Exhibit 10.41


 


ASSIGNMENT AND INDEMNIFICATION AGREEMENT


 


Assignment
and Indemnification Agreement, dated as of February 28, 2003 (this “Agreement”),
by and between ACE Capital Re Overseas Ltd. (“ACRO”) and ACE INA
Overseas Insurance Company Ltd. (“AOIC”), Capitalized terms used but not
defined herein shall have the meanings ascribed to them in the RMA (as
hereinafter defined).


 


RECITALS


 


WHEREAS,
ACRO and ESG North America Ltd. (“ESNA”) have entered into that certain
Reinsurance Management Agreement, dated as of November 1, 2001 (the “RMA”):


 


WHEREAS,
ACRO desires to assign all of its past, present and future right, title,
interest and obligations in, to and under the RMA to AOIC; and


 


WHEREAS,
AOIC believes that ESNA did not bind ACRO to any Original Reinsurance Contracts
or any reinsurance contracts having effective dates in calendar year 2002 (the
“2002 Original Reinsurance Contracts”) but desires to indemnify ACRO for
any liability ACRO may incur with respect to any Original Reinsurance Contract
or 2002 Original Reinsurance Contract.


 


NOW,
THEREFORE, in consideration of the mutual promises and covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:


 


1.                                       As
permitted under Section 18.2 of the RMA, ACRO hereby assigns and transfers
all of its right, title, interest and obligations in, to and under the RMA, to
AOIC, and AOIC hereby accepts such assignment and transfer and assumes all of
the liabilities and obligations with respect to the foregoing.  Such assignment, transfer and assumption is
effective as of the effective date of
the RMA.


 


2.                                       AOIC hereby agrees to indemnify and hold ACRO
harmless against any liability or obligation arising out of, related to, or in
any way connected with any Original Reinsurance Contract, 2002 Original
Reinsurance Contract or the RMA, as the case may be.


 


3.                                       This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
(without reference to the conflicts of law provisions thereof).  This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which together shall constitute one and the same document.  This Agreement may be executed by facsimile
signatures.


 


[The next page is the signature page.]


 

















 


IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.


 


	
   

  	
  ACE
  CAPITAL RE OVERSEAS LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rebecca L. Carne

  	
   

  
	
   

  	
  Name:

  	
  Rebecca L. Carne

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  
	
   

  	
  ACE
  INA OVERSEAS INSURANCE

  COMPANY LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Robert G Jefferson

  	
   

  
	
   

  	
  Name:

  	
  Robert G Jefferson

  
	
   

  	
  Title:

  	
  President

  
							



 


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EXECUTION COPY


 


(1) ACE Capital Re Overseas
Ltd.

as PRINCIPAL


 


and


 


(2) ESG Re North America
Ltd.

as AGENT


 


REINSURANCE MANAGEMENT
AGREEMENT


 

















 


REINSURANCE MANAGEMENT
AGREEMENT


 


This REINSURANCE
MANAGEMENT AGREEMENT (this “AGREEMENT”), dated as of
November 1, 2001, is entered into between ACE Capital Re Overseas Ltd. and ESG Re North America Ltd.


 


W I T N E
S S E T H


 


WHEREAS:


 


(A)                              The PRINCIPAL
wishes to appoint the AGENT to provide certain SERVICES (defined below); and


 


(B)                                The PRINCIPAL and
the AGENT have agreed to record in writing the terms and conditions of the
AGENT’s appointment by the PRINCIPAL.


 


NOW, THEREFORE, in consideration
of the foregoing and of the mutual promises, covenants and payments set forth
herein, IT IS HEREBY AGREED AS FOLLOWS:


 


ARTICLE I - DEFINITIONS


 


As used in this AGREEMENT (including, but not
limited to, any schedule hereto), the following terms shall have the
following defined meanings.


 


1.1                                 “AGENT”
shall
mean ESG Re North America Ltd.


 


1.2                              “ANNIVERSARY
DATE” shall mean 1 January 2002, and thereafter, the next following
January 1st.


 


1.3                                 “BUSINESS
DAY” shall mean a calendar day other than a Saturday, Sunday, or a United
States bank holiday.


 


1.4                                 [Intentionally
Omitted]


 


1.5                                 “CEDING
COMMISSION” shall mean original acquisition costs in respect of policies ceded under
Original Reinsurance Contracts (including all premium taxes), which shall in no
event exceed 31% of ORIGINAL GROSS PREMIUMS, and reinsurance brokerage fees on
ORIGINAL REINSURANCE CONTRACTS (the reasonableness of which shall be determined
by AGENT).


 


1.6                                 “CLAIM
AND SERVICES ACCOUNT” shall mean a segregated account maintained by the
PRINCIPAL with Bank of America (or other financial institution pre-approved in
writing by the PRINCIPAL’s Treasury Department) to which the AGENT shall have
limited access in accordance with Paragraph 6.3 of this AGREEMENT.


 

















 


1.7                                 “CLAIM
AND SERVICES FUND AMOUNT” shall mean the amount of monies belonging to the
PRINCIPAL to be held on deposit in the CLAIM AND SERVICES ACCOUNT.


 


1.8                                 “CLAIMS
PAYMENT” shall mean the payment of an ORIGINAL REINSURANCE CLAIM made by the
AGENT on behalf of the PRINCIPAL to a REINSURED pursuant to the PRINCIPAL’s
obligations under an ORIGINAL REINSURANCE CONTRACT.


 


1.9                                 “EFFECTIVE
DATE” shall mean the date of this AGREEMENT first above written.  For avoidance of doubt, the phrase
“effective date”, when used in lower case format, does not mean EFFECTIVE DATE
as defined in this Section 1.9.


 


1.10                           “GROSS
REINSURANCE PREMIUMS” shall mean the total monetary compensation due
from a REINSURED to the PRINCIPAL and received by the PRINCIPAL pursuant to an
ORIGINAL REINSURANCE CONTRACT.


 


1.11                           “INTELLECTUAL
PROPERTY RIGHTS” shall mean all patents, trademarks, trade names, service marks, service
names, trade secrets, copyrights, and other proprietary intellectual property
rights and applications therefor.


 


1.12                           “LEAD
REINSURER” shall mean ESG Re Ireland Ltd.


 


1.13                           “LOSS
ADJUSTMENT EXPENSES” shall mean reasonable out-of-pocket expenses (not
including salary of AGENT’s employees or overhead costs) incurred by the AGENT
in providing the SERVICES listed in Parts D, E and G of Schedule 1 to the
PRINCIPAL.


 


1.14                           “MANAGEMENT
FEES”  shall mean the remuneration to
be paid by the PRINCIPAL to the AGENT pursuant to Paragraph 6.6 of this
AGREEMENT for SERVICES as defined at Paragraph 1.21 of this AGREEMENT.


 


1.15                           “NOTICE”
shall
mean a written communication given in accordance with the terms of
Article XIX.


 


1.16                           “ORIGINAL
GROSS PREMIUMS” shall mean, with respect to policies ceded under an ORIGINAL REINSURANCE
CONTRACT, the gross original written premiums on such policies less return
premiums on such policies, including amounts refunded to policyholders due to
cancellations.


 


1.17                           “ORIGINAL
REINSURANCE CLAIM” shall mean a written request by a REINSURED for
payment under an ORIGINAL REINSURANCE CONTRACT.


 


1.18                           “ORIGINAL
REINSURANCE CONTRACT” shall mean all slips, binding letters of intent,
binders, contracts, agreements and treaties of reinsurance with an


 


2

















 


effective date in calendar year 2001 (and addenda
and endorsements thereto) issued to a REINSURED by the AGENT on behalf of both
LEAD REINSURER and the PRINCIPAL that conform to all the requirements of Schedule 3 to this AGREEMENT.


 


1.19                           “PRINCIPAL”
shall
mean ACE Capital  Re Overseas Ltd or its non-United States
domiciled, lawfully acting affiliate to whom this AGREEMENT is assigned
pursuant to the provisions of Section 18.2.


 


1.20                           “REINSURED”
shall
mean the insurance company or reinsurance company to which the PRINCIPAL issues
an ORIGINAL REINSURANCE CONTRACT through the AGENT.


 


1.21                           “SERVICES”
shall
mean the functions and duties to be performed by the AGENT, as described in Schedule 1 and Schedule 3 to this AGREEMENT.


 


1.22         “SERVICE
STANDARDS” shall mean the quality and level of SERVICES to be
provided by the AGENT, as described in Schedule 2
to this AGREEMENT.


 


1.23                           “TERRITORY”
shall
mean the United States.


 


1.24                           All references to
“$” contained in this AGREEMENT are references to U.S. dollars.


 


ARTICLE II - APPOINTMENT OF
AGENT


 


2.1                                 As of the
EFFECTIVE DATE, and subject to the terms, conditions and limitations set forth
herein, the PRINCIPAL hereby appoints the AGENT to provide SERVICES to the
PRINCIPAL and the AGENT hereby accepts such appointment.


 


2.2                                 It is expressly
understood by both the PRINCIPAL and AGENT that the PRINCIPAL’s appointment of
the AGENT to provide SERVICES under this AGREEMENT shall be non-exclusive.


 


2.3                                 In the event that
this AGREEMENT is assigned by the PRINCIPAL to an affiliate domiciled in the
United States or Canada, it is further understood that the PRINCIPAL’s
appointment of the AGENT is limited to those jurisdictions in the TERRITORY in
which the AGENT is licensed or otherwise authorized to provide SERVICES.


 


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ARTICLE III - AUTHORITY OF
AGENT


 


3.1                                 The AGENT’s
authority under this AGREEMENT shall be limited to the provision of SERVICES to
the PRINCIPAL.


 


3.2                                 The authority
conferred upon the AGENT under this AGREEMENT, including but not limited to
underwriting and claims, is personal in nature and as such, the AGENT shall not
delegate, transfer or sub-contract or otherwise assign all or part of such
authority to any person or entity except (i) existing SERVICES which are
currently delegated to Claims Risk Management, Inc. or (ii) to the extent that
the PRINCIPAL approves such delegation, transfer, sub-contracting or assignment
in writing in advance.


 


3.3                                 The underwriting
and claims authority conferred upon the AGENT under this AGREEMENT is subject
to any further limitations dictated by the terms of all  Schedules to
this AGREEMENT.


 


3.4                                 The AGENT shall
not engage any third party (including, but not limited to, any attorney or
special investigator) to act for or on behalf of the PRINCIPAL or AGENT (either
directly or indirectly) in connection with this AGREEMENT, the ORIGINAL
REINSURANCE CONTRACTS, or any ORIGINAL REINSURANCE CLAIMS presented thereunder
unless and until it informs the PRINCIPAL of any such engagement.


 


3.5                                 Except as provided
in Schedule 1, the AGENT shall not bind any outwards reinsurance of
ORIGINAL REINSURANCE CONTRACTS on behalf of the PRINCIPAL.


 


3.6                                 AGENT shall only
have authority to bind PRINCIPAL to a 50% participation in each ORIGINAL
REINSURANCE CONTRACT, provided that, such authority shall be further
conditioned on the LEAD REINSURER being bound to the remaining 50%
participation in each such contract, provided further that, AGENT shall have
the limited authority to reduce PRINCIPAL’s participation in an ORIGINAL REINSURANCE
CONTRACT where the LEAD REINSURER has committed to retrocede a portion of its
share of such contract to a captive reinsurer owned or controlled by the
managing general underwriter receiving a commission on such ORIGINAL
REINSURANCE CONTRACT.  Any such
reduction in PRINCIPAL’s participation shall be limited to the extent necessary
to provide PRINICIPAL and LEAD REINSURER with equal participations in the
ORIGINAL REINSURANCE CONTRACT after netting out the retrocession described in
the preceding sentence.


 


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ARTICLE IV -
REPRESENTATIONS AND WARRANTIES


 


4.1                                 The AGENT REPRESENTS AND WARRANTS that at all times
relevant to the execution, performance, and/or termination of this AGREEMENT,
it was and will be legally authorized and/or licensed to provide all SERVICES
contemplated hereunder in any jurisdiction of the TERRITORY in which it is or
will be operating.


 


4.2                                 The AGENT further REPRESENTS AND WARRANTS that at all times
relevant to the execution, performance and/or termination of the AGREEMENT, it
was and will be legally authorized to serve as the agent of the LEAD REINSURER
for purposes of procuring, underwriting and servicing ORIGINAL REINSURANCE
CONTRACTS, collecting reinsurance premiums, and handling, servicing and paying
ORIGINAL REINSURANCE CLAIMS.


 


ARTICLE V
- OBLIGATIONS OF AGENT


 


5.1                                 The AGENT shall,
subject to all applicable laws, provide SERVICES to the PRINCIPAL in accordance
with the SERVICE STANDARDS.


 


5.2                                 The AGENT shall
follow all lawful instructions given by the PRINCIPAL in connection with the
provision of SERVICES under this AGREEMENT.


 


5.3                                 For a period of at
least six (6) years after the termination of this AGREEMENT, the AGENT shall
prepare and maintain full and complete records in relation to every aspect of
the SERVICES provided pursuant to this AGREEMENT, including, but not limited to
such records as are necessary to document and substantiate any claims for
remuneration and/or reimbursement under this AGREEMENT.


 


5.4                                 The AGENT agrees
to execute and/or deliver at its cost, all such other documents, reports or
instruments and to take all such reasonable actions, as the PRINCIPAL may from
time to time reasonably request, in order to give full effect to the purposes
of this AGREEMENT.


 


5.5                                 In addition to the
foregoing obligations and for as long as the PRINCIPAL has any obligations
under this AGREEMENT, the AGENT shall, within five (5) BUSINESS DAYS of
receiving NOTICE of intent to inspect from the PRINCIPAL, make available for
inspection and copying by the PRINCIPAL or its designated representatives, all
records containing information relating to this AGREEMENT (including, but not
limited to, any SERVICES provided hereunder). 
All such information in the AGENT’s possession, custody or control shall
be made available at the AGENT’s registered office during normal working hours.


 


5.6                                 The AGENT shall,
at all times, comply with all applicable statutes, rules and regulations, in
providing SERVICES to the PRINCIPAL.


 


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5.7                                 The AGENT warrants
that it now has and will maintain during the term of this Agreement insurance
coverage for errors and omissions liability in amounts no less than $5 million
with an insurer that is reasonably acceptable to the PRINCIPAL.  The AGENT shall provide the PRINCIPAL with a
certificate of insurance issued by the insurer in the PRINCIPAL’s name
containing the following provision: “The PRINCIPAL will receive 30 days’ prior
written notice of any change, cancellation or other termination of this
policy.”


 


5.8                                 The AGENT will use
reasonable efforts to obtain a fidelity bond on a form and with a deductible
reasonably satisfactory to the PRINCIPAL covering all operations and employees
of the AGENT.  If such a fidelity bond is
obtained, the AGENT will provide the PRINCIPAL with a certificate issued by the
fidelity bond carrier in the PRINCIPAL’s name containing the following
provision: “The PRINCIPAL will receive 30 days’ prior written notice of any
change, cancellation or other termination of this policy.”


 


ARTICLE VI -
OBLIGATIONS OF PRINCIPAL


 


6.1                                 The PRINCIPAL
agrees to execute and deliver at its cost all documents, reports or instruments
and to take all such reasonable actions, as the AGENT may from time to time
reasonably request, in order to give full effect to the purposes of this
AGREEMENT.


 


6.2                                 On or within ten
(10) BUSINESS DAYS of the EFFECTIVE DATE, the PRINCIPAL shall establish and
place on deposit in the CLAIM AND SERVICES ACCOUNT, the sum of $250,000.


 


6.3                                 For as long as the
AGENT shall be obligated to provide SERVICES to the PRINCIPAL, the PRINCIPAL
shall afford the AGENT access to draw upon the CLAIM AND SERVICES ACCOUNT in
the manner and for the limited purposes specified in Schedule 1 (Part K) to this AGREEMENT.


 


6.4                                 In the event that
the CLAIM AND SERVICES ACCOUNT falls to less than $25,000, the PRINCIPAL shall,
within five (5) BUSINESS DAYS of receiving NOTICE from the AGENT, restore the
CLAIM AND SERVICES ACCOUNT to $250,000. 
If at any time, the funds contained in the CLAIM AND SERVICES ACCOUNT
are insufficient to satisfy the PRINCIPAL’s obligation to pay the currently due
items set forth in Part K of Schedule 1, PRINCIPAL agrees to fund the
CLAIM AND SERVICES ACCOUNT with the amounts required to pay such items within
forty-eight (48) hours of receiving a written cash call for such amounts from
the AGENT.


 


6.5                                 The PRINCIPAL
shall take all steps reasonably necessary to effectuate the obligations set
forth at Paragraph 6.2 of this AGREEMENT.


 


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6.5.1                        Notwithstanding
the foregoing, it is expressly understood that:


 


(a)                                  the PRINCIPAL
shall be the sole owner of the CLAIM AND SERVICES ACCOUNT;


 


(b)                                 all interest
generated by the CLAIM AND SERVICES ACCOUNT shall likewise belong to the
PRINCIPAL; and


 


(c)                                  the PRINCIPAL
shall have sole authority to direct the investment of all funds contained in
the CLAIM AND SERVICES ACCOUNT.


 


6.6                                 The PRINCIPAL
hereby agrees to pay the AGENT a MANAGEMENT FEE in the amount of 3.65% of the
GROSS REINSURANCE PREMIUM that is earned by the PRINCIPAL in 2002 and 2003 in
respect of ORIGINAL REINSURANCE CONTRACTS. 
The PRINCIPAL shall earn GROSS REINSURANCE PREMIUMS in accordance with
generally accepted accounting principles.


 


6.7                                 For a period of
one year from the last date that AGENT can bind PRINCIPAL to ORIGINAL
REINSURANCE CONTRACTS under the terms of this AGREEMENT, PRINCIPAL agrees not
to introduce, sell or otherwise promote any reinsurance or insurance products
which are in direct competition with the medical excess reinsurance currently
underwritten by AGENT and which is the subject of this AGREEMENT.  For purposes of this AGREEMENT, a
reinsurance or insurance product shall be deemed to be in direct competition
with the medical excess reinsurance currently underwritten by AGENT only if (i)
it involves the medical excess reinsurance lines of business currently
underwritten by AGENT and (ii) the original insurance policies comprising such
business have been underwritten by the managing general underwriters or
carriers listed in Exhibit A hereto. 
For the avoidance of doubt, this provision shall not restrict or prevent
PRINCIPAL or its affiliates from introducing, selling or otherwise promoting
any reinsurance or insurance products, including without limitation medical
excess insurance and reinsurance products, in connection with programs that are
not the subject of this AGREEMENT.


 


6.8                                 All premium
payments due to PRINCIPAL or LEAD REINSURER under ORIGINAL REINSURANCE
CONTRACTS shall be deposited by REINSURED or its agent in an escrow account
governed by an escrow agreement to be executed by the parties promptly
following the EFFECTIVE DATE.  AGENT
shall have limited authority to allocate the funds contained in such account
between PRINCIPAL and LEAD REINSURER and shall instruct the escrow agent to
distribute the amount constituting GROSS REINSURANCE PREMIUMS to PRINCIPAL on a
weekly basis.


 


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ARTICLE VII - TERM


 


7.1                                 This AGREEMENT
shall be deemed to take effect on the EFFECTIVE DATE at 12:01 a.m. at the site
of the PRINCIPAL’s registered office and shall thereafter remain in full force
and effect through the later of (i) the date that all obligations and
liabilities under ORIGINAL REINSURANCE CONTRACTS and outward reinsurance
contracts have terminated or expired or (ii) the date that all SERVICES to be
performed by the AGENT have been fully performed.


 


ARTICLE VIII - SPECIAL
TERMINATION


 


8.1                                 Notwithstanding
the provisions of Articles VII and IX, AGENT shall have the right to be
relieved of its obligation to bind PRINICIPAL to additional ORIGINAL
REINSURANCE CONTRACTS immediately by giving NOTICE to PRINCIPAL, in the event
that:


 


(a)                                  PRINCIPAL is
declared insolvent or put into liquidation by any competent regulatory
authority or court of competent jurisdiction or is otherwise unable to pay its
debts; or


 


(b)                                 PRINCIPAL has its
regulatory authority to transact any business or perform any obligations
relevant to this AGREEMENT withdrawn, suspended or made conditional and such
conditions are, in the opinion of the AGENT, unduly onerous for the proper
performance of this AGREEMENT; or


 


(c)                                  PRINCIPAL fails to
comply with any of the terms or conditions of this AGREEMENT and, provided such
breach is curable, fails to rectify such failure within thirty (30) BUSINESS
DAYS of receiving NOTICE of such failure, or is otherwise negligent in the
performance of its duties and obligations hereunder.


 


8.2                                 Notwithstanding
the provisions of Articles VII and IX, PRINCIPAL shall have the right to either
terminate this AGREEMENT or revoke AGENT’s authority to bind it to new
contracts immediately by giving NOTICE, in the event that:


 


(a)                                  AGENT or LEAD
REINSURER is declared insolvent or put into liquidation by any competent
regulatory authority or court of competent jurisdiction or is otherwise unable
to pay its debts; or


 


(b)                                 AGENT has its
regulatory authority to transact any business or perform any obligations
relevant to this AGREEMENT withdrawn, suspended or made conditional and such
conditions are, in the opinion of the PRINCIPAL, unduly onerous for the proper
performance of this AGREEMENT;


 


8

















 


(c)                                  AGENT fails to
comply with any of the terms or conditions of this AGREEMENT and, provided such
breach is curable, fails to rectify such failure within thirty (30) BUSINESS
DAYS of receiving NOTICE of such failure, or is otherwise negligent in the
performance of its duties and obligations hereunder; or


 


(d)                                 any “key
personnel” of AGENT cease to be employed by AGENT or are materially less
involved with the business covered by this AGREEMENT, and AGENT fails to
provide evidence to PRINCIPAL, within 60 days after the date any key personnel
terminates his or her employment or becomes materially less involved with the
business covered by this AGREEMENT, that satisfies PRINCIPAL (such satisfaction
to be determined in the sole discretion of PRINCIPAL) that AGENT still employs
appropriate personnel to satisfactorily provide the SERVICES.  For purposes of this provision “key
personnel” means Marty Hatfield, Daniel Martineau and Kayte Fredrickson.


 


8.3                                 Notwithstanding
the provisions of Sections 8.1 and 8.2, if, by reason of an event described in
Section 12.1, the PRINCIPAL or the AGENT shall be delayed or prevented
from performing any of its obligations hereunder, such delay shall be excused
during the continuance, and to the extent of, such event.  Notwithstanding the preceding sentence,
should such delay or non-performance persist for thirty (30) consecutive days,
any applicable provision of Section 8.1 or 8.2 will apply at the
conclusion of such thirty (30) day period.


 


ARTICLE IX - CONSEQUENCES OF
TERMINATION


 


9.1                                 The PRINCIPAL may,
at its option, upon NOTICE to the AGENT, suspend the authority of the AGENT to
assume or cede business during the pendency of any dispute regarding
termination under Article VII or VIII of this AGREEMENT.


 


9.2                                 Upon receiving
NOTICE of termination, the AGENT shall cooperate in all respects with all
reasonable requests by PRINCIPAL, including, but not limited to, the transfer
of books and records relating to ORIGINAL REINSURANCE CONTRACTS and related
matters and PRINCIPAL’s efforts to transfer the responsibilities and duties
delegated to the AGENT by the PRINCIPAL to another entity.


 


9.3                                 Such cooperation
shall include, but not be limited to, the timely production of whatever final
reports, invoices and/or statements the PRINCIPAL may reasonably request.


 


9

















 


ARTICLE X – INDEMNITY; SURVIVAL


 


10.1                           (a)                                  Indemnification of
PRINCIPAL.  PRINCIPAL and its affiliates,
officers, directors, employees, agents, successors and assigns (each a
“PRINCIPAL INDEMNIFIED PARTY”) shall be indemnified and held harmless by the
AGENT for the amount of any and all obligations, losses, causes of action,
damages, claims, costs and expenses, interest, awards, deficiencies,
liabilities, charges, judgments and penalties (including, without limitation,
reasonable attorneys’ and consultants’ fees and expenses) actually suffered or
incurred by them (whether or not incurred or suffered in an action brought or
otherwise initiated by the PRINCIPAL or its affiliates) (hereinafter a
“PRINCIPAL LOSS”), plus interest from the date of any such PRINCIPAL LOSS,
arising out of or resulting from:


 


(i)                                     the breach of any
representation or warranty made by AGENT contained in this AGREEMENT;


 


(ii)                                  the
misrepresentation, breach or nonperformance by AGENT or its affiliates of any
covenant, representation, obligation or agreement contained in this AGREEMENT;
or


 


(iii)                               any act or
omission of AGENT relating to this AGREEMENT.


 


To the extent that AGENT’s undertakings set forth
in this Section 10.1 may be unenforceable, AGENT shall contribute the
maximum amount that it is permitted to contribute under applicable law to the
payment and satisfaction of all LOSSES incurred by the PRINCIPAL.


 


(b)                                 Indemnification of
AGENT.  AGENT (together with the
PRINCIPAL INDEMNIFIED PARTIES, the “INDEMNIFIED PARTIES”) shall be indemnified
and held harmless by the PRINCIPAL (for purposes of this Article X, each
of the AGENT or the PRINCIPAL are referred to, as appropriate, as an
“INDEMNIFYING PARTY”), for the amount of any and all liabilities, losses,
damages, claims, costs and expenses, interest, awards, judgments and penalties
(including without limitation, reasonable attorneys’ and consultants’ fees and
expenses) actually suffered or incurred by AGENT (including, without
limitation, any action brought or otherwise initiated by AGENT) (together with
any PRINCIPAL LOSS, a “LOSS”), arising out of or resulting from:


 


(i)                                     the breach of any
representation or warranty made by PRINCIPAL contained in this AGREEMENT;


 


(ii)                                  the
misrepresentation, breach or nonperformance by PRINCIPAL or its affiliates of
any covenant, representation, obligation or agreement contained in this
AGREEMENT; or


 


(iii)                               any act or
omission of PRINCIPAL relating to this AGREEMENT.


 


10

















 


To the extent that PRINCIPAL’s undertakings set
forth in this Section 10.1 may be unenforceable, PRINCIPAL shall
contribute the maximum amount that it is permitted to contribute under
applicable law to the payment and satisfaction of all LOSSES incurred by the
AGENT.


 


(c)                                  Notice of Claims.  An INDEMNIFIED PARTY shall give the
applicable INDEMNIFYING PARTY notice of any matter which an INDEMNIFIED PARTY
has determined has given or could give rise to a right of indemnification under
this Article X (a “CLAIM”), within 30 days of such determination, stating
the amount of the LOSS, if known, and method of computation thereof.  If an INDEMNIFIED PARTY shall receive notice
of any claims of any third party that are subject to the indemnification
provided for in this Article X (“THIRD PARTY CLAIMS”), the INDEMNIFIED
PARTY shall give the INDEMNIFYING PARTY notice of such THIRD PARTY CLAIM within
10 days of the receipt by the INDEMNIFIED PARTY of such notice.  The failure to provide notice of a CLAIM or
a THIRD PARTY CLAIM as provided for in this subsection shall not release
the applicable INDEMNIFYING PARTY from any of its obligations under this
Article X unless such failure causes actual prejudice to the INDEMNIFYING
PARTY hereunder, in which case the INDEMNIFYING PARTY shall be released only to
the extent of such prejudice.


 


(d)                                 Procedures for
THIRD PARTY CLAIMS.  The obligations and
liabilities of an INDEMNIFYING PARTY under this Article X with respect to
LOSSES arising from THIRD PARTY CLAIMS shall be governed by and contingent upon
the following additional terms and conditions: If the INDEMNIFYING PARTY
acknowledges in writing its obligation to indemnify the INDEMNIFIED PARTY
hereunder against any LOSSES that may result from such THIRD PARTY CLAIM, then
the INDEMNIFYING PARTY shall be entitled to assume and control the defense of
such THIRD PARTY CLAIM at its expense and through counsel of its choice if it
gives notice of its intention to do so to the INDEMNIFIED PARTY within 30 days
of the receipt of such notice from the INDEMNIFIED PARTY; provided  however,
that if there exists or is reasonably likely to exist a conflict of interest
that would make it inappropriate in the judgment of the INDEMNIFIED PARTY for
the same counsel to represent both the INDEMNIFIED PARTY and the INDEMNIFYING
PARTY, then the INDEMNIFIED PARTY shall be entitled to retain its own counsel
in each jurisdiction for which the INDEMNIFIED PARTY determines counsel is
required, at the expense of the INDEMNIFYING PARTY (provided that the
INDEMNIFYING PARTY shall not be responsible for the fees and expenses of more
than one counsel for all INDEMNIFIED PARTIES). 
In the event the INDEMNIFYING PARTY exercises the right to undertake any
such defense against any such THIRD PARTY CLAIM as provided above, the
INDEMNIFIED PARTY shall cooperate, and shall use its best efforts to cause its
affiliates, officers, directors, employees and agents to cooperate, with the
INDEMNIFYING PARTY in such defense and make available to the INDEMNIFYING
PARTY, at the INDEMNIFYING PARTY’s expense, all


 


11

















 


witnesses, pertinent records, materials and
information in the INDEMNIFIED PARTY’s possession or under the INDEMNIFIED
PARTY’s control, and shall use its best efforts to cause its affiliates,
officers, directors, employees and agents to make available to the INDEMNIFYING
PARTY, at the INDEMNIFYING PARTY’s expense, all witnesses, pertinent records,
materials and information the possession or under the control of any of them,
relating thereto as is reasonably required by the INDEMNIFYING PARTY.  Similarly, in the event the INDEMNIFIED
PARTY is conducting the defense against any such THIRD PARTY CLAIM, the
INDEMNIFYING PARTY shall cooperate, and shall use its best efforts to cause its
affiliates, officers, directors, employees and agents to cooperate, with the
INDEMNIFIED PARTY in such defense and make available to the INDEMNIFIED PARTY,
at the INDEMNIFYING PARTY’s expense, all such witnesses, records, materials and
information in the INDEMNIFYING PARTY’s possession or under the INDEMNIFYING
PARTY’s control, and shall use its best efforts to cause its affiliates,
officers, directors, employees and agents to make available to the INDEMNIFIED
PARTY, at the INDEMNIFYING PARTY’s expense, all witnesses, records, materials
and information in the possession or under the control of any of them, relating
thereto as is reasonably required by the INDEMNIFIED PARTY.  No such THIRD PARTY CLAIM may be settled by
the INDEMNIFYING PARTY without the prior written consent of the INDEMNIFIED
PARTY; provided, however, that if the INDEMNIFIED PARTY does not
consent to such a settlement and such settlement involves solely monetary
damages, then in no event may the INDEMNIFYING PARTY’s liability to the
INDEMNIFIED PARTY with respect to such THIRD PARTY CLAIM exceed the amount of the
proposed settlement.


 


10.2                           The
representations, warranties and obligations of the parties hereunder shall
survive until the later of (i) the second anniversary of the date this
AGREEMENT is terminated and (ii) 30 days after the expiration of any applicable
statutes of limitations.


 


ARTICLE XI - CONFIDENTIALITY


 


11.1                           Each of the
parties hereto agrees to treat and hold as confidential (and not disclose or
provide access to any person, except (i) as expressly required to fulfill its
duties under this AGREEMENT, (ii) as necessary or desirable to conduct its
business or (iii) as determined by such party to be required by law or by an
administrative or regulatory body with jurisdiction over such party), all
information with respect to this AGREEMENT and the transactions contemplated
hereby, including but not limited to information embodied in or relating to, as
appropriate, trade secrets, processes, claims data, medical data relating to
policies underlying the ORIGINAL REINSURANCE CONTRACTS, product development, pricing
of products and services, customer and supplier lists, pricing and marketing
plans, policies and strategies, client, customer, vendor, payor, provider,
employee, supplier and consultant contracts and relations, operations methods,
product


 


12

















 


development techniques, business acquisition plans,
new personnel acquisition plans.  Each
of the parties agrees and acknowledges that remedies at law for any breach of
their obligations under this Section 11.1 are inadequate and that in
addition thereto the disclosing party shall be entitled to seek equitable
relief, including injunctive relief and specific performance, in the event of
any such breach.


 


ARTICLE XII - FORCE MAJEURE


 


12.1                           Neither the
PRINCIPAL nor the AGENT shall be held responsible or liable for delay or
failure in performance of this AGREEMENT, in whole or in part, if such delay or
failure is due to any cause beyond its reasonable control, such as, but not
limited to, fire, earthquake, floods, storms, war, terrorist attacks, invasion
of armed forces, strikes, blockade, insurrection, lockouts or other industrial
disputes.


 


ARTICLE XIII - BUSINESS
REVIEW


 


13.1                           A business review
shall take place when reasonably requested by PRINCIPAL or required by law.


 


13.2                           The purpose of the
review shall generally be to examine and discuss all issues arising under this
AGREEMENT, proposals for amendments to this AGREEMENT and the resolution of any
disputes that may have arisen.


 


ARTICLE XIV - RELATIONSHIP
BETWEEN THE PARTIES


 


14.1                           Neither of the
parties is a partner of the other, and nothing in this AGREEMENT shall create
or be deemed to create a partnership or joint venture between the PRINCIPAL and
the AGENT or between the PRINCIPAL and the LEAD REINSURER.


 


ARTICLE XV - ANNOUNCEMENTS


 


15.1                           The AGENT shall
not issue any announcement and/or release any information or statement to any
person (including, but not limited to, the press) in any way relating to this
AGREEMENT, the ORIGINAL REINSURANCE CONTRACTS, and/or any SERVICES provided
hereunder unless and until the AGENT receives NOTICE of the PRINCIPAL’s consent
to such announcement, release or statement. 
No such consent shall be required in the case of disclosures by the AGENT
to a regulatory body pursuant to a statutory obligation.


 


13

















 


ARTICLE XVI - SEVERABILITY


 


16.1                           Subject to the
provisions of Article VIII, in the event that any portion of this
AGREEMENT (or the application thereof to any person or circumstance) shall, to
any extent, be invalid or unenforceable, the remainder of this AGREEMENT (or
the application thereof to persons or circumstances other than those to which
it is invalid or unenforceable) shall not be affected thereby, and shall be
valid and enforced to the fullest extent permitted by law.


 


ARTICLE XVII - MERGER


 


17.1                           This AGREEMENT is
an integrated document, containing the entire undertaking between the AGENT and
the PRINCIPAL regarding the matters addressed herein and may be varied only by
a writing signed by both the AGENT and the PRINCIPAL.


 


17.2                           Except as set
forth in this AGREEMENT, no representations, warranties or promises have been
made or relied upon by the AGENT and the PRINCIPAL.


 


17.3                           This AGREEMENT
shall prevail over prior communications between the AGENT and the PRINCIPAL
regarding any of the matters discussed herein, including but not limited to the
Confidentiality Agreement and Letter of Intent previously executed by the
parties.


 


17.4                           The headings
contained within this AGREEMENT are for convenience only and are not a part of
this AGREEMENT.


 


ARTICLE XVIII - NON-WAIVER;
ASSIGNMENT


 


18.1                           Any extension or
waiver of the requirements hereunder shall be valid only if set forth in an
instrument in writing signed by the party to be bound thereby.  Any waiver of any term or condition shall
not be construed as a waiver of any subsequent breach or a subsequent waiver of
the same term or condition, or a waiver of any other term or condition, of this
AGREEMENT.  The failure of any party to
assert any of its rights hereunder shall not constitute a waiver of any of such
rights.


 


18.2                           This AGREEMENT may
not be assigned by operation of law or otherwise without the express written
consent of the AGENT and the PRINCIPAL (which consent may be granted or withheld
in the sole discretion of either party); provided, however, that
(i) the PRINCIPAL may assign this AGREEMENT in whole or in part to a non-United
States domiciled affiliate of the PRINCIPAL that is lawfully permitted to
underwrite ORIGINAL REINSURANCE CONTRACTS, without the consent of AGENT.


 


14

















 


ARTICLE XIX - NOTICES


 


19.1                           NOTICE(s) shall
only be effective if it is made by either the PRINCIPAL or the AGENT in
writing.


 


19.2                           NOTICE(s) shall be
sent to the intended recipient at its address or number set out below.


 


	
  PRINCIPAL

  	
  ACE Capital Re Overseas Ltd.

  	
  Phone: 

  	
  441-292-4402 

  
	
   

  	
  Victoria Hall

  	
  Fax: 

  	
  441-299-8813

  
	
   

  	
  11 Victoria Street

  	
   

  
	
   

  	
  P.O. Box HM 1826

  	
   

  
	
   

  	
  Hamilton HM HX 

  	
   

  
	
   

  	
  Bermuda

  	
   

  
	
   

  	
  Attn: Corporate Secretary

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ACE Capital Re Inc.

  	
  Phone: 

  	
  212-974-0100

  
	
   

  	
  1325 Avenue of the Americas

  	
  Fax:

  	
  212-581-3268

  
	
   

  	
  New York, New York 10019

  	
   

  
	
   

  	
  Attn: General Counsel

  	
   

  
	
   

  	
   

  	
   

  
	
  AGENT

  	
  ESG Re North America Ltd.

  	
  Phone:

  	
  1 416 864 7443 

  
	
   

  	
  1 Adelaide Street East

  	
  Fax: 

  	
  1 416 864 9615

  
	
   

  	
  Suite 2610

  	
   

  
	
   

  	
  Toronto, Ontario M5C 219

  	
   

  
					



 


19.3                           Either party may
change its NOTICE details on giving NOTICE to the other party of the change in
accordance with this Article.  Such
change shall be effective five (5) BUSINESS DAYS after the NOTICE has been
given, or such later date as may be specified in the NOTICE.


 


19.4                           Any NOTICE given
under this AGREEMENT shall, in the absence of proof of earlier receipt, be
deemed to have been duly given as follows:


 


(a)                                  if delivered
personally, on delivery;


 


(b)                                 if sent by
facsimile, when dispatched with proof of receipt by recipient;


 


(c)                                  if sent by
overnight courier service, upon delivery to recipient.


 


NOTICES under this AGREEMENT may be personally
delivered, sent by facsimile or sent by overnight courier service.


 


15

















 


19.5                           Any NOTICE given
under this AGREEMENT outside working hours in the place to which it is
addressed will be deemed not to have been given until the start of the next
period of working hours in such place.


 


19.6                           NOTICE under this
AGREEMENT may only be withdrawn or revoked by separate NOTICE given in
accordance with this Article.


 


19.7                           Each NOTICE given
or made must be unconditional and signed by a duly authorized person.


 


ARTICLE XX – INTELLECTUAL
PROPERTY RIGHTS AND TRADEMARKS


 


20.1                           Each party hereto
retains all of its rights, title and interest to all INTELLECTUAL PROPERTY
RIGHTS held by it.  Except as expressly
authorized in writing by the holder of such INTELLECTUAL PROPERTY RIGHTS, the
other party shall have no interest in and shall have no right to use such
holder’s INTELLECTUAL PROPERTY RIGHTS for any purpose, provided that AGENT
shall be permitted to use PRINCIPAL’s name in the ORIGINAL REINSURANCE
CONTRACTS to the extent necessary to perform the SERVICES.


 


ARTICLE XXI - ARBITRATION
CLAUSE


 


21.1                           As a condition
precedent to any right of action hereunder, any dispute or difference arising
out of the interpretation, performance or breach of this AGREEMENT (including
the formation or validity thereof) shall be referred to arbitration under the
most current version of the ARIAS (US) Arbitration Rules.


 


21.2                           Arbitration shall
be commenced by the claimant giving NOTICE to the respondent demanding
arbitration.


 


21.3                           The Arbitration Tribunal
shall consist of three (3) arbitrators, one to be appointed by the Claimant,
one to be appointed by the Respondent and the third to be appointed by the two
party-appointed arbitrators.  Each
party-appointed arbitrator shall be identified to the other party within thirty
(30) days after the NOTICE referred to in Section 21.2 is delivered to the
respondent.


 


21.4                           The third member
of the Tribunal shall be appointed as soon as practicable (and no later than
twenty eight (28) days) after the appointment of the two party-appointed
arbitrators.  The Tribunal shall be
constituted upon the appointment of the third arbitrator.


 


21.5                           The arbitrators
shall be disinterested persons (including those who have retired) with not less
than ten (10) years of experience as officers or directors within the


 


16

















 


insurance or reinsurance industry or as lawyers or
other professional advisers serving the industry.


 


21.6                           Where a party
fails to appoint an arbitrator within thirty (30) days after the date the
NOTICE referred to in Section 21.2 has been delivered to the respondent or
where the two party-appointed arbitrators fail to appoint a third arbitrator
within twenty eight (28) days of their appointment, then upon application by
either party, ARIAS (US) will appoint an arbitrator to fill the vacancy.  At any time prior to the appointment by
ARIAS (US) the party or arbitrators in default may make such appointment.


 


21.7                           The Tribunal may,
in its sole discretion, make such orders and directions as it considers to be
necessary for the final determination of the matters in dispute.  The Tribunal shall have the widest
discretion permitted under the law governing the arbitral procedure when making
such orders or directions.


 


21.8                           The seat of
arbitration shall be New York, New York.


 


ARTICLE XXII - GOVERNING LAW


 


22.1                           This AGREEMENT
shall be governed by and construed in accordance with the laws of the State of
New York (without giving effect to any choice or conflict of laws provisions thereof).


 


ARTICLE XXIII -
COUNTERPARTS


 


23.1                           This AGREEMENT may
be executed in any number of counterparts or duplicates, each of which shall be
an original but such counterparts or duplicates shall, together, constitute one
and the same AGREEMENT.


 


ARTICLE XXIV - SCHEDULES


 


24.1                          Any
schedule hereto, together with any appendices or attachments thereto,
shall be incorporated into and made part of this AGREEMENT.


 


24.2                           In the event of
any conflict between this AGREEMENT and the Schedules hereto, the terms contained
in the Schedules shall apply.


 


17

















 


ARTICLE XXV -
NON-SOLICITATION


 


25.1                           The PRINCIPAL (for
itself and the ACE Capital Re Affiliates) and the AGENT agree not to solicit or
entice away from the other’s employment (or employment by any affiliated
company) any person employed by the other (or its affiliate) until the expiry
of twelve (12) months from the earlier of the last date on which the AGENT is
obligated to provide SERVICES to the PRINCIPAL under this AGREEMENT or the date
when such employee’s employment with the other party (or its affiliate)
terminated.  For purposes of this
provision, the term “ACE Capital Re Affiliates” means ACE Capital Re
International Ltd. and each of its direct and indirect subsidiaries.


 


IN WITNESS
WHEREOF, the PRINCIPAL and the AGENT have caused this
AGREEMENT to be executed in duplicate, by their duly authorized
representatives.


 


	
  ACE Capital Re Overseas Ltd., as
  PRINCIPAL

  	
  ESG Re North America Ltd., as
  AGENT

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signed in Bermuda

  	
  Signed in Toronto

  
	
  this 1st day of November, 2001

  	
  this 1st day of November, 2001

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Rebecca L. Carne

  	
   

  	
  By:

  	
  /s/ M. Hatfield

  	
   

  
	
   

  	
  Name: Rebecca L. Carne

  	
   

  	
  Name:  M. HATFIELD

  
	
   

  	
  Title: Director

  	
   

  	
  Title:  President North American Operations

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ K. Fredrickson

  	
   

  
	
   

  	
   

  	
  Name:  K. FREDRICKSON

  
	
   

  	
   

  	
  Title:  Director of Underwriting/Compliance

  
						



 


18

















 


SCHEDULE 1


 


SERVICES


 


PART A: UNDERWRITING OF ORIGINAL
REINSURANCE CONTRACTS


 


1.                                       The AGENT shall
receive ORIGINAL REINSURANCE CONTRACT submissions, proposals or applications on
behalf of the PRINCIPAL.


 


2.                                       The AGENT shall
negotiate, underwrite, bind, sign and accept ORIGINAL REINSURANCE
CONTRACTS  (subject to the limitations
imposed by the provisions of Schedule 3,
and all other provisions of this AGREEMENT) on behalf of the PRINCIPAL
including addenda and endorsements thereto and cancellations thereof (subject
to the limitations imposed by the provisions of Schedule 3, and all other provisions of this AGREEMENT).


 


3.                                       The AGENT shall
fix the rate of GROSS REINSURANCE PREMIUM on all ORIGINAL REINSURANCE CONTRACTS
underwritten on behalf of the PRINCIPAL (subject to the limitations imposed by
the provisions of Schedule 3,
and all other provisions of this AGREEMENT).


 


4.                                       The premiums
payable with respect to ORIGINAL REINSURANCE CONTRACTS shall be paid to an
escrow account in the manner described in Section 6.8 of the
AGREEMENT.  AGENT shall allocate these
amounts between the PRINCIPAL and the LEAD REINSURER and direct the escrow
agent to distribute the GROSS REINSURANCE PREMIUMS to the PRINCIPAL on a weekly
basis.  The AGENT shall pay all fees
associated with the escrow account and shall be entitled to retain all interest
earned on the funds placed in the escrow account.  Except as expressly provided herein, the AGENT shall have no
ownership interest in the escrow account.


 


5.                                       AGENT shall not
bind PRINICIPAL to ORIGINAL REINSURANCE CONTRACTS (i) which AGENT knows or
reasonably believes would cause the aggregate amount of GROSS REINSURANCE
PREMIUMS to exceed $75 million or (ii) where original acquisition costs with
respect to such contract exceed 31% of ORIGINAL GROSS PREMIUMS, in each case,
without the prior written consent of PRINCIPAL.


 


6.                                       The PRINCIPAL
shall bear its share of the liabilities arising out of all ORIGINAL REINSURANCE
CONTRACTS written or bound by the AGENT in the name of the PRINCIPAL in
accordance with the terms and requirements of such ORIGINAL REINSURANCE
CONTRACTS.


 

















 


PART B: PLACEMENT OF
RETROCESSIONS


 


1.                                       Notwithstanding
the restrictions imposed by Paragraph 3.5 of this AGREEMENT, the AGENT shall be
permitted to bind the PRINICIPAL to the 2001 outwards reinsurance agreement
with Transatlantic Reinsurance Company covering ORIGINAL REINSURANCE CONTRACTS.


 


PART C: EXPENSE & OTHER
REPORTING


 


1.                                       Within forty-five
(45) BUSINESS DAYS of the close of each quarter, the AGENT shall provide the
PRINCIPAL with Bordereau(x) which shall, at a minimum, contain the date and
amount of any deposits made to and drawing(s) made from the CLAIM AND SERVICES
ACCOUNT during that quarter and all deposits to and withdrawals from the escrow
account described in Section 6.8 during the quarter.


 


2.                                       On a quarterly
basis, within forty-five (45) BUSINESS DAYS after close of each quarter (or
forty-five (45) BUSINESS DAYS after the EFFECTIVE DATE, if later) AGENT shall
provide a report to PRINCIPAL containing (I) AGENT’s recommendation for an
appropriate reserve level for each ORIGINAL REINSURANCE CONTRACT and (ii) a
summary schedule with respect thereto.


 


3.                                       The AGENT shall
provide the PRINCIPAL with such other reports as PRINCIPAL may reasonably
request for the purpose of preparing tax returns and financial statements to
the extent readily available to the AGENT.


 


PART D: ORIGINAL REINSURANCE
CLAIMS INVESTIGATION AND ASSESSMENT


 


1.                                       The AGENT shall,
upon receipt of notification of an ORIGINAL REINSURANCE CLAIM, make such
enquiries and take such action as it deems necessary or appropriate to
investigate and assess whether said ORIGINAL REINSURANCE CLAIM is covered under
the ORIGINAL REINSURANCE CONTRACT to which it relates.


 


2.                                       In the event that
the AGENT believes that an individual ORIGINAL REINSURANCE CLAIM warrants an
external opinion (legal or otherwise), this requirement must be reported in
writing to the PRINCIPAL.


 


3.                                       In the event that
the AGENT believes that an ORIGINAL REINSURANCE CLAIM, or series of ORIGINAL
REINSURANCE CLAIMS, warrants on-site review/audit, this requirement must be
reported to the PRINCIPAL.


 


4.                                       The AGENT shall
properly document all ORIGINAL REINSURANCE CLAIMS, and shall maintain proper
records in keeping with its obligations pursuant to this AGREEMENT.


 


2

















 


PART E: CLAIMS PAYMENT


 


1.                                       With respect to
any ORIGINAL REINSURANCE CLAIM less than USD $250,000, the AGENT shall make all
CLAIMS PAYMENTS called for under the ORIGINAL REINSURANCE CONTRACTS but only to
the extent that AGENT determines that such ORIGINAL REINSURANCE CLAIM is
covered under the applicable ORIGINAL REINSURANCE CONTRACT.


 


2.                                       With respect to
any individual ORIGINAL REINSURANCE CLAIM in excess of USD  $250,000 that AGENT determines is covered
under the applicable ORIGINAL REINSURANCE CONTRACT, the AGENT shall:


 


a.                                       make a request to
the LEAD REINSURER’s Claims Department for approval to make the CLAIMS PAYMENT;


 


b.                                      provide the LEAD
REINSURER’s Claims Department with documentation material to the request for
payment; and


 


c.                                       provide NOTICE of
each such claim to the PRINCIPAL.


 


2.1                                 As much notice as
is possible, and never less than five (5) BUSINESS DAYS, must be provided by
the AGENT in respect of requests for approval to make a CLAIMS PAYMENT pursuant
to Paragraph 2(a) of this Part.


 


2.2                                 The AGENT shall
develop the administrative/technical processes to comply with the requirements
of Paragraph 2.1 of this Part in consultation with the LEAD REINSURER.


 


2.3                                 The physical
payment of ORIGINAL REINSURANCE CLAIMS is the responsibility of the AGENT.


 


PART F: LIMITS TO AGENT’S ORIGINAL
REINSURANCE CLAIMS AUTHORITY


 


1.                                       The AGENT’s
authority to investigate, assess and/or pay ORIGINAL REINSURANCE CLAIMS in
accordance with Parts D and E of this Schedule shall be performed in a
manner consistent with the limitations set forth at Article III of the
AGREEMENT.


 


2.                                       Additionally, the
AGENT’s authority to investigate, assess and/or pay ORIGINAL REINSURANCE CLAIMS
in accordance with Parts D and E of this Schedule shall be subject to the
following limitations:


 


a.                                       the AGENT shall
give NOTICE to the PRINCIPAL immediately upon its becoming aware of any actual,
potential or alleged ORIGINAL REINSURANCE CLAIMS, involving:


 


3

















(i)                                     questions of
ORIGINAL REINSURANCE CONTRACT interpretation; or


 


(ii)                                  the involvement of
an Insurance Commissioner or like regulatory authority; or


 


(iii)                               a REINSURED who
has retained counsel, filed suit, or demanded arbitration.


 


b.                                      such NOTICE shall
apprise the PRINCIPAL of all pertinent details of the ORIGINAL REINSURANCE
CLAIM.


 


c.                                       the AGENT shall
seek the PRINCIPAL’s approval before taking any action with respect to any
actual, potential or alleged ORIGINAL REINSURANCE CLAIM requiring NOTICE under
this sub-part, and shall take no such action unless and until it receives
NOTICE from the LEAD REINSURER approving it.


 


3.                                       Without prejudice
to the limitations on the AGENT included herein (including, but not limited to,
those limitations included at Part E of this Schedule), the AGENT shall (i)
seek the LEAD REINSURER’s approval before making “ex-gratia” or “without
prejudice” payments to any REINSURED that are in excess of $25,000 in the
aggregate (on behalf of the PRINCIPAL and the LEAD REINSURER) and (ii) seek the
PRINCIPAL’s approval before making “ex-gratia” or “without prejudice” payments
to any REINSURED that are in excess of $50,000 in the aggregate (on behalf of
PRINCIPAL and LEAD REINSURER), and shall make no such payment unless and until
it receives NOTICE from the LEAD REINSURER or PRINCIPAL, as appropriate,
directing it to do so.


 


PART G: SALVAGES/SUBROGATION


 


1.                                       The AGENT shall
employ its best efforts to maximize salvages and recoveries (including
recoveries of all reinsurance and retrocessions inuring to the benefit of the
PRINCIPAL when appropriate) on behalf of the PRINCIPAL.  Any such recoveries shall be deposited in
the escrow account described in Section 6.8 of the AGREEMENT.


 


PART H: OUTWARD REINSURANCE CLAIMS
REPORTING


 


1.                                       Within forty-five
(45) BUSINESS DAYS of the close of each quarter, the AGENT shall provide the
PRINCIPAL with a claims bordereau which shall, at a minimum, contain the
following information regarding ORIGINAL REINSURANCE CLAIMS activity that could
give rise to recovery under the PRINCIPAL’s outward reinsurance program during
that quarter:


 


4

















 


a.                                       a listing of
ORIGINAL REINSURANCE CLAIMS notified to the AGENT (identified by ORIGINAL
REINSURANCE CONTRACT number and limits, REINSURED, original assured, date of
loss, and type of loss) for all applicable claims/occurrences;


 


b.                                      the amount
incurred, paid, and outstanding in respect of each such ORIGINAL REINSURANCE
CLAIM;


 


c.                                       the dates on which
CLAIMS PAYMENT(s) was (were) made;


 


d.                                      the amount of
reasonable LOSS ADJUSTMENT EXPENSES (if any) incurred (and drawn from the CLAIM
AND SERVICES ACCOUNT) by the AGENT on behalf of the PRINCIPAL in respect of
each ORIGINAL REINSURANCE CLAIM, net of recoveries of LOSS ADJUSTMENT EXPENSES
under any applicable outward reinsurance;


 


e.                                       the status of any
ORIGINAL REINSURANCE CLAIMS referred to the LEAD REINSURER or the PRINCIPAL for
instructions, handling and/or payment pursuant to Part F of this Schedule.


 


2.                                       The AGENT shall
(i) prepare and send to all outward reinsurers of ORIGINAL REINSURANCE
CONTRACTS described in Part B of this Schedule 1 all necessary or
appropriate reports, (ii) file all claims under such policies and (iii) collect
all claims payments made under such policies. 
Any such collections shall be deposited in the escrow account described
in Section 6.8 of the AGREEMENT


 


PART I: ORIGINAL REINSURANCE
CLAIMS REPORTING


 


1.                                       Within forty-five
(45) BUSINESS DAYS of the close of each quarter, the AGENT shall provide the
PRINCIPAL’s Reinsurance Accounting Department with the following information
regarding activity during that quarter:


 


a.                                       a listing of
premium bordereaux notified to the AGENT, identified by ORIGINAL REINSURANCE
CONTRACT number;


 


b.                                      for bordereaux
processed within the quarter, the following information should appear by
AGENT’s internal reference number identifying each ORIGINAL REISURANCE
CONTRACT;


 


(i)                                     premium;


 


(ii)                                  deductions by
category (including CLAIMS PAYMENTS and deductions from the CLAIM AND SERVICES
ACCOUNT);


 


(iii)                               applicable
outwards reinsurance premium; and


 


5

















 


(iv)                              the net sum due to
the PRINCIPAL.


 


2.                                       Within forty-five
(45) BUSINESS DAYS of the close of each calendar quarter, the AGENT shall
provide the PRINCIPAL’s Claims Department with the following information
regarding ORIGINAL REINSURANCE CLAIMS activity during that quarter;


 


a.                                       a listing of
ORIGINAL REINSURANCE CLAIMS notified to the AGENT (identified by ORIGINAL
REINSURANCE CONTRACT number and limits, REINSURED, original assured, date of
loss, and type of loss) for all individual claims/occurrences in excess of USD
$250,000;


 


b.                                      the amount
incurred, paid, and outstanding in respect of each such ORIGINAL REINSURANCE
CLAIM;


 


c.                                       the dates on which
CLAIMS PAYMENT(s) was (were) made by the Agent;


 


d.                                      the amount of
reasonable LOSS ADJUSTMENT EXPENSES (if any) incurred (and drawn from the CLAIM
AND SERVICES ACCOUNT) by the AGENT on behalf of the PRINCIPAL in respect of
each ORIGINAL REINSURANCE CLAIM;


 


e.                                       the status of any
ORIGINAL REINSURANCE CLAIMS referred to the LEAD REINSURER for instructions,
handling and/or adjudication pursuant to Part F of this Schedule.


 


3.                                       Within forty-five
(45) BUSINESS DAYS of the close of each quarter, the AGENT shall also provide
the PRINCIPAL’s Claims Department with:


 


a.                                       a listing of all
individual ORIGINAL REINSURANCE CLAIMS (identified by ORIGINAL REINSURANCE
CONTRACT number and limits, REINSURED, original assured, date of loss, and type
of loss) for which no reserve determination has as yet been made but which the
AGENT believes may present exposure to the PRINCIPAL in excess of USD $250,000,
on an incurred basis;


 


b.                                      a listing of
ORIGINAL REINSURANCE CLAIMS (identified by ORIGINAL REINSURANCE CONTRACT number
and limits, REINSURED, original assured, date of loss, and type of loss) for
which a reserve determination has been made but for which the AGENT believes
the reserve may be substantially understated and where there may be possible
exposure to the PRINCIPAL in excess of USD $250,000, on an incurred basis; and


 


c.                                       a listing of all
disputed ORIGINAL REINSURANCE CLAIMS together with an update as to the present
position on each.


 


6

















 


PART J: NOTICE OF DISPUTE


 


1.                                       In addition to its
obligations under Part F of this Schedule, the AGENT shall provide NOTICE to
the PRINCIPAL within two (2) BUSINESS DAYS of its becoming aware of any
lawsuit, threatened lawsuit, arbitration, mediation, regulatory complaint,
regulatory inquiry, or consumer complaint arising from or relating in any way
to this AGREEMENT, the provision of SERVICES by the AGENT and/or the ORIGINAL
REINSURANCE CONTRACTS, the insurance policies covered by the ORIGINAL
REINSURANCE CONTRACTS or any outward reinsurance contracts.


 


2.                                       With respect to
any lawsuit, threatened lawsuit, arbitration or mediation, with respect to an
ORIGINAL REINSURANCE CONTRACT or outward reinsurance contract where the amount
in controversy is equal to or less than $25,000, the AGENT and LEAD REINSURER
shall maintain, direct and control the defense of any such lawsuit, threatened
lawsuit, arbitration or mediation, and/or the resolution or settlement thereof.


 


3.                                       With respect to
any lawsuit, threatened lawsuit, arbitration or mediation where the amount in
controversy is in excess of $25,000, or any regulatory complaint, regulatory
inquiry, or consumer complaint with respect to an ORIGINAL REINSURANCE CONTRACT
or outward reinsurance contract:


 


a.                                       The PRINCIPAL
shall maintain, direct and control the defense of any such lawsuit, threatened
lawsuit, arbitration, mediation, regulatory complaint, regulatory inquiry, or
consumer complaint and/or the resolution or settlement thereof and AGENT shall
provide any assistance reasonably requested by the PRINCIPAL in any such
proceeding; and


 


b.                                      The AGENT shall
keep the PRINCIPAL fully informed of all proceedings, facts and developments regarding
any such lawsuit, arbitration, mediation, regulatory compliant, regulatory
inquiry or consumer complaint and/or the resolution or settlement thereof which
become known to the AGENT.


 


PART K:  AGENT’S AUTHORITY TO DRAW ON CLAIM AND
SERVICES ACCOUNT


 


1.                                       Subject to the
limitations of Article VI of this AGREEMENT, the AGENT shall be entitled
to draw upon the CLAIM AND SERVICES ACCOUNT for the payment of CLAIMS PAYMENTS
which AGENT is authorized to pay under the terms of this AGREEMENT and payment
of premiums on outward reinsurance described in Part B of this Schedule 1.


 


2.                                       The AGENT shall
also be entitled to draw upon the CLAIM AND SERVICES ACCOUNT for the payment of
LOSS ADJUSTMENT EXPENSES.


 


7

















 


MANAGEMENT FEES, and assessments and profit
commissions with respect to ORIGINAL REINSURANCE CONTRACTS.


 


PART L: NOTICES


 


1.                                       The AGENT shall
give and receive notices pursuant to the terms and conditions of ORIGINAL
REINSURANCE CONTRACTS issued by the PRINCIPAL through the AGENT and AGENT shall
promptly provide PRINCIPAL with copies of each such notice sent or received by
AGENT.


 


8

















 


SCHEDULE 2


 


SERVICE STANDARDS


 


PART A: ORIGINAL REINSURANCE UNDERWRITING STANDARDS


 


1.                                       The AGENT shall
conduct such underwriting investigations as are required by Schedule 3 and/or prudent business
practices before underwriting an ORIGINAL REINSURANCE CONTRACT on behalf of the
PRINCIPAL.


 


2.                                       The AGENT shall
fix GROSS REINSURANCE PREMIUMS in accordance with Schedule 3 and prudent business practices.


 


PART B: ORIGINAL REINSURANCE CLAIMS INVESTIGATION AND
ASSESSMENT STANDARDS


 


1.                                       The AGENT shall
investigate and assess all ORIGINAL REINSURANCE CLAIMS not requiring immediate
NOTICE to the PRINCIPAL under Part F, Paragraph 2 of Schedule 1 within fifteen (15) BUSINESS DAYS of being notified
of such ORIGINAL REINSURANCE CLAIMS.


 


2.                                       Should the
REINSURED initially submit insufficient information to allow the AGENT to
assess the ORIGINAL REINSURANCE CLAIM, the AGENT shall request further
information from the REINSURED within fifteen (15) BUSINESS DAYS of submission
of the ORIGINAL REINSURANCE CLAIM by the REINSURED.


 


PART C: ORIGINAL REINSURANCE
CLAIMS ADJUDICATION STANDARDS


 


1.                                       The AGENT shall
notify the REINSURED that an ORIGINAL REINSURANCE CLAIM is declined within five
(5) BUSINESS DAYS of determining that the ORIGINAL REINSURANCE CLAIM is invalid
or receiving NOTICE from the PRINCIPAL and/or LEAD REINSURER instructing it to
deny the ORIGINAL REINSURANCE CLAIM. Said NOTICE shall explain the reasons for
the declination, the REINSURED’s rights of appeal and any other information
required under the applicable law.


 


PART D: REPORTING STANDARDS


 


1.                                       All bordereaux
and/or reports required under the terms of this AGREEMENT shall be prepared in
a format approved by the LEAD REINSURER.


 

















 


PART E: PRECEDENCE OF APPLICABLE LAW


 


1.                                       Notwithstanding
the foregoing, if any of the deadlines set forth in this Schedule are in
conflict with any deadlines mandated by law (either by statute, regulation or
administrative order), the deadlines mandated by law shall govern.


 


2

















 


SCHEDULE 3


 


UNDERWRITING PARTICULARS


 


PART A: UNDERWRITING RESPONSIBILITY


 


1.                                      It is the duty of
each of the AGENT’s underwriters to determine the acceptability of specific
risks by an analysis and evaluation of information gathered from various
sources, including the underwriter’s own experiences.


 


2.                                      The AGENT will
assign underwriting authority to each of its underwriters in accordance with
their level of experience and knowledge.


 


PART B:   CLASSES OF BUSINESS FOR WHICH AUTHORITY IS GRANTED TO AGENT


 


1.                                      Medical excess and
self-funded specific and aggregate medical reinsurance coverage to be effective
in 2001


 


PART C: MAXIMUM LIABILITY


 


1.                                        PRINCIPAL’s share
of $5,000,000 any one person per ORIGINAL REINSURANCE CONTRACT


 


2.                                        PRINCIPAL’s share
of $5,000,000 in the aggregate per ORIGINAL REINSURANCE CONTRACT


 


PART D: UNDERWRITERS AND
UNDERWRITING AUTHORITIES


 


1.                                       The maximum policy
period on any policy reinsured under an ORIGINAL REINSURANCE CONTRACT is 18
months.


 


2.                                       The maximum term
of any ORIGINAL REINSURANCE CONTRACT shall be 18 months.


 


3.                                       AGENT shall only
have authority to bind PRINCIPAL to ORIGINAL REINSURANCE CONTRACTS where all
relevant parties have agreed to comply with AGENT’s Terms of Trade set forth in
Exhibit B hereto, including, but not limited to, pricing such contracts in
accordance with the Tillinghast, APEX or Merrill Lynch/Howard Johnson rate
manual unless AGENT obtains the prior written consent of PRINCIPAL to (i) amend
such Terms of Trade or (ii) vary from such Terms of Trade with respect to a
particular ORIGINAL REINSURANCE CONTRACT.


 


4.                                       Each ORIGINAL
REINSURANCE CONTRACT bound will have a summary sheet completed by the AGENT’s
underwriter with notes about the underwriting


 

















 


process on that risk, relevant rates, special
comments or conditions. Said summary sheet shall be retained in the file
maintained for such ORIGINAL REINSURANCE CONTRACT.


 


PART E: WORKFLOWS OF NEW, RENEWAL AND DECLINED BUSINESS


 


All
risks seen, be they declined or quoted, will be recorded on the AGENT’s
Underwriting System and filed according to the action as follows:


 


1.                                      Quotes/Pending


 


a.                                        If a risk is
acceptable then the risk will be recorded in the Quote/Pending Log recording
the following information:


 


	
  Direct
  or Reinsurance

  	
   

  	
  Territory

  
	
  Date
  Written

  	
   

  	
  Class
  Code

  
	
  Underwriter

  	
   

  	
  Inception

  
	
   

  	
   

  	
   

  
	
  Expiry
  Date

  	
   

  	
  Assured

  
	
  Broker
  Number

  	
   

  	
   

  



 


2.                                       New Risks


 


a.                                       Once a risk has
been confirmed or the AGENT has received a firm order then the full details
will be entered into the AGENT’s Policy Numbering Screen.


 


b.                                      In addition, there
will be a summary page of each risk attached to the office file that will
contain all the pertinent information plus a summary of the reasons for writing
such risk in accordance with Part E (4) of this Schedule.


 


3.                                       Declined/NTU Risks


 


a.                                        If a risk is
declined then the risk will be recorded in the Declinatures Log recording the
following information:


 


	
  Direct or Reinsurance

  	
   

  	
  Broker Number

  
	
  Inception

  	
   

  	
  Reassured

  
	
  Underwriter

  	
   

  	
  Major Peril

  
	
  Territory

  	
   

  	
  Class Code

  
	
  Declined Date

  	
   

  	
  Type

  
	
  Assured

  	
   

  	
  Reason for Declinature

  



 


b.                                      The declinature
files will be as per the numbering of the Declinatures Log.


 


2

















 


4.                                       Exclusions


 


The
AGENT warrants that, at a minimum, it has excluded or shall exclude (either
explicitly or by reference) from ORIGINAL REINSURANCE CONTRACTS:


 


a.                                       all those risks or
classes of risk excluded under the underlying policies being reinsured under an
ORIGINAL REINSURANCE CONTRACT.


 


b.                                      all other risks or
classes of risk dictated by prudent underwriting practices.


 


c.                                       First Dollar
medical business.


 


d.                                      Workers
Compensation or Carve-outs.


 


e.                                       Liability for
extra contractual obligations and ex gratia payments shall be governed by the
provisions attached as Exhibit C hereto, provided that, the LEAD REINSURER
shall be entitled to determine the aggregate obligation of PRINCIPAL and LEAD
REINSURER for ex gratia payments in amounts between $25,000 and $50,000 per
claim.


 


3

















 


EXHIBIT A


 


MANAGING GENERAL UNDERWRITERS AND
CARRIERS


 


	
  NAME

  	
   

  	
  LOCATION

  
	
  BenMark

  	
   

  	
  Jackson,
  Mississippi

  
	
  Brokers
  Risk Placement Services (BRPS)

  	
   

  	
  Chicago,
  Illinois

  
	
  BRPA-SEBA

  	
   

  	
  Chicago,
  Illinois

  
	
  CapRisk

  	
   

  	
  Lancaster,
  Pennsylvania

  
	
  International
  Insurance Services (IIS_IIAS)

  	
   

  	
  Chicago,
  Illinois

  
	
  J.
  Allan Hall

  	
   

  	
  Indianapolis,
  Indiana

  
	
  Montgomery
  Management

  	
   

  	
  Blue
  Bell, Pennsylvania

  
	
  Patient
  Choice

  	
   

  	
  Minneapolis,
  Minnesota

  
	
  Protected
  Managing General Underwriter (PMGU)

  	
   

  	
  Princeton,
  New Jersey

  
	
  Risk
  Assessment Services (RAS)

  	
   

  	
  South
  Windsor, Connecticut

  
	
  ANDONE

  	
   

  	
  Hoboken,
  New Jersey

  
	
  Centra
  Indemnity

  	
   

  	
  Macon,
  Georgia

  



 


4

















 


EXHIBIT B


 


AGENT’S TERMS OF TRADE


 


Deviations from
these guidelines for any particular case must receive approval on a triad
basis.


 


•                  Target Loss Ratio
for NEW and RENEWAL business is 86-88%


 


1.              Experience validation:


Premiums
received and claims paid by month for each treaty year so that ESG can apply
our own completion factors for undeveloped data. Past 3 years experience
information (premiums, number of certificates, claims, expenses, reserves,
etc.) broken down by month, by product if applicable, by deductible/coinsurance
and by state where possible. This experience should also include a listing of
all individuals whose annual medical claims are in excess of $50,000. The claim
details should be broken down as follows: claimant name, total amount of paid claim,
incurred period of claim, cause, status, and prognosis


 


2.              Lag studies/completion factors


 


3.              Rate manual


This
is needed so that actuarial can set acceptable target and discretionary ranges
(Confirm that there is no discount off of manual for small group business) and
a description if applicable, of any planned premium changes from this manual.


 


4.              Copies of any actuarial memorandums.


(If
not using approved APEX, THS 2000, THS 2001 or Howard Johnson rating manuals)


 


5.              Trend


Review
trend factors and establish regular communication protocols so that as the
effects of increasing trend are felt, ESG can respond and our clients will
anticipate and be open to necessary increase with off-anniversary changes.


 


6.              Breakdown of Acquisition Costs


 


	
   

  	
   

  	
  NEW & RENEWAL BUSINESS

  
	
  •                  Fronting fees

  	
   

  	
  3-5%,
  with sliding scale for premiums >$15,000,000

  
	
  •                  TPA/MGU Fees managed to
  average annual max

  	
   

  	
  up
  to 25%

  
	
  •                  Taxes

  	
   

  	
  2.5%
  or actual%

  
	
  •                  Etc.

  	
   

  	
   

  



 


NEW & RENEWAL BUSINESS: Total maximum costs not
to exceed 31% + reinsurance brokerage


 


7.              Proposed Reinsurance Structure


•                  What terms are
being offered?


•                  What is the
effective date?


•                  Is profit sharing
being requested?


 

















 


EXHIBIT C


 


PROVISIONS GOVERNING EXTRA
CONTRACTUAL

AND EX GRATIA PAYMENTS


 


EXTRA CONTRACTUAL
OBLIGATIONS


 


1.                                       In no event shall
the REINSURER(S) be liable for any proportion of the COMPANY’s AGGREGATE
LIABILITY or SPECIFIC LIABILITY consisting in any part of damages, including
those exemplary or punitive in nature, nor for fines or statutory penalties
awarded against the COMPANY, the INSURED, the MGU, and/or any agents thereof as
a result of any act, omission, or course of conduct committed by or for the
COMPANY, the INSURED, the MGU, and/or any agents thereof shall otherwise be
responsible, in connection with the handling of or pertaining to the UNDERLYING
POLICIES.


 


2.                                       The REINSURER(S)
shall likewise not be liable for any legal fees or expenses attendant to the
defense of claims of the kind referred to in Paragraph 1 above.


 


3.                                       As an exception to
this exclusion, the REINSURER(S) shall indemnify the COMPANY for its
proportionate share of any such extra contractual obligations and/or associated
legal fees or expenses attendant to the defense thereof to the extent that the
REINSURER(S) concurred, both in advance and in writing, with the COMPANY’s act,
omission, or course of conduct in connection with the handling of or pertaining
to the UNDERLYING POLICIES that resulted in the incurrence of such extra
contractual obligations.


 


4.                                       Notwithstanding
the limited exception set forth at Paragraph 3, this AGREEMENT shall not
provide any indemnity in respect of any extra contractual obligation incurred
by the COMPANY as a result of any fraudulent and/or criminal act by any
officer, director, or employee of the COMPANY, who is acting individually, or
collectively, or in collusion with any individual or corporation, or any other
organization, or party, which is involved in the presentation, or defense, or
settlement of any CLAIM covered hereunder.


 


EX GRATIA PAYMENTS


 


1.                                       Absent prior written
approval by the REINSURER(S), the REINSURER(S) shall not indemnify the COMPANY
for any payment made by the COMPANY voluntarily, knowing or believing that it
had no obligation to make such payment, for amounts in excess of $25,000 per
claim.


 

















 


8.              Copies of current policies, application forms


 


9.              Copy, if applicable of the MGU agreement in place with the
carrier


 


10.       Underwriting manual – (what we are looking for but open for
discussion based on each MGU’s experience/market)


 


NUMBER OF LIVES


•                  50 lives for new and renewal treaties


•                  25 lives for underlying employer renewals


 


SIR’s


•                  Set minimum SIR between $20,000 and $25,000
for new business


•                  Set minimum SIR between $15,000 and $20,000
for renewal business (to transition them to higher SIR)


•                  Put 15% load on underlying employer renewals
with SIR <$25,000


 


AGGREGATE
ATTACHMENT POINTS


•                  Set minimum aggregate corridor at 40% for
groups with <50 lives


•                  Set minimum aggregate corridor at 30% for
groups with 50-100 lives


•                  Set minimum aggregate corridor at 25% for
groups >100 lives


 


RUN-IN/OUT
ON NEW BUSINESS


•                  No 24/12*, 18/12* or 12/24 basis on new
sales


•                  Run-in is limited to 3-months when TPA is
new to the program.


 


RUN-IN/OUT
ON RENEWAL BUSINESS


For
renewals, put additional load on run-in and run-out factors


 


	
  Limit Run In/Out to

  	
   

  	
  Loads

  
	
  12 / 12

  	
   

  	
  1.00

  
	
  15 / 12

  	
   

  	
  1.02

  
	
  12 / 15

  	
   

  	
  1.02

  
	
  18 / 12*

  	
   

  	
  1.03

  
	
  24 / 12*

  	
   

  	
  1.04

  
	
  12 / 18

  	
   

  	
  1.03

  



 












*                                         24/12 and 18/12 may be submitted on a
facultative basis with the run-in capped at the SIR and run-in claims
accumulate to maximum of 15% of aggregate attachment point.


Effective Oct-2001 - Facultative submission for contract bases
24/12 and 18/12 are no longer require provided:


1.               Group has been with the TPA for at least 24
months as of the effective date of coverage


2.               TPA appears on the TPA Approved for 24/12,
18/12 list attached to the Terms of Trade (unique for each client – based on
preferred TPA’s)


 


PPO
FACTORS


	
  •                  New Business

  	
   

  	
  •
  Between 0.85 and 0.90

  
	
  •                  Renewals

  	
   

  	
  • No less that 0.80

  



 


NOTE:                               MGU can submit evidence supporting the use
of a lower PPO factor to ESG for review on a Fac basis


 


2

















 


CLARIFICATIONS
ON MGU QUOTES


•                  Require MGU’s to
secure signed statement from employers requesting 12/12 basis, indicating that
employer understands nature of 12/12 and potential for claims to fall through
cracks.


•                  No rate guarantees
beyond 12 months, unless on facultative basis with ESG approval


•                  No aggregate
quotes if experience is not available.


•                  No manual
aggregate quotes for groups with 100+ lives (not EE’s, total lives)


•                  MGU’s quotes and
renewals cannot be finalized until the 11th month of claims has been
received; uw has discretion to request 12th month before finalizing
rate


•                  Have direct UW add
language to their quotes indicating that:


•                  ‘Quotes are
subject to the disclosure of all paid, held, pended or unfunded claims within
30 days of the effective date’


•                  Excluded business:
MEWA’s; PEOs; business coming out of an HMO


•                 Load medical
providers by 17.5% (THS load)


 


TPA’S


•                  Review MGU’s TPA
review process and work with MGU’s to develop TPA review/assessment strategy
(i.e./ which TPAs have good controls; will work with Advocare; produce good
results; persistency; LCM co-ordination; etc.)


•                  Implement MGU
procedure that requires verification of existing, pending or potentially
catastrophic claim situations with UR and LCM firms prior to releasing new or
renewal quotes.


 


11. Information
on PPO


ES(NA)
requires all plans have a PPO network in place, or use a blind PPO like
MultiPlan or Coalition America. The Account Executive/Technician should also
ask for an overview of the current PPO contracts applicable to the product and
the renewal outlook of such contracts describing any changes and their impact
on claims costs


 


Ask
for copies of any PPO savings analysis that might be available.


 


12. Projections


Details
on the marketing strategy for the coming year, including projected premium loss
ratio and number of certificates.


 


13. Fees  at Risk/Captive


Underwriting
entity (MGU) must share in risk - captive or fees at risk or low MGU fee +
profit share refund. When fees are at risk, the provisional fee will be minimum
MGU fee payable (ie/ 9-15% then pay 9%) It will be held and paid back with
interest on same basis as normal profit refund.


 


14. Reporting


We
must be able to continuously monitor experience.


 


a.               They will update
the Quote Activity Report tracking on monthly basis, or similar information
from their in-house capabilities that is acceptable to ESG


b.              They must provide
aggregate reports on monthly basis.


c.               They must be able
to track premium & claims by treaty year, or according to any other
reinsurance terms that might be negotiated


 


15. Copies of any audit reports.


3

















 


16. Copy of Errors
& Omissions Insurance


This
is required for the carrier, the MGU, broker and copies of the insurance
certificates should be maintained in the file.


 


•                  The minimum
E&O for MGU is $2,000,000


•                  The minimum
E&O for the broker is $1,000,000


•                  The minimum
E&O for the carrier is $5,000,000


 


17. Tiered
Underwriting


In
most Stop Loss quotes, ESG will introduce tiered underwriting billed/manual
ratios for new and renewal business, using our standard tier definitions. To do
this we will need to know how their current block would be distributed between
the tiers and the current billed/manual and loss ratios, by tier. Then, we can
set target rate increases by tier, minimum billed/manual targets by tier,
persistency targets by tier, and discretion that will be allowed.


 


For
MGU’s that focus on larger group markets with more credibility on the
experience, ESG will allow a minimum billed/manual of 0.70 for selected
personnel, as the manual rate becomes less important to the final sold rates.


 


4