida     By:  

 

  

 

         Date       Executive Director & CIO        Approved as to legality:  
By:  

 

  

 

         Date      

General Counsel

    

 

  3   FHCF-2009K-4     Rule 19-8.010, F.A.C.

--------------------------------------------------------------------------------

LOGO [g95347ex102_35logo.jpg]

  

STATE BOARD OF ADMINISTRATION

OF FLORIDA

 

1801 HERMITAGE BOULEVARD

TALLAHASSEE, FLORIDA 32308

(850) 488-4406

 

POST OFFICE BOX 13300

32317-3300

  

CHARLIE CRIST

GOVERNOR

AS CHAIRMAN

 

ALEX SINK

CHIEF FINANCIAL OFFICER

AS TREASURER

 

BILL McCOLLUM

ATTORNEY GENERAL

AS SECRETARY

 

ASH WILLIAMS

EXECUTIVE DIRECTOR & CIO

   ADDENDUM NO. 5       to       REIMBURSEMENT CONTRACT       Effective: June 1,
2009       (Contract)       between   

     

UNITED PROPERTY AND CASUALTY INSURANCE COMPANY

St. Petersburg, FL

(Company)

 

NAIC # 10969

 

and

  

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA)

WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

It is Hereby Agreed, effective at 12:00:01 a.m., Eastern Time, June 1, 2009,
that this Contract shall be amended as follows:

ARTICLE JV - LIABILITY OF THE FHCF

 

  (4)

Upon the occurrence of a Covered Event, the SBA shall evaluate the potential
losses to the FHCF and the FHCF’s capacity at the time of the event. The initial
Projected Payout Multiple used to reimburse the Company for its losses shall not
exceed the Projected Payout Multiple as calculated based on the capacity needed
to provide the FHCF’s mandatory coverage and the Additional Coverage Option (up
to $10 million) pursuant to Section 215.555(4)(b)4., Florida Statutes, as
provided under Addendum No.4 to this Contract. The SBA shall make adjustments to
the Projected Payout Multiple in order to reimburse the optional Temporary
Increase in Coverage Limit (TICL) Options coverage based on the SBA’s ongoing
evaluation of potential losses and capacity. If it appears that the Estimated
Claims-Paying Capacity may be exceeded, the SBA shall reduce the published
factors or multiples for determining each participating insurer’s projected
payout uniformly among all insurers to reflect the Estimated Claims-Paying
Capacity.

 

  (6)

After the end of the calendar year, the SBA shall notify insurers of the
estimated Borrowing Capacity and the Balance of the Fund as of December 31. In
May and October of each year, the SBA shall publish in the Florida
Administrative Weekly a statement of the FHCF’s estimated Borrowing Capacity,
Estimated Claims-Paying Capacity, and the projected Balance of the Fund as of
December 31.

 

 

  1   FHCF-2009K-5     Rule 19-8.010 F.A.C.

--------------------------------------------------------------------------------

Article V(16) and (28)(b)]. shall be amended as follows:

ARTICLE V - DEFINITIONS

 

  (16)

Formula or the Premium Formula

 

This term means the Formula approved by the SBA for the purpose of determining
the Actuarially Indicated Premium to be paid to the FHCF. The Premium Formula is
defined as an approach or methodology which leads to the creation of premium
rates. The resulting rates are therefore incorporated as part of the Premium
Formula. The formula, shall, pursuant to Section 215.555(5)(b), Florida
Statutes, include a cash build-up factor in the amount specified therein.

  (28)

Retention

 

(b) When the Company experiences covered losses from more than two Covered
Events during the Contract Year, the Company’s full Retention shall be applied
to each of the two Covered Events causing the largest covered losses for the
Company. For each other Covered Event resulting in covered losses, the Company’s
Retention shall be reduced to one-third of its full Retention and applied to all
other Covered Events.

 

  1.

All reimbursement of covered losses for each Covered Event shall be based on the
Company’s full Retention up to January 1 of the Contract Year. Adjustments to
reflect a reduction to one-third of the full Retention shall be made on or after
January 1 of the Contract Year provided the Company reports its losses as
specified in this Contract.

 

Article X(3)(c)1. shall be amended as follows:

ARTICLE X - REPORTS AND REMITTANCES

(c) Loss Reimbursement Calculations

  1.

In general, the Company’s paid Ultimate Net Losses must exceed its full FHCF
Retention for a specific Covered Event before any reimbursement is payable from
the FHCF for that Covered Event. As described in Article V(28)(b), Retention
adjustments will be made on or after January 1 of the Contract Year. No interest
is payable on additional payments to the Company due to this type of Retention
adjustment. Each Company sustaining reimbursable losses will receive the amount
of reimbursement due under the Contract up to the amount of the Company’s
payout. If more than one Covered Event occurs in any one Contract Year, any
reimbursements due from the FHCF shall take into account the Company’s Retention
for each Covered Event. However, the Company’s reimbursements from the FHCF for
all Covered Events occurring during the Contract Year shall not exceed, in
aggregate, the Projected Payout Multiple or Payout Multiple, as applicable,
times the individual Company’s Reimbursement Premium for the Contract Year.

 

 

  2   FHCF-2009K-5     Rule 19-8.010 F.A.C.

--------------------------------------------------------------------------------

Approved by:

  Florida Hurricane Catastrophe Fund   By:   State Board of Administration of
the State of Florida   By:  

 

  

 

       Date     Executive Director & CIO      Approved as to legality:   By:  

 

  

 

       Date    

General Counsel

       United Property and Casualty Insurance Company    

 

   

      Typed/Printed Name and Title

  By:  

 

  

 

    Signature    Date  

 

  3   FHCF-2009K-5     Rule 19-8.010 F.A.C.