Exhibit 10.22


 




 


 





REINSURANCE AGREEMENT


 


between


 


FINANCIAL INSURANCE COMPANY LIMITED


 


and


 


VIKING INSURANCE COMPANY, LIMITED


 


Dated as of
[      ] 2004




 


 





 

















 


TABLE
OF CONTENTS


 


	
  ARTICLE I  DEFINITIONS

  	
   

  
	
   

  	
   

  
	
  ARTICLE II  COVERAGE

  	
   

  
	
   

  	
   

  
	
  ARTICLE III  ADMINISTRATION: GENERAL PROVISIONS

  	
   

  
	
   

  	
   

  
	
  ARTICLE IV  CEDING COMMISSION

  	
   

  
	
   

  	
   

  
	
  ARTICLE V  ACCOUNTING AND SETTLEMENT: RESERVE
  ADJUSTMENT

  	
   

  
	
   

  	
   

  
	
  ARTICLE VI  DURATION AND TERMINATION

  	
   

  
	
   

  	
   

  
	
  ARTICLE VII  INSOLVENCY

  	
   

  
	
   

  	
   

  
	
  ARTICLE VIII  DISPUTE RESOLUTION

  	
   

  
	
   

  	
   

  
	
  ARTICLE IX  MISCELLANEOUS PROVISIONS

  	
   

  
	
   

  	
   

  
	
  SCHEDULE A –
  Part I  CEDING COMMISSION

  	
   

  
	
   

  	
   

  
	
  SCHEDULE A
  – Part II  ESTIMATED CEDING COMMISSION

  	
   

  
	
   

  	
   

  
	
  SCHEDULE B  ACCOUNTING PERIOD REPORTS

  	
   

  
	
   

  	
   

  
	
  SCHEDULE C  LIST OF REINSURANCE ARRANGEMENTS

  	
   

  



 


[To be inserted -
list in accordance with Section 2.5]


 

















 


REINSURANCE AGREEMENT


 


This Agreement, dated as of
                        ,
2004 (this “Agreement”) is made and entered into by and between Financial
Insurance Company Limited, an insurance company organised under the laws of
England (the “Company”), and Viking Insurance Company, Limited, an insurance
company organised under the laws of Bermuda (the “Reinsurer”).  Defined terms used herein are defined below.


 


The Company and the Reinsurer mutually agree to reinsure under the
terms and conditions stated herein. 
This Agreement is solely between the Company and the Reinsurer, and the
performance of the obligations of each party under this Agreement shall be
rendered solely to the other party.  In
no instance, except as set forth in Article VII of this Agreement, shall anyone
other than the Company or the Reinsurer have any rights under this Agreement.
The Company shall be and shall remain the only party that is liable to any
insured, policyholder, claimant or beneficiary under any insurance policy or
contract reinsured hereunder.


 


ARTICLE I


 


DEFINITIONS


 


1.1                                Definitions.  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):


 


“Accounting Period” means each period
of a calendar month the first such period commencing at 00.01 Bermuda local
time (Atlantic Standard Time) on 1 January 2004 and the last such period
commencing on the first day of the calendar month in which the Termination Date
falls and ending on the Termination Date.


 


“Affiliate” means any other Person
that directly or indirectly controls, is controlled by, or is under common
control with, the first Person.  “Control”
(including the terms, “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 credit arrangement, as trustee
or executor, or otherwise.


 


“Agreement” shall have the meaning
specified in the first paragraph of this Agreement.


 


“Applicable Law” means any law
(including common law), statute, ordinance, rule, regulation, order, writ,
injunction, judgment, permit, governmental agreement or decree applicable to a
Person or any of such Person’s subsidiaries, properties, assets, or to


 

















 


such Person’s officers, directors, managing
directors, employees or agents in their capacity as such.


 


“Business Day” means any day other
than a Saturday, Sunday or other day on which banks in London are closed for
trading.


 


“Ceded Reinsurance” means all
reinsurance ceded by the Company pursuant to contracts, binders, certificates,
treaties or other evidence of reinsurance relating to the Relevant Risks in
effect on or prior to the Inception Date, or, in accordance with Section 2.5,
following the Inception Date, except the reinsurance provided pursuant to this
Agreement.


 


“Ceded Reinsurance Agreements” means
all of the contracts, binders, certificates, treaties or other evidence for
Ceded Reinsurance.


 


“Ceding Commissions” shall have the
meaning specified in Schedule A — Part I.


 


“Commutation” means, with respect to
any portion of the Ceded Reinsurance, a commutation or other similar
transaction that results in the termination of such Ceded Reinsurance with
respect to the Relevant Risks.


 


“Distributor Agreements” means all
distributor, agency or profit sharing agreements or arrangements with third
parties (each, a “Distributor”) relating to the Relevant Risks whether
entered into before, on or after the Inception Date.


 


“Estimated Ceding Commission”
shall have the meaning specified in Section 4.1.


 


“Extra Contractual Liabilities” means
all liabilities of the Company for damages (including compensatory,
consequential, exemplary, punitive, bad faith or similar or other damages)
which relate to the marketing, sale, underwriting, issuance, delivery,
cancellation or administration of contracts under which the Company assumes
Relevant Risks, including liability arising out of or relating to any alleged
or actual act, error or omission by the Company or its agents, whether
intentional or otherwise, with respect to any of such contracts, including (A)
any alleged or actual reckless conduct or bad faith in connection with the
handling of any claim arising out of or under such contracts, or (B) the
marketing, sale, underwriting, issuance, delivery, cancellation or
administration of any of such contracts.


 


 “FSA”
means the Financial Services Authority of the United Kingdom.


 


 “Governmental
Authority” means any national government, any state or other political
subdivision thereof or any self-regulatory authority, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.


 


“Inception Date” shall have the
meaning specified in Section 2.1.


 


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“Insolvency Fund” means any guarantee
fund, insolvency fund, plan, pool, association, or other arrangement, however
denominated, established or governed, which provides for the payment by the
Company of any levy, amount or charge in respect of, or assumption by the
Company of part or all of any claims, debts, charges, fees or other obligations
of an insurer or reinsurer, or its successors or assigns, as a result of its
having been declared by any competent authority to be insolvent, or as a result
of its having otherwise been deemed unable to meet any such claims, debts,
charges, fees or other obligations in whole or in part.


 


“Monthly Report” shall have the
meaning specified in Section 5.1.


 


“Negative Settlement Amount” means,
with respect to each Accounting Period, the amount of any net deficit set forth
in Line 11 of the Monthly Report for such Accounting Period as calculated in
accordance with Section 5.3(a).


 


“Person” means any natural person,
firm, limited liability company, general partnership, limited partnership,
joint venture, association, corporation, trust, Governmental Authority or other
entity.


 


“Positive Settlement Amount” means,
with respect to each Accounting Period, the amount of any net surplus set forth
in Line 11 of the Monthly Report for such Accounting Period as calculated in
accordance with Section 5.3(a).


 


“Relevant Liabilities” means all
insurance liabilities and obligations arising under the Relevant Risks  including, without limitation (i) benefits,
surrender amounts and other amounts payable to policyholders under the terms of
the Relevant Risks, (ii) other consideration paid on or after the Inception
Date with respect to the Relevant Risks, (iii) Insolvency Fund or premium based
assessments based on premiums and other consideration paid on or after the Inception
Date with respect to the Relevant Risks, (iv) all amounts payable on or after
the Inception Date for returns or refunds of premiums under the Relevant Risks,
(v) all liability for commission or profit sharing payments and other fees or
compensation payable, including under Distributor Agreements, with respect to
the Relevant Risks in respect of premiums and other consideration paid on or
after the Inception Date, (vi) all Extra Contractual Liabilities and (vii)
compensation paid in respect of, or in relation to changes to, Distributor
Agreements on or after the Inception Date, unless otherwise agreed to in
writing by the Reinsurer.


 


“Relevant Risks” means the whole or,
as the case may be, such part of the insurance or reinsurance risks as are
assumed or borne by the Company under or in connection with any and all
insurance and reinsurance policies and contracts to which it is a party and
which are in force at any time on or prior to the Termination Date.  Where the Company is a co-insurer with any
other company or companies under any such insurance or reinsurance policy or
contract, the insurance or reinsurance risks which are to be treated as assumed
or borne by the Company for these purposes are:-


 


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(i)                                     those risks which
the Company has agreed with its co-insurer or co-insurers are to be assumed or
borne by the Company; and


 


(ii)                                  those other risks (if
any) which the Company has agreed with its co-insurer or co-insurers are to be
assumed or borne by such co-insurer or co-insurers, but only to the extent that
such co-insurer or co-insurers shall have defaulted in meeting its or their
obligations in respect of those risks and the Company incurs a liability in
respect of those risks as a result.


 


“RIR” means the
notional investment return in respect of an Accounting Period as defined in
Section 5.3.


 


“Technical Provisions” means, as of
any given date, the  technical
provisions of the Company calculated in accordance with the Valuation and
Accounting Principles.


 


“Valuation and Accounting Principles”
means the valuation rules for determining the amount of the assets and
liabilities of the Company in accordance with the Interim Prudential Sourcebook
for Insurers issued by the FSA (as amended or replaced from time to time) under
the powers conferred on the FSA pursuant to the Financial Services and Markets
Act 2000, as such rules are required to be applied by the Company in the
preparation of its annual returns to the FSA (taking into account any waivers
or modifications of such valuation rules as are approved by the FSA from time
to time in respect of the Company) and, to the extent not inconsistent
therewith, the accounting principles and practices hitherto adopted by the
Company in preparing its annual audited accounts.


 


“Termination Date” means the effective
date of any termination of this Agreement as provided in Article VI.


 


“3 Month LIBOR” means the British
Bankers Association Interest Settlement Rate for sterling quoted for a three
month period as displayed on the appropriate Telerate screen page at 11.00 a.m.
(London time) on the day on which such Interest Settlement Rate is required to
be computed pursuant to this Agreement.


 


ARTICLE II


 


COVERAGE


 


2.1                                Coverage.  Upon the terms and subject to the conditions and other provisions
of this Agreement, as of 00.01. Bermuda local time (Atlantic Standard Time) on
1 January 2004 (the “Inception Date”), the Reinsurer agrees to reinsure the
Relevant Liabilities by way of the Reinsurer indemnifying the Company in respect
of each Negative Settlement Amount.  As
consideration for the reinsurance by the Reinsurer under this Agreement, the
Company shall pay to the Reinsurer each Positive Settlement Amount.  The parties


 


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shall
also pay Ceding Commission and Estimated Ceding Commission in accordance with
the provisions of this Agreement.


 


2.2                                Conditions.  Except as otherwise set forth or contemplated herein, no changes,
amendments or modifications made on or after the Inception Date in the terms
and conditions of the Relevant Risks in-force as of the Inception Date which
adversely affect the liability of the Reinsurer hereunder shall be covered
hereunder without the prior written approval of such changes, amendments or
modifications by the Reinsurer, which approval shall not be unreasonably
withheld or delayed.  In the event that
any such changes, amendments or modifications are made in any such Relevant
Risk without the prior written approval of the Reinsurer, this Agreement will
cover liability incurred by the Company for Relevant Risks as if the unapproved
changes, amendments or modifications had not been made.


 


2.3                                Territory.  The territorial limits of the Agreement shall be identical to
those of the Relevant Liabilities.


 


2.4                                Commutation of Ceded Reinsurance.  The Company shall not, without the
Reinsurer’s prior written approval, in its sole discretion, take any action to
amend or terminate any Ceded Reinsurance under any Ceded Reinsurance Agreement
or enter into any Commutation of Ceded Reinsurance.


 


2.5                                New Reinsurance Covers.  Subsequent to the Inception Date, the
Company shall not enter into any reinsurance arrangements with respect to the
Relevant Liabilities without the prior written consent of the Reinsurer, in its
sole discretion.  For these purposes,
the Reinsurer consents to the Company having entered into the reinsurance
arrangements specified in Schedule C.


 


ARTICLE III


 


ADMINISTRATION: GENERAL PROVISIONS


 


3.1                                Contract Administration.  The Company shall procure that the Relevant
Risks are administered in accordance with their terms and the terms of any
applicable Distributor Agreement, including, but not limited to, the collection
of premiums and other amounts due from policyholders, the payment of all
Relevant Liabilities and the administration of claims and disbursements.  All benefits under the contracts and
policies constituting the Relevant Risks paid by the Company shall be binding
upon the Reinsurer, provided, however, that such payments are
within the terms, conditions and limitations of the contracts and policies
constituting the Relevant Risks.  The
Company shall procure that the Relevant Risks are administered in good faith
and with the care, skill, prudence, and diligence of a person experienced in
administering payment protection insurance business, personal accident
insurance business and travel insurance business.  The Company shall procure that the Relevant Risks are
administered in compliance with Applicable Law and the current service
provider’s administrative performance standards


 


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in
effect on the date hereof, with such revisions to such standards as are no less
favourable to the Reinsurer than such standards.  Notwithstanding the foregoing, the parties may, from time to
time, mutually develop specific and/or different standards for the
administration of the Relevant Risks.


 


3.2                                Sub-contracting of Contract Administration.  The Company may
subcontract the performance of any service or services which the Company is
required to procure in connection with the administration of the Relevant Risks
to (i) an Affiliate, (ii) a service provider utilized by the Company with
respect to the Relevant Risks or its other business as of the date hereof,
(iii) any Person to whom such subcontracting is required to be effected under
the terms of any Distributor Agreement or (iv) with the prior written consent
of the Reinsurer, any other Person, such consent not to be unreasonably
withheld; provided, that no such subcontracting shall relieve the
Company from any of its obligations or liabilities hereunder, and the Company
shall remain responsible for all obligations or liabilities of such
subcontractor with regard to the provision of such advice or services as if
provided by the Company.


 


3.3                                Ceded Reinsurance Agreements and Distributor Agreements.  The Company shall manage
and administer the Ceded Reinsurance Agreements and the Distributor Agreements,
including:-


 


(i)                                     providing all
reports and notices required with regard to the Ceded Reinsurance Agreements
and the Distributor Agreements to the reinsurers or other third parties, as
applicable, within the time required by the applicable Ceded Reinsurance
Agreement or Distributor Agreements; and


 


(ii)                                  doing all other
things necessary to comply with the terms and conditions of the Ceded
Reinsurance Agreements and the Distributor Agreements.


 


Without limiting the foregoing, the Company
shall:-


 


(i)                                   promptly pay when due
all reinsurance premiums due to reinsurers under the Ceded Reinsurance
Agreements and use all commercially reasonable efforts to collect from such
reinsurers all amounts due under Ceded Reinsurance; and


 


(ii)                                promptly pay when due
all profit sharing, commissions or other compensation due to third parties
under the Distributor Agreement and use all commercially reasonable efforts to
collect from such third parties all amounts due thereunder.  Notwithstanding the obligation of the
Company under this Section 3.3 to use all commercially reasonable efforts to
collect such reinsurance recoverables, the risk of the Company not collecting
or being unable to collect (for whatever reason) any amount due under Ceded
Reinsurance shall be borne by the Reinsurer in accordance with Line 2 of
Schedule B of this Agreement.


 


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3.4                                Reinsured Policy Terms.  The Company shall set all insurance rates
and underwriting criteria in respect of the Relevant Risks from and after the
Inception Date consistently with the manner in which it has done so in the
past, consulting with the Reinsurer on any issue which is expected to have a
material adverse impact on any amounts which 
the Reinsurer reasonably expects to become payable to it under the terms
of this Agreement.


 


3.5                                Claims Settlements.  The Company agrees that if so requested by
the Reinsurer it will provide notice to the Reinsurer as soon as is reasonably
practicable of its intention to commence litigation proceedings in respect of a
claim in excess of £100,000 with respect to a Reinsured Policy along with (if
requested by the Reinsurer) copies of all pleadings and reports of
investigation with respect to that claim. 
The Reinsurer shall have the right, at its own expense, to participate
jointly with the Company in the investigation, adjustment or defence of such
claims.


 


3.6                                Inspection.  The Company shall keep accurate and complete records, files and
accounts of all transactions and matters with respect to the Relevant Risks in
accordance with its record management practices in effect from time to
time.  The Reinsurer or its designated
representative (or Person appointed or charged with the duty to examine or
investigate the Reinsurer under Applicable Law) may upon reasonable notice
inspect and copy (and take away such copies), at the offices of the Company
where such records are located, the papers and any and all other books or
documents of the Company reasonably relating to the Relevant Risks and the
administration thereof (including compliance with the provisions of Section
3.1), during normal business hours for such period as this Agreement is in
effect or for as long thereafter as the Company seeks performance by the
Reinsurer pursuant to the terms of this Agreement or the Reinsurer reasonably
needs access to such records for regulatory, tax or similar purposes.  Where any papers, books or documents
relating to the Relevant Risks and the administration thereof are those of any
sub-contractor of the Company, the Company shall procure at the Reinsurer’s
expense, to the extent that the Company is entitled and able to do so, that the
Reinsurer may upon reasonable notice inspect and copy such papers, books or
documents (and take away such copies) at the office of the sub-contractor where
such papers, books or documents are located. 
The information obtained shall be used only for purposes relating to
reinsurance under this agreement and as permitted under Section 3.7.


 


3.7                                Co-operation.  Each party hereto shall co-operate fully with the other in all
reasonable respects in order to accomplish the objectives of this Agreement
including making available to each their respective officers and employees for
interview and meetings with Governmental Authorities and furnishing any
additional assistance, information and documents as may be reasonably requested
by either party from time to time.  Each
party is permitted to furnish such documents and information concerning this
Agreement, the reinsurance under this Agreement and the objectives of this
Agreement (i) to its advisors, insurance managers and auditors as may be
desirable in connection


 


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with
servicing the business of the party concerned or such party complying with
Applicable Law and (ii) as required under Applicable Law.


 


3.8                                Errors and Omissions.  If any delay, omission, error or failure to
pay amounts due or to perform any other act required by this Agreement is
unintentional and caused by misunderstanding or oversight, the Company and the
Reinsurer will adjust the situation to what it would have been had the
misunderstanding or oversight not occurred. 
The party first discovering such misunderstanding or oversight, or an
act resulting from such misunderstanding or oversight, will notify the other
party in writing promptly upon discovery thereof, and the parties shall act to
correct such misunderstanding or oversight within twenty (20) Business Days of
such other party’s receipt of such notice. 
However, this Section shall not be construed as a waiver by either party
of its right to enforce strictly the terms of this Agreement.


 


3.9                                Age, Sex and Other Adjustments.  The liability of the Reinsurer shall follow
that of the Company including in circumstances where the Company’s liability
under any of the Relevant Risks is changed because of a misstatement of age or
sex or any other material fact, and the Company and the Reinsurer will make all
appropriate adjustments to amounts due to each other under this Agreement in
such circumstances.


 


3.10                          Setoff. 
Any debts or credits, matured or unmatured, liquidated or unliquidated,
regardless of when they arose or were incurred, in favour of or against either
the Company or the Reinsurer with respect to this Agreement  are deemed mutual debts or credits, as the
case may be, and shall be setoff from any amounts due to the Company or the
Reinsurer hereunder, as the case may be, and only the net balance shall be
allowed or paid.


 


ARTICLE IV


 


CEDING COMMISSION


 


4.1                                Ceding Commission.  On and subject to the terms of this
Agreement, the Reinsurer shall pay to the Company (or, as the case may be, the
Company shall pay to the Reinsurer), an estimate of the Ceding Commission (the
“Estimated Ceding Commission”) payable in respect of that Accounting Period in
an amount determined in accordance with Schedule A Part II.  The amount of the Estimated Ceding
Commission in respect of each Accounting Period shall, subject to Section 4.2
below, be calculated by the Reinsurer in good faith on the basis of information
provided by the Company and shall be paid, by the Reinsurer or the Company as
the case may be, at the same time as any Negative or Positive Settlement Amount
required to be paid in respect of the previous Accounting Period becomes due in
accordance with the arrangements set out in Section 5.4 below. The Estimated
Ceding Commission in respect of any Accounting Period is, for the avoidance of
doubt, an estimate of the actual Ceding Commission due in respect of that
Accounting Period and the adjustment to such estimate shall be


 


8

















 


effected
through the Ceding Commission Adjustments referred to in Schedule B and Section
5.5.


 


4.2                                Estimated Ceding Commission initially due.  Notwithstanding Section
4.1, the amounts of the Estimated Ceding Commission in respect of each of the
first 6 Accounting Periods shall be in the respective amounts set out in
Schedule A Part III.  Upon execution of
this Agreement, the Reinsurer shall pay to the Company an amount equal to the
Estimated Ceding Commission in respect of the first Accounting Period as set
out in Schedule A Part III.  Subsequent
amounts due as Estimated Ceding Commission under Schedule A Part III shall be
paid in accordance with Section 5.4 below.


 


ARTICLE V


 


ACCOUNTING AND SETTLEMENT: RESERVE
ADJUSTMENT


 


5.1                                Monthly Reports.  Subject as set out in Section 5.4(b), no
later than 3 Business Days before the end of each Accounting Period (or more
frequently as mutually agreed by the parties) the Company shall supply the
Reinsurer with a report that shall provide an estimate of the financial data
for such Accounting Period required in Schedule B together with details of the
Ceding Commission estimated to be payable in respect of the following
Accounting Period (the “Monthly Report”).


 


5.2                                Computations. At the end of each
Accounting Period the Company shall compute:


 


(i)            the amount (being “X” in the formula set
out in Section 5.3 below) shown in Line 4 in the table contained in
Schedule B; and


 


(ii)           the amount (being “Y” in the formula set out
in Section 5.3 below) shown in Line 9 in the table contained in Schedule
B.


 


in each case in accordance with the notes set
out in Schedule B and insofar as not inconsistent with such notes otherwise in
accordance with the Valuation and Accounting Principles.


 


5.3                                Positive and Negative Settlement Amounts.


 


(a)           In
respect of each Accounting Period, if the formula:


 


(X – Y + RIR)


 


shall produce a positive amount, that shall be the Positive Settlement
Amount for that Accounting Period, and if it shall produce a negative amount,
that shall be the Negative Settlement Amount for that Accounting Period, and
that Positive Settlement Amount or Negative Settlement Amount, as the case may
be, shall be the amount set out in Line 11 of Schedule B.


 


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(b)                                 The amount of RIR in respect
of any Accounting Period shall be determined by multiplying an amount equal to
the simple average of (i) the Technical Provisions on the first day of the
Accounting Period and (ii) the Technical Provisions on the last day of such
Accounting Period by a rate equal to:


 


((1.052) ^ (actual number of days in the Accounting Period/366)) - 1


 


in the year 2004, but for Accounting Periods
thereafter,


 


((1 + 3 Month LIBOR) ^ (actual number of days
in the Accounting Period/number of days in the 3 Month LIBOR period as from the
date of its calculation)) - 1


 


Where:


 


^              is to the power of


 


5.4                                Payments.


 


(a)            Subject as provided in Section 5.4(b)
below:-


 


(i)                                  For each Accounting
Period in respect of which there is a Negative Settlement Amount, the Reinsurer
shall pay to the Company by telegraphic transfer within 5 Business Days of the
delivery of the Monthly Report by the Company an amount equal to the absolute
value of such Negative Settlement Amount together with the Estimated Ceding
Commission (if any) payable by the Reinsurer to the Company in respect of the
following Accounting Period.


 


(ii)                                 For each Accounting
Period as to which there is a Positive Settlement Amount the Company shall pay
to the Reinsurer by telegraphic transfer within 5 Business Days of the delivery
of the Monthly Report by the Company an amount equal to the absolute value of
such Positive Settlement Amount together with the Estimated Ceding Commission
(if any) payable by the Company to the Reinsurer in respect of the following
Accounting Period.


 


(iii)                              If there is a Negative
Settlement Amount for any Accounting Period and the Company is required to pay
the Estimated Ceding Commission to the Reinsurer in respect of the following
Accounting Period, a net payment shall be made by the Company or the Reinsurer
as appropriate.


 


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(iv)                             If there is a Positive
Settlement Amount for any Accounting Period and the Reinsurer is required to
pay the Estimated Ceding Commission to the Company in respect of the following
Accounting Period, a net payment shall be made by the Company or the Reinsurer
as appropriate.


 


(b)                                In relation to all
Accounting Periods commencing prior to the execution and delivery of this
Agreement, the Company shall calculate and deliver a report (“the First Monthly
Report”) to the Reinsurer as to the total aggregate net amount payable by the
Company (or as the case may be the Reinsurer) to place the Company and the
Reinsurer in the respective financial positions in which they would have been
in under this Agreement on the date of such payment, disregarding for this
purpose the time cost of money, had this Agreement been executed and delivered
at the commencement of the first Accounting Period. Such payment shall be made
by telegraphic transfer within 5 Business Days of the delivery of the First
Monthly Report.


 


5.5                                Actual Data.  In preparing all reports required under this Agreement, the
Company shall use all commercially reasonable efforts to supply the actual
data.  If the actual data cannot be
supplied with the appropriate report, the Company shall produce best estimates
and shall provide amended reports based on actual data no more than ten (10)
Business Days after the actual data becomes available and the parties will
settle any additional amounts due within five (5) Business Days thereafter,
together with interest as provided in Section 5.7 hereof.


 


5.6                                Additional Reports and Information.  For so long as this Agreement remains in
effect and for a period of 7 years after its termination, each of the parties
shall periodically furnish to the other such other reports and information as
is reasonably available to it and as may be reasonably requested by such other
party for regulatory, tax or similar purposes.


 


5.7                                Delayed Payments.  In the event that all or any portion of any
payment due to either party pursuant to this Agreement becomes overdue the
portion of the amount overdue shall bear interest at an annual rate equal to 3
Month LIBOR on the date that the payment becomes overdue plus 200 basis points
per annum, for the period that the amount is overdue.


 


5.8                                Certificate of the Chief Financial Officer of the Company. The certificate of the Chief Financial Officer of the Company as
to any matter arising in respect of the amount of any payment falling to be
made under this Agreement shall, in the absence of manifest error, be final and
binding on the parties.


 


5.10                          Breach of Required Minimum
Margin of Solvency. No payment required to be made by the Company to the
Reinsurer at a relevant time under the terms of this Agreement shall be
required to be made at that time if that payment would cause the Company to
breach


 


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the “Required Minimum Margin” required to be maintained by the Company
in accordance with the FSA’s Interim Prudential Sourcebook for Insurers (as
amended or replaced from time to time). 
Any payment not made by the Company to the Reinsurer for this reason
shall be paid by the Company to the Reinsurer as soon as the making of the payment
would not cause that “Required Minimum Margin” to be breached.


 


ARTICLE VI


 


DURATION AND TERMINATION


 


6.1                                Duration.  Except as otherwise provided herein, this Agreement shall be
unlimited in duration.


 


6.2                                Reinsurer’s Liability.  The Reinsurer’s liability with respect to
the Relevant Liabilities will terminate on the date that termination takes
effect as a result of any notice given at the option of the Reinsurer or the
Company in accordance with Section 6.3 and otherwise on the date this Agreement
is terminated upon the written agreement of the parties.


 


6.3                                Optional Termination.  Either the Reinsurer or the Company may
terminate this Agreement and the reinsurance hereunder upon prior written
notice given at any time to expire on the last day of the Accounting Period in
which such notice is given, at any time after the Reinsurer and the Company
have both become wholly owned subsidiaries of Genworth Financial, Inc.


 


For the purposes of this Section, a company shall be a wholly owned
subsidiary of Genworth Financial, Inc. if all of its ordinary shares are
owned:-


 


(i)             by
Genworth Financial, Inc., or


 


(ii)           by
any other company the ordinary shares of which are owned directly by Genworth
Financial, Inc. or by another wholly owned subsidiary of Genworth Financial,
Inc.


 


6.4                                Consequence of Termination


 


                                                (a)           In the event that this Agreement is terminated pursuant to Section
6.3, this Agreement shall terminate as of the end of the applicable Accounting
Period in which the notice of termination pursuant to Section 6.3 is
received by the non-terminating party and a net accounting and settlement as to
any balance due under this Agreement shall be undertaken by the parties for
such Accounting Period and in respect of adjustments required for any earlier
Accounting Period (the “Final Settlement”).


 


(b)                                In the event that,
subsequent to the Final Settlement, the Company receives any amount, or is
required to pay any amount, or actual data becomes available


 


12

















 


to the Company, which in any such case was
not taken into account in calculating any Positive or Negative Settlement
Amount but which would have been so taken into account had it been received or
paid or become available prior to the Termination Date or the Final Settlement,
the Company or (as the case may be) the Reinsurer shall make such payment or
payments to the other as is required to reflect as nearly as possible the
position that would have prevailed had such amount or data been so taken into
account, provided, however, that the obligations under this Section
6.4(b) to make any such payment shall terminate 18 months after the date on
which any notice is served under Section 6.3.


 


ARTICLE VII


 


INSOLVENCY


 


7.1                                Payments.  In the event of the insolvency of the Company, payment due to the
Company under this Agreement shall be payable by the Reinsurer directly to the
Company or to its liquidator, receiver, or statutory successor on the basis of
the liability of the Company under the contract or contracts reinsured, without
diminution because of the insolvency of the Company.  It is agreed and understood, however, that (i) in the event of
the insolvency of the Company, the Company shall give to the Reinsurer written
notice of the pendency of a claim against the insolvent Company on a Reinsured
Policy within a reasonable time after such claim is filed in the insolvency
proceeding and (ii) during the pendency of such claim the Reinsurer may
investigate such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated any defences which it may deem available
to the Company or its liquidator, receiver or statutory successor.


 


7.2                                Expenses.  It is further understood that any expense thus incurred by the
Reinsurer pursuant to Section 7.1 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 defence undertaken by the Reinsurer.


 


ARTICLE VIII


 


DISPUTE RESOLUTION


 


8.1                                General Provisions.


 


(a)                                  Any dispute,
controversy or claim arising out of or relating to this Agreement or the
validity, interpretation, breach or termination thereof (a “Dispute”), shall be
resolved in accordance with the procedures set forth in this Article VIII,
which shall be the sole and exclusive procedure for the resolution of any such
Dispute.


 


13

















 


(b)                                 Commencing with the
request contemplated by Section 8.2, all communications between the parties or
their representatives in connection with the attempted resolution of any
Dispute, including any mediator’s evaluation referred to in Section 8.3, shall
be deemed to be without prejudice communications and to have been delivered in
furtherance of a Dispute settlement and shall be exempt from inspection, and
shall not be admissible in evidence for any reason (whether as an admission or
otherwise).


 


(c)                                  In connection with
any Dispute, the parties expressly waive and forego any right to (i) punitive,
exemplary, statutorily-enhanced or similar damages in excess of compensatory
damages, and (ii) trial by jury.


 


(d)                                 The specific
procedures set forth below, including but not limited to the time limits
referenced therein, may be modified by agreement of the parties in writing.


 


(e)                                  The running of time
shall be suspended in respect of any Dispute for the purposes of any defences
based upon the passage of time (whether under the Limitation Act 1980 (in its
present form or as subsequently amended or replaced) or otherwise) while the
procedures specified in this Article VIII are pending. The parties will take
such action, if any, required to effectuate this suspension.


 


8.2                                Consideration by Senior Executives.  If a Dispute is not resolved in the normal
course of business at the operational level, the parties shall attempt in good
faith to resolve any Dispute by negotiation between executives who hold, in
respect of each of the business entities involved in the Dispute, at a minimum,
the office of President, Chief Executive Officer or Chief Financial
Officer.  Either party may initiate the
executive negotiation process by written notice to the other.  Fifteen (15) days after delivery of the
notice, the receiving party shall submit to the other a written response. The
notice and response shall include (i) a statement of the Dispute and of each
party’s position, and (ii) the name and title of the executive who will
represent that party and of any other person who will accompany the executive.  Such executives will meet in person or by
telephone within 30 days of the initial notice to seek a resolution.


 


8.3                                Mediation.  If a Dispute is not resolved by negotiation as provided in
Section 8.2 within forty-five (45) days from the initial notice, then either
party may submit the Dispute for resolution by mediation pursuant to the Center
for Public Resources (“CPR”) Model Mediation Procedure as then in effect.  The parties will select a mediator from the
CPR Panels of Distinguished Neutrals, but such mediator must have prior
reinsurance experience either as a lawyer or as a present or former officer or
management employee of a reinsurance company, but not of the Company, or the
Reinsurer, or any of their respective affiliates.  Either party at commencement of the mediation may ask the
mediator to provide an evaluation of the Dispute and the parties’ relative
positions.


 


14

















 


8.4                                Arbitration.  If a Dispute is not resolved by mediation as provided in Section
8.3 within thirty (30) days of the selection of a mediator (unless the mediator
chooses to withdraw sooner), either party may submit the Dispute to be finally
resolved by arbitration pursuant to the CPR Rules for Non-Administered
Arbitration as then in effect.  The
parties consent to a single, consolidated arbitration for all known Disputes
existing at the time of the arbitration and for which arbitration is permitted.


 


(a)                                  The neutral
organisation for purposes of the CPR rules will be the CPR.  the arbitral tribunal shall be composed of
three arbitrators who are each experienced in the reinsurance business, of whom
each party shall appoint one in accordance with the “screened” appointment
procedure provided in Rule 5.4 of the CPR rules.  The non-party appointed arbitrator must have prior U.S.
reinsurance experience as a present or former officer or management employee of
a reinsurance company, but not of the Company, or the Reinsurer, or any of
their respective affiliates.  The
arbitration shall be conducted in New York. Each party shall be permitted to
present its case, witnesses and evidence, if any, in the presence of the other
party.  A written transcript of the
proceedings shall be made and furnished to the parties.  The arbitrators shall determine the dispute
in accordance with English law, without giving effect to any conflict of law
rules or other rules that might render such law inapplicable or unavailable,
and shall apply this Agreement according to its terms, provided that the
provisions relating to arbitration shall be governed by the Federal Arbitration
Act, 9 U.S.C. § 1 et seq.


 


(b)                                 The parties agree to
be bound by any award or order resulting from any arbitration conducted
hereunder and further agree that judgment on any award or order resulting from
an arbitration conducted under this Section may be entered and enforced in any
court having jurisdiction thereof.


 


(c)                                  Except as expressly
permitted by this Agreement, no party will commence or voluntarily participate
in any court action or proceeding concerning a Dispute, except (i) for
enforcement as contemplated by Section 8.4(c) above, (ii) to restrict or vacate
an arbitral decision based on the grounds specified under Applicable Law, or
(iii) for interim relief as provided in paragraph (e) below.  For the purposes of the foregoing the
parties hereto submit to the non-exclusive jurisdiction of the courts of
England.


 


(d)                                 In addition to the
authority otherwise conferred on the arbitral tribunal, the tribunal shall have
the authority to make such orders for interim relief, including injunctive
relief, as it may deem just and equitable. 
Notwithstanding paragraph (d) above, each party acknowledges that in the
event of any actual or threatened breach of certain of the provisions of this
Agreement, the remedy at law may not be adequate, and therefore injunctive or
other interim relief may be sought immediately to restrain such breach.  If the tribunal shall not have been
appointed, either party may seek interim relief from a court having
jurisdiction if


 


15

















 


the award to which the applicant may be
entitled may be rendered ineffectual without such interim relief.  Upon appointment of the tribunal following
any grant of interim relief by a court, the tribunal may affirm or disaffirm
such relief, and the parties will seek modification or rescission of the court
action as necessary to accord with the tribunal’s decision.


 


(e)                                  Each of the parties
will bear its own legal costs in relation to any arbitration proceedings
considered under this Section.


 


8.5                                Agreement to an alternative procedure.  If the parties to this Agreement mutually
agree that the alternate procedure set out in Section 8.6 and 8.7 below shall
apply to a particular Dispute, then the parties shall resolve that Dispute in
accordance with Sections 8.6 and 8.7 below rather than in accordance with
Sections 8.3 and 8.4 above.


 


8.6                                Alternative Mediation procedure.  If the parties have mutually agreed under
Section 8.5 that this section shall apply to a Dispute and such Dispute is not
resolved by negotiation as provided in Section 8.2 within 45 days from the
initial notice (or such longer period as the parties may agree)  then the parties will attempt to settle that
Dispute by mediation in accordance with the Centre for Effective Dispute
Resolution (CEDR Solve) Model Mediation Procedure (the “Model Procedure”).  To initiate a mediation, either party shall
give notice in writing (“ADR Notice”) to the other party in accordance with the
provisions of Section 9, requesting mediation in accordance with the provisions
of the Model Procedure.  A copy of the
ADR Notice should also be sent to CEDR Solve.


 


8.7                                Alternative Arbitration procedure.  If the parties have mutually agreed under
Section 8.5 that this section shall apply to a Dispute and such Dispute is not
resolved within 42 days (or such longer period as the parties may agree) of the
giving of the ADR Notice, or if one of the parties refuses to participate in
mediation, the Dispute shall be referred to and finally resolved under the
Rules of Arbitration of the International Chamber of Commerce (the “Rules”) by
3 arbitrators appointed in accordance with the Rules, and so that:


 


(a)                                 The Tribunal shall
consist of three arbitrators to be appointed in accordance with the Rules.


 


(b)            The place of arbitration shall be London.


 


(c)            The language to be used in the arbitral
proceedings shall be English.


 


16

















 


ARTICLE IX


 


MISCELLANEOUS PROVISIONS


 


9.1                                Headings and Schedules.  Headings used herein are not a part of this
Agreement and shall not affect the terms hereof.  The attached Schedules are a part of this Agreement.


 


9.2                                Notices.  All notices, requests, demands and other communications under
this Agreement must be in writing and will be deemed to have been duly given or
made as follows: (a) if sent by registered or certified mail in the United
States return receipt requested, upon receipt; (b) if sent by reputable
overnight air courier, four Business Days after mailing; (c) if sent by
facsimile transmission, with a copy mailed on the same day in the manner
provided in (a) or (b) above, when transmitted and receipt is confirmed by
telephone; or (d) if otherwise actually personally delivered, when delivered,
and shall be delivered as follows.


 


If to the Company:


 


Vantage West,

Great West Road,

Brentford,

Middlesex TW8 9AG


 


Facsimile: +44 (0) 20 8380 3065

Attention:  Company Secretary


 


If to the Reinsurer:


 


Craig Appin House,

8 Wesley Street, 

Hamilton, 

Bermuda,


 


Facsimile: [                                            ]

Attention:
[                                            ],


 


or to such other address or to such other Person as either party may
have last designated by notice to the other party.


 


9.3                                Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
permitted assigns and legal representatives. 
Neither this Agreement, nor any right or obligation hereunder, may be
assigned by any party without the prior written consent of the other party
hereto.  Any assignment in violation of
this Section 9.3 shall be void and shall have no force and


 


17

















 


effect.  Nothing in this Section
9.3 shall be construed to prohibit the Reinsurer from retroceding all or any
portion of the business reinsured hereunder.


 


9.4                                Execution in Counterpart.  This Agreement may be executed by the
parties hereto in any number of counterparts, and by each of the parties hereto
in separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.


 


9.5                                Currency.  Whenever the acronym “GBP” or the “£” sign appears in this
Agreement, they shall be construed to mean British Pounds Sterling and all
transactions under this Agreement shall be in British Pounds Sterling.


 


9.6                                Amendments.  This Agreement may not be changed, altered or modified unless the
same shall be in writing executed by the Company and the Reinsurer.


 


9.7                                Governing Law.  This Agreement will be construed, performed and enforced in
accordance with the laws of England without giving effect to its principles or
rules of conflict of laws thereof to the extent such principles or rules would
require or permit the application of the laws of another jurisdiction.


 


9.8                                Entire Agreement: Severability.  This Agreement constitutes the entire
agreement between the parties hereto relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, undertakings, statements,
representations and warranties, negotiations and discussions, whether oral or
written of the parties and there are no general or specific warranties, representations
or other agreements by or among the parties in connection with the entering
into of this Agreement or the subject matter hereof except as specifically set
forth or contemplated herein.


 


9.9                                Enforceability.  If any provision of this Agreement is held
to be void or unenforceable, in whole or in part, (i) such holding shall not
affect the validity and enforceability of the remainder of this Agreement,
including any other provision, paragraph or subparagraph, and (ii) the parties
agree to attempt in good faith to reform such void or unenforceable provision
to the extent necessary to render such provision enforceable and to carry out
its original intent.


 


9.10                          No Waiver: Preservation of Remedies.  No consent or waiver, express or implied, by
any party to or of any breach or default by any other party in the performance
by such other party of its obligations hereunder shall be deemed or construed
to be a consent or waiver to or of any other breach or default in the
performance of obligations hereunder by such other party hereunder.  Failure on the part of any party to complain
of any act or failure to act of any other party or to declare any other party
in default, irrespective of how long such failure continues, shall not
constitute a waiver by such first party of any of its rights hereunder.  The rights and remedies provided are
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or equity.


 


18

















 


9.11                          Third Party Beneficiary.  Nothing in this Agreement shall confer any
rights upon any Person that is not a party or a successor or permitted assignee
of a party to this Agreement.


 


9.12                          Interpretation.  Whenever the words “include”, “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation”.


 


9.13                          Survival.  Articles VIII and IX shall survive the termination of this
Agreement and Section 6.4(b) shall remain in force for a period of 18
months after the date on which any notice is served under Section 6.3.


 


9.14                          Negotiated Agreement. This Agreement has
been negotiated by the parties and the fact that the initial and final draft
will have been prepared by either party or an intermediary will not give rise
to any presumption for or against any party to this Agreement or be used in any
respect or forum in the construction or interpretation of this Agreement or any
of its provisions.


 


19

















 


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


 


	
   

  	
  FINANCIAL INSURANCE COMPANY LIMITED

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VIKING INSURANCE COMPANY, LIMITED

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
						



 


20

















 


SCHEDULE A – Part I


 


CEDING COMMISSION


 


The Company shall calculate in respect of each Accounting Period the
amount by which the deferred acquisition costs of the Company  shall have increased or decreased over such
Accounting Period (the “Ceding Commission”). 
The Ceding Commission in respect of such Accounting Period for the
purposes of Article IV of this Agreement:-


 


(i)                                    shall be payable by
the Reinsurer to the Company in an amount equal to the amount, if any, by which
the deferred acquisition costs of the Company shall have decreased over that
Accounting Period; and


 


(ii)                                 shall be payable by
the Company to the Reinsurer in an amount equal to the amount, if any, by which
the deferred acquisition costs of the Company shall have increased over that
Accounting Period.


 


For the avoidance of doubt, the amount of deferred acquisition costs at
any relevant time shall be calculated in accordance with the Valuation and
Accounting Principles.


 


In calculating the Ceding Commission for the first Accounting Period,
the deferred acquisition costs of the Company shall at the commencement of such
Accounting Period be taken as £ [   ].


 


21

















 


SCHEDULE A – Part II


 


ESTIMATED CEDING COMMISSION


 


Subject as provided in
Schedule A - Part III below, the Reinsurer shall produce at the end of each
Accounting Period on the basis of information provided by the Company a best
estimate of the Ceding Commission for the next following Accounting Period.


 


 


SCHEDULE A - PART III


 


ESTIMATED CEDING COMMISSION FOR FIRST 6
ACCOUNTING PERIODS


 


For the first 6 Accounting Periods the Estimated Ceding Commission
shall, in the case of each amount, be payable by the Reinsurer and shall be as
follows, provided that the parties acknowledge that such amounts are estimates
only and shall be the subject of the Reinsurer’s Ceding Commission Adjustment
and the Company’s Ceding Commission Adjustment, as appropriate, in accordance
with Lines 3 and 8 of Schedule B of this Agreement and Section 5.5:-


 


	
  Accounting Period ending on:-

  	
   

  	
  Amount of
  Ceding Commission:-

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  31st January 2004

  	
   

  	
  £

  	
  3,167,000

  	
   

  
	
  29th February 2004

  	
   

  	
  £

  	
  3,167,000

  	
   

  
	
  31st March 2004

  	
   

  	
  £

  	
  3,167,000

  	
   

  
	
  30th April 2004

  	
   

  	
  £

  	
  3,167,000

  	
   

  
	
  31st May 2004

  	
   

  	
  £

  	
  3,167,000

  	
   

  
	
  30th June 2004

  	
   

  	
  £

  	
  3,167,000

  	
   

  



 


22

















 


SCHEDULE B


 


ACCOUNTING PERIOD REPORTS


 


Note: All amounts paid or payable by the Company in respect of
insurance premium tax or any other tax assessed by reference to the premium
payable under any policy are to be netted off all amounts paid or payable to
the Company in respect of such insurance premium tax or other tax in
calculating any of the items listed below. 
No account shall be taken in any of the items listed below of any amount
payable or receivable under this Agreement or of any change in the Company’s
provision for deferred acquisition costs provided that this shall not affect
the requirement to include the Reinsurer’s Ceding Commission Adjustment or the
Company’s Ceding Commission Adjustment as the case may be.


 


	
  Line no.

  	
   

  	
  Item

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Earned Premiums

  	
   

  	
  £

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Other Income

  	
   

  	
  £

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Reinsurer’s Ceding Commission Adjustment

  	
   

  	
  £

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Total Income (Lines
  1 to 3)

  	
   

  	
  £

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Claims Incurred

  	
   

  	
  £

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Expenses Payable

  	
   

  	
  £

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Other Changes In Technical Provisions

  	
   

  	
  £

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Company’s Ceding Commission Adjustment

  	
   

  	
  £

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Total Expenditure
  (Lines 5 to 8)

  	
   

  	
  £

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  RIR

  	
   

  	
  £

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  Positive /
  (Negative) Settlement Amount (Line 4 - Line 9 + Line 10)

  	
   

  	
  £

  	
   

  	
   

  



 


where, in respect of each Accounting Period:


 


Line 1:                               “Earned
Premiums” shall mean gross premiums written in such Accounting Period plus any
decrease or minus any increase in the provision for unearned premiums over such
Accounting Period, as described in item I.1 of paragraph 12 of Schedule 9A of
the Companies Act 1985 and the notes thereto. 
In calculating the gross premiums written in any Accounting Period there
shall be deducted the outward reinsurance premiums paid in such Accounting
Period.  To the amount of any increase
in the provision for unearned premiums over such Accounting Period there shall
be added any decrease or there shall be subtracted any increase, over such
Accounting Period, in the amount of the unearned reinsurance premiums paid by
the Company.  To the amount of any
decrease in the provision for unearned premiums over such Accounting Period,
there shall be added any increase, or there shall be subtracted any decrease,
over such Accounting Period, in the amount of the


 

















 


unearned reinsurance premiums paid by the
Company.  In calculating the gross
premiums written, full account shall be taken of the effect of cancellations
notified in such Accounting Period and of any other arrangement under which a
policy is terminated in such Accounting Period;


 


Line 2:                               “Other
Income” shall mean all other income becoming due to the Company in the relevant
Accounting Period, excluding any income from investments and any realised or
unrealised gains on investments and excluding any amount received or becoming
due under Ceded Reinsurance;


 


Line 3:                               “Reinsurer’s
Ceding Commission Adjustment” shall mean the amount (if any) due from the
Reinsurer as a result of the actual Ceding Commission for such Accounting
Period calculated in accordance with Schedule A  Part I being different from the Estimated Ceding Commission for
that Accounting Period;


 


Line 4:                               “Total
Income” shall mean the sum of Earned Premiums, Other Income and Reinsurer’s
Ceding Commission Adjustment;


 


Line 5:                               “Claims
Incurred” shall mean claims paid in respect of the Relevant Liabilities less
reinsurance recoveries received in respect of the Relevant Liabilities in the
relevant Accounting Period  plus any
increase (or minus any decrease) over such Accounting Period in the provision
for claims.  For these purposes, such
provision for claims shall be calculated, at the beginning and end of each
Accounting Period, net of any available credit for reinsurance, not being a
credit in respect of any reinsurance claim which is due but unpaid, and
otherwise in accordance with the manner in which such provision for claims
would be calculated for the purposes of item I.4(b) of paragraph 12 of Schedule
9A of the Companies Act 1985;


 


Line 6:                               “Expenses
Payable” shall mean operating expenses incurred in the relevant Accounting
Period including without limitation:-


 


(a)     bonuses
and rebates, net of reinsurance, as described in item I.6 of paragraph 12 of
Schedule 9A of the Companies Act 1985;


 


(b)     acquisition
costs, administrative expenses, reinsurance commissions and profit
participation, as described in item I.7 of the said paragraph 12 and the notes
thereto; and


 


(c)     the
charges described in items I.8 and III.8 of the said paragraph 12,


 


but, for the avoidance of doubt, shall exclude investment expenses and
charges, realised or unrealised losses on investments, and income and
corporation tax;


 


Line 7:                               “Other
Changes in Technical Provisions” shall mean the increase in technical
provisions (or the decrease in technical provisions in which event such
decrease


 


24

















 


shall be expressed as a negative amount) not
accounted for in any other line of this Schedule B, as described in item I.5
and I.9 of paragraph 12 of Schedule 9A of the Companies Act 1985 and any other
increases in reserves (or decreases in reserves, in which event such decreases
shall be expressed as negative amounts) required to be taken into account for
the purposes of the returns made to the FSA but not required to be so taken
into account under Schedule 9A of the Companies Act 1985 in respect of the
Company including any change required as a result of the Company not having
received any amount due in respect of Ceded Reinsurance;


 


Line 8:                               “Company’s
Ceding Commission Adjustment” shall mean any amount due from the Company as a
result of the actual Ceding Commission for such Accounting Period calculated in
accordance with Schedule A - Part I being different from the Estimated Ceding
Commission for that Accounting Period;


 


Line 9:                               “Total
Expenditure” shall mean the sum of Claims Incurred, Expenses Payable, Other
Expenditure, Other Changes in Technical Provisions and Company’s Ceding
Commission Adjustment;


 


Line 10:                         “RIR”
shall mean the amount calculated pursuant to Section 5.3(b) of this Agreement;
and


 


Line 11:                         the
“Positive Settlement Amount” and the “Negative Settlement Amount” shall mean
the amounts calculated pursuant to Section 5.3(a) of this Agreement.


 


Any amounts included in any of the items listed above shall be included
in the calculation set out in this Schedule B only to the extent that such
amounts have not been accounted for in any Monthly Report relating to any
previous Accounting Period.  Any amount
specifically excluded from any line item shall be treated as though it were
excluded from all other line items unless the context shall expressly require
otherwise.  No amount shall be included
in more than one line item.  In the
event of any conflict between the application of any express provision in these
notes or this Agreement, and the application of any statutory or regulatory
rule under this Schedule, in each case for the purposes of determining the
amount of any line item in this Schedule, the express provisions in these notes
and this Agreement shall prevail.


 


In calculating the Positive or Negative Settlement Amount (as the case
may be) for the first Accounting Period:-


 


(i)                 the provision for unearned premiums
shall at the commencement of such Accounting Period be taken as
£[    ];


 


(ii)                the amount of the unearned reinsurance
premiums shall at the commencement of such Accounting Period be taken as
£[    ];


 


(iii)               the claims provision net of any
available credit for reinsurance, not being a credit in respect of any
reinsurance claim which is due but unpaid at the


 


25

















 


commencement of such Accounting Period shall at such commencement be
taken as £[   ]; and


 


(iv)              the technical provisions and reserves
referred to in Line 7 above shall at the commencement of such Accounting Period
be taken as £[    ].


 


26

















 


SCHEDULE C


 


LIST OF REINSURANCE ARRANGEMENTS