exv10w2



 





Exhibit 10.2




TABLE OF CONTENTS




to

AGREEMENT OF REINSURANCE

NO. 9034-07

between

PHILADELPHIA INDEMNITY INSURANCE COMPANY

PHILADELPHIA INSURANCE COMPANY

and

GENERAL REINSURANCE CORPORATION




	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 
	GENERAL ARTICLES
	 
	 	 	 	 
	Article I
	 	SCOPE OF AGREEMENT	 	1
	Article II
	 	PARTIES TO THE AGREEMENT	 	1
	Article III
	 	MANAGEMENT OF CLAIMS AND LOSSES	 	2
	Article IV
	 	RECOVERIES	 	2
	Article V
	 	TRIA INUREMENT	 	2
	Article VI
	 	PREMIUM REPORTS AND REMITTANCES	 	3
	Article VII
	 	ERRORS AND OMISSIONS	 	3
	Article VIII
	 	SPECIAL ACCEPTANCES	 	3
	Article IX
	 	RESERVES AND TAXES	 	4
	Article X
	 	OFFSET	 	4
	Article XI
	 	INSPECTION OF RECORDS	 	4
	Article XII
	 	ARBITRATION	 	4
	Article XIII
	 	INSOLVENCY OF THE COMPANY	 	5
	Article XIV
	 	ENTIRE AGREEMENT	 	5
	 
	 	 	 	 
	EXHIBIT A — EXCESS OF LOSS REINSURANCE (Per Risk) of Property Business
	 
	 	 	 	 
	Section 1
	 	BUSINESS SUBJECT TO THIS EXHIBIT	 	A-1
	Section 2
	 	COMMENCEMENT	 	A-1
	Section 3
	 	LIABILITY OF THE REINSURER	 	A-1
	Section 4
	 	DEFINITIONS	 	A-2
	Section 5
	 	EXCLUSIONS	 	A-5
	Section 6
	 	OTHER REINSURANCE	 	A-8
	Section 7
	 	REINSURANCE PREMIUM	 	A-9
	Section 8
	 	REPORTS AND REMITTANCES	 	A-9
	Section 9
	 	AUTOMATIC REINSTATEMENT	 	A-10
	Section 10
	 	TERMINATION	 	A-11
	Section 11
	 	MORTGAGEE REINSURANCE ENDORSEMENT	 	A-11
	 
	 	 	 	 
	EXHIBIT B — EXCESS OF LOSS REINSURANCE (Per Risk) of Property Business (Coverage for Terrorism
Only)
	 
	 	 	 	 
	Section 1
	 	BUSINESS SUBJECT TO THIS EXHIBIT	 	B-1
	Section 2
	 	TERM	 	B-1
	Section 3
	 	LIABILITY OF THE REINSURER	 	B-1
	Section 4
	 	DEFINITIONS	 	B-2
	Section 5
	 	EXCLUSIONS	 	B-3
	Section 6
	 	REINSURANCE PREMIUM	 	B-3
	Section 7
	 	REPORTS AND REMITTANCES	 	B-3






GENERAL REINSURANCE CORPORATION

A Berkshire Hathaway Company









 







AGREEMENT OF REINSURANCE

NO. 9034-07




between




PHILADELPHIA INDEMNITY INSURANCE COMPANY

PHILADELPHIA INSURANCE COMPANY

One Bala Plaza, Suite 100

Bala Cynwyd, Pennsylvania 19004

(herein collectively referred to as the “Company”)




and




GENERAL REINSURANCE CORPORATION

a Delaware corporation

having its principal offices at

Financial Centre

695 East Main Street P.O. Box 10350

Stamford, Connecticut 06904-2350

(herein referred to as the “Reinsurer”)




 




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




Article I  —  SCOPE OF AGREEMENT



As a condition precedent to the Reinsurer’s obligations under this Agreement, the Company shall
cede to the Reinsurer the business described in this Agreement, and the Reinsurer shall accept such
business as reinsurance from the Company.



This Agreement is comprised of General Articles I through XIV and the Exhibit(s) listed below and
each Exhibit which may be made a part of this Agreement. The terms of the General Articles and of
the Exhibit(s) shall determine the rights and obligations of the parties. The terms of the General
Articles shall apply to each Exhibit unless specifically amended therein. In the event of
termination of all the Exhibits made a part of this Agreement, the General Articles shall
automatically terminate when the liability of the Reinsurer under said Exhibits ceases.




     EXHIBIT A  —  EXCESS OF LOSS REINSURANCE


of



Property Business




     EXHIBIT B  —  EXCESS OF LOSS REINSURANCE


of



Property Business (Coverage for Terrorism Only)




Article II  —  PARTIES TO THE AGREEMENT



This Agreement is solely between the Company and the Reinsurer. When more than one Company is
named as a party to this Agreement, the first Company named shall be the




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GENERAL REINSURANCE CORPORATION









 







agent of the other companies as to all matters pertaining to this Agreement. Performance of the obligations of each
party under this Agreement shall be rendered solely to the other
party. However, if the Company becomes insolvent, the liability of the Reinsurer shall be modified
to the extent set forth in the article entitled INSOLVENCY OF THE COMPANY. In no instance shall
any insured of the Company or any claimant against an insured of the Company have any rights under
this Agreement.




Article III  —  MANAGEMENT OF CLAIMS AND LOSSES



The Company shall investigate and settle or defend all claims and losses. When requested by the
Reinsurer, the Company shall permit the Reinsurer, at the expense of the Reinsurer, to be
associated with the Company in the defense or control of any claim, loss, or legal proceeding which
involves or is likely to involve the Reinsurer. All payments of claims or losses by the Company
within the terms and limits of its policies which are within the limits set forth in the applicable
Exhibit shall be binding on the Reinsurer, subject to the terms of this Agreement.




Article IV  —  RECOVERIES



The Company shall pay to or credit the Reinsurer with the Reinsurer’s portion of any recovery
obtained from salvage, subrogation, or other insurance. Adjustment Expense for recoveries shall be
deducted from the amount recovered. However, if the Adjustment Expense incurred in obtaining
recoveries exceeds the amount recovered, if any, the excess Adjustment Expense shall be apportioned
between the parties in proportion to the liability of each party for the loss before the recovery
was obtained.



The Reinsurer shall be subrogated to the rights of the Company to the extent of its loss payments
to the Company. The Company agrees to enforce its rights of salvage, subrogation, and its rights
against insurers or to assign these rights to the Reinsurer.



If the reinsurance under an Exhibit is on a share basis, the recoveries shall be apportioned
between the parties in the same ratio as the amounts of their liabilities bear to the loss. If the
reinsurance under an Exhibit is on an excess basis, recoveries shall be distributed to the parties
in an order inverse to that in which their liabilities accrued.




Article V  —  TRIA INUREMENT



As respects any “insured loss”, as defined in the Terrorism Risk Insurance Act of 2002 (“the Act”),
for which the Reinsurer makes a payment to the Company under this Agreement, the following
provisions shall apply.



If the sum of:





	 	(a)	 	Financial assistance provided under the Act to the Company and its
affiliates, if any, (as “affiliate” is defined in the Act) with respect to all
“insured loss” that applies to each “program year”, as defined in the Act; and
	 
	 	(b)	 	Amounts due from all reinsurance which the Company and its
affiliates, if any, purchase, including but not limited to this reinsurance,
all other treaty reinsurance and all facultative reinsurance, and whether






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GENERAL REINSURANCE CORPORATION









 









collectible or not, under which there is a recoverable for any such “insured
loss”,


exceeds the amount of the Company’s and its affiliates’, if any, gross “insured loss”, the excess
amount shall be allocated to the Reinsurer in the ratio that the Reinsurer’s liability for the
“insured loss” under this Agreement bears to the total collectible reinsurance recoverables for the
“insured loss” under (b) above.



Upon receipt of payment under the Act by the Company and its affiliates, if any, the Company shall
pay to or credit the Reinsurer under this Agreement with the Reinsurer’s share of such excess
amount determined in accordance with the preceding paragraph.




Article VI  —  PREMIUM REPORTS AND REMITTANCES



All reinsurance premium reports required by the Exhibit(s) attached hereto may be sent to:




     Client Accounting Unit

     General Reinsurance Corporation

     Financial Centre

     P.O. Box 10353

     Stamford, CT 06904-2353



All reinsurance premiums and any other amounts due the Reinsurer may be remitted to the following
lockbox address:




     General Reinsurance Corporation

     75 Remittance Drive

     Suite 2555

     Chicago, IL 60675-2555




Article VII  —  ERRORS AND OMISSIONS



The Reinsurer shall not be relieved of liability because of an error or accidental omission of the
Company in reporting any claim or loss or any business reinsured under this Agreement, provided
that the error or omission is rectified promptly after discovery. The Reinsurer shall be obligated
only for the return of the premium paid for business reported but not reinsured under this
Agreement.




Article VIII  —  SPECIAL ACCEPTANCES



Business not within the terms of this Agreement may be submitted to the Reinsurer for special
acceptance and, if accepted by the Reinsurer, shall be subject to all of the terms of this
Agreement except as modified by the special acceptance.






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Article IX  —  RESERVES AND TAXES



The Reinsurer shall maintain the required reserves as to the Reinsurer’s portion of unearned
premium, if any, claims, losses, and Adjustment Expense.



The Company shall be liable for all premium taxes on premium ceded to the Reinsurer under this
Agreement. If the Reinsurer is obligated to pay any premium taxes on this premium, the Company
shall reimburse the Reinsurer; however, the Company shall not be required to pay taxes twice on the
same premium.




Article X  —  OFFSET



The Company or the Reinsurer may offset any balance, whether on account of premium, commission,
claims or losses, Adjustment Expense, salvage, or otherwise, due from one party to the other under
this Agreement or under any other agreement heretofore or hereafter entered into between the
Company and the Reinsurer.




Article XI  —  INSPECTION OF RECORDS



The Company shall allow the Reinsurer to inspect, at reasonable times, the records of the Company
relevant to the business reinsured under this Agreement, including the Company’s files concerning
claims, losses, or legal proceedings which involve or are likely to involve the Reinsurer. The
Reinsurer’s right of inspection shall continue after the termination of this Agreement.




Article XII  —  ARBITRATION



All unresolved differences of opinion between the Company and the Reinsurer relating to this
Agreement, including its formation and validity, shall be submitted to arbitration consisting of
one arbitrator chosen by the Company, one arbitrator chosen by the Reinsurer, and a third
arbitrator chosen by the first two arbitrators.



The party demanding arbitration shall communicate its demand for arbitration to the other party by
registered or certified mail, identifying the nature of the dispute and the name of its arbitrator,
and the other party shall then be bound to name its arbitrator within 30 days after receipt of the
demand.



Failure or refusal of the other party to so name its arbitrator shall empower the demanding party
to name the second arbitrator. If the first two arbitrators are unable to agree upon a third
arbitrator after the second arbitrator is named, each arbitrator shall name three candidates, two
of whom shall be declined by the other arbitrator, and the choice shall be made between the two
remaining candidates by drawing lots. The arbitrators shall be disinterested and shall be active
or retired officers of property or casualty insurance or reinsurance companies.



The arbitrators shall adopt their own rules and procedures and are relieved from judicial
formalities. In addition to considering the rules of law and the customs and practices of the
insurance and reinsurance business, the arbitrators shall make their award with a view to effecting
the intent of this Agreement.






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The decision of the majority of the arbitrators shall be in writing and shall be final and binding
upon the parties.



Each party shall bear the cost of its own arbitrator and shall jointly and equally bear with the
other party the expense of the third arbitrator and other costs of the arbitration. In the event
both arbitrators are chosen by one party, the fees of all arbitrators shall be equally divided
between the parties.



The arbitration shall be held at the times and places agreed upon by the arbitrators.




Article XIII  —  INSOLVENCY OF THE COMPANY



In the event of the insolvency of the Company, the reinsurance proceeds will be paid to the Company
or the liquidator, with reasonable provision for verification, on the basis of the claim allowed in
the insolvency proceeding without diminution by reason of the inability of the Company to pay all
or part of the claim, except as otherwise specified in the statutes of any state having
jurisdiction of the insolvency proceedings or except where the Agreement, or other written
agreement, specifically provides another payee of such reinsurance in the event of insolvency.



The Reinsurer shall be given written notice of the pendency of each claim against the Company on
the policy(ies) reinsured hereunder within a reasonable time after such claim is filed in the
insolvency proceedings. The Reinsurer shall have the right to investigate each such claim and to
interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any
defenses which it may deem available to the Company or its liquidator. The expense thus incurred
by the Reinsurer shall be chargeable, subject to court approval, against the insolvent Company as
part of the expense of liquidation to the extent of a proportionate share of the benefit which may
accrue to the Company solely as a result of the defense undertaken by the Reinsurer.




Article XIV  —  ENTIRE AGREEMENT



This Agreement constitutes the entire Agreement between the parties with respect to the business
reinsured hereunder. Any change or modification to this Agreement shall be made by written
amendment to this Agreement and signed by the parties hereto.



IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in





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GENERAL REINSURANCE CORPORATION









 









duplicate,



this 14th day of August , 2007,




	 	 	 	 	 
	 

	 	PHILADELPHIA INDEMNITY INSURANCE COMPANY
	 	 	PHILADELPHIA INSURANCE COMPANY	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	Christopher J. Maguire	 	 
	 

	 	EVP & CUO	 	 
	 
	 	 	 	 
	Attest: William A. McKenna
	 	 	 	 
	 
	 	 	 	 
	and this 13th day of August, 2007.
	 	 	 	 
	 
	 	 	 	 
	 

	 	GENERAL REINSURANCE CORPORATION	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	Joan LaFrance	 	 
	 

	 	Senior Vice President	 	 
	 
	 	 	 	 
	 

	      Attest: Karen Morello	 	 






GENERAL REINSURANCE CORPORATION
A Berkshire Hathaway Company


 










 








EXHIBIT A




Attached to and made a part of

Agreement of Reinsurance No. 9034-07




EXCESS OF LOSS REINSURANCE

(Per Risk)

of

Property Business




      

Section 1  —  BUSINESS SUBJECT TO THIS EXHIBIT



This Exhibit shall apply to Property Business written by the Company, which is defined as insurance
which is classified in the NAIC form of annual statement as fire, allied lines, inland marine,
commercial multiple peril (property coverages), associations homeowners multiple peril (property
coverages), or automobile physical damage (comprehensive and collision) when written on a garage
open lot basis or in the Company’s Antique/Collector Car Program, and as insurance that is
classified by the Company as crime and fidelity when written as part of a package policy, except
those lines specifically excluded in the section entitled EXCLUSIONS, on Risks wherever located in
the United States of America, its territories and possessions. On policies which provide inland
marine coverage beyond these territorial limits, the territorial limits of this Exhibit shall be
identical with those of the Company’s policies.




Section 2  —  COMMENCEMENT



This Exhibit shall apply to new and renewal policies of the Company becoming effective at and after
12:01 A.M., January 1, 2007, and to policies of the Company in force at 12:01 A.M., January 1,
2007, with respect to claims and losses resulting from Occurrences taking place at and after the
aforesaid time and date, and shall continue in force until terminated in accordance with the
provisions of the section entitled TERMINATION.




Section 3  —  LIABILITY OF THE REINSURER



The Reinsurer shall pay to the Company, with respect to each Risk of the Company, the amount of Net
Loss sustained by the Company in excess of the Company Retention but not exceeding the Limits of Liability of the Reinsurer as set forth in the Schedule of Reinsurance.




SCHEDULE OF REINSURANCE

 





	 	 	 	 	 	 	 	 	 
	Class of Business	 	Company Retention	 	Limits of Liability of the Reinsurer
	 
	 	 	 	 	 	 	 	 
	 
	 
	 	 	 	 	 	 	 	 
	Property Business

	 	$	2,000,000	 	 	First Excess Cover: The next

	 

	 	 	 	 	 	$3,000,000 in excess of the first

	 

	 	 	 	 	 	$2,000,000	 






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SCHEDULE OF REINSURANCE (Continued)




 





	 	 	 	 	 
	Class of Business	 	Company Retention	 	Limits of Liability of the Reinsurer
	 
	 	 	 	 
	 
	 
	 	 	 	Second Excess Cover: The next
	 
	 	 	 	$5,000,000 in excess of the first
	 
	 	 	 	$5,000,000
	 
	 	 	 	 
	 
	 	 	 	Third Excess Cover: The next
	 
	 	 	 	$5,000,000 in excess of the first
	 
	 	 	 	$10,000,000
	 




The liability of the Reinsurer shall not exceed:





	 	(a)	 	$6,000,000 under the First Excess Cover nor $10,000,000 under the
Second Excess Cover nor $10,000,000 under the Third Excess Cover with respect
to all Net Loss on all Risks involved in one Occurrence.
	 
	 	(b)	 	$15,000,000 under the Second Excess Cover nor $15,000,000 under the
Third Excess Cover with respect to all Net Loss on all Risks involved in all
Occurrences (including Extra Contractual Obligations) taking place during each
Agreement Year. For purposes of this provision, upon a run off termination of
this Exhibit the last completed Agreement Year shall be combined with the
remaining period that reinsurance is afforded under this Exhibit to constitute
a single Agreement Year.




All insurance written under one or more policies of the Company against the same peril on the same
Risk shall be combined, and the Company Retention and the Limits of Liability of the Reinsurer
shall be determined on the basis of the sum of all insurance against the same peril and on the same
Risk which is in force at the time of a claim or loss.




Section 4  —  DEFINITIONS





	 	(a)	 	Company Retention
	 
	 	 	 	This term shall mean the amount the Company and its underlying facultative
reinsurers shall retain for its own account; however, this requirement shall
be satisfied if this amount is retained by the Company or its affiliated
companies under common management or common ownership.
	 
	 	(b)	 	Net Loss
	 
	 	 	 	This term shall mean all payments by the Company within the terms and limits
of its policies in settlement of claims or losses, after deduction of salvage
and other recoveries and after deduction of amounts due from all other
reinsurance, except underlying facultative reinsur-






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	 	 	 	ance and catastrophe reinsurance, whether collectible or not. This term shall
include Adjustment Expense. If the Company becomes insolvent, this
definition shall be modified to the extent set forth in the article entitled
INSOLVENCY OF THE COMPANY.
	 
	 	 	 	Notwithstanding the provisions of the article entitled MANAGEMENT OF CLAIMS
AND LOSSES, this term shall also include 95% of Extra Contractual
Obligations, provided that the Reinsurer is given written notice of
circumstances which may result in an Extra Contractual Obligation within 36
months of the later of the termination date of this Exhibit or the
termination of reinsurance on the policy under which the Extra Contractual
Obligation arose.
	 
	 	 	 	Nothing in this definition shall imply that losses are not recoverable
hereunder until the Company’s Net Loss has been finally ascertained.
	 
	 	(c)	 	Adjustment Expense
	 
	 	 	 	This term shall mean expenditures by the Company within the terms of its
policies in the direct defense of claims and in connection with Extra
Contractual Obligations and as allocated to an individual claim or loss
(other than for office expenses and for the salaries and expenses of
employees of the Company or of any subsidiary or related or wholly owned
company of the Company) made in connection with the disposition of a claim,
loss, or legal proceeding including investigation, negotiation, and legal
expenses; court costs; prejudgment interest; and postjudgment interest.
	 
	 	 	 	Notwithstanding the provisions of the article entitled MANAGEMENT OF CLAIMS
AND LOSSES, this term shall also be deemed to include any expenses incurred
by the Company in bringing or in defending a declaratory judgment action
brought to determine the Company’s obligations to its insured with respect to
a specific claim under a policy (or coverage part thereof) reinsured
hereunder. However, the amount of any declaratory judgment expense that may
be included in computation of Adjustment Expense shall not exceed the lesser
of the amount of insurance under the policy or the Reinsurer’s Limit of
Liability for each Risk under this Exhibit.
	 
	 	 	 	The date on which a declaratory judgment expense is incurred by the Company
shall be deemed, in all circumstances, to be the date of the original
Occurrence.
	 
	 	(d)	 	Extra Contractual Obligations
	 
	 	 	 	This term shall mean a loss which is not covered under any other provision of
this Exhibit resulting from an action taken by the insured or assignee
arising from the Company’s handling of any claim otherwise covered under this
Exhibit on the Risks reinsured hereunder which have total amounts of
insurance greater than the Company Retention.







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	 	 	 	The date on which an Extra Contractual Obligation is incurred by the Company
shall be deemed, in all circumstances, to be the date of the original
Occurrence.
	 
	 	 	 	There shall be no coverage hereunder where the Extra Contractual Obligation
has been incurred due to the fraud or criminal conduct of a member of the
Board of Directors, a corporate officer of the Company, or any other employee
of the Company, acting individually or collectively or in collusion with any
individual or corporation or any other organization or party involved in the
investigation, defense or settlement of any claim covered hereunder.
	 
	 	 	 	Any insurance which indemnifies or protects the Company against claims which
are the subject matter of this definition shall inure to the benefit of the
Reinsurer and shall be deducted to arrive at the amount of the Company’s Net
Loss.
	 
	 	(e)	 	Risk
	 
	 	 	 	The Company shall establish what constitutes one Risk and shall make such
determination based on the peril of fire at the time of acceptance, provided:
	 
	 	(1)	 	A Building and its contents, regardless of the number of insureds or
policies involved, including time element coverages, shall never be considered
more than one Risk.
	 
	 	 	 	When two or more Buildings and their contents, including time element
coverages, are situated at the same General Location, the Company shall
identify on its records at the time of acceptance by the Company those
individual Buildings and their contents, including time element coverages,
that are to be considered to constitute each Risk; if such identification is
not made, all of the Buildings and their contents situated at the same
General Location shall be considered one Risk.
	 
	 	 	 	When there are known and named extensions of coverage involving other risk
locations (including but not limited to suppliers extensions, customer
extensions and interdependencies and whether triggered by physical loss at
the risk location or another location) that are included and formally
recorded on the Company’s records at the time of acceptance of the Risk, all
such known and named extensions of coverage shall be included in calculation
of the one Risk.
	 
	 	(2)	 	Unknown, unnamed or unidentified extensions of coverage shall be
considered separate Risks. The maximum amount which may be included in Net
Loss with respect to each such Risk shall be $250,000. Further, the Limit of
Liability of the Reinsurer shall not exceed $500,000 of Net Loss with respect
to all such Risks involved in one Occurrence. Such Occurrence limit is part
of, and not in addition to the Occurrence limit stipulated in the section
entitled LIABILITY OF THE REINSURER.







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	 	(3)	 	As respects the Company’s Antique/Collector Car Program, each
collection will be considered a Risk.
	 
	 	(f)	 	Building
	 
	 	 	 	This term shall mean each structure enclosed within exterior walls. Exterior
walls are defined as walls constructed on the perimeter foundation,
regardless of the number of additional structures or roofs placed upon this
perimeter foundation.
	 
	 	(g)	 	Occurrence
	 
	 	 	 	This term shall mean a loss or series of losses arising out of one event.
	 
	 	(h)	 	General Location
	 
	 	 	 	This term shall mean a contiguous and unbroken tract of land surrounded by
public roads, railroads, rivers or other natural barriers.
	 
	 	(i)	 	Agreement Year
	 
	 	 	 	This term shall mean each twelve month period commencing on January
1st.
	 
	 	(j)	 	Company’s Subject Earned Premium
	 
	 	 	 	This term shall mean the premium earned by the Company on the business
reinsured hereunder, after deduction from such premium earned of the portion
paid for share reinsurance which inures to the benefit of the Reinsurer.





Section 5  —  EXCLUSIONS



This Exhibit shall not apply to:





	 	(a)	 	Reinsurance assumed by the Company other than reinsurance of primary
business assumed from affiliated companies;
	 
	 	(b)	 	Nuclear incident per the Nuclear Incident Exclusion Clause — Physical
Damage — Reinsurance attached hereto;
	 
	 	(c)	 	Any loss or liability accruing to the Company directly or indirectly
from any insurance written by or through any pool or association including
pools or associations in which membership by the Company is required under any
statutes or regulations;
	 
	 	(d)	 	Any liability of the Company arising from its participation or
membership in any insolvency fund;
	 
	 	(e)	 	Any loss or damage directly or indirectly arising out of, caused by,
or resulting from war, as described in paragraph (1) below, or any act of
terrorism, as described in paragraphs (2), (3), (4) and (5) below. Such





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GENERAL REINSURANCE CORPORATION










 










	 	 	 	loss or damage is excluded regardless of (i) any other cause or event
contributing to such loss or damage in any way or at any time, or (ii)
whether such loss or damage is accidental or intentional.
	 
	 	(1)	 	War, including undeclared or civil war; warlike action by a military
force, including action in hindering or defending against an actual or
expected attack, by any government, sovereign or other authority using
military personnel or other agents; or insurrection, rebellion, revolution,
usurped power or action taken by governmental authority in hindering or
defending against any of these. War includes any activity that would be
included as an “act of terrorism” in paragraphs (2), (3), (4) and (5) below,
but for the fact that such activity was perpetrated by an official, employee
or agent of a foreign state acting for or on behalf of such state.
	 
	 	(2)	 	Any “act of terrorism”, as described in paragraphs (3), (4) and (5)
below, but only with respect to loss or damage that is not excluded by
paragraph (1) above.
	 
	 	(3)	 	Any act defined as an “act of terrorism” in the Terrorism Risk
Insurance Act of 2002.
	 
	 	(4)	 	Any act authorized by a governmental authority for the purpose of
preventing, terminating, countering or responding to any act or threat of
terrorism or for the purpose of preventing or minimizing the consequences of
any act or threat of terrorism.






	 	(5)	 	Any activity (other than an act described in (3)
above), including the threat of an activity or any preparation for
an activity, that (a) causes either (i) damage to property, or (ii)
injury to persons; and (b) appears to be intended to: (i) intimidate
or coerce a civilian population, or (ii) disrupt any segment of an
economy, or (iii) influence the policy of a government by
intimidation or coercion, or (iv) affect the conduct of a government
by destruction, assassination, kidnapping or hostage-taking, or (v)
advance a political, religious or ideological cause; provided,
however, that an “act of terrorism” for purposes of this exclusion
shall not include any act or threat as described above perpetrated
by an official, employee or agent of a foreign state acting for or
on behalf of such state.






	 	(f)	 	Risks written on a layered basis, whether primary or excess of loss,
or policies written with a deductible or franchise of more than $500,000;
however, this exclusion shall not apply to policies which provide a percentage
deductible or franchise in connection with windstorm, earthquake or flood;
	 
	 	(g)	 	Pollution to the extent excluded in the Company’s policies.
Nevertheless, if the insured elects to purchase any “buy back” or additional
coverage options, such options shall not be covered hereunder;






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GENERAL REINSURANCE CORPORATION









 










	 	(h)	 	Insurance against earthquake, except when written in conjunction with
fire and otherwise eligible perils;
	 
	 	(i)	 	Insurance on growing crops;
	 
	 	(j)	 	Insurance against flood, surface water, waves, tidal waves, overflow
of any body of water, or their spray, all whether driven by wind or not,
except when written in conjunction with fire and otherwise eligible perils;
	 
	 	(k)	 	Business classified as fidelity; however, this exclusion shall not
apply to crime and fidelity with limits no greater than $2,000,000 when
written as part of a package policy;
	 
	 	(l)	 	Credit insurance;
	 
	 	(m)	 	Business classified as boiler and machinery;
	 
	 	(n)	 	Mortgage impairment insurance and similar kinds of insurance,
howsoever styled, providing coverage to an insured with respect to its
mortgagee interest in property or its owner interest in foreclosed property;
	 
	 	(o)	 	Difference in conditions insurance and similar kinds of insurance,
howsoever styled, but not to include the Condominium Association Difference in
Conditions Coverage Form (PI-DIC-1, 11/03);
	 
	 	(p)	 	Risks which have a total insurable value of more than $250,000,000;
however, this exclusion shall not apply if the Company writes 100% of the
Risk;
	 
	 	(q)	 	Losses with respect to overhead transmission and distribution lines
and their supporting structures, other than those on or within 1,000 feet of
the insured premises. However, public utilities extension and/or suppliers
extension and/or contingent business interruption coverage are not subject to
this exclusion, provided these are not part of a transmitters’ or
distributors’ policy;
	 
	 	(r)	 	Inland marine business with respect to the following:






	 	(1)	 	Cargo insurance when written as such with respect to
ocean vessels;
	 
	 	(2)	 	Faulty film, tape, processing and editing insurance
and cast insurance;
	 
	 	(3)	 	Furriers’ customers policies;
	 
	 	(4)	 	Insurance on livestock under so-called “mortality
policies”;
	 
	 	(5)	 	Mining equipment while underground;
	 
	 	(6)	 	Registered mail and armored car insurance;





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	 	(s)	 	Loss of, damage to, or failure of, or consequential loss resulting
therewith (including but not limited to earnings and extra expense) of
satellites, spacecraft, and launch vehicles, including cargo and freight
carried therein, in all phases of operation (including but not limited to
manufacturing, transit, pre-launch, launch, and in-orbit);
	 
	 	(t)	 	Losses arising, directly or indirectly, out of loss of, alteration
of, or damage to or a reduction in the functionality, availability or
operation of a computer system, hardware, program, software, data, information
repository, microchip, integrated circuit or similar device in computer
equipment or non-computer equipment, whether the property of the policyholder
of the Company or not, unless such loss arises out of physical damage
occurring at the insured’s premises as a result of the following perils to the
extent that these perils are covered under this Exhibit: fire, lightning,
explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil
commotion, sprinkler leakage, sinkhole collapse, volcanic action, falling
objects, weight of snow, ice or sleet, water damage, flood and/or earth
movement. Nothing in this exclusion shall be construed to extend coverage
under this Exhibit to any liability which would not have been covered in the
absence of this exclusion;
	 
	 	(u)	 	Mobile homes unless written as part of a commercial multiple peril
policy;
	 
	 	(v)	 	Watercraft, other than watercraft insured under a standard homeowners
policy or when written as part of contents coverage under a commercial
multiple peril policy.




If the Company is bound, without knowledge of or contrary to the instructions of the Company’s
supervisory underwriting personnel, on any business falling within the scope of one or more of the
exclusions set forth in this section, these exclusions, except (a) through (e), (g), (i), (k), (l)
and (n) shall be suspended with respect to such business until 60 days after an underwriting
supervisor of the Company acquires knowledge of such business.




Section 6  —  OTHER REINSURANCE



The obligations of the Company to reinsure business falling within the scope of this Exhibit and of
the Reinsurer to accept such reinsurance are mandatory and no other reinsurance (either facultative
or treaty) is permitted, except as provided for below.



When the amount of insurance written by the Company on an individual Risk exceeds $15,000,000, the
Company may purchase facultative excess of loss or share reinsurance for the excess amount on such
Risk. The Company may also purchase facultative excess of loss reinsurance or facultative share
reinsurance within the liability of the Reinsurer, if, in the underwriting judgment of the Company,
the Reinsurer will be benefited thereby.



The Company may also purchase facultative excess of loss reinsurance within the Company Retention.
In no event, however, shall the amount required with respect to the net Company Retention after
such reinsurance be reduced to less than $500,000.




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Recoveries from catastrophe reinsurance shall be deemed not to reduce the amount required with
respect to the Company Retention.




Section 7  —  REINSURANCE PREMIUM



The Company shall pay to the Reinsurer:





	 	(a)	 	For the First Excess Cover, 1.90% of the Company’s Subject Earned
Premium;
	 
	 	(b)	 	For the Second Excess Cover, 0.88% of the Company’s Subject Earned
Premium;
	 
	 	(c)	 	For the Third Excess Cover, 0.29% of the Company’s Subject Earned
Premium.





     Section 8  —  REPORTS AND REMITTANCES





	 	(a)	 	Reinsurance Premium
	 
	 	 	 	Within 25 days after the close of each calendar quarter, the Company shall
render to the Reinsurer a report of the reinsurance premium for the quarter
with respect to the Company’s Subject Earned Premium during the quarter,
summarizing the reinsurance premium by line of insurance. The amount due the
Reinsurer, shall be remitted within 25 days after the close of the quarter.
	 
	 	(b)	 	Claims and Losses
	 
	 	 	 	The Company shall report promptly to the Reinsurer each claim or loss which
in the Company’s opinion may involve the reinsurance afforded by this
Exhibit. The Company shall also report promptly to the Reinsurer any action
alleging Extra Contractual Obligations against the Company or any declaratory
judgment action brought by or against the Company on the business reinsured
hereunder. The Company shall advise the Reinsurer of the estimated amount of
Net Loss in connection with each such claim or loss and of any subsequent
changes in such estimates.
	 
	 	 	 	Promptly upon receipt of a definitive statement of Net Loss from the Company,
but within no more than 25 days after receipt of such statement, the
Reinsurer shall pay to the Company the Reinsurer’s portion of Net Loss. The
Company shall report to the Reinsurer any subsequent changes in the amount of
Net Loss, and the amount due either party shall be remitted promptly, but
within no more than 25 days after receipt of such report.
	 
	 	(c)	 	P.C.S. Catastrophe Bulletins







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	 	 	 	The Company shall furnish to the Reinsurer, upon request, the following
information with respect to each catastrophe set forth in the Catastrophe
Bulletins published by the Property Claim Services:






	 	(1)	 	The preliminary estimates of the amount recoverable
from the Reinsurer;
	 
	 	(2)	 	The Reinsurer’s portion of claims, losses, and
Adjustment Expenses paid less salvage recovered during each calendar
quarter;
	 
	 	(3)	 	The Reinsurer’s portion of reserves for claims,
losses, and Adjustment Expenses at the end of each calendar quarter.






	 	(d)	 	General
	 
	 	 	 	In addition to the reports required by (a), (b), and (c) above, the Company
shall furnish such other information as may be required by the Reinsurer for
the completion of the Reinsurer’s quarterly and annual statements and
internal records.
	 
	 	 	 	All reports shall be rendered on forms or in format acceptable to the Company
and the Reinsurer.





Section 9  —  AUTOMATIC REINSTATEMENT



The Limit of Liability of the Reinsurer with respect to each Risk shall be reduced by an amount
equal to the amount of liability paid by the Reinsurer, but that part of the liability of the
Reinsurer that is so reduced shall be automatically reinstated from the date of the Occurrence for
which payment is made; however, the Limits of Liability of the Reinsurer under the Second and Third
Excess Covers with respect to all Occurrences taking place during each Agreement Year shall not
exceed the amounts set forth in the section entitled LIABILITY OF THE REINSURER. In consideration
of this automatic reinstatement:





	 	(a)	 	For each amount so reinstated in the First Excess Cover, there shall
be no additional reinsurance premium;
	 
	 	(b)	 	For first $5,000,000 so reinstated in the Second and Third Excess
Covers, there shall be no additional reinsurance premium;
	 
	 	(c)	 	For the next $5,000,000, so reinstated in the Second Excess Cover,
the Company shall pay to the Reinsurer an additional reinsurance premium that
shall be the product of 100% of the reinsurance premium set forth in
sub-paragraph (b) of the section entitled REINSURANCE PREMIUM for the
Agreement Year multiplied by the amount of the reinstated Limit of Liability
of the Reinsurer divided by $5,000,000;
	 
	 	(d)	 	For the next $5,000,000, so reinstated in the Third Excess Cover, the
Company shall pay to the Reinsurer an additional reinsurance premium that
shall be the product of 100% of the reinsurance premium set forth in
sub-paragraph (c) of the section entitled REINSURANCE PREMIUM






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	 	 	 	for the Agreement Year multiplied by the amount of the reinstated Limit of
Liability of the Reinsurer divided by $5,000,000.




The reinsurance premium so developed for each amount reinstated shall be in addition to the
reinsurance premium set forth in the section entitled REINSURANCE PREMIUM.




Section 10  —  TERMINATION



Either party may terminate this Exhibit at any time by sending to the other, by registered mail to
its principal office, notice stating the time and date when, not less than 90 days after the date
of mailing of such notice, termination shall be effective. Upon termination of this Exhibit, at
the Company’s option:





	 	(a)	 	The Reinsurer shall continue to be liable, with respect to policies
in force at the time and date of termination, for claims and losses resulting
from Occurrences taking place until the expiration, cancellation, or next
anniversary date, not to exceed one year, of each such policy of the Company,
which ever occurs first. The reinsurance premium for policies in force a the
time and date of termination shall be calculated by applying the provisions of
the section entitled REINSURANCE PREMIUM to the monthly earned premiums that
derive from the unearned premium applicable to policies in force at the time
and date of termination.
	 
	 	(b)	 	The Reinsurer shall not be liable for claims and losses resulting
from Occurrences taking place at and after the effective time and date of
termination.





Section 11  —  MORTGAGEE REINSURANCE ENDORSEMENTS



To induce a mortgagee named in a policy of the Company to accept such policy, the Company and the
Reinsurer may agree to name such mortgagee as a third party beneficiary in a Mortgagee Reinsurance
Endorsement made a part of this Exhibit. For each such Mortgagee Reinsurance Endorsement so
issued, the Company shall indemnify the Reinsurer for any and all liability, loss, cost, or expense
the Reinsurer may sustain or incur in excess of its obligations under this Exhibit by reason of the
issuance of such Mortgagee Reinsurance Endorsement.



If the Reinsurer becomes liable to a mortgagee under any Mortgagee Reinsurance Endorsement, the
Reinsurer shall, to the extent of its liability:





	 	(a)	 	Benefit pro-rata in reductions of the Company’s loss by salvage,
subrogation, compromise, or otherwise.
	 
	 	(b)	 	Be automatically subrogated to all of the mortgagee’s rights against
the Company under the policy.







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	 	(c)	 	Be completely discharged from its obligation to make any payment to the
Company under this Exhibit and be entitled to set off against any amount due
from the Reinsurer to the Company under this or any other agreement for any
amounts for which the Reinsurer would not be liable except for the existence
of such Mortgagee Reinsurance Endorsement.




The Reinsurer shall have the right to cancel any Mortgagee Reinsurance Endorsement by notice to the
mortgagee.



Prior to the termination date, the Company shall advise the Reinsurer as to which of the above
options shall apply.




GENERAL REINSURANCE CORPORATION

A Berkshire Hathaway Company










 








EXHIBIT B




Attached to and made a part of

Agreement of Reinsurance No. 9034-07




EXCESS OF LOSS REINSURANCE

(Per Risk)

of

Property Business

(Coverage for Terrorism Only)




      

Section 1  —  BUSINESS SUBJECT TO THIS EXHIBIT


This Exhibit shall apply to Property Business written by the Company, as defined in Exhibit A to
this Agreement, but only as respects loss or damage directly or indirectly arising out of, caused
by, or resulting from Terrorism Occurrences taking place during the term of this Exhibit,
regardless of any other cause or event contributing to such loss or damage in any way or at any
time, or whether such loss or damage is accidental or intentional.




Section 2  —  TERM



This Exhibit shall apply to new and renewal policies of the Company becoming effective at and after
12:01 A.M., January 1, 2007, and to policies of the Company in force at 12:01 A.M., January 1,
2007, with respect to claims and losses resulting from Terrorism Occurrences taking place at and
after the aforesaid time and date, and prior to 12:01 A.M., January 1, 2008.



However, if Exhibit A to this Agreement is terminated within the term stipulated above, this
Exhibit will automatically terminate on the same date. In such instance, the Reinsurer shall not
be liable for Terrorism Occurrences taking place at and after the time and date of termination and
shall return to the Company the reinsurance premium unearned, calculated on the monthly pro rata
basis, as of such time and date.




Section 3  —  LIABILITY OF THE REINSURER



The Reinsurer shall pay to the Company, with respect to each Risk of the Company, the amount of Net
Loss sustained by the Company in excess of the Company Retention but not exceeding the Limits of
Liability of the Reinsurer as set forth in the Schedule of Reinsurance.






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SCHEDULE OF REINSURANCE




	 	 	 	 	 	 	 	 	 	 	 	 	 
	Class of Business	 	Company Retention	 	Limits of Liability of the Reinsurer
	 	 	 	 	 	 	First	 	Second
	 	 	 	 	 	 	Excess Cover	 	Excess Cover
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Property Business
	 	$	2,000,000	 	 	$	8,000,000	 	 	$	5,000,000	 
	 




The liability of the Reinsurer shall not exceed $8,000,000 under the First Excess Cover nor
$5,000,000 under the Second Excess Cover with respect to all Net Loss arising out of all loss or
damage directly or indirectly arising out of, caused by, or resulting from all Terrorism
Occurrences taking place during the term of this Exhibit, regardless of any other cause or event
contributing to such loss or damage in any way or at any time, or whether such loss or damage is
accidental or intentional.



All insurance written under one or more policies of the Company against the same peril on the same
Risk shall be combined, and the Company Retention and the Limits of Liability of the Reinsurer
shall be determined on the basis of the sum of all insurance against the same peril and on the same
Risk which is in force at the time of a claim or loss.




Section 4  —  DEFINITIONS



The terms “Company Retention”, “Net Loss”, “Adjustment Expense”, “Extra Contractual Obligations”,
“Risk”, “Building” and “General Location” shall have the same meaning as in Exhibit A to this
Agreement.



The term “Terrorism Occurrence” shall mean an Occurrence arising out of any Act of Terrorism, as
described in paragraphs (1) and (2) below.





	 	(1)	 	An Act of Terrorism means an activity, including the threat of an
activity or any preparation for an activity, that (a) causes either (i) damage
to property, or (ii) injury to persons; and (b) appears to be intended to: (i)
intimidate or coerce a civilian population, or (ii) disrupt any segment of an
economy, or (iii) influence the policy of a government by intimidation or
coercion, or (iv) affect the conduct of a government by destruction,
assassination, kidnapping or hostage-taking, or (v) advance a political,
religious or ideological cause; provided, however, that an Act of Terrorism
for purposes of this definition shall not include any act or threat as
described above perpetrated by an official, employee or agent of a foreign
state acting for or on behalf of such state.
	 
	 	(2)	 	An Act of Terrorism is also deemed to include any act authorized by a
governmental authority for the purpose of preventing, terminating, countering
or responding to any act or threat of terrorism or for the pur-






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	 	 	 	pose of preventing or minimizing the consequences of any act or threat of
terrorism.





Section 5  —  EXCLUSIONS



This Exhibit shall be subject to the exclusions set forth in the section entitled EXCLUSIONS of
Exhibit A to this Agreement, except that for purposes of this Exhibit, exclusion (e) of said
Section is amended to read as follows:





	 	(e)	 	Any loss or damage directly or indirectly arising out of, caused by,
or resulting from war, including undeclared or civil war; warlike action by a
military force, including action in hindering or defending against an actual
or expected attack, by any government, sovereign or other authority using
military personnel or other agents; or insurrection, rebellion, revolution,
usurped power or action taken by governmental authority in hindering or
defending against any of these. War includes any activity that would be
included as an Act of Terrorism, but for the fact that such activity was
perpetrated by an official, employee or agent of a foreign state acting for or
on behalf of such state. Such loss or damage is excluded regardless of (i)
any other cause or event contributing to such loss or damage in any way or at
any time, or (ii) whether such loss or damage is accidental or intentional.





Section 6  —  REINSURANCE PREMIUM



The Company shall pay to the Reinsurer:





	 	(a)	 	For the First Excess Cover, a flat reinsurance premium of $640,000
for the term of this Exhibit;
	 
	 	(b)	 	For the Second Excess Cover, a flat reinsurance premium of $400,000
for the term of this Exhibit.





     Section 7  —  REPORTS AND REMITTANCES





	 	(a)	 	Reinsurance Premium
	 
	 	 	 	Within 25 days after the close of each calendar quarter, the Company shall
pay to the Reinsurer one quarter of the flat reinsurance premium stipulated
in the section entitled REINSURANCE PREMIUM.
	 
	 	(b)	 	Claims and Losses
	 
	 	 	 	The Company shall report promptly to the Reinsurer each claim or loss which
in the Company’s opinion may involve the reinsurance afforded by this
Exhibit. The Company shall also report promptly to the Reinsurer any action
alleging Extra Contractual Obligations against the Company or any declaratory
judgment action brought by or against the Company on the business reinsured
hereunder. The Company






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	 	 	 	shalladvise the Reinsurer of the estimated amount of
Net Loss and Adjustment Expense in connection with each such claim or loss and of any
subsequent changes in such estimates.







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GENERAL REINSURANCE CORPORATION









 










	 	 	 	Promptly upon receipt of a definitive statement of Net Loss and Adjustment
Expense from the Company, but within no more than 25 days after receipt of
such statement, the Reinsurer shall pay to the Company the Reinsurer’s
portion of Net Loss and the Reinsurer’s portion of Adjustment Expense, if
any. The Company shall report to the Reinsurer any subsequent changes in
the amount of Net Loss and/or Adjustment Expense, and the amount due either
party shall be remitted promptly, but within no more than 25 days after
receipt of such report.
	 
	 	(c)	 	General
	 
	 	 	 	In addition to the reports required by (a), (b), and (c) above, the Company
shall furnish such other information as may be required by the Reinsurer for
the completion of the Reinsurer’s quarterly and annual statements and
internal records.
	 
	 	 	 	All reports shall be rendered on forms or in format acceptable to the
Company and the Reinsurer.






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ENDORSEMENT NO. 6 REVISED




Attached to and made a part of

AGREEMENT OF REINSURANCE

NO. 9034

between

PHILADELPHIA INDEMNITY COMPANY

PHILADELPHIA INSURANCE COMPANY

(herein collectively referred to as the “Company”)

and

GENERAL REINSURANCE CORPORATION

(herein referred to as the “Reinsurer”)



IT IS MUTUALLY AGREED that, effective 12:01 A.M., January 1, 2007, this Agreement and Exhibit A
attached thereto are hereby terminated, having been replaced concurrently by Agreement No. 9034-07
between the Company and the Reinsurer. The Reinsurer shall not be liable for claims and losses
resulting from Occurrences taking place at and after such time and date.



IN
WITNESS WHEREOF, the parties hereto have caused this Endorsement to be executed in duplicate,



this 14th day of August, 2007,





	 	 	 	 	 
	 

	 	PHILADELPHIA INDEMNITY COMPANY
	 	 	PHILADELPHIA INSURANCE COMPANY	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	Christopher J. Maguire	 	 
	 

	 	EVP & CUO	 	 
	 
	 	 	 	 
	Attest: William A. McKenna
	 	 	 	 
	 
	 	 	 	 
	and
this 25th day of July, 2007.
	 	 	 	 
	 
	 	 	 	 
	 

	 	GENERAL REINSURANCE CORPORATION	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	Joan LaFrance	 	 
	 

	 	Senior Vice President	 	 
	 
	 	 	 	 
	Attest: Diane Hyland	 	 








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