Exhibit 10.1


 


COMMUTATION AGREEMENT


 


This Commutation Agreement is entered into by the


 


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


 


(Hereinafter referred to as the “Reinsured”)


 


and


 


SOMERSET INSURANCE LIMITED


 


(hereinafter referred to as the “Reinsurer”)


 


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


 


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


 


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


 


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


 


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


 


1





















 


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


 


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


 


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


 


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


 


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


 


2





















 


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


 


 


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


 


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


 


 


	
  BY:

  	
  /s/ Paul J. Malvasio

  	
   

  
	
   

  	
  NAVIGATORS
  INSURANCE COMPANY

  
	
   

  	
  For and on
  behalf of the Reinsured

  



 


 


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


 


 


	
  BY:

  	
  /s/ Michael Hardy

  	
   

  
	
   

  	
  SOMERSET
  INSURANCE LIMITED

  



 


3





















 


Somerset Insurance Limited


Schedule of Reinsurance Agreements


 


	
  Ref. #

  	
   

  	
  Description

  
	
   

  	
   

  	
   

  
	
  117

  	
   

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

  
	
   

  	
   

  	
   

  
	
  123

  	
   

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

  
	
   

  	
   

  	
   

  
	
  124

  	
   

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

  



 





















 


Somerset Insurance Limited


Commutation Settlement Schedule


Due from / (to) Somerset


As of September 30, 2004


 


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


 


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


 


	
  Description

  	
   

  	
  Ref.

  	
   

  	
  U/Y

  	
   

  	
  (1)

  Balance Due

  from (to)

  Somerset

  	
   

  	
  (2)

  Outstanding

  Loss

  Reserves

  	
   

  	
  (3)

  Unearned

  Premium

  Reserves

  	
   

  	
  (4)

  Return

  Commission

  on U/E Premium

  	
   

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

  Net

  Total

  	
   

  
	
  Inscorp-Marine

  	
   

  	
  117

  	
   

  	
  86-98

  	
   

  	
  $

  	
   9,670

  	
   

  	
  $

  	
   343,396

  	
   

  	
  $

  	
   —

  	
   

  	
  $

  	
   —

  	
   

  	
  $

  	
   353,065

  	
   

  
	
  Inscorp-Property

  	
   

  	
  123

  	
   

  	
  89-95

  	
   

  	
  76,141

  	
   

  	
  82,799

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  158,939

  	
   

  
	
  Inscorp-Aviation

  	
   

  	
  124

  	
   

  	
  89-95

  	
   

  	
  1,822

  	
   

  	
  143,390

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  145,212

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Chartwell-Marine

  	
   

  	
  117

  	
   

  	
  99

  	
   

  	
  35,991

  	
   

  	
  141,664

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  177,655

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Trenwick-Marine

  	
   

  	
  117

  	
   

  	
  2000-03

  	
   

  	
  209,008

  	
   

  	
  2,044,263

  	
   

  	
  81,764

  	
   

  	
  8,994

  	
   

  	
  2,326,041

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  332,630

  	
   

  	
  $

  	
  2,755,512

  	
   

  	
  $

  	
  81,764

  	
   

  	
  $

  	
  8,994

  	
   

  	
  $

  	
  3,160,914

  	
  A

  



 


	
  Funds Held Detail

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  (1)

  Accrued

  Reinstatement

  Premiums

  	
   

  	
  (2)

  R/I Balances in

  Course of

  Collection

  	
   

  	
  (3)

  Premium in the

  Course of

  Collecton

  	
   

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

  Total

  	
   

  
	
  Inscorp-Marine

  	
   

  	
  117

  	
   

  	
  86-98

  	
   

  	
  $

  	
   (13,389

  	
  )

  	
  $

  	
   95,141

  	
   

  	
  $

  	
   671

  	
   

  	
  $

  	
   82,423

  	
   

  
	
  Inscorp-Property

  	
   

  	
  123

  	
   

  	
  89-95

  	
   

  	
  —

  	
   

  	
  75,243

  	
   

  	
  —

  	
   

  	
  75,243

  	
   

  
	
  Inscorp-Aviation

  	
   

  	
  124

  	
   

  	
  89-95

  	
   

  	
  (31,855

  	
  )

  	
  (54,820

  	
  )

  	
  (17

  	
  )

  	
  (86,692

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Chartwell-Marine

  	
   

  	
  117

  	
   

  	
  99

  	
   

  	
  —

  	
   

  	
  134,041

  	
   

  	
  1,224

  	
   

  	
  135,265

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Trenwick-Marine

  	
   

  	
  117

  	
   

  	
  2000-03

  	
   

  	
  3,452

  	
   

  	
  14,859

  	
   

  	
  262,539

  	
   

  	
  280,850

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
   (41,792

  	
  )

  	
  $

  	
   264,464

  	
   

  	
  $

  	
   264,417

  	
   

  	
  $

  	
   487,089

  	
   B

  



 


Profit Commission


 


	
   

  	
   

  	
   

  	
   

  	
  2003

  	
   

  	
  2004

  	
   

  	
  Total

  	
   

  
	
  Company

  	
   

  	
  Treaty

  	
   

  	
  Balance Due

  from (to)

  Somerset

  	
   

  	
  Balance Due

  from (to)

  Somerset

  	
   

  	
  Balance Due

  from (to)

  Somerset

  	
   

  
	
  Inscorp

  	
   

  	
  117

  	
   

  	
  $

  	
  128,159

  	
   

  	
  $

  	
  4,133

  	
   

  	
  $

  	
  132,292

  	
   

  
	
  Chartwell

  	
   

  	
  117

  	
   

  	
  (3,247

  	
  )

  	
  4,297

  	
   

  	
  1,050

  	
   

  
	
  Trenwick

  	
   

  	
  117

  	
   

  	
  26,581

  	
   

  	
  143,538

  	
   

  	
  170,119

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  $

  	
  151,493

  	
   

  	
  $

  	
  151,968

  	
   

  	
  $

  	
  303,461

  	
  C

  



 


	
  Recap of all Balances

  	
   

  	
  Amount

  	
   

  
	
  Accounts

  	
   

  	
  $

  	
   3,160,914

  	
    A

  
	
  Funds Held

  	
   

  	
  (487,089

  	
  ) B

  
	
  Profit Commission

  	
   

  	
  303,461

  	
    C

  
	
  Less: FET

  	
   

  	
  (275

  	
  )

  
	
  Due from (to) Somerset

  	
   

  	
  $

  	
   2,977,011