Exhibit 10.38

 

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PRIVATE PASSENGER AUTOMOBILE QUOTA SHARE

REINSURANCE CONTRACT

issued to

ASSURANCEAMERICA INSURANCE COMPANY

Atlanta, Georgia

 

1

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PRIVATE PASSENGER AUTOMOBILE QUOTA SHARE

REINSURANCE CONTRACT

TABLE OF CONTENTS

 

Article

        Page      Preamble      4   

1

   Business Covered      4   

2

   Retention and Limit      5   

3

   Term      6   

4

   Special Termination      7   

5

   Maximum Limits of Liability      8   

6

   Territory      8   

7

   Assignments      9   

8

   Other Reinsurance      9   

9

   Exclusions      9   

10

   Premium      11   

11

   Provisional Ceding Commission      11   

12

   Commission Adjustment      11   

13

   Definitions      12   

14

   Extra Contractual Obligations/Loss in Excess of Policy Limits      13   

15

   Loss and Loss Adjustment Expense      14   

16

   Salvage and Subrogation      14   

17

   Original Conditions      14   

18

   No Third Party Rights      15   

19

   Accounts and Remittances      15   

20

   Special Provisions      16   

21

   Net Retained Liability      16   

22

   Offset      16   

23

   Currency      16   

24

   Unauthorized Reinsurance      17   

25

   Taxes      19   

26

   Access to Records      19   

27

   Confidentiality      20   

28

   Indemnification and Errors and Omissions      21   

29

   Insolvency      21   

30

   Arbitration      22   

31

   Service of Suit      23   

32

   Savings Clause      24   

33

   Governing Law      25   

34

   Entire Agreement      25   

35

   Non-Waiver      25   

36

   Intermediary      25   

 

 

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PRIVATE PASSENGER AUTOMOBILE QUOTA SHARE

REINSURANCE CONTRACT

TABLE OF CONTENTS

 

Articles

(Cont’d)

        Page  

37

   Mode of Execution      26       Company Signing Block      26   

Attachments

               Nuclear Incident Exclusion Clause - Liability - Reinsurance -
U.S.A.      27       Nuclear Incident Exclusion Clause - Physical Damage -
Reinsurance -U.S.A.      32       Pools, Associations and Syndicates Exclusion
Clause      34       Trust Agreement Requirements Clause      36   

 

 

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PRIVATE PASSENGER AUTOMOBILE QUOTA SHARE

REINSURANCE CONTRACT

(the “Contract”)

issued to

ASSURANCEAMERICA INSURANCE COMPANY

Atlanta, Georgia

(the “Company”)

by

THE REINSURER IDENTIFIED

IN THE INTERESTS AND LIABILITIES AGREEMENT(S)

ATTACHED TO AND FORMING PART OF THIS CONTRACT

(the “Reinsurer”)

PREAMBLE

Wherever the word “Company” is used in this Contract, such term shall be held to
exclude any and/or all subsidiary or affiliated companies that are under the
management of the Company. Notice shall be given to the Reinsurer of any
subsidiary or affiliated companies or new books of business that may hereafter
come under the management of the Company as soon as practicable thereafter.
Furthermore, such business must be accepted by the Reinsurer in writing prior to
such business being covered under the terms of this Contract.

ARTICLE 1

BUSINESS COVERED

This Contract is to share with the Reinsurer the interests and liabilities of
the Company under all Policies classified by the Company as Private Passenger
Automobile Liability (including but not limited to Bodily Injury Liability,
Property Damage Liability, Personal Injury Protection, Medical Payments, and
Uninsured and Underinsured Motorist Protection) and Physical Damage and
Uninsured Motorist Property Damage Insurance as defined in the ISO Private
Passenger Automobile Manual and individual risks as may be directly assigned to
the Company under Private Passenger assigned risk pools, plans or other residual
market mechanisms as follows:

 

  1. as respects Policies issued in states covered hereunder, other than the
State of Florida, Policies written or renewed during the term of this Contract;
and

 

  2. as respects Policies issued in the State of Florida, Policies written or
renewed at or after April 1, 2012;

subject to the terms and conditions herein contained.

 

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ARTICLE 2

RETENTION AND LIMIT

 

A. 1. The Company shall cede, and the Reinsurer shall accept as reinsurance:

 

  a. a 50.0% share of Bodily Injury Liability business reinsured hereunder;

 

  b. an 85.0% share of all business other than Bodily Injury Liability business
reinsured hereunder;

 

  c. a minimum 15.0% share of all business subject to subparagraphs (a) and
(b) above shall be retained by the Company, unless otherwise agreed by the
Reinsurer.

 

  2. The Reinsurer shall pay to the Company the Reinsurer’s quota share of
losses under the Policies and shall pay the Loss Expense Allowance as set forth
in the Loss and Loss Adjustment Expense Article.

 

B. In addition to the Reinsurer’s liability as specified above, the Company
shall cede and the Reinsurer shall accept a 75.0% share of Extra Contractual
Obligations and/or Loss in Excess of Policy Limits, as defined herein, subject
to a maximum of $900,000 (75.0% of $1,200,000) any one Occurrence. Recoveries
under any Errors and Omissions insurance purchased by the Company shall inure to
the benefit of coverage for Extra Contractual Obligations and Loss in Excess of
Policy Limits provided hereunder.

 

C. Notwithstanding the above, the Reinsurer’s liability shall not exceed an
amount equal to 3.0% of collected Net Premiums Earned as respects loss arising
from Extra Contractual Obligations, Loss in Excess of Policy Limits and class
action lawsuits in the aggregate under this Contract.

 

D. Furthermore, the Reinsurer’s liability for indemnity losses under property
coverages reinsured hereunder shall be limited to an amount equal to 1.50% of
collected Net Premiums Earned any one Occurrence, and further limited to an
amount equal to 3.00% of collected Net Premiums Earned as respects all such
Occurrences in the aggregate which are subject to this Contract.

 

E. The Reinsurer’s liability for Losses Incurred, prior to addition of the Loss
Expense Allowance, and prior to application of any debit or credit from the
Company’s Florida Private Passenger Automobile Quota Share Reinsurance Contract,
effective April 1, 2011, shall be subject to the following limits, as respects
loss arising from Bodily Injury Liability coverage:

 

  1. for Policies issued in the State of Georgia, an amount equal to 77.50% of
the collected Net Premiums Earned for Bodily Injury Liability coverage for said
Policies;

 

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  2.

for Policies issued in the State of Florida, an amount equal to 77.50% of the
collected Net Premiums Earned for Bodily Injury Liability coverage for said
Policies;

 

  3.

for Policies issued in all other states combined that are covered hereunder, an
amount equal to 77.50% of the collected Net Premiums Earned for Bodily Injury
Liability coverage for said Policies.

 

F.

The Reinsurer’s liability for Losses Incurred, prior to addition of the Loss
Expense Allowance, and prior to application of any debit or credit from the
Company’s Florida Private Passenger Automobile Quota Share Reinsurance Contract,
effective April 1, 2011, shall be subject to the following limits, arising from
Personal Injury Protection under Policies issued in the State of Florida shall
not exceed an amount equal to 77.50% of the collected Net Premiums Earned for
Personal Injury Protection for said Policies.

 

G.

However, the limits stated in paragraphs E and F above shall not include any
Extra Contractual Obligations and/or loss excess of Policy limits paid in excess
of the Company’s Policy limit.

 

H.

Nevertheless, the Reinsurer’s liability hereunder shall not exceed 140% of the
amount by which Losses Incurred during the term of this Contract plus ceding
commission hereunder bears to the Net Premiums Written for the term of this
Contract.

ARTICLE 3

TERM

 

A.

This Contract shall become effective on January 1, 2012, and shall remain in
effect until December 31, 2012, both days inclusive, with respect to losses
under Policies written or renewed during the term of this Contract.

 

B.

In the event of expiration of this Contract, or termination, as provided in the
Special Termination Article, the Reinsurer shall continue to cover all Policies
coming within the scope of this Contract, including those written or renewed
during the period of notice, until the natural expiration or anniversary of such
Policies, whichever occurs first, but in no event longer than 12 months from the
date of expiration or termination plus odd time, not to exceed 15 months total.
However, should any Policy be extended, continued or renewed due to regulatory
or other legal restrictions, this Contract shall automatically provide extended
coverage until the Company can legally terminate or non-renew such Policies, not
to exceed 24 months from the date of expiration or termination.

 

C.

Upon expiration or termination, the Company, at its option, may elect to
terminate the Reinsurer’s liability for all losses occurring subsequent to
expiration or termination. The Reinsurer shall pay to the Company the ceded
unearned premium (net of provisional ceding commission thereon) under this
Contract appropriate to the mode of expiration or termination.

 

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ARTICLE 4

SPECIAL TERMINATION

 

A.

The Company may terminate the Reinsurer’s share in this Contract by giving not
less than 90 days’ prior written notice to the Reinsurer, or the Reinsurer may
terminate this Contract by giving not less than 90 days’ prior written notice to
the Company in the event any of the following circumstances occur:

 

  1.

the other party has become insolvent or has been placed into liquidation or
receivership (whether voluntary or involuntary) or proceedings have been
instituted against that party for the appointment of a receiver, liquidator,
rehabilitator, conservator or trustee in bankruptcy, or other agent known by
whatever name, to take possession of its assets or control of its operations; or

 

  2.

the other party has become merged with, acquired by or controlled by any other
company, corporation, or individual(s) not controlling that party’s operations
previously; or

 

  3.

failure of the other party to make payment of any undisputed balance under this
Contract when due, and failure to remit the overdue payment within 45 days of
the due date; or

 

  4.

a State Insurance Department or other legal authority orders the other party to
cease writing business.

 

B.

The Company may terminate this Contract by giving not less than 90 days’ prior
written notice to the Reinsurer in the event any of the following circumstances
occur:

 

  1.

the Reinsurer’s A.M. Best’s rating is assigned or downgraded below “A-”; or

 

  2.

the Reinsurer has reinsured its entire liability under this Contract with an
unaffiliated Company without the Company’s prior written consent; or

 

  3.

the Reinsurer ceases assuming new and renewal property and casualty treaty
reinsurance business.

 

C.

The Reinsurer may terminate this Contract by giving not less than 90 days’ prior
written to the Company, in the event any of the following circumstances occur:

 

  1.

the Company’s policyholders’ surplus at the inception of this Contract is less
than 75.0% of the amount of surplus 12 months prior to that date; or

 

  2.

the Company’s policyholders’ surplus at any time during the term of this
Contract is less than 75.0% of the amount of surplus at the date of the
Company’s most recent

 

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financial statement filed with regulatory authorities and available to the
public as of the inception of this Contract; or

 

  3.

the Company does not increase capital and surplus as required by the South
Carolina Department of Insurance prior to filing its statutory annual statement
as of December 31, 2011.

 

D.

If this Contract is terminated in accordance with either paragraph A, B or C
above, the Company, at its sole discretion, shall elect whether this Contract
terminates on a run-off or cut-off basis as set forth in the Term Article. The
reinsurance premium due the Reinsurer hereunder shall be pro rated based on the
period of the Reinsurer’s participation hereon, and the Reinsurer shall
immediately return any excess premium received.

ARTICLE 5

MAXIMUM LIMITS OF LIABILITY

 

A.

For purposes of determining the liability of the Reinsurer, the limits of
liability of the Company with respect to any one Policy shall be deemed not to
exceed the minimum statutory limits of liability in each respective state, or
the limits of liability set forth below, whichever is greater:

 

Automobile Bodily Injury Liability

   $25,000/$50,000

Property Damage Liability

   $25,000

Uninsured/Underinsured Motorists Coverage

   $25,000/$50,000

Medical Payments

   $5,000

 

B.

In the event the Company is required by a regulatory authority to offer higher
limits to individual risks under financial responsibility laws or under private
passenger assigned risk pools, plans and other residual mechanisms, such higher
limits shall be deemed to be statutory in compliance with the terms of this
Contract, and the Reinsurer’s liability shall also include its proportion of
those limits greater than the limits as specified herein. However, it is
understood that under the financial responsibility laws in the State of
Virginia, the Company may offer limits of $50,000/$100,000/$50,000 and the
Reinsurer agrees to cover such limits.

ARTICLE 6

TERRITORY

This Contract shall cover wherever the Company’s Policies cover, but is limited
to losses occurring on Policies issued to insureds located in the States of
Alabama, Arizona, Florida, Georgia, Indiana, Missouri, Mississippi, South
Carolina and Virginia. Policies issued to insureds

 

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located in states other than those states indicated above shall be covered under
this Contract only after the Company has received prior written approval from
the Reinsurer.

ARTICLE 7

ASSIGNMENTS

The provisions of the quota share participation of this Contract shall apply to
risks assigned to the Company under any Assigned Risk Plan if, in the opinion of
the Company, such risks were assigned to the Company because of the business
reinsured hereunder.

ARTICLE 8

OTHER REINSURANCE

The Company may purchase inuring property catastrophe reinsurance, premium for
which shall not exceed 0.35% of the gross subject premium (plus any applicable
reinstatement premium) and shall be deducted in the Company’s determination of
Net Written Premium.

ARTICLE 9

EXCLUSIONS

 

A.

This Contract does not cover:

 

  1.

Garagekeepers’ Legal Liability.

 

  2.

Vendor’s Single Interest.

 

  3.

Vehicles primarily used as fire and police units.

 

  4.

Automobile fleets and policies issued to automobile dealers.

 

  5.

Mobile homes.

 

  6.

As regards interests which at time of loss or damage are on shore, no liability
shall attach hereto in respect of any loss or damage which is occasioned by war,
invasion, hostilities, acts of foreign enemies, civil war, rebellion,
insurrection, military or usurped power, or martial law or confiscation by order
of any government or public authority.

This exclusion shall not, however, apply to interests which at time of loss or
damage are within the territorial limits of the United States of America
(comprising the fifty States of the Union and the District of Columbia and
including bridges between the

 

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U.S.A. and Mexico provided they are under United States ownership), Canada, St.
Pierre and Miquelon, provided such interests are insured under Policies,
endorsements or binders containing a standard war or hostilities or warlike
operations exclusion clause.

 

  7.

Losses excluded by the attached:

 

  a.

Nuclear Incident Exclusion Clause—Liability—Reinsurance—U.S.A., and

 

  b.

Nuclear Incident Exclusion Clause—Physical Damage—Reinsurance—U.S.A.

 

  8.

Reinsurance assumed by the Company.

 

  9.

Vehicles used in racing or speed events, to the extent excluded by the Company’s
original Policies and any endorsements attached thereto.

 

  10.

Pools, Associations and Syndicates per the attached Pools, Associations and
Syndicates Exclusion Clause, except for assignments pursuant to the Assignments
Article.

 

  11.

Taxis, limos, buses and any other vehicle principally used as a public or livery
conveyance.

 

  12.

Loss or damage or costs or expenses arising from seepage and/or pollution and/or
contamination, other than contamination from smoke. Nevertheless, this exclusion
does not preclude any payment of the cost of the removal of debris or property
damaged by a loss otherwise covered hereunder, but subject always to a limit of
25.0% of the Company’s property business under the original Policy.

 

  13.

Business classified by the Company as Accidental Death and Dismemberment.

 

  14.

Business classified by the Company as Program Business.

 

  15.

Terrorism, to the extent excluded in the Company’s Policies and any endorsements
attached thereto.

 

  16.

Business written in the States of Texas and Louisiana.

 

B.

If the Company is bound, without the knowledge and contrary to the instructions
of the Company’s supervisory personnel, on any business falling within the scope
of one or more of the exclusions set forth herein, the exclusion shall be
suspended with respect to such business until 30 days after an underwriting
supervisor of the Company acquires knowledge thereof and until the Company can
legally terminate its liability thereunder.

 

C.

Business which is beyond the terms, conditions or limitations of this Contract
may be submitted to the Reinsurer for special acceptance hereunder and such
business, if accepted

 

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by the Reinsurer in writing, shall be subject to all of the terms, conditions
and limitations of this Contract, except as modified by the special acceptance.

ARTICLE 10

PREMIUM

 

A.

The Reinsurer shall be credited with its exact proportions of the Company’s Net
Written Premium as set forth in paragraph A of the Retention and Limit Article.

 

B.

It is agreed that the Net Written Premium for Policies allocated to this
Contract shall not exceed $88,000,000. In the event the premium limit applies,
the quota share cessions hereunder shall be reduced in the same proportion that
the premium limit bears to the Company’s subject Net Written Premium. The
provisions of this paragraph may be waived or altered by mutual agreement, in
which event this Contract shall be amended.

 

C.

Furthermore, in the event the Company’s Net Written Premium from Policies issued
in the State of Missouri exceeds $2,000,000 hereunder, the percentages of the
Company’s liability ceded hereunder, as respects such Policies, shall be reduced
to the proportion that $2,000,000 bears to the Company’s Net Written Premium
from such Policies.

ARTICLE 11

PROVISIONAL CEDING COMMISSION

 

A.

The Reinsurer shall allow the Company a provisional ceding commission of 20.00%
of the collected Net Written Premium ceded and paid hereunder. The Company shall
allow the Reinsurer return commission on return premiums at the same rate.

 

B.

It is expressly agreed that the ceding commission allowed the Company includes
provision for all dividends, commissions, taxes, assessments, and all other
expenses of whatever nature, except Loss Expense Allowance.

ARTICLE 12

COMMISSION ADJUSTMENT

 

A.

The provisional commission allowed the Company shall be adjusted in accordance
with the provisions set forth herein. The adjusted commission rate shall be
calculated as follows and be applied to collected Net Premiums Earned:

 

  1.

If the ratio of Losses Incurred to collected Net Premiums Earned is 79.50% or
greater, the adjusted commission rate shall be 14.00%;

 

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  2.

If the ratio of Losses Incurred to collected Net Premiums Earned is less than
79.50%, but not less than 69.50%, the adjusted commission rate shall be 14.00%,
plus the difference in percentage points between 79.50% and the actual ratio of
Losses Incurred to collected Net Premiums Earned;

 

  3.

If the ratio of Losses Incurred to collected Net Premiums Earned is 69.50% or
less, the adjusted commission rate shall be 24.00%.

 

B.

If the ratio of Losses Incurred to collected Net Premiums Earned is greater than
79.50%, the difference in percentage points between the actual ratio of Losses
Incurred to collected Net Premiums Earned and 79.50% shall be multiplied by
collected Net Premiums Earned and the product shall be carried forward to the
successor contract to this Contract as a debit to Losses Incurred. If the ratio
of Losses Incurred to collected Net Premiums Earned is less than 69.50%, the
difference in percentage points between 69.50% and the actual ratio of Losses
Incurred to collected Net Premiums Earned shall be multiplied by collected Net
Premiums Earned and the product shall be carried forward to the successor
contract to this Contract as a credit to Losses Incurred. However, no
carry-forward shall affect results of adjustments beyond the third contract, if
any, issued following the expiration date of this Contract.

 

C.

Within 12 months after the expiration date of this Contract, or January 1, 2014
if this Contract is terminated on a cut-off basis, and annually thereafter until
all losses subject hereto have been finally settled, the Company shall calculate
and report the adjusted commission on collected Net Premiums Earned. If the
adjusted commission on collected Net Premiums Earned is less than commissions
previously allowed by the Reinsurer on collected Net Premiums Earned, the
Company shall remit the difference to the Reinsurer with its report. If the
adjusted commission on collected Net Premiums Earned is greater than commissions
previously allowed by the Reinsurer on collected Net Premiums Earned, the
Reinsurer shall remit the difference to the Company as promptly as possible
after receipt and verification of the Company’s report. Notwithstanding the
foregoing, if the ceded paid Losses Incurred is greater than 73.50% of Net
Premiums Earned prior to 12 months after the expiration date of this Contract
then the adjusted commission shall be settled on a quarterly basis.

ARTICLE 13

DEFINITIONS

 

A.

“Policy” means any binder, policy or contract of insurance issued, accepted or
held covered provisionally or otherwise, for and on behalf of the Company.

 

B.

“Net Written Premium” means the original premiums written by the Company, prior
to disbursement of any dividends, but less cancellations and return premiums,
and less premiums, if any, ceded by the Company for inuring property catastrophe
excess of loss reinsurance.

 

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C.

“Net Premiums Earned” means ceded Net Written Premium for Policies allocated to
this Contract, less the unearned portion thereof as of the effective date of
calculation.

 

D.

“Losses Incurred” means ceded losses paid as of the effective date of
calculation, plus the ceded reserves for losses outstanding as of the same date,
plus or minus the dollar amount of the deficit or credit incurred by the
Reinsurer under the Company’s Florida Private Passenger Automobile Quota Share
Reinsurance Contract, effective April 1, 2011, if any. “Losses Incurred” shall
also include the Loss Expense Allowance applied to collected Net Premiums Earned
as of the date of calculation.

 

E.

“Occurrence” means each accident, casualty, disaster or loss, or series of
accidents, casualties, disasters or losses, arising out of or caused by one
event.

ARTICLE 14

EXTRA CONTRACTUAL OBLIGATIONS/LOSS IN EXCESS OF POLICY LIMITS

 

A.

This Contract shall cover Extra Contractual Obligations, as provided in the
Retention and Limit Article. “Extra Contractual Obligations” shall be defined as
those liabilities not covered under any other provision of this Contract and
that arise from the handling of any claim on business covered hereunder, such
liabilities arising because of, but not limited to, the following: failure by
the Company to settle within the Policy limit, or by reason of alleged or actual
negligence, fraud or bad faith in rejecting an offer of settlement or in the
preparation of the defense or in the trial of any action against its insured or
reinsured or in the preparation or prosecution of an appeal consequent upon such
action.

 

B.

This Contract shall cover Loss in Excess of Policy Limits, as provided in the
Retention and Limit Article. “Loss in Excess of Policy Limits” shall be defined
as Loss in excess of the original Policy limit, having been incurred because of,
but not limited to, failure by the Company to settle within the Policy limit or
by reason of alleged or actual negligence, fraud or bad faith in rejecting an
offer of settlement or in the preparation of the defense or in the trial of any
action against its insured or reinsured or in the preparation or prosecution of
an appeal consequent upon such action.

 

C.

An Extra Contractual Obligation and/or Loss in Excess of Policy Limits shall be
deemed to have occurred on the same date as the loss covered under the Company’s
Policy, and shall constitute part of the original loss.

 

D.

For the purposes of the Loss in Excess of Policy Limits coverage hereunder, the
word “Loss” shall mean any amounts for which the Company would have been
contractually liable to pay had it not been for the limit of the original
Policy.

 

E.

Loss adjustment expense in respect of Extra Contractual Obligations and/or Loss
in Excess of Policy Limits shall be covered hereunder subject to the provisions
of Article 15—Loss and Loss Adjustment Expense.

 

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F.

However, this Article shall not apply where the loss has been incurred due to
the finding of fraud of a member of the Board of Directors or a corporate
officer of the Company acting individually or collectively or in collusion with
any individual or corporation or any other organization or party involved in the
presentation, defense or settlement of any claim covered hereunder.

 

G.

In no event shall coverage be provided to the extent not permitted under law.

ARTICLE 15

LOSS AND LOSS ADJUSTMENT EXPENSE

The Company or its authorized representative shall adjust, settle or compromise
all claims and losses under Policies reinsured hereunder. All such adjustments,
settlements and compromises made by the Company or its authorized
representative, when binding upon the Company, shall be binding upon the
Reinsurer, it being the intention of the parties that the Reinsurer shall follow
the fortunes of the Company in any and all respects without limitation, except
as specifically provided for in this Contract. It is agreed for purposes of this
Contract that the Reinsurer shall provide the Company an allowance for such loss
adjustment expenses equal to 10.00% of the Net Premiums Earned (the “Loss
Expense Allowance”) hereunder. The Reinsurer may at any time, at its own
expense, be associated with the Company in the defense of any claim, loss or
legal proceeding, provided that the Company shall have the authority, in its
sole judgment, to make the final decision as to its conduct of any claim.

ARTICLE 16

SALVAGE AND SUBROGATION

The Reinsurer shall be credited with its proportionate share of salvage or
subrogation recoveries (i.e., reimbursement obtained or recovery made by the
Company, less the actual cost, excluding salaries of officials and employees of
the Company, of obtaining such reimbursement or making such recovery) on account
of claims and settlements involving reinsurance hereunder.

ARTICLE 17

ORIGINAL CONDITIONS

All reinsurance under this Contract shall be subject to the same rates, terms,
conditions, waivers and interpretations, and to the same modifications and
alterations as the respective Policies of the Company. However, in no event
shall this be construed in any way to provide coverage outside the terms and
conditions set forth in this Contract.

 

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ARTICLE 18

NO THIRD PARTY RIGHTS

This Contract is solely between the Company and the Reinsurer, and in no
instance shall any insured, claimant or other third party have any rights under
this Contract except as may be expressly provided otherwise herein.

ARTICLE 19

ACCOUNTS AND REMITTANCES

 

A.

Within 30 days following the end of each month, the Company shall render a net
account to the Reinsurer. Such account shall contain the following, summarized
by line of business:

 

  1.

the Reinsurer’s share of Net Written Premium collected during the month; less,

 

  2.

the provisional ceding commission on (1) above, as provided for in this
Contract; less,

 

  3.

the Reinsurer’s share of loss and the Loss Expense Allowance equal to 10.00% of
the collected Net Premiums Earned during the month; plus,

 

  4.

the Reinsurer’s share of subrogation, salvage or other recoveries during the
month.

 

B.

If the amount due as respects the monthly account is due to the Reinsurer, the
Company shall remit the amount due with the report. If the amount due as
respects the monthly account is due to the Company, the Reinsurer shall remit
the amount due within 15 days after receipt of the account.

 

C.

This account shall also bear a notation advising of the outstanding loss reserve
at the end of the month, as well as the unearned premium reserve at the end of
the month.

 

D.

Within 30 days following the expiration or termination of this Contract, and
within 30 days after the end of each month thereafter until all losses subject
hereto are settled or commuted, the Company shall furnish the following
information to the Reinsurer:

 

  1.

a summary of Net Written Premium and Net Premiums Earned;

 

  2.

a summary of collected Net Written Premium and Net Premiums Earned;

 

  3.

a summary of paid and outstanding loss and the 10.00% Loss Expense Allowance;

 

  4.

any other information which the Reinsurer may require for its financial
statements which may be reasonably available to the Company.

 

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ARTICLE 20

SPECIAL PROVISIONS

The Company shall provide the Reinsurer with the Company’s analysis and rate
recommendations prior to implementing any rate revisions or filing such
revisions with a State department of insurance. The Company shall allow the
Reinsurer five (5) business days to review and comment prior to the Company
implementing or filing the rate revisions. However, this provision shall not
apply to the Company’s rate change in the State of Alabama for the First Quarter
of 2012.

ARTICLE 21

NET RETAINED LIABILITY

 

A.

This Contract applies only to that portion of any loss that the Company retains
net for its own account (prior to deduction of any reinsurance that inures
solely to the benefit of the Company).

 

B.

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

ARTICLE 22

OFFSET

The Company and the Reinsurer shall have the right to offset any balance or
amounts due from one party to the other under the terms of this Contract. The
party asserting the right of offset may exercise such right any time whether the
balances due are on account of premiums or losses or otherwise.

ARTICLE 23

CURRENCY

 

A.

Where the word “Dollars” and/or the sign “$” appear in this Contract, they shall
mean United States Dollars.

 

B.

For purposes of this Contract, where the Company receives premiums or pays
losses in currencies other than United States Dollars, such premiums or losses
shall be converted

 

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into United States Dollars at the actual rates of exchange at which these
premiums or losses arc entered in the Company’s books.

ARTICLE 24

UNAUTHORIZED REINSURANCE

 

A.

This Article applies only to the extent the Reinsurer does not qualify for
credit with any insurance regulatory authority having jurisdiction over the
Company’s reserves.

 

B.

The Company agrees, in respect of its Policies falling within the scope of this
Contract, that when it files with its insurance regulatory authority, or sets up
on its books liabilities as required by law, it will forward to the Reinsurer a
statement showing the proportion of such liabilities applicable to the
Reinsurer. The “Reinsurer’s Obligations” shall be defined as follows:

 

  1.

unearned premium (if applicable);

 

  2.

known outstanding losses that have been reported to the Reinsurer;

 

  3.

losses paid by the Company but not recovered from the Reinsurer;

 

  4.

losses incurred but not reported;

 

  5.

Loss Expense Allowance due but not recovered from the Reinsurer;

 

  6.

all other amounts for which the Company cannot take credit on its financial
statements unless funding is provided by the Reinsurer.

 

C.

The Reinsurer’s Obligations shall be funded by funds withheld, cash advances,
Trust Agreement or a Letter of Credit (LOC). The Reinsurer shall have the option
of determining the method of funding provided it is acceptable to the insurance
regulatory authorities having jurisdiction over the Company’s reserves.

 

D.

When funding by a Trust Agreement, the Reinsurer shall ensure that the Trust
Agreement complies with the provisions of the “Trust Agreement Requirements
Clause” attached hereto. When funding by an LOC, the Reinsurer agrees to apply
for and secure timely delivery to the Company of a clean, irrevocable and
unconditional LOC, issued by a bank and containing provisions, both of which
must be acceptable to the National Association of Insurance Commissioners (also
referred to as the NAIC) and to the insurance regulatory authorities having
jurisdiction over the Company’s reserves, in an amount equal to the Reinsurer’s
Obligations. Such LOC shall be issued for a period of not less than one year,
and shall be automatically extended for one year from its date of expiration or
any future expiration date unless 30 days (or such other time period as may be
required by insurance regulatory authorities), prior to any expiration date the
issuing bank shall notify the

 

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Company by certified or registered mail that the issuing bank elects not to
consider the LOC extended for any additional period.

 

E.

The Reinsurer and the Company agree that any funding provided by the Reinsurer
pursuant to the provisions of this Contract may be drawn upon at any time,
notwithstanding any other provision of this Contract, and be utilized by the
Company or any successor, by operation of law, of the Company including, without
limitation, any liquidator, rehabilitator, receiver or conservator of the
Company, for the following purposes, unless otherwise provided for in a separate
Trust Agreement:

 

  1.

to reimburse the Company for the Reinsurer’s Obligations, the payment of which
is due under the terms of this Contract and that has not been otherwise paid;

 

  2.

to make refund of any sum that is in excess of the actual amount required to pay
the Reinsurer’s Obligations under this Contract (or in excess of 102% of the
Reinsurer’s Obligations, if funding is provided by a Trust Agreement);

 

  3.

to fund an account with the Company for the Reinsurer’s Obligations. Such cash
deposit shall be held in an interest bearing account separate from the Company’s
other assets, and interest thereon not in excess of the prime rate shall accrue
to the benefit of the Reinsurer. Any taxes payable on accrued interest shall be
paid out of the assets in the account that are in excess of the Reinsurer’s
Obligations (or in excess of 102% of the Reinsurer’s Obligations, if funding is
provided by a Trust Agreement). If the assets are inadequate to pay taxes, any
taxes due shall be paid or reimbursed by the Reinsurer;

 

  4.

to pay the Reinsurer’s share of any other amounts the Company claims are due
under this Contract.

 

F.

If the amount drawn by the Company is in excess of the actual amount required
for E(l) or E(3), or in the case of E(4), the actual amount determined to be
due, the Company shall promptly return to the Reinsurer the excess amount so
drawn. All of the foregoing shall be applied without diminution because of
insolvency on the part of the Company or the Reinsurer.

 

G.

The issuing bank shall have no responsibility whatsoever in connection with the
propriety of withdrawals made by the Company or the disposition of funds
withdrawn, except to ensure that withdrawals are made only upon the order of
properly authorized representatives of the Company.

 

H.

At annual intervals, or more frequently at the discretion of the Company, but
never more frequently than quarterly, the Company shall prepare a specific
statement of the Reinsurer’s Obligations for the sole purpose of amending the
LOC or other method of funding, in the following manner:

 

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  1.

If the statement shows that the Reinsurer’s Obligations exceed the balance of
the LOC as of the statement date, the Reinsurer shall, within 30 days after
receipt of the statement, secure delivery to the Company of an amendment to the
LOC increasing the amount of credit by the amount of such difference. Should
another method of funding be used, the Reinsurer shall, within the time period
outlined above, increase such funding by the amount of such difference.

 

  2.

If, however, the statement shows that the Reinsurer’s Obligations are less than
the balance of the LOC (or that 102% of the Reinsurer’s Obligations are less
than the trust account balance if funding is provided by a Trust Agreement), as
of the statement date, the Company shall, within 30 days after receipt of
written request from the Reinsurer, release such excess credit by agreeing to
accept an amendment to the LOC reducing the amount of credit available by the
amount of such excess credit. Should another method of funding be used, the
Company shall, within the time period outlined above, decrease such funding by
the amount of such excess.

ARTICLE 25

TAXES

 

A.

In consideration of the terms under which this Contract is issued, the Company
undertakes not to claim any deduction of the premium hereon when making Canadian
tax returns or when making tax returns, other than Income or Profits Tax
returns, to any state or territory of the United States of America or to the
District of Columbia.

 

B.     1.

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

 

  2.

In the event of any return of premium becoming due hereunder, the Reinsurer
shall deduct the applicable percentage of the premium from the amount of the
return, and the Company or its agent should take steps to recover the Tax from
the U.S. Government.

ARTICLE 26

ACCESS TO RECORDS

The Reinsurer or its duly authorized representatives shall have the right to
visit the offices of the Company to inspect, examine, audit, and verify any of
the Policy, accounting or claim files (“Records”) relating to business reinsured
under this Contract during regular business hours after giving five (5) working
days’ prior notice. This right shall be exercisable during the term of this
Contract or after the expiration or termination of this Contract.
Notwithstanding the above, the

 

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Reinsurer shall not have any right of access to the Records of the Company if it
is not current in all undisputed payments due the Company.

ARTICLE 27

CONFIDENTIALITY

 

A.

The Reinsurer hereby acknowledges that the documents, information and data
provided to it by the Company, whether directly or through an authorized agent,
in connection with the placement, execution and performance of this Contract
(“Confidential Information”) are proprietary and confidential to the Company.
Confidential Information shall not include documents, information or data that
the Reinsurer can show:

 

  1.

are publicly known or have become publicly known through no unauthorized act of
the Reinsurer;

 

  2.

have been rightfully received from a third person without obligation of
confidentiality; or

 

  3.

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

 

B.

Absent the written consent of the Company, the Reinsurer shall not disclose any
Confidential Information to any third parties, including any affiliated
companies, except:

 

  1.

when required by retrocessionaires as respects the business ceded to this
Contract, provided that the Reinsurer ensures that such retrocessionaires abide
by the terms of this Article;

 

  2.

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

 

  3.

when required by external auditors performing an audit of the Reinsurer’s
records in the normal course of business.

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

 

C.

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

 

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D.

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

ARTICLE 28

INDEMNIFICATION AND ERRORS AND OMISSIONS

 

A.

The Reinsurer is reinsuring, subject to the terms and conditions of this
Contract, the obligations of the Company under its Policies. The Company shall
be the sole judge as to:

 

  1.

what shall constitute a claim or loss covered under its Policies;

 

  2.

the Company’s liability thereunder;

 

  3.

the amount or amounts that it shall be proper for the Company to pay thereunder.

 

B.

The Reinsurer shall be bound by the judgment of the Company as to the
obligation(s) and liability(ies) of the Company under its Policies.

 

C.

Any inadvertent error, omission or delay in complying with the terms and
conditions of this Contract shall not be held to relieve either party hereto
from any liability that would attach to it hereunder if such error, omission or
delay had not been made, provided such error, omission or delay is rectified
immediately upon discovery.

ARTICLE 29

INSOLVENCY

 

A.

If more than one reinsured company is referenced within the definition of
“Company” in the Preamble to this Contract, this Article will apply severally to
each such company. Further, this Article and the laws of the domiciliary state
will apply in the event of the insolvency of any company covered hereunder. In
the event of a conflict between any provision of this Article and the laws of
the domiciliary state of any company covered hereunder, that domiciliary state’s
laws will prevail.

 

B.

In the event of the insolvency of the Company, this reinsurance (or the portion
of any risk or obligation assumed by the Reinsurer, if required by applicable
law) shall be payable directly to the Company, or to its liquidator, receiver,
conservator or statutory successor, either: (1) on the basis of the liability of
the Company, or (2) on the basis of claims filed and allowed in the liquidation
proceeding, whichever may be required by applicable statute, without diminution
because of the insolvency of the Company or because the liquidator, receiver,
conservator or statutory successor of the Company has failed to pay all or a
portion of any claim. It is agreed, however, that the liquidator, receiver,
conservator or statutory successor of the Company shall give written notice to
the Reinsurer of the

 

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pendency of a claim against the Company indicating the Policy or bond reinsured,
which claim would involve a possible liability on the part of the Reinsurer
within a reasonable time after such claim is filed in the conservation or
liquidation proceeding or in the receivership, and that during the pendency of
such claim, the Reinsurer may investigate such claim and interpose, at its own
expense, in the proceeding where such claim is to be adjudicated any defense or
defenses that it may deem available to the Company or its liquidator, receiver,
conservator or statutory successor. The expense thus incurred by the Reinsurer
shall be chargeable, subject to the approval of the court, against the Company
as part of the expense of conservation or liquidation to the extent of a pro
rata share of the benefit that may accrue to the Company solely as a result of
the defense undertaken by the Reinsurer.

 

C.

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

 

D.

As to all reinsurance made, ceded, renewed or otherwise becoming effective under
this Contract, the reinsurance shall be payable as set forth above by the
Reinsurer to the Company or to its liquidator, receiver, conservator or
statutory successor, (except as provided by Section 4118(a)(1)(A) of the New
York Insurance Law, provided the conditions of 1114(c) of such law have been
met, if New York law applies) or except (1) where the Contract specifically
provides another payee in the event of the insolvency of the Company, or
(2) where the Reinsurer, with the consent of the direct insured or insureds, has
assumed such Policy obligations of the Company as direct obligations of the
Reinsurer to the payees under such Policies and in substitution for the
obligations of the Company to such payees. Then, and in that event only, the
Company, with the prior approval of the certificate of assumption on New York
risks by the Superintendent of Insurance of the State of New York, or with the
prior approval of such other regulatory authority as may be applicable, is
entirely released from its obligation and the Reinsurer shall pay any loss
directly to payees under such Policy.

ARTICLE 30

ARBITRATION

 

A.

Any dispute arising out of the interpretation, performance or breach of this
Contract, including the formation or validity thereof, shall be submitted for
decision to a panel of three arbitrators. Notice requesting arbitration shall be
in writing and sent certified or registered mail, return receipt requested.

 

B.

One arbitrator shall be chosen by each party and the two arbitrators shall then
choose an impartial third arbitrator who shall preside at the hearing. If either
party fails to appoint its arbitrator within 30 days after being requested to do
so by the other party, the latter, after

 

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10 days’ prior notice by certified or registered mail of its intention to do so,
may appoint the second arbitrator.

 

C.

If the two arbitrators do not agree on a third arbitrator within 60 days of
their appointment, the third arbitrator shall be chosen in accordance with the
procedures for selecting the third arbitrator in force on the date the
arbitration is demanded, established by the AIDA Reinsurance and Insurance
Arbitration Society—U.S. (ARIAS). The arbitrators shall be persons knowledgeable
about insurance and reinsurance who have no personal or financial interest in
the result of the arbitration. If a member of the panel dies, becomes disabled
or is otherwise unwilling or unable to serve, a substitute shall be selected in
the same manner as the departing member was chosen and the arbitration shall
continue.

 

D.

Within 30 days after all arbitrators have been appointed, the panel shall meet
and determine timely periods for briefs, discovery procedures and schedules of
hearings.

 

E.

The panel shall be relieved of all judicial formality and shall not be bound by
the strict rules of procedure and evidence. The arbitration shall take place in
the city in which the Company’s Head Office is located or at such other place as
the parties shall agree. The decision of any two arbitrators shall be in writing
and shall be final and binding. The panel is empowered to grant interim relief
as it may deem appropriate.

 

F.

The panel shall interpret this Contract as an honorable engagement rather than
as merely a legal obligation and shall make its decision considering the custom
and practice of the applicable insurance and reinsurance business as promptly as
possible after the hearings. Notwithstanding anything to the contrary in this
Contract, the arbitrators may at their discretion, consider underwriting and
placement information provided by the Company to the Reinsurer, as well as any
correspondence exchanged by the parties that is related to this Contract.
Judgment upon an award may be entered in any court having jurisdiction thereof.

 

G.

Each party shall bear the expense of its own arbitrator and shall jointly and
equally bear with the other party the cost of the third arbitrator. The
remaining costs of the arbitration shall be allocated by the panel. The panel
may, at its discretion, award such further costs and expenses as it considers
appropriate, including but not limited to attorneys’ fees, to the extent
permitted by law.

ARTICLE 31

SERVICE OF SUIT

 

A.

This Article applies only to those Reinsurers not domiciled in the United States
of America, and/or not authorized in any state, territory and/or district of the
United States of America where authorization is required by insurance regulatory
authorities.

 

B.

This Article shall not be read to conflict with or override the obligations of
the parties to arbitrate their disputes as provided for in the Arbitration
Article. This Article is intended as

 

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an aid to compelling arbitration or enforcing such arbitration or arbitral
award, not as an alternative to the Arbitration Article for resolving disputes
arising out of this Contract.

 

C.

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

 

D.

Service of process in such suit may be made upon Kerns, Frost & Pearlman, LLC,
70 West Madison Street, Suite 5350, Chicago, Illinois 60602. The above-named are
authorized and directed to accept service of process on behalf of the Reinsurer
in any such suit.

 

E.

Further, pursuant to any statute of any state, territory or district of the
United States that makes provision therefor, the Reinsurer hereby designates the
Superintendent, Commissioner or Director of Insurance, or other officer
specified for that purpose in the statute, or his successor or successors in
office, as its true and lawful attorney upon whom may be served any lawful
process in any action, suit or proceeding instituted by or on behalf of the
Company or any beneficiary hereunder arising out of this Contract, and hereby
designates the above-named as the person to whom the said officer is authorized
to mail such process or a true copy thereof.

ARTICLE 32

SAVINGS CLAUSE

If any law or regulation of any Federal, State or local government of the United
States of America, or the ruling officials having supervision over insurance
companies, should prohibit or render illegal this Contract, or any portion
thereof, as to risks or properties located in the jurisdictions of such
authority, either the Company or the Reinsurer may upon written notice to the
other suspend or abrogate this Contract insofar as it relates to risks or
properties located within such jurisdiction to such extent as may be necessary
to comply with such laws, regulations or ruling. Such illegality shall in no way
affect any other portion hereof, provided that the Reinsurer or Company may
terminate or suspend this Contract insofar as it relates to the business to
which such law or regulation may apply.

 

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ARTICLE 33

GOVERNING LAW

This Contract shall be governed as to performance, administration and
interpretation by the laws of the State of Georgia, exclusive of conflict of law
rules. However, with respect to credit for reinsurance, the rules of all
applicable states shall apply.

ARTICLE 34

ENTIRE AGREEMENT

This Contract sets forth all of the duties and obligations between the Company
and the Reinsurer and supersedes any and all prior or contemporaneous or written
agreements with respect to matters referred to in this Contract. This Contract
may not be modified, amended or changed except by an agreement in writing signed
by both parties.

ARTICLE 35

NON-WAIVER

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

ARTICLE 36

INTERMEDIARY

Guy Carpenter & Company, LLC, is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All communications
(including notices, statements, premiums, return premiums, commissions, taxes,
losses, Loss Expense Allowance, salvages, and loss settlements) relating thereto
shall be transmitted to the Company or the Reinsurer through Guy Carpenter &
Company, LLC, 3600 Minnesota Drive, Suite 400, Edina, Minnesota 55435. Payments
by the Company to the Intermediary shall be deemed payment to the Reinsurer.
Payments by the Reinsurer to the Intermediary shall be deemed payment to the
Company only to the extent that such payments are actually received by the
Company.

 

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ARTICLE 37

MODE OF EXECUTION

 

A.

This Contract may be executed by:

 

  1.

An original written ink signature of paper documents.

 

  2.

An exchange of facsimile copies showing the original written ink signature of
paper documents.

 

  3.

Electronic signature technology employing computer software and a digital
signature or digitizer pen pad to capture a person’s handwritten signature in
such a manner that the signature is unique to the person signing, is under the
sole control of the person signing, is capable of verification to authenticate
the signature and is linked to the document signed in such a manner that if the
data is changed, such signature is invalidated.

 

B.

The use of any one or a combination of these methods of execution shall
constitute a legally binding and valid signing of this Contract. This Contract
may be executed in one or more counterparts, each of which, when duly executed,
shall be deemed an original.

IN WITNESS WHEREOF, the Company has caused this Contract to be executed by its
duly authorized representative(s) this 30th day of December, in the year of
2011.

ASSURANCEAMERICA INSURANCE COMPANY

 

/s/    Mark H. Hain, EVP

PRIVATE PASSENGER AUTOMOBILE QUOTA SHARE

REINSURANCE CONTRACT

 

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INTERESTS AND LIABILITIES AGREEMENT

(the “Agreement”)

of

GREENLIGHT REINSURANCE, LTD.

(the “Subscribing Reinsurer”)

as respects the

PRIVATE PASSENGER AUTOMOBILE QUOTA SHARE

REINSURANCE CONTRACT

Effective: January 1, 2012

(the “Contract”)

issued to and executed by

ASSURANCEAMERICA INSURANCE COMPANY

Atlanta, Georgia

(the “Company”)

The Subscribing Reinsurer’s share in the interests and liabilities of the
Reinsurer as set forth in the Contract shall be 100.0%.

The share of the Subscribing Reinsurer in the interests and liabilities of the
Reinsurer in respect of the Contract shall be separate and apart from the shares
of other subscribing reinsurers, if any, on the Contract. The interests and
liabilities of the Subscribing Reinsurer shall not be joint with those of such
other subscribing reinsurers and in no event shall the Subscribing Reinsurer
participate in the interests and liabilities of such other subscribing
reinsurers.

This Agreement shall become effective January 1, 2012 and shall be subject to
the provisions of the Term Article and Special Termination Article and all other
terms and conditions of the Contract.

Premium and loss payments made to Guy Carpenter shall be deposited in a Premium
and Loss Account in accordance with Section 32.3(a)(1) of Regulation 98 of the
New York Insurance Department. The Subscribing Reinsurer consents to withdrawals
from said account in accordance with Section 32.3(a)(3) of the Regulation,
including interest and Federal Excise Tax.

 

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Brokerage hereunder is 1.0% of gross ceded premium.

IN WITNESS WHEREOF, the Subscribing Reinsurer has caused this Agreement to be
executed by its duly authorized representative as follows:

on this 30TH day of December, in the year 2011.

GREENLIGHT REINSURANCE, LTD.

 

Jim Ehman   LOGO [g2846472.jpg]

Market Reference Number:

ASSURANCEAMERICA INSURANCE COMPANY

PRIVATE PASSENGER AUTOMOBILE QUOTA SHARE

REINSURANCE CONTRACT

 

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NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - U.S.A.

 

(1)

This reinsurance does not cover any loss or liability accruing to the Reassured
as a member of, or subscriber to, any association of insurers or Reinsurer
formed for the purpose of covering nuclear energy risks or as a direct or
indirect reinsurer of any such member, subscriber or association.

 

(2)

Without in any way restricting the operation of paragraph (1) of this Clause it
is understood and agreed that for all purposes of this reinsurance all the
original Policies of the Reassured (new, renewal and replacement) of the classes
specified in Clause II of this paragraph (2) from the time specified in Clause
III in this paragraph (2) shall be deemed to include the following provision
(specified as the Limited Exclusion Provision):

Limited Exclusion Provision.*

 

  I.

It is agreed that the Policy does not apply under any liability coverage, to

injury, sickness, disease, death or destruction

bodily injury or property damage

with respect to which an insured under the Policy is also an insured under a
nuclear energy liability Policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance
Association of Canada, or would be an insured under any such Policy but for its
termination upon exhaustion of its limit of liability.

 

  II.

Family Automobile Policies (liability only), Special Automobile Policies
(private passenger automobiles, liability only), Farmers Comprehensive Personal
Liability Policies (liability only), Comprehensive Personal Liability Policies
(liability only) or Policies of a similar nature; and the liability portion of
combination forms related to the four classes of Policies stated above, such as
the Comprehensive Dwelling Policy and the applicable types of Homeowners
Policies.

 

  III.

The inception dates and thereafter of all original Policies as described in II
above, whether new, renewal or replacement, being Policies which either

 

  (a)

become effective on or after 1st May, 1960, or

 

  (b)

become effective before that date and contain the Limited Exclusion Provision
set out above;

provided this paragraph (2) shall not be applicable to Family Automobile
Policies, Special Automobile Policies, or Policies or combination Policies of a
similar nature, issued by the Reassured on New York risks, until 90 days
following approval of the

 

 

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Limited Exclusion Provision by the Governmental Authority having jurisdiction
thereof.

 

(3)

Except for those classes of Policies specified in Clause II of paragraph (2) and
without in any way restricting the operation of paragraph (1) of this Clause, it
is understood and agreed that for all purposes of this reinsurance the original
liability Policies of the Reassured (new, renewal and replacement) affording the
following coverages:

Owners, Landlords and Tenants Liability, Contractual Liability, Elevator
Liability, Owners or Contractors (including railroad) Protective Liability,
Manufacturers and Contractors Liability, Product Liability, Professional and
Malpractice Liability, Storekeepers Liability, Garage Liability, Automobile
Liability (including Massachusetts Motor Vehicle or Garage Liability)

shall be deemed to include, with respect to such coverages, from the time
specified in Clause V of this paragraph (3), the following provision (specified
as the Broad Exclusion Provision):

Broad Exclusion Provision.*

It is agreed that the Policy does not apply:

 

  I.

Under any Liability Coverage, to

injury, sickness, disease, death or destruction

bodily injury or property damage

 

  (a)

with respect to which an insured under the Policy is also an insured under a
nuclear energy liability Policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance
Association of Canada, or would be an insured under any such Policy but for its
termination upon exhaustion of its limit of liability; or

 

  (b)

resulting from the hazardous properties of nuclear material and with respect to
which (1) any person or organization is required to maintain financial
protection pursuant to the Atomic Energy Act of 1954, or any law amendatory
thereof, or (2) the insured is, or had this Policy not been issued would be,
entitled to indemnity from the United States of America, or any agency thereof,
under any agreement entered into by the United States of America, or any agency
thereof, with any person or organization.

 

  II.

Under any Medical Payments Coverage, or under any Supplementary Payments
Provision relating to

immediate medical or surgical relief

 

 

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first aid,

to expenses incurred with respect to

bodily injury, sickness, disease or death

bodily injury

resulting from the hazardous properties of nuclear material and arising out of
the operation of a nuclear facility by any person or organization.

 

  III.

Under any Liability Coverage, to

injury, sickness, disease, death or destruction

bodily injury or property damage

resulting from the hazardous properties of nuclear material, if

 

  (a)

the nuclear material (1) is at any nuclear facility owned by, or operated by or
on behalf of, an insured or (2) has been discharged or dispersed therefrom;

 

  (b)

the nuclear material is contained in spent fuel or waste at any time possessed,
handled, used, processed, stored, transported or disposed of by or on behalf of
an insured; or

 

  (c)

the

injury, sickness, disease, death or destruction

bodily injury or property damage

arises out of the furnishing by an insured of services, materials, parts or
equipment in connection with the planning, construction, maintenance, operation
or use of any nuclear facility, but if such facility is located within the
United States of America, its territories or possessions or Canada, this
exclusion (c) applies only to

injury to or destruction of property at such nuclear facility.

property damage to such nuclear facility and any property thereat.

 

IV.

As used in this endorsement:

“hazardous properties” include radioactive, toxic or explosive properties;
“nuclear material” means source material, special nuclear material or byproduct
material; “source material,” “special nuclear material,” and “byproduct
material” have the meanings given them in the Atomic Energy Act of 1954 or in
any law amendatory

 

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thereof; “spent fuel” means any fuel element or fuel component, solid or liquid,
which has been used or exposed to radiation in a nuclear reactor; “waste” means
any waste material (1) containing byproduct material other than the tailings or
wastes produced by the extraction or concentration of uranium or thorium from
any ore processed primarily for its source material content and (2) resulting
from the operation by any person or organization of any nuclear facility
included under the first two paragraphs of the definition of nuclear facility;
“nuclear facility” means

 

  (a)

any nuclear reactor,

 

  (b)

any equipment or device designed or used for (1) separating the isotopes of
uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling,
processing or packaging waste,

 

  (c)

any equipment or device used for the processing, fabricating or alloying of
special nuclear material if at any time the total amount of such material in the
custody of the insured at the premises where such equipment or device is located
consists of or contains more than 25 grams of plutonium or uranium 233 or any
combination thereof, or more than 250 grams of uranium 235,

 

  (d)

any structure, basin, excavation, premises or place prepared or used for the
storage or disposal of waste,

and includes the site on which any of the foregoing is located, all operations
conducted on such site and all premises used for such operations; “nuclear
reactor” means any apparatus designed or used to sustain nuclear fission in a
self-supporting chain reaction or to contain a critical mass of fissionable
material;

With respect to injury to or destruction of property, the word “injury” or
“destruction” includes all forms of radioactive contamination of property.
“property damage” includes all forms of radioactive contamination of property.

 

  V.

The inception dates and thereafter of all original Policies affording coverages
specified in this paragraph (3), whether new, renewal or replacement, being
Policies which become effective on or after 1st May, 1960, provided this
paragraph (3) shall not be applicable to

 

  (i)

Garage and Automobile Policies issued by the Reassured on New York risks, or

 

  (ii)

statutory liability insurance required under Chapter 90, General Laws of
Massachusetts,

until 90 days following approval of the Broad Exclusion Provision by the
Governmental Authority having jurisdiction thereof.

 

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(4)

Without in any way restricting the operation of paragraph (1) of this Clause, it
is understood and agreed that paragraphs (2) and (3) above are not applicable to
original liability Policies of the Reassured in Canada and that with respect to
such Policies this Clause shall be deemed to include the Nuclear Energy
Liability Exclusion Provisions adopted by the Canadian Underwriters’ Association
or the Independent Insurance Conference of Canada.

 

 

*NOTE. The words printed in italics in the Limited Exclusion Provision and in
the Broad Exclusion Provision shall apply only in relation to original liability
Policies which include a Limited Exclusion Provision or a Broad Exclusion
Provision containing those words.

 

 

 

   

NOTES:    

   Wherever used herein the terms:    “Reassured”    shall be understood to mean
“Company,” “Reinsured,” “Reassured” or whatever other term is used in the
attached reinsurance document to designate the reinsured company or companies.
   “Agreement”    shall be understood to mean “Agreement,” “Contract,” “Policy”
or whatever other term is used to designate the attached reinsurance document.
   “Reinsurer”    shall be understood to mean “Reinsurer,” “Underwriters” or
whatever other term is used in the attached reinsurance document to designate
the reinsurer or Reinsurer.

21/9/67

     

NMA 1590 (amended)

  

 

 

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NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE -

REINSURANCE - U.S.A.

 

  1.

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

 

  2.

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

 

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

 

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

 

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

 

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

 

  3.

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

 

  (a)

where Reassured does not have knowledge of such nuclear reactor power plant or
nuclear installation, or

 

  (b)

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

 

  4.

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

 

 

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  5.

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

 

  6.

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

 

  7.

Reassured to be sole judge of what constitutes:

 

  (a)

substantial quantities, and

 

  (b)

the extent of installation, plant or site.

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

 

  (a)

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

 

  (b)

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

12/12/57

NMA 1119

 

       

NOTES:

   Wherever used herein the terms:      “Reassured”   

shall be understood to mean “Company,” “Reinsured,” “Reassured” or whatever
other term is used in the attached reinsurance document to designate the
reinsured company or companies.

     “Agreement”   

shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever other
term is used to designate the attached reinsurance document.

     “Reinsurer”   

shall be understood to mean “Reinsurer,” “Underwriters” or whatever other term
is used in the attached reinsurance document to designate the reinsurer or
Reinsurer.

 

 

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POOLS, ASSOCIATIONS AND SYNDICATES EXCLUSION CLAUSE

Section A:

Excluding:

 

  (1)

All business derived directly or indirectly from any Pool, Association or
Syndicate which maintains its own reinsurance facilities.

 

  (2)

Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968
for the purpose of insuring property whether on a country-wide basis or in
respect of designated areas. This exclusion shall not apply to so-called
Automobile Insurance Plans or other Pools formed to provide coverage for
Automobile Physical Damage.

Section B:

Excluding business written by the Company for the same perils, which is known at
the time to be insured by, or in excess of underlying amounts placed in any
Pool, Association or Syndicate, whether by way of insurance or reinsurance,
formed for the purpose of writing any of the following:

Oil, Gas or Petro-Chemical Plants and/or

Oil or Gas Drilling Rigs

Aviation Risks

Section B does not apply:

 

  (1)

Where the Total Insured Value over all interests of the risk in question is less
than $250,000,000.

 

  (2)

To interests traditionally underwritten as Inland Marine and/or Stock and/or
Contents written on a Blanket basis.

 

  (3)

To Contingent Business Interruption, except when the Company is aware that the
key location is known at the time to be insured in any Pool, Association or
Syndicate indicated above, other than as provided for under Section B(l).

 

   

NOTES:

   Wherever used herein the terms:    “Company”    shall be understood to mean
“Company,” “Reinsured,” “Reassured” or whatever other term is used in the
attached

 

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      reinsurance document to designate the reinsured company or companies.   
“Agreement”    shall be understood to mean “Agreement,” “Contract,” “Policy” or
whatever other term is used to designate the attached reinsurance document.   
“Reinsurer”    shall be understood to mean “Reinsurer,” “Underwriters” or
whatever other term is used in the attached reinsurance document to designate
the reinsurer or Reinsurer.

 

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TRUST AGREEMENT REQUIREMENTS CLAUSE

 

A.

Except as provided in paragraph B of this Clause, if the Reinsurer satisfies its
funding obligations under the Unauthorized Reinsurance Article by providing a
Trust Agreement, the Reinsurer shall ensure that the Trust Agreement:

 

  1.

Requires the Reinsurer to establish a trust account for the benefit of the
Company, and specifies what the Trust Agreement is to cover;

 

  2.

Stipulates that assets deposited in the trust account shall be valued according
to their current fair market value and shall consist only of cash (United States
legal tender), certificates of deposit (issued by a United States bank and
payable in United States legal tender), and investments of the types permitted
by the regulatory authorities having jurisdiction over the Company’s reserves,
or any combination of the three, provided that the investments are issued by an
institution that is not the parent, subsidiary or affiliate of either the
Reinsurer or the Company;

 

  3.

Requires the Reinsurer, prior to depositing assets with the trustee, to execute
assignments or endorsements in blank, or to transfer legal title to the trustee
of all shares, obligations or any other assets requiring assignments, in order
that the Company, or the trustee upon the direction of the Company, may whenever
necessary negotiate these assets without consent or signature from the Reinsurer
or any other entity;

 

  4.

Requires that all settlements of account between the Company and the Reinsurer
be made in cash or its equivalent; and

 

  5.

Provides that assets in the trust account shall be withdrawn only as permitted
in this Contract, without diminution because of the insolvency of the Company or
the Reinsurer.

 

B.

If a ceding insurer is domiciled in California and the Reinsurer satisfies its
funding obligations under the Unauthorized Reinsurance Article by providing a
Trust Agreement, the Reinsurer shall ensure that the Trust Agreement:

 

  1.

Provides that assets deposited in the trust account shall be valued according to
their current fair market value and shall consist only of cash in United States
dollars, certificates of deposit issued by a United States financial institution
as defined in California Insurance Code Section 922.7(a) and payable in United
States dollars, and investments permitted by the California Insurance Code, or
any combination of the above.

 

  2.

Provides that investments in or issued by an entity controlling, controlled by
or under common control with either the grantor or the beneficiary of the trust
shall not exceed 5% of total investments.

 

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  3.

Requires the Reinsurer, prior to depositing assets with the trustee, to execute
assignments or endorsements in blank, or to transfer legal title to the trustee
of all shares, obligations or any other assets requiring assignments, in order
that the ceding insurer, or the trustee upon the direction of the ceding
insurer, may, whenever necessary, negotiate these assets without consent or
signature from the Reinsurer or any other entity.

 

  4.

Provides that assets in the trust account shall be withdrawn only as permitted
in this Contract, without diminution because of the insolvency of the ceding
insurer or the Reinsurer.

 

C.

If there are multiple ceding insurers that collectively comprise the Company,
“regulatory authorities” as referenced in subparagraph A(2) above, shall mean
the individual ceding insurer’s domestic regulator. If such ceding insurer is
subject to the commercial domicile laws or regulations of another state, such
laws or regulations shall apply to the extent not in conflict with those of such
ceding insurer’s domicile.

 

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