exv10w4



 



Exhibit 10.4 Property Excess Of Loss Agreement of Reinsurance No. TP1600E with Swiss
Reinsurance America Corporation effective January 1, 2003


 






 



TABLE OF CONTENTS



to

AGREEMENT OF REINSURANCE

NO. 9034

between

PHILADELPHIA INDEMNITY 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
	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-5
	Section 6	 	
REINSURANCE PREMIUM
	 	B-6
	Section 7	 	
REPORTS AND REMITTANCES
	 	B-6




GENERAL REINSURANCE CORPORATION









 


PROPERTY EXCESS OF LOSS

AGREEMENT OF REINSURANCE

NO. TP1600E



EFFECTIVE: JANUARY 1, 2003



between



PHILADELPHIA INDEMNITY COMPANY

PHILADELPHIA INSURANCE COMPANY

One Bala Plaza, Suite 100

Bala Cynwyd, Pennsylvania 19004



and



SWISS REINSURANCE AMERICA CORPORATION

Armonk, New York



 






 





PROPERTY EXCESS OF LOSS AGREEMENT OF REINSURANCE NO. TP1600E




	 	 	 	 	 	 	 	 	 
	ARTICLE	 	CONTENTS	 	PAGE
	
	 	
	 	

	 	 	 	 	PREAMBLE
	 	 	1	 
	 	I	 	 	SCOPE OF AGREEMENT
	 	 	1	 
	II	 	PARTIES TO THE AGREEMENT
	 	 	1	 
	III	 	COMMENCEMENT AND TERMINATION
	 	 	2	 
	IV	 	LIMIT AND RETENTION
	 	 	2	 
	 	V	 	 	DEFINITIONS
	 	 	3	 
	VI	 	OTHER REINSURANCE
	 	 	7	 
	VII	 	EXCLUSIONS
	 	 	7	 
	VIII	 	REINSURANCE PREMIUM
	 	 	10	 
	IX	 	REPORTS AND REMITTANCES
	 	 	10	 
	 	X	 	 	MANAGEMENT OF CLAIMS AND LOSSES
	 	 	11	 
	XI	 	RECOVERIES
	 	 	12	 
	XII	 	TERRORISM EXCESS RECOVERY
	 	 	12	 
	XIII	 	ERRORS AND OMISSIONS
	 	 	13	 
	XIV	 	SPECIAL ACCEPTANCES
	 	 	14	 
	 	XV	 	 	RESERVES AND TAXES
	 	 	14	 
	XVI	 	OFFSET
	 	 	14	 
	XVII	 	INSPECTION OF RECORDS
	 	 	14	 
	XVIII	 	ARBITRATION
	 	 	14	 
	XIX	 	INSOLVENCY OF THE COMPANY
	 	 	15	 
	 	 	 	 	SIGNATURES
	 	 	16	 




	 	 	 
	ATTACHMENTS:	 	
INSOLVENCY FUNDS EXCLUSION CLAUSE

NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE -

       REINSURANCE - U.S.A.

LARGE INSURABLE VALUES EXCLUSION CLAUSE



 






 



PROPERTY EXCESS OF LOSS

AGREEMENT OF REINSURANCE

NO. TP1600E

(hereinafter referred to as the “Agreement”)



between



PHILADELPHIA INDEMNITY COMPANY

PHILADELPHIA INSURANCE COMPANY

One Bala Plaza, Suite 100

Bala Cynwyd, Pennsylvania 19004

(hereinafter referred to as the “Company”)



and



SWISS REINSURANCE AMERICA CORPORATION

Armonk, New York

(hereinafter 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



	A.	 	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.
	 
	B.	 	This Agreement shall apply to Property Business written by the Company,
which is defined as insurance and classified in the NAIC form of annual
statement as fire, allied lines, inland marine, commercial multiple peril
(property coverages), homeowners multiple peril (property coverages) or
automobile physical damage (comprehensive and collision) when written on a
garage open lot basis, plate glass, and burglary and theft, 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 coverage beyond these territorial
limits, the territorial limits of this Agreement shall be identical with
those of the Company’s policies.



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 agent of the other companies as to all


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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 – COMMENCEMENT AND TERMINATION



	A.	 	This Agreement shall apply to new and renewal policies of the Company
becoming effective at and after 12:01 a.m., January 1, 2003, and to
policies of the Company in force at 12:01 a.m., January 1, 2003, 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 set forth in Paragraph B.
below.
	 
	B.	 	Either party may terminate this Agreement at any calendar quarter 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 Agreement at the Company’s option:




	 	1.	 	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, whichever occurs first. The
reinsurance premium for policies in force at the time and date of
termination shall be calculated by applying the provisions of the
Article 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.
	 
	 	2.	 	The Reinsurer shall not be liable for any claims or losses
resulting from Occurrences taking place at and after the effective
time and date of termination.



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


ARTICLE IV – LIMIT AND RETENTION



	A.	 	As respects one or more than one Line of Business covered under this
Agreement, the Company shall retain the first $10,000,000 of Net Loss as
respects each risk in any one Loss Occurrence. The Reinsurer shall then be
liable for the amount by which the Company’s Net Loss exceeds the
Company’s retention of $10,000,000, but the liability of



 2. No. TP1600E






 







	 	 	the Reinsurer shall never exceed $5,000,000 each risk any one Loss
Occurrence, nor shall the Reinsurer’s liability from all Risks in each
Occurrence exceed $15,000,000.
	 
	B.	 	It is understood that the liability of the Reinsurer shall not exceed
$5,000,000 with respect to all Net Loss and Adjustment Expenses combined
arising out of all loss or damage or indirectly arising out of, caused by
or resulting from all Terrorism Loss Occurrences taking place during each
calendar year 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.
	 
	C.	 	Reinsurance of the Company’s retention, set forth above, shall not be
deducted in arriving at the Company’s Net Loss herein.



ARTICLE V – DEFINITIONS



	A.	 	Company Retention
	 
	 	 	This term shall mean the amount the Company and its underlying reinsurer
shall retain for their 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 reinsurance 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 100% of Losses in Excess of Policy
Limits and 100% of Extra Contractual Obligations.
	 
	 	 	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 Losses in
Excess of Policy Limits and in connection with Extra Contractual
Obligations and as allocated to an individual claim or



 3. No. TP1600E






 







	 	 	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 Loses, 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 Agreement.
	 
	 	 	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.	 	Losses in Excess of Policy Limits and Extra Contractual Obligations




	 	1.	 	The term “Loss in Excess of Policy Limits” shall mean a payment
made to a third party claimant in excess of policy limit which the
Company is legally obligated to pay resulting from an action taken by
the insured or assignee arising from a third party claimant being
awarded an amount in excess of the Company’s policy limit as a result
of the Company’s failure to settle within the policy limit of the
Company’s alleged or actual negligence or bad faith in rejecting an
offer of settlement or in the preparation of the defense or in the
trial of any action against its insured or in the preparation or
prosecution of an appeal consequent upon such action.
	 
	 	2.	 	The term “Extra Contractual Obligation” shall mean a loss which
the Company is legally obligated to pay, which is not covered under
any other provision of this Agreement and which arises from the
Company’s handling of any claim on the policies reinsured hereunder
which have limits of liability greater than the Company Retention.




	 	 	The date on which a Loss in Excess of Policy Limits or 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 Loss in Excess of the Policy
Limit or 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



 4. No. TP1600E






 







	 	 	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 or reinsurance, whether collectible or not, which indemnifies
or protects the Company against claims which are the subject matter of this
definition and any contribution, subrogation, or recovery 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, provided:




	 	1.	 	A Building and its contents, including time element coverages,
shall never be considered more than one Risk;
	 
	 	2.	 	When two or more Buildings and their contents 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 that are 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.




	F.	 	Building
	 
	 	 	This term shall mean each separately roofed structure enclosed within
exterior walls.
	 
	G.	 	Loss Occurrence




	 	A.	 	The term “Loss Occurrence” shall mean the sum of all individual
losses directly occasioned by any one disaster, accident or loss or
series of disasters, accidents or losses arising out of one event
which occurs within the area of one state of the United States or
province of Canada and states or provinces contiguous thereto and to
one another. However, the duration and extent of any one Loss
Occurrence shall be limited to all individual losses sustained by the
Company occurring during any period of 168 consecutive hours arising
out of and directly occasioned by the same event except that the term
“Loss Occurrence” shall be further defined as follows:
	 


	 	1.	 	As regards windstorm, hail, tornado, hurricane, cyclone,
including ensuing collapse and water damage, all individual losses
sustained by the Company occurring during any period of 72
consecutive hours arising out of and directly occasioned by the
same event. However, the event need not be limited to one state
or province or states or provinces contiguous thereto.



 5. No. TP1600E






 





	 	2.	 	As regards riot, riot attending a strike, civil
commotion, vandism and malicious mischief, all individual losses
sustained by the Company, occurring during any period of 72
consecutive hours within the area of one municipality or county
and the municipalities or counties contiguous thereto arising out
of and directly occasioned by the same event. The maximum
duration of 72 consecutive hours may be extended in respect of
individual losses which occur beyond such 72 consecutive hours
during the continued occupation of an assured’s premises by
strikers, provided such occupation commenced during the aforesaid
period.
	 
	 	3.	 	As regards earthquake (the epicentre of which need not
necessarily be within the territorial confines referred to in the
opening paragraph of this Article) and fire following directly
occasioned by the earthquake, only those individual fire losses
which commence during the period of 168 consecutive hours may be
included in the Company’s Loss Occurrence.
	 
	 	4.	 	As regards Freeze, only individual losses directly
occasioned by collapse, breakage of glass and water damage (caused
by bursting of frozen pipes and tanks) may be included in the
Company’s Loss Occurrence.
	 
	 	5.	 	As regards Terrorism, all individual losses sustained by
the Company occurring during any period of 72 consecutive hours
arising out of and directly occasioned by the same event. Should
such an event of Terrorism give rise to other perils which, in an
unbroken chain of causation, have occasioned the losses, the cause
of the losses is understood to be that event of Terrorism.




	 	a.	 	“Terrorism,” for purposes of this Agreement,
shall mean any actual or threatened violent act or act
harmful to human life, tangible or intangible property or
infrastructure directed towards or having the effect of (i)
influencing or protesting against any de jure or de facto
government or policy thereof, (ii) intimidating, coercing or
putting in fear a civilian population or section thereof for
the purpose of establishing or advancing a specific
ideological, religious or political system of thought,
perpetrated by a specific individual or group directly or
indirectly through agents acting on behalf of said individual
or group or (iii) retaliating against any country for direct
or vicarious support by that country of any other government
or political system.
	 
	 	b.	 	Any act declared pursuant to the Terrorism Risk
Insurance Act of 2002 shall also be considered “Terrorism”
for purposes of this Agreement.



 6. No. TP1600E






 





	 	B.	 	For all Loss Occurrences the Company may choose the date and time
when any such period of consecutive hours commences provided that it
is not earlier than the date and time of the occurrence of the first
recorded individual loss sustained by the Company arising out of that
disaster, accident or loss and provided that only one such period of
168 consecutive hours shall apply with respect to one event except for
those Loss Occurrences referred to in 1., 2. and 5. above, where only
one such period of 72 consecutive hours shall apply with respect to
one event, regardless of the duration of the event.
	 
	 	C.	 	No individual losses occasioned by an event that would be covered
by 72 hours clauses may be included in any Loss Occurrence claimed
under the 168 hours provision.




	H.	 	Company’s Subject Earned Premium
	 
	 	 	This term shall mean the premium earned by the Company on the business
reinsured hereunder, after deduction from such earned premium of the
portion paid for reinsurance which inures to the benefit of the Reinsurer.



ARTICLE VI – OTHER REINSURANCE


The obligations of the Company to reinsure business falling within the scope of
this Agreement 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.


The Company may 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.
In no event, however, shall the amount required with respect to the Company
Retention be reduced.


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


ARTICLE VII – 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.	 	“Self-insurance” or “self-insured obligations”, howsoever styled, of the
Company, its affiliates or subsidiaries, or any insurance



 7. No. TP1600E






 







	 	 	wherein the Company, its affiliates or subsidiaries, are named as the
insured party, either alone or jointly with some other party,
notwithstanding that no legal liability may arise in respect thereof by
reason of the fact that the Company, its affiliates or subsidiaries, may
not be obligated by law to pay a claim to itself, its affiliates or
subsidiaries;
	 
	D.	 	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;
	 
	E.	 	Any liability of the Company arising from its participation or membership
in any insolvency fund;
	 
	F.	 	Any loss or damage which is occasioned by 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; however, this exclusion shall not apply to any policy which
contains a standard war exclusion;
	 
	G.	 	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;
	 
	H.	 	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;
	 
	I.	 	Insurance against earthquake, except when written in conjunction with
fire and otherwise eligible perils;
	 
	J.	 	Insurance on growing crops;
	 
	K.	 	Insurance against flood, 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;
	 
	L.	 	Business classified as fidelity, however this exclusion shall not apply
to crime and fidelity with limits no greater than $1,000,000 when written
as such;
	 
	M.	 	Credit insurance;
	 
	N.	 	Business classified as boiler and machinery;



 8. No. TP1600E






 







	O.	 	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;
	 
	P.	 	Difference in conditions insurance and similar kinds of insurance,
howsoever styled;
	 
	Q.	 	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;
	 
	R.	 	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.
	 
	S.	 	Offshore property Risks;
	 
	T.	 	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.	 	Drilling rigs for natural fuels;
	 
	 	4.	 	Furriers’ customers policies;
	 
	 	5.	 	Insurance on livestock under so-called “mortality policies”,
	 
	 	6.	 	Mining equipment while underground;
	 
	 	7.	 	Registered mail and armored car insurance;




	U.	 	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
pre-launch, launch, and in-orbit).
	 
	V.	 	Ex-gratia payments made by the Company, however this exclusion shall not
apply if the Reinsurer give its prior approval.
	 
	W.	 	Mobile homes unless written as part of a commercial multiple peril
policy.



 9. No. TP1600E






 







	X.	 	Large Insurable Values as per the attached Large Insurable Values
Exclusion Clause, which is made part of this Agreement.



If the Company is bound without knowledge of or contrary to the instructions of
the Company’s supervisory underwriting personnel, or any business falling
within the scope of one or more of the exclusions set forth in this section,
these exclusions, except A. through F., H., J., L., M. and O. shall suspend
with respect to such business until 60 days after an underwriting supervisor of
the Company acquires knowledge of such business.


ARTICLE VIII – REINSURANCE PREMIUM



	A.	 	The Company shall pay to the Reinsurer a premium for the reinsurance
provided hereunder at a rate of 1.23%. Such rate shall be applied to the
Company’s Subject Earned Premium for the calendar year under calculation.
	 
	B.	 	The term “Subject Earned Premium” as used herein is equal to the sum of
the Net Premiums Written on the business covered hereunder during the
period under consideration, plus the unearned premium reserve as respects
premiums in force at the beginning of such period, less the unearned
premium reserve as respects premiums in force at the end of the period,
said unearned premium is to be calculated on an actual daily basis or in
accordance with the Company’s methodology, as agreed.
	 
	C.	 	The term “Net Premiums Written” shall mean gross premiums written less
returns, allowances and reinsurances which inure to the benefit of the
Reinsurer.
	 
	D.	 	The following percentages of the Company’s premium shall be allocated to
the business covered under this Agreement: 100% Businessowners.



ARTICLE IX – 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; and the amount
due the Reinsurer shall be remitted with 25 days after the close of the
quarter.
	 
	B.	 	Claims and Losses
	 
	 	 	The Company shall report promptly to the Reinsurer, but within no more than
25 days after the Company becomes aware of the claim or



 10. No. TP1600E






 







	 	 	loss, each claim or loss which, in the Company’s opinion, may involve the
reinsurance afforded by this Agreement. The Company shall also report
promptly to the Reinsurer, but within no more than the 25 day time period
stipulated above, 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 and Adjustment Expense 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 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.	 	P.C.S. Catastrophe Bulletins
	 
	 	 	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.



ARTICLE X – 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


 11. No. TP1600E






 


Reinsurer, at the expense of the Reinsurer, to be associated with the Company
in the defense or settlement 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 polices which are
within the limits set forth in the Article entitled Limits and Retention shall
be binding on the Reinsurer, subject to the terms of this Agreement.


ARTICLE XI – 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 hereunder 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 hereunder is on an excess
basis, recoveries shall be distributed to the parties in an order inverse to
that in which their liabilities accrued.


ARTICLE XII – TERRORISM EXCESS RECOVERY



	A.	 	For purposes of this Article:





	 	1.	 	“Act” shall mean the Terrorism Risk Insurance Act of 2002, any
amendments thereto and any regulations promulgated thereunder.
	 
	 	2.	 	“Affiliate,” “Insured Losses,” and “Program Year” shall have the
meanings provided in the Act.
	 
	 	3.	 	“Company” shall include the Company and all affiliates.




	B.	 	To the extent that an Insured Loss is otherwise payable hereunder, the
reinsurance provided by this Agreement shall apply only to the portion of
liability, loss, cost and/or expense retained by the Company net of any
federal assistance pursuant to the Act. This reinsurance shall not apply
to any fines, civil penalties or surcharges assessed pursuant to the Act.



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	C.	 	The respective liability of the Reinsurer and of the Company for Insured
Losses in any Program Year under this Agreement shall each be reduced by
the ratio that the financial assistance available to the Company under the
Act for that Program Year bears to the Company’s total Insured Losses for
the same Program Year.
	 
	D.	 	The parties recognize that, for any Program Year, the Reinsurer may
without waiver of the foregoing Paragraphs make payments for Insured
Losses which, together with available financial assistance under the Act
and the Company retentions and/or deductibles hereunder, exceed the
Company’s Insured Losses. In such event, the Reinsurer’s proportional
share of all such excess recovery (hereafter “Reinsurer’s Excess Share”)
shall inure to the benefit of the Reinsurer. All excess recovery
described in this Paragraph shall be allocated to the Reinsurer and the
Company in proportion to the respective liability of each for Insured
Losses, net of federal assistance under the Act, salvage, subrogation and
other similar recoveries, as applicable.
	 
	E.	 	In the event of a Reinsurer’s Excess Share, the Company shall:




	 	1.	 	Promptly pay the Reinsurer’s Excess Share to the Reinsurer; or
	 
	 	2.	 	Upon request of the Reinsurer at any time and at the Reinsurer’s
sole discretion, instead assign to the Reinsurer its rights to recover
directly from the federal government any portion of Reinsurer’s Excess
Share not already paid to the Reinsurer. The Company shall cooperate
with and assist the Reinsurer, at its own expense, to the extent
reasonably necessary for the Reinsurer to exercise those rights. If
the Reinsurer is unable, for any reason, to exercise any right
assigned to it by the Company pursuant to this Article, the Company
shall pay the Reinsurer’s Excess Share to the Reinsurer as if no
assignment had taken place.




	F.	 	In the event of an Insured Loss, the Company shall provide the Reinsurer
with a monthly report detailing claim settlement activities and financial
assistance under the Act. Calculations for each Program Year shall
continue to be made until the settlement of all Insured Losses covered
hereunder. To the extent that the Company allocates Insured Losses and/or
federal assistance under the Act among affiliates, claims, contracts or
otherwise in any manner which impacts the reinsurance provided hereunder,
the Company shall apply a reasonable allocation method acceptable to the
Reinsurer.



ARTICLE XIII – 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


 13. No. TP1600E






 


obligated only for the return of the premium paid for business reported but not
reinsured under this Agreement.


ARTICLE XIV – 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.


ARTICLE XV – 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 are 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 XVI – OFFSET


The Company or the Reinsurer may offset any balance, whether on account of
premium, commission, claims or loses, 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 XVII – 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 XVIII – 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(s), and a third arbitrator chosen by the
first two arbitrators.


 14. No. TP1600E






 


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
impartial 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.


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 XIX – 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, specially 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 of 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 their
own expense, in the proceeding where such claim is to be adjudicated, any
defenses which they may deem available to the Company or its liquidator. The
expense thus incurred


 15. No. TP1600E






 


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.


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate, by their duly authorized representatives as of the
following dates:


In Bala Cynwyd, Pennsylvania, this 18th day of AUGUST, 2003.



	 	 	 
	ATTEST:	 	
PHILADELPHIA INDEMNITY COMPANY

PHILADELPHIA INSURANCE COMPANY
	 	 	 
	FLORENCE R. MCCALLUM	 	
CHRISTOPHER J. MAGUIRE
	
	 	


	And in Armonk, New York, this	 	
8th day of AUGUST, 2003.
	 	 	 
	ATTEST:	 	
SWISS REINSURANCE AMERICA CORPORATION
	 	 	 
	PETER THOMSON	 	
MATTHIAS WEBER
	
	 	


	Member of Management	 	
Member of Senior Management



BH: jh

PHIL IDEMN-1600E



 16. No. TP1600E






 


SUPPLEMENT TO THE ATTACHMENTS




	 	 	DEFINITION OF IDENTIFICATION TERMS USED WITHIN THE ATTACHMENTS
	 
	A.	 	Wherever the term “Company” or “Reinsured” or “Reassured” or whatever
other term is used to designate the reinsured company or companies within
the various attachments to the reinsurance agreement, the term shall be
understood to mean Company or Reinsured or Reassured or whatever other
term is used in the attached reinsurance agreement to designate the
reinsured company or companies.
	 
	B.	 	Wherever the term “Agreement” or “Contract” or “Policy” or whatever other
term is used to designate the attached reinsurance agreement within the
various attachments to the reinsurance agreement, the term shall be
understood to mean Agreement or Contract or Policy or whatever other term
is used to designate the attached reinsurance agreement.
	 
	C.	 	Wherever the term “Reinsurer” or “Reinsurers” or “Underwriters” or
whatever other term is used to designate the reinsurer or reinsurers in
the various attachments to the reinsurance agreement, the term shall be
understood to mean Reinsurer or Reinsurers or Underwriters or whatever
other term is used to designate the reinsuring company or companies.



INSOLVENCY FUNDS EXCLUSION CLAUSE



This Agreement excludes all liability of the Company arising by contract,
operation of law, or otherwise from its participation or membership, whether
voluntary or involuntary, in any insolvency fund or from reimbursement of any
person for any such liability. “Insolvency fund” includes any guaranty fund,
insolvency fund, plan, pool, association, fund or other arrangement, howsoever
denominated, established or governed, which provides for any assessment of or
payment or assumption by any person of part or all of any claim, debt, charge,
fee, or other obligation of an insurer, or its successors or assigns, which has
been declared by any competent authority to be insolvent or which is otherwise
deemed unable to meet any claim, debt, charge, fee or other obligation in whole
or in part.


 






 



NUCLEAR INCIDENT EXCLUSION CLAUSE -
PHYSICAL DAMAGE - REINSURANCE - U.S.A.


N.M.A. 1119




	1.	 	This Reinsurance does not cover any loss or liability accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer,
from any Pool of Insurers or Reinsurers formed for the purpose of covering
Atomic or Nuclear Energy risks.
	 
	2.	 	Without in any way restricting the operation of paragraph 1. of this
Clause, this Reinsurance does not cover any loss or liability accruing to
the Reassured, directly or indirectly, and whether as Insurer or
Reinsurer, from any insurance against Physical Damage (including business
interruption or consequential loss arising out of such Physical Damage)
to:




	 	I.	 	Nuclear reactor power plants including all auxiliary property on
the site, or
	 
	 	II.	 	Any other nuclear reactor installation, including laboratories
handling radioactive materials in connection with reactor
installations, and critical facilities as such, or
	 
	 	III.	 	Installations for fabricating complete fuel elements or for
processing substantial quantities of “special nuclear material,” and
for reprocessing, salvaging, chemically separating, storing or
disposing of spent nuclear fuel or waste materials, or
	 
	 	IV.	 	Installations other than those listed in paragraph 2. III. above
using substantial quantities of radioactive isotopes or other products
of nuclear fission.




	3.	 	Without in any way restricting the operation of paragraphs 1. and 2. of
this Clause, this Reinsurance does not cover any loss or liability by
radioactive contamination accruing to the Reassured, directly or
indirectly, and whether as Insurer or Reinsurer, from any insurance on
property which is on the same site as a nuclear reactor power plant or
other nuclear installation and which normally would be insured therewith,
except that this paragraph 3. shall not operate:




	 	(a)	 	where the Reassured does not have knowledge of such
nuclear reactor power plant or nuclear installation, or
	 
	 	(b)	 	where the said insurance contains a provision excluding
coverage for damage to property caused by or resulting from
radioactive contamination, however caused. However, on and after
1st January, 1960, this sub-paragraph (b) shall only apply
provided the said radioactive contamination exclusion provision
has been approved by the Governmental Authority having
jurisdiction thereof.



- 1 -






 



	4.	 	Without in any way restricting the operation of paragraphs 1., 2. and 3.
of this Clause, this Reinsurance does not cover any loss or liability by
radioactive contamination accruing to the Reassured, directly or
indirectly, and whether as Insurer or Reinsurer, when such radioactive
contamination is a named hazard specifically insured against.
	 
	5.	 	It is understood and agreed this Clause shall not extend to risks using
radioactive isotopes in any form where the nuclear exposure is not
considered by the Reassured to be the primary hazard.
	 
	6.	 	The term “special nuclear material” shall have the meaning given to it by
the Atomic Energy Act of 1954 or by any law amendatory thereof.
	 
	7.	 	Reassured to be sole judge of what constitutes:




	 	(a)	 	substantial quantities, and
	 
	 	(b)	 	the extent of installation, plant or site.



NOTE: - Without in any way restricting the operation of paragraph 1. hereof, it
is understood and agreed that



	 	(a)	 	all policies issued by the Reassured on or before 31st December,
1957 shall be free from the application of the other provisions of
this Clause until expiry date or 31st December, 1960 whichever first
occurs whereupon all the provisions of this Clause shall apply,
	 
	 	(b)	 	with respect to any risk located in Canada policies issued by the
Reassured on or before 31st December, 1958 shall be free from the
application of the other provisions of this Clause until expiry date
or 31st December, 1960 whichever first occurs whereupon all the
provisions of this Clause shall apply.



- 2 -


N.M.A. 1119






 


LARGE INSURABLE VALUES EXCLUSION CLAUSE



(Applies to Loss Occurrences involving an event of Terrorism)



This Agreement does not cover Policies issued to a company or group of
companies where the sum of:



	1.	 	total full values, whether insured or not, for all buildings and
contents, and
	 
	2.	 	total sums insured for Business Interruption and/or Extra Expenses,



exceeds a limit of $500,000,000 each location at the time when reinsurance
coverage would have attached, but for this exclusion.