Exhibit 10.1

Underwriting Services Agreement

by and among

New Point Re IV Limited,

Alterra Agency Limited

and

Alterra Bermuda Limited

May 1, 2011

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Table of Contents

 

         Page  

ARTICLE 1 Defined Terms

     1   

SECTION 1.1

  Defined Terms      1   

ARTICLE 2 Appointment and Authority

     5   

SECTION 2.1

  Appointment and Acceptance      5   

SECTION 2.2

  Exclusivity      6   

SECTION 2.3

  Non-Compete      6   

SECTION 2.4

  Effective Date      6   

SECTION 2.5

  Location      6   

SECTION 2.6

  Instructions      6   

SECTION 2.7

  Performance Standards      6   

SECTION 2.8

  Limitations of Authority      7   

ARTICLE 3 Contract Services

     7   

SECTION 3.1

  Underwriting Services      7   

SECTION 3.2

  Actuarial Services      8   

SECTION 3.3

  Collections and Operating Account; Investment of Assets      8   

SECTION 3.4

  Administrative Services      9   

SECTION 3.5

  Underwriting Committee      10   

SECTION 3.6

  Production      10   

SECTION 3.7

  Acquisition Expenses      10   

SECTION 3.8

  Claims Under Covered Contracts      11   

SECTION 3.9

  Licenses and Authorities      11   

ARTICLE 4 Retrocession Services

     12   

SECTION 4.1

  Retrocession      12   

ARTICLE 5 Fees

     12   

SECTION 5.1

  Underwriting Fee      12   

SECTION 5.2

  Performance Fee      12   

SECTION 5.3

  Administrative Fee      13   

SECTION 5.4

  Dispute Resolution      14   

SECTION 5.5

  Offset      14   

SECTION 5.6

  Insufficient Funds      14   

ARTICLE 6 Reporting

     14   

SECTION 6.1

  Accounting Reports      14   

SECTION 6.2

  Underwriting Report      15   

SECTION 6.3

  Reserve Reports      15   

SECTION 6.4

  Performance Fee Reports      15   

 

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SECTION 6.5

  Holidays      16   

ARTICLE 7 Records

     16   

SECTION 7.1

  Maintenance of and Access to Records      16   

SECTION 7.2

  Ownership of Records      16   

ARTICLE 8 Expenses

     16   

SECTION 8.1

  Expenses of the Underwriting Manager and ABL      16   

SECTION 8.2

  Expenses of the Company      16   

ARTICLE 9 Term of Agreement

     17   

SECTION 9.1

  Term and Extension      17   

SECTION 9.2

  Effect of Termination      17   

ARTICLE 10 Indemnification

     18   

SECTION 10.1

  Indemnified Parties      18   

SECTION 10.2

  Notice      19   

ARTICLE 11 Confidentiality

     19   

SECTION 11.1

  Confidential Information      19   

ARTICLE 12 Miscellaneous

     20   

SECTION 12.1

  Arbitration      20   

SECTION 12.2

  Relationship of the Parties      21   

SECTION 12.3

  Assignment      21   

SECTION 12.4

  Amendment      21   

SECTION 12.5

  No Waiver or Modification      22   

SECTION 12.6

  Further Assurances      22   

SECTION 12.7

  Severability      22   

SECTION 12.8

  Governing Law      22   

SECTION 12.9

  Notices      22   

SECTION 12.10

  Entire Agreement      23   

SECTION 12.11

  Headings      23   

SECTION 12.12

  Interpretation      23   

SECTION 12.13

  Counterparts      24   

SECTION 12.14

  Currency      24   

SECTION 12.15

  Force Majeure      24   

 

APPENDIX 1

   Underwriting Guidelines

APPENDIX 2

   U.S. Federal Income Tax Operating Guidelines

APPENDIX 3

   Investment Guidelines

 

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UNDERWRITING SERVICES AGREEMENT

This UNDERWRITING SERVICES AGREEMENT (this “Agreement”) is dated the 1st day of
May, 2011.

AMONG

 

  1. New Point Re IV Limited (the “Company”), of Alterra House, 2 Front Street,
Hamilton HM 11, Bermuda, a company organized under the laws of Bermuda and
licensed to carry on insurance and reinsurance business;

 

  2. Alterra Agency Limited (the “Underwriting Manager”), of Alterra House, 2
Front Street, Hamilton HM 11, Bermuda, a company organized under the laws of
Bermuda and registered as an insurance manager; and

 

  3. Alterra Bermuda Limited (“ABL”), of Alterra House, 2 Front Street, Hamilton
HM 11, Bermuda, a company organized under the laws of Bermuda and licensed to
carry on insurance and reinsurance business.

The Company, the Underwriting Manager, and ABL may be referred to herein
individually as a “Party” and collectively as the “Parties.”

WHEREAS, the Company desires to issue collateralized (i) contracts providing
property catastrophe excess of loss retrocessional cover and (ii) industry loss
warranties; and

WHEREAS, the Company desires to appoint the Underwriting Manager to act as its
agent for the limited purposes described in this Agreement, and the Underwriting
Manager is willing to accept such appointment.

NOW, THEREFORE, subject to the terms and conditions of this Agreement, in
consideration of the mutual covenants set forth herein, intending to be legally
bound, the Parties hereby agree as follows:

ARTICLE 1

DEFINED TERMS

SECTION 1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings (definitions are applicable to both the singular and
the plural forms of each term defined in this Article):

“ABL” has the meaning ascribed in the introductory paragraph hereto.

“Accounting Report” has the meaning ascribed in Section 6.1.

 

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“Acquisition Expenses” means (i) commissions, fees and other expenses directly
allocable to the issuance of the Covered Contracts and owed by the Company to
third- party agents, brokers, producers or other intermediaries and (ii) premium
taxes, United States Federal excise taxes and other similar taxes payable by the
Company with respect to Covered Contracts.

“Adjusted Net Income (Loss)” means (i) the net income or loss of the Company,
determined in accordance with GAAP, with respect to the Covered Contracts
underwritten hereunder and incepting during the Underwriting Term, including all
income earned and expenses incurred during the Underwriting Term and all income
earned and expenses incurred thereafter that are allocable to such Covered
Contracts, but before any Performance Fees payable with respect to the
Underwriting Term, less (ii) any investment income of the Company.

“Administrative Fee” has the meaning ascribed in Section 5.3.

“Administrative Services” has the meaning ascribed in Section 3.4.

“Affiliate” of a specific Person means a Person that (at the time when the
determination is to be made) directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the specified Person. For purposes of this Agreement, (i) ABL, the Underwriting
Manager and their Affiliates (other than the Company and New Point IV), on the
one hand, and (ii) the Company and New Point IV, on the other hand, shall not be
considered Affiliates of one another.

“Agreement” has the meaning ascribed in the preamble of this Agreement.

“Appointing Authority” has the meaning ascribed in Section 12.1.

“Board” has the meaning ascribed in Section 2.3.

“Business Day” means any day other than a Saturday or Sunday or a day on which
banking institutions in Bermuda are permitted or obligated by law to close.

“Ceded Retrocession Agreements” has the meaning ascribed in Section 4.1.

“Change of Control” means, with respect to the Person at issue (the “Target”),
(i) an acquisition by an individual, legal entity or group of effective control
(whether through legal or beneficial ownership of shares of the applicable
Person, by contract or otherwise) of voting shares having more than 50% of the
aggregate voting power of the Target or any parent company of the Target (a
“Target Parent Company”) or (ii) any amalgamation or merger or consolidation of:
(x) a Target Parent Company in which the shareholders immediately prior to such
amalgamation or merger or consolidation do not continue to hold or have the
right to direct the voting of voting shares having more than 50% of the voting
power of such Target Parent Company immediately after such amalgamation or
merger or consolidation; or (y) the Target in which a Target Parent Company does
not continue to hold or have the right to direct the voting of voting shares
having more than 50% of the voting power of the Target immediately after such
amalgamation or merger or consolidation or (iii) a sale of all or substantially
all of the Target’s assets or (iv) the execution by the Target or any of its
Affiliates of an agreement

 

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to which the Target or any of its Affiliates is a party or by which it is bound,
providing for any of the events set forth above in clause (i), (ii) or (iii);
provided, that none of the transactions set forth in clause (i), (ii), (iii) or
(iv) above between and among the Target and any controlled Affiliate of the
Target shall constitute a Change of Control.

“Company” has the meaning ascribed in the introductory paragraph hereto.

“Company Indemnified Parties” has the meaning ascribed in Section 10.1.

“Company Termination Notice” has the meaning ascribed in Section 9.1.

“Company Trigger Event” means a Change of Control of New Point IV or the
Company.

“Confidential Information” has the meaning ascribed in Section 11.1.

“Control” (including with correlative meaning, the terms “controlling,”
“controlled by” and “under common control with”) means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.

“Covered Contracts” means (i) contracts providing collateralized property
catastrophe excess of loss retrocessional cover and (ii) collateralized industry
loss warranties, in each case of clauses (i) and (ii) that comply with the
Underwriting Guidelines.

“Cumulative Adjusted Net Income (Loss)” means the Adjusted Net Income (Loss)
from the first day of the Underwriting Term until the calculation date of
Cumulative Adjusted Net Income (Loss).

“Customer” means a retrocedent or prospective retrocedent, or other acquiror or
prospective acquiror of an industry loss warranty, or agent, broker or other
intermediary acting on any of their behalf.

“Effective Date” has the meaning ascribed in Section 2.4.

“Exempt Period” has the meaning ascribed in Section 2.3.

“Exempt Period Termination Notice” has the meaning ascribed in Section 2.3.

“GAAP” shall mean United States generally accepted accounting principles, as in
effect from time to time, consistently applied.

“Government Authority” means any legislature, executive branch or governmental
department, commission, board, agency, court, tribunal or instrumentality.

 

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“Included Company” means (i) any Affiliate of ABL that is controlled by ABL and
(ii) any Person for whom ABL or any Person identified in clause (i) above
provides all or substantially all of the underwriting services.

“Losses” has the meaning ascribed in Section 10.1.

“New Point IV” means New Point IV Limited, a company organized under the laws of
Bermuda, and the parent company of the Company.

“Operating Account” has the meaning ascribed in Section 3.3.

“Party” has the meaning ascribed in the second paragraph hereto.

“Performance Fee” has the meaning ascribed in Section 5.2.

“Performance Fee Report” has the meaning ascribed in Section 5.2.

“Person” means any individual, company, corporation, limited liability company,
partnership, firm, joint venture, association, trust, unincorporated
organization, Government Authority or other entity.

“Premium” means the premium and all other amounts payable to the Company on
Covered Contracts.

“Risk Modeling Systems” means any risk modeling systems, methods of pricing
coverage for retrocessional risks, methods of tracking the subject business and
related documents and materials developed by the Underwriting Manager at its own
expense or in cooperation with third parties.

“Settlement Auditor” has the meaning ascribed in Section 5.4.

“Shareholders” means the holders of common shares, par value $1.00 per share, of
New Point IV.

“Target” has the meaning ascribed in the definition of Change of Control.

“Target Parent Company” has the meaning ascribed in the definition of Change of
Control.

“Termination Date” has the meaning ascribed in Section 9.1.

“UM Change of Control Event” has the meaning ascribed in the definition of
Underwriting Manager Trigger Event.

“UM Indemnified Parties” has the meaning ascribed in Section 10.1.

“UM Termination Notice” has the meaning ascribed in Section 9.1.

“Underwriting Committee” has the meaning ascribed in Section 3.5.

 

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“Underwriting Fee” has the meaning ascribed in Section 5.1.

“Underwriting Guidelines” means the underwriting guidelines set forth in
Appendix 1 to this Agreement.

“Underwriting Manager” has the meaning ascribed in the introductory paragraph
hereto.

“Underwriting Manager Trigger Event” means the occurrence of any of the
following events:

(i) an assignment made for the benefit of creditors of ABL or the Underwriting
Manager;

(ii) the voluntary commencement of an insolvency or bankruptcy proceeding by ABL
or the Underwriting Manager, or the institution of a bankruptcy or insolvency
proceeding against ABL or the Underwriting Manager that is not dismissed within
five (5) Business Days after institution thereof;

(iii) the commission by the Underwriting Manager or any of its directors,
officers or employees, as reasonably determined by the Company, of fraud,
dishonesty or bad faith in the performance by such Underwriting Manager or any
such director, officer or employee of the services under this Agreement;

(iv) a material breach of this Agreement by the Underwriting Manager or ABL that
is not cured within thirty (30) days of receipt of written notice of such breach
from the Company; or

(v) the Change of Control of ABL or the Underwriting Manager (the “UM Change of
Control Event”).

“Underwriting Term” means the period commencing on May 1, 2011 and ending on the
Termination Date.

ARTICLE 2

APPOINTMENT AND AUTHORITY

SECTION 2.1 Appointment and Acceptance. (a) The Company hereby appoints the
Underwriting Manager to be the Company’s limited agent solely to provide the
services and exercise the authorities specified in this Agreement. The
Underwriting Manager hereby accepts this appointment.

(b) The Underwriting Manager shall have the authority expressly conferred on it
by this Agreement and the duty and authority to provide the services described
in this Agreement.

 

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SECTION 2.2 Exclusivity. Except as otherwise provided in this Agreement, the
appointment hereunder shall be exclusive during the term of this Agreement, and,
except as otherwise provided by this Agreement, no other Person shall provide to
the Company the services specified in this Agreement to be provided by, or
exercise on behalf of the Company the authorities conferred on, the Underwriting
Manager pursuant to this Agreement.

SECTION 2.3 Non-Compete. From the Effective Date until the Termination Date, ABL
will not, and will cause all of the Included Companies (including Included
Companies on the date of this Agreement and in the future through acquisitions
or otherwise) to not, underwrite Covered Contracts; provided, that the foregoing
restriction shall not apply (i) to any Covered Contract underwritten after
March 30, 2012 if cover in respect of such Covered Contract does not incept
until after the Termination Date and (ii) during any period (any such period, an
“Exempt Period”) that the Company does not have sufficient resources to
underwrite Covered Contracts, as determined by the Board of Directors of the
Company (the “Board”) (based on the advice of the Underwriting Committee). Each
Exempt Period shall commence upon receipt by ABL and the Underwriting Manager of
notice from the Board that the Board has determined (after consultation with the
Underwriting Committee) that the Company’s resources are insufficient to
underwrite Covered Contracts. Each Exempt Period shall terminate upon receipt by
ABL and the Underwriting Manager of notice from the Board that the Board has
determined (after consultation with the Underwriting Committee) that the Company
has sufficient resources to accept retrocessions of additional Covered Contracts
(the “Exempt Period Termination Notice”).

SECTION 2.4 Effective Date. This Agreement shall be effective as of 12:01 a.m.
Atlantic Standard Time on May 1, 2011 (the “Effective Date”).

SECTION 2.5 Location. The Underwriting Manager shall provide the services
specified in this Agreement from its offices in Bermuda, shall in no event
provide any such services within the United States and shall provide such
services in accordance with and subject to the U.S. Federal Income Tax Operating
Guidelines attached as Appendix 2 to this Agreement.

SECTION 2.6 Instructions. The Underwriting Manager shall follow such
instructions as reasonably given to it from time to time by the Company
regarding the services rendered under this Agreement. The Company shall give all
instructions to the Underwriting Manager in writing and shall specify a
reasonable amount of time in which to allow the Underwriting Manager to take
appropriate action.

SECTION 2.7 Performance Standards. The Underwriting Manager agrees to perform
faithfully its duties under this Agreement to the best of its professional
ability, in accordance with the standard of care reasonably to be expected of a
professional insurance underwriter, and with that degree of knowledge, skill and
judgment which is exercised by ABL with respect to its own business. In
addition, the Underwriting Manager shall comply in all material respects with
all applicable laws and regulations in respect of all activities conducted by it
under this Agreement.

 

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SECTION 2.8 Limitations of Authority.

(a) The Underwriting Manager shall have no power or authority other than as
granted and set forth herein and no other or greater power shall be implied from
the grant or denial of powers specifically mentioned herein.

(b) In addition to the other limitations expressly contained in this Agreement,
the Underwriting Manager has no authority to:

(i) make, accept or endorse notes or otherwise incur any liability which is not
incurred in the ordinary course of business of the Underwriting Manager on
behalf of the Company pursuant to the terms and conditions of this Agreement;

(ii) issue a guaranty, other than as provided for in this Agreement or as
permitted expressly in writing by the Company;

(iii) hold itself out as an agent of the Company in any other manner, or for any
other purposes, than as specifically prescribed in this Agreement; or

(iv) settle or conduct lawsuits or other disputes other than coverage disputes
relating to Covered Contracts or respond to any regulatory investigations on
behalf of the Company.

(c) Other than as set forth in Section 3.8(c), the Underwriting Manager shall
have no authority to appoint sub-agents for the Company without prior written
approval of the Company, which consent shall not be unreasonably withheld.

ARTICLE 3

CONTRACT SERVICES

SECTION 3.1 Underwriting Services. The Underwriting Manager agrees to underwrite
Covered Contracts on behalf of the Company in accordance with the terms hereof.
In underwriting the Covered Contracts, the Underwriting Manager shall perform
the following services:

(a) Provide indications, quotations and authorizations of terms and conditions
to prospective Customers for the issuance of Covered Contracts;

(b) Prepare and negotiate retrocession agreements and industry loss warranties
and related documents, including the arrangement of all collateral facilities to
be put in place, in connection with the underwriting of Covered Contracts;

(c) Determine premium rates and other underwriting terms and conditions with
respect to the underwriting of Covered Contracts;

(d) Establish commissions, fees and other expenses to be paid to agents,
producers, brokers and other intermediaries in connection with the underwriting
of the Covered Contracts; provided, that no contingent commissions shall be paid
to agents, producers, brokers or other intermediaries in connection with the
issuance of Covered Contracts;

 

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(e) Execute on behalf of the Company all Covered Contracts underwritten
hereunder and obtain executed copies of all Covered Contracts underwritten
hereunder from the other parties thereto;

(f) Retain on behalf of the Company at least one fully executed copy of each
Covered Contract underwritten hereunder and provide fully executed copies of the
Covered Contracts underwritten hereunder to the other parties thereto;

(g) Establish fees to be paid to service providers by or for the account of the
Company in connection with services as may be needed from time to time with
respect to the Covered Contracts; and

(h) Maintain on behalf of the Company collateral supporting all of the Covered
Contracts underwritten hereunder as required by the Underwriting Guidelines.

SECTION 3.2 Actuarial Services. The Underwriting Manager agrees to provide
actuarial support to the Company with respect to the Covered Contracts,
including preparation of pricing indications and projections of profitability on
Covered Contracts, utilizing and analyzing the results of Risk Modeling Systems,
compiling aggregate limit and probable maximum loss data, analyzing historical
loss information and estimating loss reserves.

SECTION 3.3 Collections and Operating Account; Investment of Assets. The
Underwriting Manager agrees to perform the following services with respect to
the collection of amounts due to the Company and the maintenance of the
Operating Account:

(a) The Underwriting Manager shall diligently seek to collect all Premiums,
reinsurance recoverables and other funds due to the Company in connection with
the Covered Contracts underwritten hereunder and any Ceded Retrocession
Agreements and promptly (but in no event later than five (5) Business Days
following receipt) deposit such payments into a separate bank account owned and
established by the Company (the “Operating Account”). All Premiums, reinsurance
recoverables and other funds received by the Underwriting Manager on behalf of
the Company pursuant to this Agreement shall be held by the Underwriting Manager
in a fiduciary capacity for the benefit of the Company. Unless otherwise
directed by the Company or contemplated by paragraph (c) of this Section 3.3,
the Underwriting Manager shall have the right to withdraw from the Operating
Account only those fees, expenses, taxes or other amounts either due to the
Underwriting Manager pursuant to this Agreement or to be paid by the
Underwriting Manager on behalf of the Company pursuant to this Agreement, and in
each case, only in accordance with the terms of this Agreement.

(b) In the event that the Company receives any Premiums, reinsurance
recoverables or other funds that the Underwriting Manager is authorized to
collect pursuant to this Agreement, the Company shall promptly deposit such
payments into the Operating Account.

 

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(c) The Underwriting Manager shall cause to be invested all assets of the
Company in the Operating Account that are in excess of amounts reasonably
determined by the Underwriting Manager to be necessary from time to time to
satisfy the Company’s obligations as they become due. All such investments must
be made in compliance with the investment guidelines set forth in Appendix 3 to
this Agreement.

(d) All payments of interest and other income, if any, received in respect of
the assets in the Operating Account shall be credited to and become part of the
Operating Account.

SECTION 3.4 Administrative Services. The Underwriting Manager shall perform the
following administrative services, as well as all other services that are
necessary to ensure that New Point IV and the Company comply with all applicable
legal and regulatory reporting and filing requirements (the “Administrative
Services”):

(a) act as Principal Representative for the Company pursuant to Bermuda law;

(b) coordinate with the Company’s independent auditors in the preparation of
statutory financial statements of the Company as may be required to be filed
from time to time with the Bermuda Monetary Authority and audited annual and
unaudited quarterly financial statements of New Point IV and the Company
prepared in accordance with GAAP;

(c) prepare and distribute to Shareholders annual and quarterly financial
statements of New Point IV and of the Company prepared in accordance with GAAP;

(d) prepare and file with the Bermuda Monetary Authority statutory financial
statements of the Company as required by Bermuda law;

(e) prepare and file with the Bermuda Monetary Authority financial statements of
the Company prepared in accordance with GAAP when required by Bermuda law or
requested by the Bermuda Monetary Authority;

(f) prepare and distribute to Shareholders on a monthly basis the calculation of
book value per share of New Point IV;

(g) coordinate with the Company’s tax advisors in the preparation of, and
forward to Shareholders at their request on an annual basis, an “annual
information statement” for New Point IV and the Company as described under
Treasury Regulation § 1.1295-1(g) and, if relevant, information regarding New
Point IV’s and the Company’s earnings required for U.S. Internal Revenue Service
Form 5471 filings, as soon as reasonably possible after December 31st of each
year, and the Underwriting Manager shall use its reasonable best efforts to
distribute such information, if requested by a Shareholder, within seventy
(70) days following December 31st of each year;

(h) coordinate with the Company’s tax advisors in the preparation of protective
U.S. Federal income tax returns for New Point IV and the Company; and

 

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(i) maintain on the Company’s behalf all licenses and other registrations and
authorities required by law or regulation for the Company to conduct its
business in accordance with this Agreement.

SECTION 3.5 Underwriting Committee. (a) On or prior to the Effective Date, ABL
shall form, and during the term of this Agreement, maintain, an underwriting
committee (the “Underwriting Committee”) to provide advice to the Underwriting
Manager and the Company in connection with the underwriting of Covered Contracts
hereunder. Without limiting the foregoing, the Underwriting Committee shall:

(i) meet at regular intervals, but not less often than quarterly, to review the
Company’s portfolio of Covered Contracts, review terms and conditions of
proposed transactions with Customers and provide advice to the Underwriting
Manager and the Company regarding the composition of the Company’s risk
portfolio;

(ii) monitor and report the sufficiency of the Company’s resources to continue
to accept new business;

(iii) consult with the Underwriting Manager and the Company regarding major
underwriting decisions;

(iv) evaluate proposals to acquire retrocessional cover for the benefit of the
Company; and

(v) provide such other advice as reasonably requested by the Underwriting
Manager or the Company from time to time with regard to the business of the
Company.

(b) ABL shall cause the Underwriting Committee to exercise commercially
reasonable due care in providing its advice to the Underwriting Manager and the
Company. ABL shall provide to the Underwriting Manager the services of its Chief
Underwriting Officer, Reinsurance, other senior underwriters and such other
personnel as is necessary in the judgment of ABL to satisfy the Underwriting
Manager’s responsibilities under the terms of this Agreement.

SECTION 3.6 Production. The Underwriting Manager shall have the authority to
prepare, print, publish and mail descriptive brochures and other promotional
material related to the possible issuance by the Company of Covered Contracts,
subject to the pre-approval by the Company of the form and content of such
material. The Company shall bear all mailing, printing, publishing and other
related expenses for any such promotional materials that the Underwriting
Manager distributes.

SECTION 3.7 Acquisition Expenses. The Underwriting Manager shall pay when due,
from funds in the Operating Account, all applicable Acquisition Expenses.

 

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SECTION 3.8 Claims Under Covered Contracts. (a) The Underwriting Manager shall
receive all notices of claims under Covered Contracts underwritten hereunder and
shall promptly notify the Company of such notices received. The Underwriting
Manager shall promptly notify the Company of the initiation of any suit,
arbitration proceeding or other legal proceeding against the Company or the
Underwriting Manager served on the Underwriting Manager, or of any written or
significant oral threat to initiate any suit, arbitration proceeding or other
legal proceeding against the Company or the Underwriting Manager received by the
Underwriting Manager. The Underwriting Manager shall promptly supply the Company
with a description of the nature of such claim, suit, arbitration proceeding or
other legal proceeding. The Company shall promptly forward to the Underwriting
Manager any notices of claims, suits, arbitration proceedings or other legal
proceedings against the Company that it receives other than from the
Underwriting Manager.

(b) The Underwriting Manager shall determine on behalf of the Company whether to
pay, deny or settle all claims under the Covered Contracts underwritten
hereunder. The Underwriting Manager shall have exclusive control over the
investigation, adjustment, negotiation, settlement or defense of any claims,
suits, arbitration proceedings or other legal proceedings in connection with
such Covered Contracts; provided, that the Underwriting Manager shall conduct
any such investigation, adjustment, negotiation, settlement or defense of
claims, suits, arbitration proceedings or other legal proceedings in the same
manner as if it were performing such services with respect to business of its
Affiliates not subject to this Agreement. The Underwriting Manager shall be
entitled to pay any such claims from funds in the Operating Account.

(c) The Underwriting Manager shall exercise all the rights of the Company to
pursue and control salvage and subrogation recoveries in connection with Covered
Contracts underwritten hereunder using outside attorneys, experts, advisers,
consultants, witnesses and investigators determined by the Underwriting Manager
as necessary; provided, that the Underwriting Manager shall pursue any such
recoveries in the same manner as if it were pursuing such recoveries with
respect to business of its Affiliates not subject to this Agreement. When so
requested in writing by the Underwriting Manager, the Company shall, at the
expense of the Company, join in any pursuit of salvage and subrogation
recoveries in connection with Covered Contracts underwritten hereunder.

(d) Notwithstanding anything in this Agreement to the contrary, the Company
shall have the right, at its own expense, to participate jointly with the
Underwriting Manager in the investigation, adjustment, negotiation, settlement
and defense of claims, suits, arbitration proceedings and other legal
proceedings in connection with Covered Contracts underwritten hereunder, as well
as the pursuit of salvage and subrogation recoveries.

SECTION 3.9 Licenses and Authorities. The Underwriting Manager shall at all
times maintain all licenses and other registrations and authorities required by
law or regulation to perform the services required to be performed by the
Underwriting Manager hereunder.

 

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ARTICLE 4

RETROCESSION SERVICES

SECTION 4.1 Retrocession. (a) At the direction of the Company, the Underwriting
Manager shall arrange and purchase retrocessional cover for the benefit of the
Company (“Ceded Retrocession Agreements”). Except as directed by the Company,
the Underwriting Manager shall have no authority hereunder to purchase or
otherwise bind retrocessional cover for the benefit of the Company or to
terminate, waive or amend the terms of any Ceded Retrocession Agreements.

(b) The Underwriting Manager shall manage and administer the Ceded Retrocession
Agreements, including providing all reports and notices required in regard to
the Ceded Retrocession Agreements to the retrocessionaires thereunder within the
time required by the applicable retrocession agreement or agreements and doing
all other things necessary to comply with the terms of the Ceded Retrocession
Agreements. Without limiting the foregoing, the Underwriting Manager shall
timely pay retrocession premiums due to retrocessionaires under the Ceded
Retrocession Agreements from funds in the Operating Account and shall diligently
seek to collect from such retrocessionaires all reinsurance receivables due
thereunder.

ARTICLE 5

FEES

SECTION 5.1 Underwriting Fee. (a) The Company agrees to pay to the Underwriting
Manager a service fee (the “Underwriting Fee”) equal to four percent (4%) of the
gross written premiums with respect to the Covered Contracts underwritten
hereunder and incepting during the Underwriting Term. The Underwriting Fee shall
be payable quarterly as premiums are received within fourteen (14) days
following the close of each fiscal quarter, commencing July 31, 2011. The
Underwriting Manager shall be permitted to withdraw from the Operating Account
the amount of each quarterly Underwriting Fee payment concurrently with the
delivery by the Underwriting Manager of the Accounting Report for such calendar
quarter.

(b) In the event of any rebates, returns of premium or other adjustments to
gross written premium with respect to the Covered Contracts underwritten
hereunder, the Underwriting Manager shall be required to return to the Company
(by deposit into the Operating Account) any Underwriting Fees previously paid to
the Underwriting Manager with respect to such rebates, returns of premium or
other adjustments.

SECTION 5.2 Performance Fee. (a) The Company agrees to pay to the Underwriting
Manager a performance fee (the “Performance Fee”) with respect to the Covered
Contracts underwritten hereunder and incepting during the Underwriting Term
equal to eight and one third percent (8 1/3%) of the Cumulative Adjusted Net
Income for the Underwriting Term.

 

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(b) Within ninety (90) days following the end of the Underwriting Term and
within thirty (30) days following the end of each fiscal quarter thereafter, the
Underwriting Manager shall (i) calculate the Performance Fee for the
Underwriting Term as of the end of such period and (ii) deliver to the Company a
report (a “Performance Fee Report”) setting forth the Underwriting Manager’s
calculation of the Performance Fee and the components thereof and the aggregate
amount of Performance Fee previously paid with respect to the Underwriting Term.
The Performance Fee shall be calculated based on the Company’s audited financial
statements determined in accordance with GAAP and all of the Company’s
subsequent unaudited quarterly and audited annual financial statements
determined in accordance with GAAP through the calculation date. Following the
delivery of each Performance Fee Report, the Underwriting Manager shall
(x) provide to the Company and its authorized representatives copies of such
work papers and other documents relating to its preparation of the Performance
Fee Report as the Company or its authorized representatives may reasonably
request and (y) cooperate with, and make its personnel reasonably available to,
the Company and its authorized representatives for the purpose of providing such
other information as the Company and its authorized representatives may
reasonably request concerning the Performance Fee Report.

(c) Subject to Section 5.4 below, within fifteen (15) days following the
Company’s receipt of each Performance Fee Report, (i) the Company shall pay to
the Underwriting Manager the amount, if any, that the Performance Fee as set
forth in the Performance Fee Report exceeds the aggregate amount of any
Performance Fee previously paid by the Company to the Underwriting Manager and
not returned to the Company pursuant to this Section 5.2(c) or (ii) the
Underwriting Manager shall pay to the Company the amount, if any, that the
Performance Fee as set forth in the Performance Fee Report is less than the
aggregate amount of any Performance Fee previously paid by the Company to the
Underwriting Manager and not returned to the Company pursuant to this
Section 5.2(c).

(d) Notwithstanding anything to the contrary contained in this Section 5.2, in
the event that this Agreement is terminated by the Company with respect to all
of the services pursuant to Section 9.2(b), the Performance Fee payable to the
Underwriting Manager for any period subsequent to such termination shall be
reduced by the amount of all fees and expenses incurred by the Company to
perform, or to retain a third party administrator to perform, all of the
services that would be required to be provided by the Underwriting Manager
hereunder were this Agreement not so terminated.

SECTION 5.3 Administrative Fee. The Company agrees to pay to the Underwriting
Manager, as consideration for the performance of the Administrative Services, an
administrative fee for each calendar quarter until the first anniversary of the
last day of the Underwriting Term in an amount equal to $50,000 (the
“Administrative Fee”). The Administrative Fee shall be payable within fourteen
(14) days following the close of each fiscal quarter, commencing July 31, 2011.
The Underwriting Manager shall be permitted to withdraw from the Operating
Account the amount of each quarterly Administrative Fee payment concurrently
with the delivery by the Underwriting Manager of the Accounting Report for such
quarter.

 

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SECTION 5.4 Dispute Resolution. If the Underwriting Manager and the Company are
unable to agree on the amount of any payment pursuant to this Article 5, such
disagreements shall be submitted to an independent certified public accounting
firm of national standing and reputation jointly selected and retained by the
Underwriting Manager and the Company (the “Settlement Auditor”) for resolution.
The Parties shall, and shall cause their respective Affiliates and independent
auditors to, cooperate in good faith with the Settlement Auditor and shall give
the Settlement Auditor access to all books, records, work papers and other
information requested by the Settlement Auditor for purposes of such resolution.
The Settlement Auditor shall, within sixty (60) days after its engagement,
deliver to the Underwriting Manager and the Company a conclusive written
resolution of all disagreements submitted to it, which shall be in accordance
with this Agreement and shall be binding upon the Parties hereto. The
Underwriting Manager and the Company shall each pay one-half of the fees and
expenses of the Settlement Auditor. The Underwriting Manager and the Company
shall pay to each other any amount owed to the other as determined by the
Settlement Auditor within ten (10) days of its final determination.

SECTION 5.5 Offset. Any balance or balances due from one Party to another Party
under this Agreement shall be offset against any balance or balances due to the
former from the latter under this Agreement.

SECTION 5.6 Insufficient Funds. Notwithstanding anything to the contrary
contained in Sections 5.1 or 5.2, in the event that due to regulatory or
collateral requirements, the Company does not have sufficient funds on hand to
make a payment of the Underwriting Fee or the Performance Fee (or any portion
thereof) when due under this Agreement, the Company will not be in breach of
this Agreement for failure to make such payment, but shall make such payment
(without interest or any other penalty) promptly as and when sufficient funds
become available.

ARTICLE 6

REPORTING

SECTION 6.1 Accounting Reports. (a) Within fourteen (14) days following the
close of each fiscal quarter, commencing July 31, 2011, the Underwriting Manager
will prepare and forward to the Company a detailed and itemized statement of
account (the “Accounting Report”), in a form acceptable to both the Underwriting
Manager and the Company, setting forth the following:

(i) all Premiums, reinsurance recoverables, investment income and any other
funds received by the Underwriting Manager on the Company’s behalf during the
previous fiscal quarter;

(ii) any Underwriting Fees (and adjustments thereto) or Administrative Fees due
for the previous fiscal quarter;

(iii) any premiums paid in respect of Ceded Retrocession Agreements during the
previous fiscal quarter;

 

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(iv) all Acquisition Expenses paid during the previous fiscal quarter;

(v) all claims and other amounts paid by the Underwriting Manager on behalf of
the Company during the previous fiscal quarter under the Covered Contracts;

(vi) the balance of the Operating Account as of the end of the previous fiscal
quarter (the reporting obligations set forth in this clause may be satisfied by
delivery of a bank statement or statements);

(vii) the amount of all collateral supporting the Covered Contracts written
through the date of such Accounting Report; and

(viii) the market value of the Company’s assets that are invested pursuant to
Section 3.3(c) as of the end of the previous fiscal quarter.

(b) Within forty-five (45) days following the close of each fiscal year, the
Underwriting Manager will prepare and forward to the Company a compilation of
the information set forth in the Accounting Reports for the immediately
preceding fiscal year.

SECTION 6.2 Underwriting Report. Within fourteen (14) days following the close
of each calendar month, the Underwriting Manager will prepare and forward to the
Company a detailed and itemized report, in a form acceptable to both the
Underwriting Manager and the Company, setting forth the following:

(a) a list of all Covered Contracts underwritten by the Underwriting Manager
hereunder during the previous calendar month;

(b) with respect to each of the Covered Contracts listed pursuant to
Section 6.2(a), the name of the Customer, the dates of coverage, the premium
charged thereon, the per occurrence and aggregate insured amounts provided under
each Covered Contract issued and such other specific data or information
regarding the Covered Contracts as the Company may reasonably request; and

(c) a list of all Acquisition Expenses, paid losses, unearned premium reserve
and deferred acquisition costs relating to all Covered Contracts listed pursuant
to Section 6.2(a).

SECTION 6.3 Reserve Reports. Within thirty (30) days after the end of each
fiscal quarter, the Underwriting Manager shall prepare and forward to the
Company a report, in a form to be agreed upon by the Underwriting Manager and
the Company, setting forth a calculation and the amount of statutory reserves
the Company is required to maintain under Bermuda law as of the quarter end in
connection with the Covered Contracts.

SECTION 6.4 Performance Fee Reports. The Underwriting Manager shall prepare and
deliver to the Company the Performance Fee Reports in accordance with
Section 5.2.

 

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SECTION 6.5 Holidays. If the last day on which a report may be prepared and
forwarded is not a Business Day, then the report may be prepared or forwarded on
the next Business Day.

ARTICLE 7

RECORDS

SECTION 7.1 Maintenance of and Access to Records. The Underwriting Manager will
keep full and accurate books and records, whether in paper or electronic form,
of all transactions pertaining to the Covered Contracts underwritten by the
Underwriting Manager hereunder. The Underwriting Manager shall also keep full
and accurate books and records clearly recording the deposits into and
withdrawals from the Operating Account. The Company and its representatives
shall, as they may from time to time reasonably request, have access to and the
right to inspect and copy, at the Underwriting Manager’s main offices, during
regular business hours, and upon reasonable notice, all books and records
concerning such Covered Contracts and the Operating Account. The Underwriting
Manager shall maintain all books and records required by this Agreement related
to the Covered Contracts until seven (7) years after the expiration of such
Covered Contracts and shall maintain all books and records related to the
Operating Account until seven (7) years after the Underwriting Manager ceases to
perform any services for the Company hereunder. The Underwriting Manager shall
permit the books and records related to such Covered Contracts and the Operating
Account to be audited by an auditor appointed by the Company at any time upon
reasonable notice from the Company. This Article shall survive any termination
of this Agreement; provided, that if this Agreement is terminated pursuant to
Section 9.2(b), the Underwriting Manager shall deliver all books and records
maintained by the Underwriting Manager pursuant to this Article 7 as directed by
the Company at the time of such termination of this Agreement.

SECTION 7.2 Ownership of Records. The Company shall be the owner and entitled to
possession of all books and records prepared by the Underwriting Manager in
connection with the Covered Contracts, the Operating Account and this Agreement,
provided, that the Underwriting Manager shall be entitled to make and retain one
copy of such materials.

ARTICLE 8

EXPENSES

SECTION 8.1 Expenses of the Underwriting Manager and ABL. Unless otherwise
expressly provided herein, the Company will not be responsible for any expenses
of the Underwriting Manager and ABL whatsoever, including all wages and salaries
of their officers and employees, all other personnel costs, rent, utilities,
transportation expenses, travel expenses, entertainment expenses, postage,
advertising expenses, local license fees and taxes of any kind.

SECTION 8.2 Expenses of the Company. The Company will bear the cost of all fees
under Article 5 of this Agreement, all Acquisition Expenses and the Company’s
engagement of a corporate secretary, independent auditor, outside legal counsel
and other advisors retained by the Company.

 

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ARTICLE 9

TERM OF AGREEMENT

SECTION 9.1 Term and Extension. (a) Subject to Section 9.2, the term of this
Agreement begins on the Effective Date and shall continue until 11:59 p.m.
Atlantic Standard Time on the earliest to occur of: (i) April 30, 2012, (ii) the
date of termination specified in a Company Termination Notice delivered by the
Underwriting Manager to the Company pursuant to Section 9.1(b), and (iii) the
date of termination specified in a UM Termination Notice delivered by the
Company to the Underwriting Manager pursuant to Section 9.1(c) (the earliest to
occur of clauses (i), (ii) and (iii), the “Termination Date”).

(b) In the event a Company Trigger Event occurs, the Company shall provide
prompt written notice to the Underwriting Manager of such occurrence and the
Underwriting Manager may, at its option, terminate this Agreement by delivering
to the Company a written notice of termination indicating the Company Trigger
Event causing such termination and the effective date of such termination (the
“Company Termination Notice”); provided, the Company Termination Notice must be
delivered to the Company within forty-five (45) days of the Underwriting
Manager’s receipt of notice of the Company Trigger Event causing such
termination.

(c) In the event an Underwriting Manager Trigger Event occurs, the Underwriting
Manager shall provide prompt written notice to the Company of such occurrence
and the Company may, at its option, terminate this Agreement by delivering to
the Underwriting Manager a written notice of termination indicating the
Underwriting Manager Trigger Event causing such termination and the effective
date of such termination (the “UM Termination Notice”); provided, the UM
Termination Notice must be delivered to the Underwriting Manager within
forty-five (45) days of the Company’s receipt of notice of the Underwriting
Manager Trigger Event causing such termination.

SECTION 9.2 Effect of Termination. (a) Upon any termination of this Agreement,
the Underwriting Manager will have no authority hereunder, either directly or
indirectly to: (i) underwrite any new or renewal Covered Contracts on behalf of
the Company, (ii) extend the term of or alter the perils covered by any Covered
Contract underwritten on or prior to the Termination Date or (iii) increase the
amount of reinsurance afforded by, or otherwise increase the Company’s liability
on, any Covered Contract in effect on or prior to the Termination Date. Subject
to Section 9.2(b), such termination shall have no effect on the rights and
duties of the Parties under this Agreement, including the obligation of the
Underwriting Manager to provide the services set forth herein and the obligation
of the Company to compensate the Underwriting Manager pursuant to Article 5,
with respect to Covered Contracts underwritten by the Underwriting Manager
hereunder on or prior to the Termination Date, and such rights and duties shall
continue until such Covered Contracts have expired and all losses in connection
therewith are settled or commuted.

 

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(b) Upon any termination of this Agreement upon the occurrence of an
Underwriting Manager Trigger Event, other than an UM Change of Control Event,
the Company shall have the option, in lieu of termination as contemplated by
Section 9.2(a), to terminate this Agreement with respect to all services
provided by the Underwriting Manager hereunder. Upon any such termination, the
Underwriting Manager shall cooperate fully in the transfer of services required
by this Agreement, the transfer of all funds remaining in the Operating Account
and any other assets of the Company held by the Underwriting Manager and the
books and records maintained by the Underwriting Manager pursuant to Article 7,
in each case, as directed by the Company, so that the Company or a third party
administrator selected by the Company will be able to perform such services
without interruption following such termination of this Agreement. If, following
such termination of this Agreement, the Underwriting Manager receives any
Premiums, reinsurance recoverables or other funds due the Company, the
Underwriting Manager shall promptly forward such funds as directed by the
Company.

(c) Notwithstanding anything in this Agreement to the contrary, this
Section 9.2(c) and Articles 10, 11 and 12 shall survive any termination of this
Agreement pursuant to Section 9.2(b) until the expiration of all Covered
Contracts and the settlement or commutation of all losses thereunder.
Notwithstanding anything in this Agreement to the contrary, Section 2.3 shall
not survive any termination of this Agreement.

ARTICLE 10

INDEMNIFICATION

SECTION 10.1 Indemnified Parties. (a) The Company agrees to indemnify, defend
and hold forever harmless the Underwriting Manager and its Affiliates,
directors, officers, employees, agents, successors and permitted assigns
(collectively, the “UM Indemnified Parties”) from and against, and to promptly
pay or reimburse any UM Indemnified Party, all losses, claims, liabilities,
damages, deficiencies, costs or expenses of any type (including, without
limitation, attorneys’ fees) (collectively “Losses”) incurred by the UM
Indemnified Parties (i) on account of any third-party claim or proceeding
arising out of this Agreement, or (ii) arising from any breach of, or failure to
perform, any covenant or obligation of the Company contained in this Agreement
unless such breach or failure to perform is the result of a failure by the
Underwriting Manager or ABL to perform any of their covenants or obligations
hereunder; provided, that notwithstanding the foregoing, for purposes of this
Section 10.1(a), the term “Losses” shall not include any Losses arising due to
(x) the fraud, dishonesty, bad faith, gross negligence or willful misconduct of
any of the UM Indemnified Parties or (y) acts of the Underwriting Manager that
are outside the grant of agency authority specified in this Agreement.

 

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(b) Each of the Underwriting Manager and ABL agrees, severally not jointly, to
indemnify, defend and hold forever harmless the Company and its Affiliates,
directors, officers, employees, agents, successors and permitted assigns
(collectively, the “Company Indemnified Parties”) from and against, and to
promptly pay or reimburse any Company Indemnified Party, all Losses incurred by
the Company Indemnified Parties arising from any breach of, or failure to
perform, any covenant or obligation of the Underwriting Manager or ABL, as
applicable, contained in this Agreement; provided, that notwithstanding the
foregoing, for purposes of this Section 10.1(b), the term “Losses” shall not
include any Losses arising due to the fraud, dishonesty, bad faith, gross
negligence or willful misconduct of any of the Company Indemnified Parties.

SECTION 10.2 Notice. Upon becoming aware of a claim for which an indemnified
party may be entitled to indemnification hereunder, the indemnified party shall
promptly notify the indemnifying party thereof in writing (provided, that the
failure to promptly notify the indemnifying party in writing shall not
constitute a defense to the right of indemnity unless such delay materially
prejudices the indemnifying party’s defense of such claim), and the indemnifying
party shall have the right to assume the defense of such claim with counsel of
its own choice; provided, that the indemnified party shall be entitled to
participate, at its cost and expense, with counsel of its own choice, provided
that the indemnifying party shall control the defense of the claim. An
indemnifying party may not settle any claim without the prior written consent of
the indemnified party, which consent shall not be unreasonably withheld.

ARTICLE 11

CONFIDENTIALITY

SECTION 11.1 Confidential Information.

(a) Each Party acknowledges that it may receive confidential or proprietary
information or trade secrets (collectively “Confidential Information”) of the
other Parties hereto. Each Party agrees:

(i) to hold such Confidential Information in confidence and to protect such
Confidential Information with at least the same degree of care as it normally
exercises to protect its own confidential or proprietary information or trade
secrets of a similar nature;

(ii) to use such Confidential Information solely for the purpose of performing
its obligations under this Agreement;

(iii) to reproduce such Confidential Information only to the extent necessary
for such purposes;

(iv) to restrict disclosure of such Confidential Information to its employees,
officers, directors, shareholders, consultants, agents, auditors, actuaries,
legal counsel and other external advisors with a need to know for the purposes
of performing its obligations under this Agreement and to inform such employees,
officers, directors, shareholders, consultants, agents, auditors, actuaries,
legal counsel and other external advisors of its confidentiality obligations
under this Agreement; and

 

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(v) not to otherwise disclose such Confidential Information to any third party
(including, without limitation, in any public statement or announcement) without
the prior written approval of the other Parties.

(b) The restrictions on the use or disclosure of Confidential Information in
Section 11.1(a) shall not apply to any Confidential Information:

(i) after it has become generally available to the public without breach of this
Agreement;

(ii) which is disclosed to a Party by a third party not known by such Party to
be bound by an obligation of confidentiality;

(iii) which is disclosed by a Party pursuant to any statute, regulation, order,
subpoena or document discovery request (with reasonable prior notice to the
other Parties); or

(iv) which the Parties agree in writing is free of such restrictions.

ARTICLE 12

MISCELLANEOUS

SECTION 12.1 Arbitration.

(a) Except with respect to disagreements covered by Section 5.4, as a condition
precedent to any right of action hereunder in the event of any dispute or
difference of opinion arising out of, relating to, or in connection with this
Agreement, including any question regarding its existence, breach, validity or
termination, such dispute or difference of opinion shall be referred to and
finally resolved by arbitration. The arbitration shall be conducted under the
UNCITRAL Model Law in accordance with the Bermuda International Conciliation and
Arbitration Act 1993 and the UNCITRAL Arbitration Rules presently in force,
except as same may be expressly modified herein or by mutual agreement of the
Parties.

(b) The tribunal shall consist of three (3) arbitrators, one of whom shall be
nominated by the Underwriting Manager on behalf of itself and ABL and the other
of whom shall be nominated by the Company. The two (2) arbitrators so nominated
shall nominate the third arbitrator, who shall be the chairman. If either of the
Underwriting Manager or the Company refuses or neglects to appoint an arbitrator
within forty-five (45) days of a written request by the other Party to do so,
the Appointments’ Committee of the Chartered Institute of Arbitrators Bermuda
Branch (the “Appointing Authority”) shall appoint an arbitrator on such Party’s
behalf. If the two (2) arbitrators do not agree on a third arbitrator within
thirty (30) days of their appointment, the chairman shall be appointed by the
Appointing Authority. The arbitrators shall be present or former officers of
property reinsurance companies, other than the Parties or any of their
respective Affiliates, or other professionals with significant experience in the
property reinsurance business.

 

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(c) The place of the arbitration shall be Bermuda.

(d) The substantive law of the arbitration shall be that of Bermuda.

(e) Each Party shall bear its own expenses and attorneys’ fees and the expense
of its own arbitrator, and shall jointly and equally bear with the other the
expense of the chairman and of the arbitration. In the event that an arbitrator
is chosen by the Appointing Authority because of a Party’s failure to appoint an
arbitrator, as above provided, the expense of that arbitrator shall be borne by
that Party. Notwithstanding the foregoing, the arbitrators shall have the
discretion to award costs.

(f) The arbitration award shall be final and binding on the Parties. Judgment
upon the award may be entered in any court having jurisdiction thereof or having
jurisdiction over the relevant Party or its assets.

(g) In order to facilitate the comprehensive resolution of related disputes, and
upon request of any Party to the arbitration proceeding, the arbitration
tribunal may consolidate the arbitration proceeding with any other arbitration
proceeding or proceedings involving any of the Parties hereto relating to this
Agreement. The arbitration tribunal shall consolidate such arbitrations if, but
only if, it determines that (i) there are issues of fact or law common to the
two proceedings so that a consolidated proceeding would be more efficient than
separate proceedings and (ii) no Party would be unduly prejudiced as a result of
such consolidation through undue delay or otherwise. All Parties to this
Agreement have by its execution consented to this procedure and no further
consent is required from any Party for this procedure to be effective.

SECTION 12.2 Relationship of the Parties. The Underwriting Manager and ABL, on
the one hand, and the Company on the other, and their respective Affiliates are
and shall remain independent contractors and not employees or agents of each
other. Except as expressly granted by the other Party in writing, neither Party
shall have any authority, express or implied, to act as an agent of the other
Party or its subsidiaries or Affiliates under this Agreement. It is not the
intent of the Parties hereto to create, nor should this Agreement be construed
to create, a partnership, joint venture or employment relationship among or
between the Parties (including their respective officers, employees, agents or
representatives).

SECTION 12.3 Assignment. This Agreement will be binding upon and inure to the
benefit of the Parties hereto and their respective successors and permitted
assigns. Notwithstanding the foregoing, and except as otherwise provided in this
Agreement, no Party may pledge, assign, transfer, subcontract or delegate,
either in whole or in part its rights and obligations under this Agreement
without the prior written consent of the other Parties.

SECTION 12.4 Amendment. This Agreement, including any appendices, may be amended
by the Parties in a writing signed by a duly authorized representative of each
Party.

 

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SECTION 12.5 No Waiver or Modification. None of the Parties shall be deemed to
have waived any rights or remedies accruing to it hereunder unless such waiver
is in writing and signed by such Party. Any waiver by any Party of a breach of
any provision of this Agreement by another Party shall not be held to constitute
a course of conduct or a waiver of a subsequent breach of that or any other
provision.

SECTION 12.6 Further Assurances. Each Party agrees to perform any further acts
and execute and deliver any further documents which may be reasonably necessary
to carry out the provisions of this Agreement.

SECTION 12.7 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law or rule in any jurisdiction in any respect,
such invalidity shall not affect the validity, legality and enforceability of
any other provision or any other jurisdiction and the remaining terms and
provisions of this Agreement shall not in any way be affected or impaired
thereby, all of which shall remain in full force and effect, and the affected
term or provision shall be modified to the minimum extent permitted by law so as
to achieve most fully the intention of this Agreement.

SECTION 12.8 Governing Law. The laws of Bermuda shall govern all matters
concerning the validity, performance, and interpretation of this Agreement.

SECTION 12.9 Notices. Any written notices, demands or other communication
required to be sent or given under this Agreement by any of the Parties shall be
deemed properly served if sent to the recipient by reputable express courier
service (charges paid) or by facsimile. Date of service of such notice shall be
one (1) Business Day after date of delivery to the overnight courier if sent by
overnight courier, or if by facsimile, the date the facsimile is confirmed if
received during the recipient’s normal business hours, or at the beginning of
the recipient’s next Business Day if not received during the recipient’s normal
business hours. Such notices, demands and other communications shall be sent to
the addresses indicated below or such other address or to the attention of such
other person as the recipient has indicated by prior written notice to the
sending Party in accordance with this Section 12.9:

If to the Underwriting Manager, to:

Alterra Agency Limited

Alterra House

2 Front Street

Hamilton HM11, Bermuda

Facsimile: (441) 292-5331

Attention: General Counsel

If to ABL, to:

Alterra Bermuda Limited

Alterra House

 

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2 Front Street

Hamilton HM11, Bermuda

Facsimile: (441) 292-5331

Attention: General Counsel

If to the Company, to:

New Point Re IV Limited

c/o Alterra Agency Limited

Alterra House

2 Front Street

Hamilton HM11, Bermuda

Facsimile: (441) 292-5331

Attention: General Counsel

with copies to:

Each director on the Board of Directors of the Company at the address for such
director given to the Underwriting Manager in accordance with this Section 12.9.

SECTION 12.10 Entire Agreement. Except as otherwise expressly set forth herein,
this Agreement, and any appendices hereto (all of which are hereby incorporated
in this Agreement and made a part hereof), constitutes the entire agreement of
the Parties with respect to the subject matter hereof and supersedes all prior
agreements or understandings between the Parties on the subject matter. Any and
all prior representations, statements, or agreements between the Parties hereto
are merged herein and shall not survive or exist except as stated herein.

SECTION 12.11 Headings. The descriptive headings of this Agreement are intended
for reference only and shall not affect the construction or interpretation of
this Agreement.

SECTION 12.12 Interpretation. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction will be applied against any Party. This Agreement
has been negotiated by the Parties, and the fact that the initial and final
draft will have been prepared by any Party or an intermediary will not give rise
to any presumption for or against any Party to this Agreement to be used in any
respect or forum in the construction or interpretation of this Agreement. Each
Party participated in drafting this Agreement. Words in the singular or plural
include the singular and plural, and pronouns stated in either the masculine,
the feminine or neuter gender shall include the masculine, feminine and neuter.
Whenever the words “include,” “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without
limitation.”

 

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SECTION 12.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which counterpart, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, when taken together,
shall constitute one and the same agreement.

SECTION 12.14 Currency. Whenever the word “dollars” or the “$” sign appears in
this Agreement, they shall be construed to mean United States Dollars, and all
transactions under this Agreement shall be denominated in United States Dollars.

SECTION 12.15 Force Majeure. Neither the Company nor the Underwriting Manager
shall have any liability for any failure to perform this Agreement in accordance
with its terms if such failure is caused by unforeseeable causes beyond the
control of such Party, which may include unavailability of communications,
facilities, acts of God or the public enemy, acts of third parties including
delays of maintenance and vendors, acts of civil or military authority, fires,
floods, storms, earthquakes, accidents, explosions, sabotage, strikes, lockouts
or other labor disturbances, national emergency, system failure, unavailability
of energy sources, materials or equipment, delay in transportation, riots,
terrorism or war, provided, that such Party promptly (a) notifies the other
Parties of its inability to so perform, the steps and plans it will take to
rectify such inability and the anticipated length of such inability and (b) acts
diligently to rectify such inability.

[signatures appear on following page]

 

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
by their authorized officers as of the date first set forth above.

 

NEW POINT RE IV LIMITED By:       Name:   Title: ALTERRA AGENCY LIMITED By:    
  Name:   Title: ALTERRA BERMUDA LIMITED By:       Name:   Title:

 

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APPENDIX 1

UNDERWRITING GUIDELINES 2011

 

1. Contracts

Contracts to be underwritten shall consist of collateralized property
catastrophe excess of loss retrocession contracts written on an ultimate net
loss basis and collateralized industry loss warranties. The contracts may
include occurrence and aggregate loss triggers that attach following an
accumulation of smaller catastrophes. Contracts ceded by Alterra Bermuda Limited
or its affiliates will not be covered.

 

2. Reinstatements

Contracts shall not include any provisions for automatic reinstatement of limit.

 

3. Term of Cover

Cover in respect of contracts underwritten hereunder must incept on or after
May 1, 2011 and before April 30, 2012 and terminate on or before April 30, 2013.

 

4. Reinsured Portfolio

The majority of risk of loss will be derived from reinsurance written by the
underlying cedent, but it is permissible to include some elements of direct
insurance.

 

5. Territorial Scope

The territorial scope of contracts generally will be on a worldwide basis, a
U.S.-only basis, a worldwide excluding US. basis or a named territories basis.

 

6. Exclusions

Contracts are intended to cover only natural catastrophe exposure and,
therefore, will contain customary exclusions for Nuclear, Terrorism, War
(active/passive), Pollution, Offshore Marine/Energy, Aviation and Space Risks,
or sublimit contributions to loss from such perils

 

7. Brokerage

Brokerage commissions on each contract shall not exceed 10% of premium. No
contingent commissions shall be paid to agents, producers, brokers or other
intermediaries in connection with the issuance of contracts.

 

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8. Deposit Accounting

Contracts that would be given deposit accounting treatment will not be written.

 

9. Approval

Each contract will be approved by the Chief Underwriting Officer, Reinsurance of
Alterra Bermuda Limited prior to binding.

 

10. Collateral

All contracts will be collateralized by a trust agreement or letter of credit.
Collateral will be posted in an amount equal to the policy limit on such
contracts, less the amount of any uncollected premium (net of acquisition
expenses and underwriting fees) and less paid losses under such contracts. Each
contract will have contractual provisions, individually negotiated, under which
collateral held in trust or supporting letters of credit can be released and/or
any claims settled.

 

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APPENDIX 2

U.S. FEDERAL INCOME TAX

OPERATING GUIDELINES

New Point Re IV Limited (“New Point Re IV”) intends to provide retrocession
cover to reinsurance companies through reinsurance transactions developed and
negotiated by Alterra Agency Limited (the “Underwriting Manager”) pursuant to an
Underwriting Services Agreement.

To minimize the risk that New Point Re IV is engaged in a U.S. trade or business
(a “USTB”), it is necessary to put in place safeguards with respect to the types
of activities conducted in the United States. The following guidelines must be
complied with in order that New Point Re IV not be characterized as engaged in a
USTB.

(i) Marketing and Solicitation Activities

(A) Neither New Point Re IV nor any of its officers, directors, employees, or
agents (including Alterra Capital Holdings Limited and Alterra Bermuda Limited)
(collectively “Alterra”) and the Underwriting Manager, or their officers,
directors, employees or agents acting on behalf of New Point Re IV)
(collectively, “New Point Re IV Representatives”) should advertise the sale of
or otherwise solicit persons with regard to the products of New Point Re IV
while physically present in the United States.

(B) Advertisements in trade journals and on a New Point Re IV or Alterra website
(if any) should not include a phone number, e-mail address, address or contact
person. A website must be passive – i.e., it should not provide for a method
that would allow potential insureds or reinsureds to complete applications
online for submission to New Point Re IV.

(C) Additionally, with respect to internet advertisements on other websites,
such advertisement must not constitute a referral with respect to a product
(e.g., a recommendation, endorsement or promotion of the advertised product).
Fees paid by New Point Re IV for such advertisement should be on an arm’s length
flat fee or fee per website hit basis.

(D) The server (if any) for New Point Re IV’s e-mail facilities, primary data
storage and website and e-mail system should be located outside the United
States and should have an “address” outside the United States.

 

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(E) New Point Re IV Representatives may attend insurance conventions and
seminars and speak or participate in panel discussions, even if clients,
insurers or potential clients are in attendance. However, only general business
objectives of New Point Re IV may be discussed and specific projects should not
be discussed. This cautionary advice applies regardless whether the clients or
potential clients are U.S. or non-U.S. reinsurers.

(F) Although no assurance can be given, sporadic, occasional visits and
marketing contacts with reinsurance clients, potential reinsurance clients or
reinsurance intermediaries in the United States may be undertaken. Such visits
or contacts should be conducted at the office of the reinsurance client,
potential reinsurance client or reinsurance intermediary, and New Point Re IV
should not (1) maintain an office in the United States or (2) use the office,
personnel, business equipment and the like of an affiliate or agent in the
United States, including, without limitation, a shareholder or an affiliate of a
shareholder,1 for purposes of such visits or contacts. An officer or agent of
New Point Re IV should monitor such visits to ensure that such visits are not
“regular and continuous.” In particular, as discussed below, New Point Re IV
Representatives should not meet in the United States with reinsurance clients,
potential reinsurance clients or reinsurance intermediaries to discuss specific
reinsurance transactions. Regular visits and marketing contacts must be avoided.

(G) New Point Re IV Representatives may discuss general business objectives of
New Point Re IV during sporadic occasional visits. New Point Re IV
Representatives should not negotiate or discuss the terms of specific
reinsurance transactions; rather, New Point Re IV Representatives should advise
potential clients or intermediaries to call, or call on, New Point Re IV
(through the Underwriting Manager) in Bermuda or elsewhere outside the United
States. Although the potential client or intermediary may negotiate from the
United States, New Point Re IV (through the Underwriting Manager) should
negotiate from Bermuda or elsewhere outside the United States, whether by
meetings, letter, facsimile, email or telephone. Regular visits and marketing
contacts must be avoided.

(H) A U.S. reinsurer ceding business to New Point Re IV, or any agent thereof
(including the Underwriting Manager), while physically present in the United
States, should not represent to any client or potential client that it
represents the interests of, or is conducting business on behalf of, New Point
Re IV.

 

1 

All references to (1) an affiliate of New Point Re IV, (2) a shareholder of New
Point Re IV or (3) an affiliate of a shareholder of New Point Re IV, include the
U.S. agents, if any, of such person.

 

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(I) U.S. personnel of (1) affiliates of New Point Re IV, (2) shareholders of New
Point Re IV, (3) affiliates of shareholders of New Point Re IV or (4) agents of
New Point Re IV, if any, while physically present in the United States should
not contact potential ceding reinsurers to solicit business on behalf of New
Point Re IV, however, independent U.S. or non-U.S. reinsurance intermediaries
may be utilized in this regard.

(ii) Negotiating, Underwriting and Contracting Activities

(A) Underwriting guidelines, practices, etc. for New Point Re IV should be
adopted by its Board of Directors (“Board”) at meetings convened outside the
United States.

(B) Potential cedents should be required to submit their reinsurance proposals
and all other documents related to reinsurance coverage to New Point Re IV
(through the Underwriting Manager) either through a U.S. licensed reinsurance
intermediary or directly to New Point Re IV (through the Underwriting Manager)
in Bermuda or elsewhere outside the United States, and such proposals should be
received by New Point Re IV (through the Underwriting Manager) in Bermuda or
elsewhere outside the United States.

(C) Any reinsurer licensed to do business in the United States that cedes
business to New Point Re IV should not in any manner be directed by New Point Re
IV with respect to such reinsurer’s conduct of its insurance business. New Point
Re IV and the Underwriting Manager must not participate in the preparation of
underwriting, claims and payments guidelines to be applied by any U.S. reinsurer
ceding business to New Point Re IV or any managing general underwriter
underwriting business on behalf of such admitted U.S. reinsurer. This guideline
would not preclude New Point Re IV (through the Underwriting Manager) from
conducting a review from outside the United States of the underwriting, claims
and payments guidelines of a U.S. licensed ceding reinsurer and declining to
participate in a reinsurance transaction absent modifications to such
guidelines. New Point Re IV must not compensate any U.S. managing general
underwriter with respect to business ceded from any admitted U.S. reinsurer
(although the admitted U.S. reinsurer ceding business to New Point Re IV may
share any ceding commission charged to New Point Re IV with a managing general
underwriter).

(D) Any U.S. reinsurer ceding business to New Point Re IV should retain a
significant portion of its business (e.g., not cede to New Point Re IV more than
a specified percentage or a specified dollar amount within the reinsured
policy’s limits) so that the cedent will continue to hold a significant interest
in the underwritten business.

 

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(E) Any U.S. reinsurer ceding business to New Point Re IV should have
significant unrelated business (i.e., business other than business ceded to New
Point Re IV).

(F) Any reinsurance arrangement between New Point Re IV and a U.S. reinsurer
must be on an arm’s length basis and must be consistent with industry standards
with respect to similar arrangements (e.g., the reinsurance premium payable by,
and the ceding commission payable to, the licensed reinsurer must be arm’s
length and the termination provisions must be reasonable).

(G) New Point Re IV should not specifically reimburse any U.S. licensed
reinsurer that cedes business to it for its ordinary and necessary trade or
business expenses (e.g., rent, salaries and similar expenses). This guideline
would not preclude New Point Re IV from paying an arm’s length ceding commission
to such reinsurers.

(H) The business of New Point Re IV should incorporate adequate risk shifting
and risk distribution for U.S. federal income tax purposes. In this respect, its
insurance and reinsurance contracts should, at a minimum, satisfy the
requirements of Financial Accounting Standards 113, 5 and 60, as appropriate.

(I) Risk proposal review, including review of a quota share treaty, and any
subsequent commitment by New Point Re IV (through the Underwriting Manager)
should be made while physically present in Bermuda or elsewhere outside the
United States. Additionally, no underwriters should engage in negotiations or
discussions on behalf of New Point Re IV (including, without limitation, by
e-mail or telephone) with respect to a particular risk proposal while physically
present in the United States

(J) U.S. personnel of (1) affiliates of New Point Re IV, (2) shareholders of New
Point Re IV, (3) affiliates of shareholders of New Point Re IV or (4) agents of
New Point Re IV, if any, while physically present in the United States should
not contact potential reinsurers during the negotiation, underwriting and
contracting process on behalf of New Point Re IV. However, independent U.S. or
non-U.S. reinsurance intermediaries may be utilized in this regard.

(K) All negotiations and decisions with respect to the terms of reinsurance
contracts and similar matters should be conducted and made independently by New
Point Re IV in Bermuda or elsewhere outside the United States. New Point Re IV
Representatives who are U.S. residents may participate in these negotiations
only when physically present outside the United States. These negotiations and
decisions must not constitute mere ministerial ratifications of evaluations and
decisions

 

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made in the United States with respect to proposals by potential reinsurance
clients. If approval of an underwriting committee is required, the underwriting
committee should meet and consider proposals in Bermuda or elsewhere outside the
United States.

(L) No person, including New Point Re IV Representatives, should have the
authority to directly or indirectly, or may directly or indirectly, solicit,
negotiate, accept or conclude contracts on behalf of New Point Re IV while in
the United States, and no such contracts may be executed in the United States on
behalf of New Point Re IV.

(M) Documents relating to the reinsurance contracts of New Point Re IV should be
mailed to the potential ceding reinsurer from Bermuda or elsewhere outside the
United States. Alternatively, reinsurance intermediaries located outside the
United States may be utilized. Documents related to “outward” retrocession
coverage should be mailed by the potential retrocessionaire to New Point Re IV
in Bermuda or elsewhere outside the United States.

(N) All evidences of reinsurance, as well as all “outward” retrocession
contracts, should be signed and delivered by New Point Re IV (through the
Underwriting Manager) in Bermuda or elsewhere outside the United States.
Similarly, ongoing policy renewal and maintenance activities should be conducted
in Bermuda or elsewhere outside the United States. Consistent with industry
practices, payment of reinsurance premiums and losses and delivery of
reinsurance contracts may also be made through a broker or intermediary.

(O) Each contract of reinsurance should clearly set forth which party (e.g. the
ceding company) is liable for the U.S. federal insurance excise tax, if any.

(P) Once the negotiations, decisions and contract terms with respect to the
underwriting of any reinsurance contract have been completed, to the extent it
is necessary, occasional follow-up meetings relating to the contract with
independent professionals (such as lawyers, accountants or actuaries) may be
held in the United States at the offices of the professionals. These meetings
should generally not include reinsureds (or their representatives) as
participants.

(Q) Except to the extent explicitly permitted in these guidelines, due diligence
activities with respect to reinsurance transactions generally should not be
conducted in the United States by New Point Re IV or an agent thereof; rather,
New Point Re IV should request the necessary information be submitted to it in
Bermuda. If it becomes necessary to conduct such activities in the United
States, they should be conducted by an independent agent hired for this purpose.

 

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(iii) Premium Billing and Collection

(A) Premiums should be billed by New Point Re IV (through the Underwriting
Manager) from Bermuda.

(B) Premium payments should be made by a reinsured to New Point Re IV in Bermuda
or through an independent reinsurance intermediary (although such payments may
be made from an account of the reinsured maintained with a U.S. bank or a U.S.
branch of a non-U.S. bank).

(iv) Licensing

(A) New Point Re IV must be licensed in Bermuda.

(B) New Point Re IV should not seek authorization as an insurer or reinsurer in
any state or jurisdiction of the United States without consultation with counsel
to determine the effect of such authorization in combination with other relevant
factors on their United States tax status. U.S. letters of credit and Regulation
114 trusts, standing alone, should not cause a U.S. federal income tax problem.

(v) Investment and Trading Activities

(A) Although trading in stock or securities for the accounts of New Point Re IV
(whether conducted by New Point Re IV, its employees, shareholders or U.S.
brokers) should not constitute engaging in a U.S. trade or business, it is
preferable for all investment decisions to be made by New Point Re IV in Bermuda
or elsewhere outside the United States. Such investing or trading activities do
not include asset/liability management functions. Such functions should be
conducted from Bermuda or elsewhere outside the United States.

(B) New Point Re IV’s investment guidelines should be adopted at a meeting of
its Board held in Bermuda or elsewhere outside the United States.

(C) The holding of money or assets in the United States and contracting for
investment services with independent investment advisors in the United States
who will act in accordance with the investment guidelines adopted by New Point
Re IV’s Board is not precluded (although it would be preferable for day-to-day
portfolio decisions to be made by non-U.S. investment advisors).

 

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(D) Use of an investment advisor in the United States by New Point Re IV should
be contracted for on an arm’s-length basis. Additionally, if a “related”
investment advisor is utilized, the related investment advisor should offer
similar services to unrelated parties.

(E) New Point Re IV should not maintain capital and surplus in excess of the
reasonable needs of its insurance business.

(vi) Claims Handling Activities

(A) Claims and payment guidelines for New Point Re IV should be adopted by its
Board at meetings convened in Bermuda.

(B) Claims under reinsurance contracts should be made directly to and from New
Point Re IV in Bermuda or elsewhere outside the United States.

(C) Reinsurance contracts should preferably provide for arbitration outside the
United States.

(D) Investigation, settlement and other claims handling activities should be
conducted (1) outside of the United States or (2) if within the United States,
by unrelated independent contractors and/or attorneys hired by New Point Re IV
for this purpose. To the extent that independent contractors or attorneys are
engaged to assist in the investigation and settlement of claims, they should be
employed on a case-by-case basis and given limited settlement authority, and
ultimate settlement authority should be exercised outside the United States by
New Point Re IV. Alternatively, New Point Re IV’s policy forms may provide that
reinsureds are permitted to handle their own claims.

(E) Final determination as to New Point Re IV’s liability for claims should be
made in Bermuda or elsewhere outside the United States, and payment instructions
should be prepared and executed in Bermuda or elsewhere outside the United
States. Payment of claims and expenses should be initiated from Bermuda or
elsewhere outside the United States, although payment may be made from assets
situated within the United States (e.g., reinsurance trusts).

(F) A quota share arrangement with a reinsurer licensed to do business in the
United States which cedes business to New Point Re IV should not include a
“cut-through” endorsement that would allow an insured of the licensed reinsurer
to proceed directly against New Point Re IV.

 

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(vii) Management Activities

(A) Actual management authority with respect to the activities of New Point Re
IV should be vested in its respective officers and directors.

(B) Fundamental corporate policy decisions must be made by New Point Re IV’s
Board, and New Point Re IV’s Board should approve a resolution granting the
appropriate authority to conduct New Point Re IV’s business to its officers.

(C) All shareholders’ meetings, Board meetings and meetings of committees and
subcommittees of New Point Re IV’s Board must be conducted in Bermuda or
elsewhere outside the United States.

(D) A majority of directors of New Point Re IV (and a majority of the directors
present at each meeting of the board of directors or an executive committee
thereof) should have business experience commensurate with their positions and
should not be merely passive board members.

(E) A director of New Point Re IV who also serves as an officer of New Point Re
IV (or otherwise directly participates in operating decisions) should not engage
in any management activity on behalf of New Point Re IV in the United States. A
director of New Point Re IV who does not serve as an officer (and does not
otherwise participate in operating decisions) may prepare for Board meetings
while in the United States, provided such director does not communicate with any
other person with respect to such matters within the United States. In this
regard, directors may receive board packages in the United States.

(F) Directors, shareholders and service providers (other than independent
professionals, such as lawyers, accountants or actuaries) should be instructed
not to discuss the substantive affairs of New Point Re IV in the United States.

(G) A majority of the meetings of the New Point Re IV Board should be held in
Bermuda, and a U.S. director who is unable to attend a Board meeting should not
participate in such meeting by telephone from the United States.

(H) All day-to-day management activities of New Point Re IV, including
communications with the general public and maintenance and auditing of corporate
books and records, should be conducted in Bermuda by New Point Re IV employees
or service providers.

(I) No U.S. resident should participate in the day-to-day management of New
Point Re IV while physically present in the United States. Any officer of or
service provider to New Point Re that is a U.S. resident may not engage in any
substantive activity on New Point Re

 

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IV’s behalf unless such officer or service provider is physically present in
Bermuda or elsewhere outside the United States. Accordingly, to alleviate
difficult evidentiary issues (i.e., establishing that an officer or service
provider of New Point Re IV who is a U.S. resident did not perform activity on
New Point Re IV’s behalf while physically present in the United States), we
would recommend that all officers or service provider of New Point Re IV
expected to provide services to New Point Re IV that are U.S. residents maintain
accurate and contemporaneous logs of daily activity.

(J) No New Point Re IV Representative, including U.S.-based officers and
directors of New Point Re IV, or employees of U.S. based shareholders of New
Point Re IV or its affiliates should engage in any activity on behalf of New
Point Re IV (including, without limitation, telephone conversations,
communications via “e-mail” or oral discussions) with respect to a specific
insurance related transaction while physically present in the United States.

(K) New Point Re IV should have its own officers, and the officers of New Point
Re IV should have relevant experience in the business to be performed
commensurate with their positions. If New Point Re IV does not have employees,
work performed on behalf of New Point Re IV should be performed by a service
provider which has contracted with New Point Re IV to provide such services on
an arm’s length basis.

(L) New Point Re IV should not maintain or have available to it any office, room
or other fixed place of business in the United States through which its business
is conducted, including the office or home of a New Point Re IV Representative
or the office of an affiliate. Care should be taken not to conduct any meetings
or operations of New Point Re IV at the U.S. offices of (1) affiliates of New
Point Re IV, (2) shareholders of New Point Re IV, (3) affiliates of shareholders
of New Point Re IV or (4) agents of New Point Re IV. For example, if a New Point
Re IV Representative visits his or her residence in the United States on
weekends, such person should not conduct any business on behalf of New Point Re
IV from his or her residence.

(M) All communications with New Point Re IV should be directed to it or the
Underwriting Manager at its or the Underwriting Manager’s Bermuda office.

(N) The letterhead of New Point Re IV should not include an address in the
United States, and business cards of New Point Re IV Representatives should not
have an address or telephone number in the United States.

 

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(O) New Point Re IV should not be listed in any directory with a U.S. address or
contact and should not have any telephone or facsimile numbers in the United
States.

(P) No act of New Point Re IV should intimate that it has a U.S. business
presence.

(Q) There should be persons in Bermuda with the qualifications, experience,
power and authority to negotiate and conclude contracts on behalf of New Point
Re IV, and such persons must be the only persons who habitually exercise such
authority and must do so only when in Bermuda or elsewhere outside the United
States. The number of such persons will be based on the volume of business of
New Point Re IV.

(R) New Point Re IV should have an operating account in Bermuda or elsewhere
outside the United States. This account should be used to pay all operating
expenses, including travel expenses of a New Point Re IV Representative. It
would be preferable for persons in Bermuda to have signatory authority over such
account. If a person in the United States has signatory authorization over such
account, such U.S. person must indicate this authority on their U.S. federal
income tax returns and must file a TD F 90-22.1.

(S) All disbursements paid from such operating account should be approved in
Bermuda or elsewhere outside the United States.

(T) Cash management activities should be conducted in Bermuda or elsewhere
outside the United States.

(U) No New Point Re IV Representative should serve as an officer or director of
a reinsurer licensed to do business in the United States which cedes business to
New Point Re IV.

(V) Any service arrangements with any U.S. entity that may be affiliated with or
related to New Point Re IV, or affiliated with or related to a shareholder of
New Point Re IV, must be consistent with industry standards with respect to
similar arrangements. New Point Re IV must have the right to terminate such
contracts with any U.S. entity with or without cause upon reasonable notice
(i.e., notice consistent with industry standards). Employees of a U.S. affiliate
should not provide “core” insurance services to New Point Re IV (e.g., actuarial
or underwriting services) while physically present in the United States.
Moreover, any U.S. company that provides support services to New Point Re IV
shall not (1) conduct any insurance or reinsurance business on behalf of New
Point Re IV in the United States or (2) have contact with customers or potential
customers of New Point Re IV (except to the extent explicitly permitted in the
guidelines).

 

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(W) New Point Re IV should consider filing protective U.S. tax returns annually
reflecting no income. Such filings have the consequence of (1) ensuring that if
the IRS were to argue that New Point Re IV is engaged in a U.S. trade or
business for U.S. federal income tax purposes, it would be allowed its ordinary
and necessary business deductions and (2) commencing the running of the statute
of limitation on the taxable year with respect to which the return was filed.

(viii) Related Person Insurance Income Procedures

(A) The Underwriting Manager shall (i) establish reasonable procedures to
monitor related person insurance income and to determine the application of the
exceptions therefrom; and (ii) report to New Point Re IV if it reasonably
determines that a shareholder of Holdings may be required to include related
person insurance income under section 951 of the Internal Revenue Code.

 

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APPENDIX 3

INVESTMENT GUIDELINES

The Underwriting Manager shall cause to be invested all assets of the Company in
the Operating Account that are in excess of amounts reasonably determined by the
Underwriting Manager to be necessary from time to time to satisfy the Company’s
obligations as they become due. All such investments must be made in one or more
funds with daily liquidity that are rated at least A1+, P1, F1+, AAAm, Aaa or
AAA/V1+ by a nationally recognized rating agency.

 

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