Exhibit 10.1

 

COMMUTATION AGREEMENT

 

This Commutation Agreement is entered into by the

 

Navigators Insurance Company, and/or its affiliated and/or subsidiary companies
including branch offices.

 

(Hereinafter referred to as the “Reinsured”)

 

and

 

SOMERSET INSURANCE LIMITED

 

(hereinafter referred to as the “Reinsurer”)

 

WHEREAS, the Reinsured and the Reinsurer entered into certain reinsurance
contracts (the “Reinsurance Contracts”) listed on the attached Schedule; and

 

WHEREAS, the Reinsured and the Reinsurer desire fully and finally to settle and
commute all obligations and liabilities known and unknown under the Reinsurance
Contracts.

 

NOW THEREFORE, it is hereby agreed by and between the Reinsured and Reinsurer as
follows:

 

1.                                       The Reinsurer shall pay to the
Reinsured the sum of US $2,977,011.00, representing the full amount of the
Reinsurer’s obligations to the Reinsured as set forth in the attached
Commutation Settlement Schedule.

 

2.                                       Upon receipt and in consideration for
the sum of US $2,977,011.00 as provided in paragraph 1, the Reinsured hereby
releases and discharges the Reinsurer, its officers, directors, shareholders and
affiliates, and their heirs, executors, administrators, successors and assigns
from any and all liabilities and obligations arising under or related to the
Reinsurance Contracts whether known or unknown, reported or unreported, and
whether currently existing or arising in the future, including but not limited
to all claims, debts, demands, causes of action, suits, duties, adjustments,
obligations, offsets, liability for payment of interest, sums of money,
accounts, bonds, bills, covenants, contracts, controversies, agreements,
promises, doings, omissions, reckoning, damages, judgments, costs, expenses and
losses whatsoever relating to or arising in connection with the Reinsurance
Contracts.

 

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3.                                       The Reinsurer in consideration of the
Reinsured’s execution of this Commutation Agreement does hereby release and
discharge the Reinsured, its members, officers, directors, shareholders, and
affiliates and their heirs, executors, administrators, successors, and assigns
from any and all liabilities and obligations arising under or related to the
Reinsurance Contracts whether known or unknown, reported or unreported, and
whether currently existing or arising in the future, including but not limited
to all claims, debts, demands, causes of action, suits, duties, adjustments,
obligations, offsets, liability for payment of interest, sums of money,
accounts, bonds, bills, covenants, contracts, controversies, agreements,
promises, doings, omissions, reckoning, damages, judgments, costs, expenses and
losses whatsoever relating to or arising in connection with the Reinsurance
Contracts, it being the mutual intention of the Reinsured and the Reinsurer that
this Commutation Agreement shall operate as a full accord and final commutation,
satisfaction and release of any and all current and future liabilities arising
out of, or in connection with the Reinsurance Contracts.

 

4.                                       This Commutation Agreement embodies the
entire agreement between the Reinsured and the Reinsurer with regard to the
subject matter contained herein and this Commutation Agreement may not be
changed orally or in writing except by written addendum, signed by the Reinsured
and the Reinsurer.  Neither party hereof has relied upon any statement, warranty
or representation made by the other, or the other’s agents, servants or
employees.

 

5.                                       This Commutation Agreement shall be of
no force or effect unless the payment described in paragraph 1  above has been
received by the Reinsured, and until then the Reinsurer shall be obligated to
the Reinsured pursuant to the Reinsurance Contracts, and each party shall have
all rights, obligations and defenses, as if this Commutation Agreement had never
been entered into.

 

6.                                       The Reinsurer and the Reinsured,
including their agents, servants, and employees, hereby expressly agree that the
terms and conditions of this Commutation Agreement shall be confidential between
the parties and shall not be disclosed to a third party by one party hereto
without prior written consent of the other, except when required by the parties’
auditors, governing regulatory bodies, or upon order of a court, arising out of
proceedings commenced in a court, or administrative tribunal or arbitration
panel.  Either party making disclosure of this Agreement in a manner permitted
hereunder shall nonetheless take all reasonable precautions otherwise to protect
the confidentiality of this Commutation Agreement.

 

7.                                       This Commutation Agreement shall be
binding upon and inure to the benefit of the Reinsurer and Reinsured and their
respective successors and assigns.

 

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8.                                       This Agreement shall be governed and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.  The parties
agree to submit to the exclusive jurisdiction of the courts of the State of New
York and the Federal District Court for the Southern District of New York for
the resolution of any disputes arising hereunder.

 

 

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

 

In New York, New York this 21st day of December, 2004.

 

 

BY:

/s/ Paul J. Malvasio

 

 

NAVIGATORS INSURANCE COMPANY

 

For and on behalf of the Reinsured

 

 

and in Bermuda this 21st day of December, 2004.

 

 

BY:

/s/ Michael Hardy

 

 

SOMERSET INSURANCE LIMITED

 

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Somerset Insurance Limited

Schedule of Reinsurance Agreements

 

Ref. #

 

Description

 

 

 

117

 

Trenwick America Reinsurance Corporation (on behalf of itself and as successor
by merger to Chartwell Insurance Company) retrocession of Navigators Management
Company, Inc. Marine Pool.

 

 

 

123

 

Insurance Corporation of New York retrocession of Somerset Property, Inc.
Property Pool (Somerset Property was subsequently merged into Navigators
Management Company, Inc.).

 

 

 

124

 

United Reinsurance Corporation of New York (subsequently merged into Insurance
Corporation of New York and later merged into Trenwick Group) retrocession of
Somerset Aviation, Inc. Pool. (Somerset Aviation was later merged into
Navigators Insurance Services of Texas, Inc.).

 

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Somerset Insurance Limited

Commutation Settlement Schedule

Due from / (to) Somerset

As of September 30, 2004

 

As a result of the Trenwick Commutation executed in the 2003 third quarter,
Navigators Insurance Company assumed all marine, property and aviation pool
assets and obligations of Trenwick and its Affiliated Companies (Ins. Corp. and
Chartwell).  The assets assumed included Trenwick’s reinsurance recoverables
from Somerset .  This schedule reflects all receivables and payables due from or
(to) Somerset Insurance Limited recorded on our accounting records as of
September 30, 2004 incuding IBNR loss reserves of $1,070,191.

 

Upon the execution of the attached commutation agreement and payment of $
2,977,011 to Navigators by Somerset,  Navigators will release Somerset from all
of its obligations and the Trust Account used to secure its obligations to
Navigators.

 

Description

 

Ref.

 

U/Y

 

(1)
Balance Due
from (to)
Somerset

 

(2)
Outstanding
Loss
Reserves

 

(3)
Unearned
Premium
Reserves

 

(4)
Return
Commission
on U/E Premium

 

(1)+(2)+(3)-(4)
Net
Total

 

Inscorp-Marine

 

117

 

86-98

 

$

 9,670

 

$

 343,396

 

$

 —

 

$

 —

 

$

 353,065

 

Inscorp-Property

 

123

 

89-95

 

76,141

 

82,799

 

—

 

—

 

158,939

 

Inscorp-Aviation

 

124

 

89-95

 

1,822

 

143,390

 

—

 

—

 

145,212

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chartwell-Marine

 

117

 

99

 

35,991

 

141,664

 

—

 

—

 

177,655

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trenwick-Marine

 

117

 

2000-03

 

209,008

 

2,044,263

 

81,764

 

8,994

 

2,326,041

 

Total

 

 

 

 

 

$

332,630

 

$

2,755,512

 

$

81,764

 

$

8,994

 

$

3,160,914

A

 

Funds Held Detail

 

 

 

 

 

(1)
Accrued
Reinstatement
Premiums

 

(2)
R/I Balances in
Course of
Collection

 

(3)
Premium in the
Course of
Collecton

 

+(1)+(2)+(3)
Total

 

Inscorp-Marine

 

117

 

86-98

 

$

 (13,389

)

$

 95,141

 

$

 671

 

$

 82,423

 

Inscorp-Property

 

123

 

89-95

 

—

 

75,243

 

—

 

75,243

 

Inscorp-Aviation

 

124

 

89-95

 

(31,855

)

(54,820

)

(17

)

(86,692

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chartwell-Marine

 

117

 

99

 

—

 

134,041

 

1,224

 

135,265

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trenwick-Marine

 

117

 

2000-03

 

3,452

 

14,859

 

262,539

 

280,850

 

Total

 

 

 

 

 

$

 (41,792

)

$

 264,464

 

$

 264,417

 

$

 487,089

 B

 

Profit Commission

 

 

 

 

 

2003

 

2004

 

Total

 

Company

 

Treaty

 

Balance Due
from (to)
Somerset

 

Balance Due
from (to)
Somerset

 

Balance Due
from (to)
Somerset

 

Inscorp

 

117

 

$

128,159

 

$

4,133

 

$

132,292

 

Chartwell

 

117

 

(3,247

)

4,297

 

1,050

 

Trenwick

 

117

 

26,581

 

143,538

 

170,119

 

Total

 

 

 

$

151,493

 

$

151,968

 

$

303,461

C

 

Recap of all Balances

 

Amount

 

Accounts

 

$

 3,160,914

  A

Funds Held

 

(487,089

) B

Profit Commission

 

303,461

  C

Less: FET

 

(275

)

Due from (to) Somerset

 

$

 2,977,011

 

 

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