EXHIBIT 10.28


 


BROKERAGE BUSINESS POOL MANAGEMENT
AGREEMENT


 


This Brokerage Business Pool Management Agreement
(“Pool Management Agreement”) by and between Tower Insurance Company of New
York (“TICNY”), an insurance company domiciled in New York and CastlePoint
Insurance Company (“CPIC”), an insurance company domiciled in New York, is made
effective as of 12:01 a.m., January 1, 2007,  (the “Effective Date”).


 


WHEREAS, TICNY and CPIC are each authorized to
transact, and do transact, a multiple line property and casualty insurance
business; and


 


WHEREAS, TICNY and CPIC desire to pool their
respective Brokerage Business  (defined
below) in order to make more efficient use of available surplus and achieve
other operating efficiencies; and


 


WHEREAS, TICNY and CPIC have entered into the
Brokerage Business Pooling Agreement (“Brokerage Pooling Agreement”) to which
this Pool Management Agreement is attached; and


 


WHEREAS, the pool participants desire TICNY to be the
manager of such pool, in view of its expertise in Brokerage Business;


 


NOW,
THEREFORE, for mutual
considerations, the sufficiency and receipt of which is hereby acknowledged,
TICNY and CPIC agree as follows:


 


ARTICLE I                                   Definitions


 


The following terms, whenever used herein,
shall have the following meanings:


 


“Brokerage Business” shall mean broad classes
of business that are underwritten on an individual policy basis by an insurance
company’s underwriting staff through wholesale and retail agents, and for which
most or all of the services are provided by the insurance company as part of
the overall product offering.


 


“Brokerage
Business Pool” shall mean Brokerage Business written by or on behalf of the
Participating Companies or assumed by a Participating Company (including such
business assumed by 


 


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TICNY from its affiliates),
that is pooled and allocated to each of the Participating Companies based upon
their Pooling Percentage as set forth in the Brokerage Business Pooling Agreement
to which this Pool Management Agreement is attached, as may be amended
from time to time.


 


“Existing
Reinsurance” shall have the same meaning it has in the Brokerage Business Pooling
Agreement.


 


“Management Fees” shall mean the management fees
payable by CPIC to TICNY pursuant to Article III.


 


“Net
Liability” shall have the same meaning it has in the Brokerage Business Pooling
Agreement.


 


“Net
Loss Ratio” shall have the same meaning it has in the Brokerage Pool Agreement.


 


“Net Premium Earned” shall have the same
meaning it has in the Brokerage Business Pooling Agreement.


 


“Net
Written Premium” shall have the same meaning it has in the Brokerage Business Pooling
Agreement.


 


“Participating
Companies” shall mean TICNY and CPIC.


 


“Policies”
shall have the same meaning that it has in the Brokerage Business Pooling
Agreement.


 


“Pooling
Percentages” shall be those percentages set forth on Schedule 1 attached
to the Brokerage Business Pooling Agreement, as amended from time to time.


 


“Pool
Reinsurance” shall have the same meaning that it has in the Brokerage Business Pooling
Agreement.


 


ARTICLE II                                                                               Term


 


A.                                   This Pool Management Agreement will become
effective on the Effective Date. Any Participating Company may terminate its
respective participation in this Pool Management Agreement as of the date forty-eight
(48) months after the Effective Date and thereafter as of the close of a
calendar quarter by giving at least six (6) months prior written notice to
the other party by certified or registered mail.


 


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B.                                     Notwithstanding paragraph A above, this Pool
Management Agreement may be terminated immediately with respect to new or
renewal business (a) at any time by mutual consent in writing by each of
the Participating Companies or (b) as of the close of a calendar quarter,
upon not less than sixty (60) days prior written notice by a Participating
Company to the other Participating Company of such Participating Company’s
exercise of its right to terminate its participation in the Brokerage Business
Pool.


 


C.                                     If this Pool Management Agreement is
terminated pursuant to this Article II, all rights and obligations of the
Participating Companies under this Pool Management Agreement prior to such
termination shall continue to be governed by the terms of this Pool Management
Agreement.


 


ARTICLE III                           Pool Management


 


TICNY shall be the manager of the Brokerage Business Pool and provide
management services which shall include, but not be limited to, the following:


 


1.                                       Marketing, underwriting and issuance of Policies;


 


2.                                       Determining premium rates and other
underwriting terms and conditions with respect to the issuance of Policies;


 


3.                                       Establishing commissions and fees to be paid
to producers and/or brokers in connection with the underwriting of Policies;


 


4.                                       Establishing commissions and fees to be paid
to service providers by or for the account of the Brokerage Business Pool;


 


5.                                       Collecting premiums and other amounts due
under Policies;


 


6.                                       Adjusting settling, defending and paying
claims under Policies;


 


7.                                       Perform all administrative and
policyholder services in connection with the issuance of Policies;


 


8.                                       Purchasing, managing and administering
Existing Reinsurance and Pool Reinsurance as defined and set forth in the
Brokerage Business Pooling Agreement;


 


9.                                       Underwriting audit and control, product
development and state filings;


 


10.                                 Loss prevention/premium audit;


 


11.                                 Information technology;


 


12.                                 Accounting and cash management;


 


13.                                 Human resources and other administrative
functions; and


 


14.                                 Remitting and Reporting as set forth in Article IX
of the Pooling Agreement.


 


 


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Expenses incurred in connection with the foregoing
services excluding loss adjustment expense included in the Net Loss Ratio (the “Management
Expenses”) shall be shared between the Participating Companies based upon their
respective Pooling Percentages.


 


CPIC shall pay to TICNY management fees for the
foregoing services (“Management Fees”) during each calendar year of this Pool
Management Agreement (or part thereof) equal to (i) (A) the
management fee percentage for such year (as set forth below) (the “Management
Fee Percentage”) times (B) their respective Pooling Percentage of the
gross written premium of the Brokerage Business for such year, net of return
premiums and net of ceded reinsurance premiums for Pool Reinsurance less (ii) their
Pooling Percentage of (A) ceding commissions set forth in Article VIII
of the Brokerage Business Pooling Agreement and (B) the shared Management
Expenses as set forth above and less (iii) loss adjustment expenses
included in the Net Loss Ratio. The Management Fee Percentage for the Brokerage
Business shall be 34% (which shall be applied during each year as to premium
written during the year) until April 1, 2007 and be adjusted based on Net Loss Ratio of the pooled business.


 


The Management Fee Percentage shall, on each six
month anniversary of the Effective Date, increase nine-tenths of a percentage
point for every percentage point by which the Net Loss Ratio is below 61% up to
a maximum Management Fee Percentage of 36%, and decrease nine-tenths of a
percentage point for every percentage point by which the Net Loss Ratio exceeds
61%, subject to a minimum Management Fee Percentage of 31% as follows:


 


	
  Net Loss Ratio

  	
   

  	
  Management Fee Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  64.33% or higher

  	
   

  	
  31.0

  	
   

  
	
  64

  	
   

  	
  31.3

  	
   

  
	
  63

  	
   

  	
  32.2

  	
   

  
	
  62

  	
   

  	
  33.1

  	
   

  
	
  61

  	
   

  	
  34.0

  	
   

  
	
  60

  	
   

  	
  34.9

  	
   

  
	
  59

  	
   

  	
  35.8

  	
   

  
	
  58.78 or lower

  	
   

  	
  36.0

  	
   

  



 


 


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Such Management Fee Percentage shall remain provisional
until all losses for a given year have been settled (or deemed settled as set
forth below). Within sixty (60) days following the end of each year, TICNY
shall calculate the Net Loss Ratio for each year that remains open and shall
forward copies of such calculations to CPIC. The Participating Companies will
settle amounts due within ten (10) days thereafter. The Net Loss Ratio for
each year shall be deemed to be finalized six (6) years following the
close of such year or at any time before six (6) years by mutual agreement
of the Participating Companies. However, in recognition that regulatory
authorities may not approve an intercompany transaction containing these
management fees, the Participating Companies shall use their best good faith
effort to structure the transaction for the Participating Companies in order
that the sum of the Net Loss Ratio plus Management Fees equals 95% for the
Brokerage Business Pool.


 


ARTICLE IV                          Amendments 


 


This Pool Management Agreement may be amended only if in writing
and signed by each Participating Company.


 


ARTICLE V                              Arbitration


 


A.                                   As a condition precedent to any right of
action hereunder, in the event of any dispute or difference of opinion
hereafter arising with respect to this Pool Management Agreement, it is hereby
mutually agreed that such dispute or difference of opinion shall be submitted
to arbitration. One Arbiter shall be chosen by each Participating Company that
is a party to such dispute and an Umpire shall be chosen by the Arbiters before
they enter upon arbitration, all of whom shall be active or retired
disinterested executive officers of insurance or reinsurance companies or
Underwriters at Lloyd’s of London. In the event that a Participating Company
should fail to choose an Arbiter within thirty (30) days following a written
request by another Participating Company to do so, the requesting Participating
Company’s Arbiter shall choose a second arbiter before entering upon
arbitration. If the two arbitrators are unable to agree upon the third
arbitrator within thirty (30) days of their appointment, the third arbitrator
shall be selected from a list of six individuals (three named by each
arbitrator) by a judge of the


 


 


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United States District Court
having jurisdiction over the geographical area in which the arbitration is to
take place, or if that court declines to act, the state court having general
jurisdiction in such area.


 


B.                                     Participating Companies party to the dispute
shall present their case to the Arbiters within thirty (30) days following the
date of appointment of the Umpire. The Arbiters shall consider this Pool
Management Agreement as an honorable engagement rather than merely as a legal
obligation and they are relieved of all judicial formalities and may abstain
from following the strict rules of law. The decision of the Arbiters shall
be final and binding on all Participating Companies; but failing to agree, they
shall call in the Umpire and the decision of the majority shall be final and
binding upon all parties. Judgment upon the final decision of the Arbiters may be
entered in any court of competent jurisdiction.


 


C.                                     Each Participating Company that is a party to
the dispute shall bear the expense of its own Arbiter, and shall jointly and
equally bear with the other the expense of the Umpire and of the arbitration. In
the event that the two Arbiters are chosen by the requesting Participating
Company, as above provided, the expense of the Arbiters, the Umpire and the
arbitration shall be equally divided between the Participating Companies that
are parties to the arbitration.


 


ARTICLE VI                          Miscellaneous Provisions


 


A.                                   Headings used herein are not a part of
this Pool Management Agreement and shall not affect the terms hereof.


 


B.                                     All notices, requests, demands and other
communications under this Pool Management 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, two 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.


 


C.                                     This Pool Management 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


 


 


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Pool Management Agreement,
nor any right or obligation hereunder, may be assigned by any party
without the prior written consent of the other party hereto.


 


D.                                    This Pool Management 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.


 


E.                                      This Pool Management Agreement will be
construed, performed and enforced in accordance with the laws of the State of
New York 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.


 


F.                                      This Pool Management Agreement constitutes
the entire agreement between the parties hereto relating to the subject matter
hereof and supersedes all prior and contemporaneous agreements, understandings,
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 Pool Management Agreement or the
subject matter hereof except as specifically set forth or contemplated herein.
If any provision of this Pool Management 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 Pool Management 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.


 


G.                                     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 


 


 


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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.


 


H.                                    Except as expressly provided for in the insolvency
provisions above, nothing in this Pool Management Agreement will confer any
rights upon any person that is not a party or a successor or permitted assignee
of a party to this Pool Management Agreement.


 


I.                                         Wherever the words “include,” “includes” or “including”
are used in this Pool Management Agreement, they shall be deemed to be followed
by the words “without limitation.”


 


J.                                        This Article VI shall survive the
termination of this Pool Management Agreement.


 


IN WITNESS WHEREOF, the Participating Companies have caused this Pool Management
Agreement to be executed as of the day and year first above written, subject to
the satisfaction of New York Insurance Law § 1505, including any
conditions such regulators may impose on the terms of this Agreement subsequent
to the date hereof.


 


 


TOWER INSURANCE COMPANY OF NEW YORK


 


 


	
  By: 

  	
  /s/ Francis M. Colalucci

  	
   

  
	
   

  
	
  Name: Francis M. Colalucci

  
	
   

  
	
  Title: Senior Vice President and Chief Financial
  Officer

  



 


 


CASTLEPOINT INSURANCE COMPANY


 


 


	
  By: 

  	
  /s/ Joel S. Weiner

  	
   

  
	
   

  
	
  Name: Joel S. Weiner

  
	
   

  
	
  Title: Senior Vice President and Chief Financial
  Officer

  



 


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