exv10w13



 











Exhibit 10.13




Liberty
American Insurance Company


Pinellas
Park, Florida


Mobile
USA Insurance Company

Pinellas Park, Florida

and

any and all other companies which are now

or may hereafter become member companies of

Liberty
American Insurance Group, Inc.

Hereinafter referred to collectively as the “Company”




Reinstatement Premium Protection

Reinsurance Contract




Effective: June 1, 2005




Reinsurance Confirmation




Business Cover



By this Contract the Reinsurer agrees to indemnify the Company for 100% of any reinstatement
premium which the Company pays or becomes liable to pay as a result of loss occurrences commencing
during the term of this Contract under the provisions of the Company’s Florida Only Excess
Catastrophe Reinsurance Contract effective June 1, 2005 (hereinafter referred to as the “Underlying
Contract” and described in Schedule A attached to and forming part of this Contract), subject to
the terms and conditions set forth herein. However, the liability of the Reinsurer shall not
exceed $21,175,000 during the term of this Contract.




Commencement & Termination



Effective June 1, 2005, with respect to losses arising out of loss occurrences commencing on or
after that date, through May 31, 2006 both days inclusive. Extended expiration in the event a loss
occurrence is in progress at termination or expiration.



The Company may terminate a Subscribing Reinsurer’s percentage share in this Contract by giving
written notice to the Subscribing Reinsurer in the event any of the following circumstances occur
as clarified by public announcement for subparagraphs 1 through 7 below and upon discovery for
subparagraph 8 below:





	 	1.	 	The Subscribing Reinsurer’s policyholders’ surplus after the date lines are bound
for this Contract has been reduced by more than 20.0% of the amount of surplus 12 months
prior to that date; or
	 
	 	2.	 	The Subscribing Reinsurer’s policyholders’ surplus at any time between the date
lines are bound and the date of termination of this Contract has been reduced by more
than 20.0% of the amount of surplus at the date of the Subscribing Reinsurer’s most
recent financial statement filed with regulatory authorities and available to the public
as of the date lines are bound for this Contract; or
	 
	 	3.	 	The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded
below A- (inclusive of “Not Rated” ratings) and/or Standard & Poor’s rating has been
assigned or downgraded below BBB+ at any time between the date lines are bound and the
date of termination of this Contract; or
	 
	 	4.	 	The Subscribing Reinsurer has become merged with, acquired by or controlled by any
other company, corporation or individual(s) not controlling the Subscribing Reinsurer’s
operations previously; or




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	 	5.	 	A State Insurance Department or other legal authority has ordered the Subscribing
Reinsurer to cease writing business; or
	 
	 	6.	 	The Subscribing Reinsurer has become insolvent or has been placed into liquidation
or receivership (whether voluntary or involuntary) or proceedings have been instituted
against the Subscribing Reinsurer for the appointment of a receiver, liquidator,
rehabilitator, conservator or trustee in bankruptcy, or other agent known by whatever
name, to take possession of its assets or control of its operations; or
	 
	 	7.	 	The Subscribing Reinsurer has reinsured its entire liability under this Contract
without the Company’s prior written consent; or
	 
	 	8.	 	The Subscribing Reinsurer has ceased assuming new or renewal property or casualty
treaty reinsurance business.




The Reinsurer shall have no liability hereunder with respect to losses arising out of loss
occurrences commencing after the effective date of termination.




Concurrency of Conditions



It is agreed that this Contract will follow the terms, conditions, exclusions, definitions,
warranties and settlements of the Company under the Underlying Contract, which are not inconsistent
with the provisions of this Contract.



The Company shall advise the Reinsurer of any material changes in the Underlying Contract which may
affect the liability of the Reinsurer under this Contract.




Premium



As premium for the reinsurance provided hereunder, the Company shall pay the Reinsurer the
following:




Layer 2: $1,950,000

Layer 3: $1,150,000

Layer 4: $525,000

Layer 5: $600,000

Layer 6: $400,000


The sum of the above amounts shall be payable in four equal installments of $1,156,250 on June 1,
2005, September 1, 2005, December 1, 2005 and March 1, 2006.




Loss Notices and Settlements



Whenever reinstatement premium settlements made by the Company under the Underlying Contract appear
likely to result in a claim hereunder, the Company shall notify the Reinsurer. The Reinsurer shall
be advised of all subsequent developments relating to such claims which, in the opinion of the
Company, may materially affect the position of the Reinsurer.



All reinstatement premium settlements made by the Company under the Underlying Contract, provided
they are within the terms of the Underlying Contract and within the terms of this Contract, shall
be binding upon the Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be
liable upon receipt of reasonable evidence of the amount paid (or scheduled to be paid) by the
Company.




Late Payments



See attached. Interest penalty based on 6-month United States Treasury Bill Rate. Interest
penalty of less than $100 shall be waived.




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Brokerage




10% of gross reinsurance premium.




Other Provisions




Offset (BRMA 36D)

Access to Records (BRMA 1D)

Net Retained Lines (BRMA 32B)

Errors and Omissions (BRMA 14F)

Currency (BRMA 12A)

Taxes (BRMA 50C)

Federal Excise Tax

Reserves

Insolvency

Arbitration

Service of Suit

Agency Agreement

Governing Law (State of Florida)

Confidentiality

Severability

Intermediary (BRMA 23A)



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Late Payments





	A.	 	The provisions of this Article shall not be implemented unless specifically invoked, in
writing, by one of the parties to this Contract.
	 
	B.	 	In the event any premium, loss or other payment due either party is not received by the
intermediary named herein (hereinafter referred to as the “Intermediary”) by the payment due
date, the party to whom payment is due may, by notifying the Intermediary in writing, require
the debtor party to pay, and the debtor party agrees to pay, an interest penalty on the amount
past due calculated for each such payment on the last business day of each month as follows:






	 	1.	 	The number of full days which have expired since the due date or the last monthly
calculation, whichever the lesser, times
	 
	 	2.	 	1/365ths of the six-month United States Treasury Bill Rate as quoted in The Wall
Street Journal on the first business day of the month for which the calculation is made;
times
	 
	 	3.	 	The amount past due, including accrued interest.






It is agreed that interest shall accumulate until payment of the original amount due plus
interest penalties have been received by the Intermediary.




	C.	 	The establishment of the due date shall, for purposes of this Article, be determined as
follows:






	 	1.	 	As respects the payment of routine deposits and premiums due the Reinsurer, the due
date shall be as provided for in the applicable section of this Contract. In the event a
due date is not specifically stated for a given payment, it shall be deemed due 30 days
after the date of transmittal by the Intermediary of the initial billing for each such
payment.
	 
	 	2.	 	Any claim or loss payment due the Company hereunder shall be deemed due 10 business
days after the proof of loss or demand for payment is transmitted to the Reinsurer. If
such loss or claim payment is not received within the 10 days, interest will accrue on
the payment or amount overdue in accordance with paragraph B above, from the date the
proof of loss or demand for payment was transmitted to the Reinsurer.
	 
	 	3.	 	As respects any payment, adjustment or return due either party not otherwise
provided for in subparagraphs 1 and 2 of paragraph C above, the due date shall be as
provided for in the applicable section of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be deemed due 10 business days
following transmittal of written notification that the provisions of this Article have
been invoked.






For purposes of interest calculations only, amounts due hereunder shall be deemed paid upon
receipt by the Intermediary.




	D.	 	Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from
contesting the validity of any claim, or from participating in the defense of any claim or
suit, or prohibiting either party from contesting the validity of any payment or from
initiating any arbitration or other proceeding in accordance with the provisions of this
Contract. If the debtor party prevails in an arbitration or other proceeding, then any
interest penalties due hereunder on the amount in dispute shall be null and void. If the
debtor party loses in such proceeding, then the interest penalty on the amount determined to
be due hereunder shall be calculated in accordance with the provisions set forth above unless
otherwise determined by such proceedings. If a debtor party advances payment of any amount it
is contesting, and proves to be correct in its contestation, either in whole or in part, the
other party shall reimburse the debtor party for any such excess payment made plus interest on
the excess amount calculated in accordance with this Article.
	 
	E.	 	Interest penalties arising out of the application of this Article that are $100 or less from
any party shall be waived unless there is a pattern of late payments consisting of three or
more items over the course of any 12-month period.




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Reserves





	A.	 	The Reinsurer agrees to fund, within 30 days of the Company’s request, its share of the
Company’s ceded outstanding loss and loss adjustment expense reserves (including incurred but
not reported loss reserves for known loss occurrences established by the Company) by:






	 	1.	 	Clean, irrevocable and unconditional letters of credit issued and confirmed, if
confirmation is required by the insurance regulatory authorities involved, by a bank or
banks meeting the NAIC Securities Valuation Office credit standards for issuers of
letters of credit and acceptable to said insurance regulatory authorities; and/or
	 
	 	2.	 	Escrow accounts for the benefit of the Company; and/or
	 
	 	3.	 	Cash advances;






if the Reinsurer is unauthorized in any state of the United States of America or the District
of Columbia having jurisdiction over the Company and if, without such funding, a penalty would
accrue to the Company on any financial statement, including but not limited to quarterly
filings, it is required to file with the insurance regulatory authorities involved.




The Reinsurer, at its sole option, may fund in other than cash if its method of funding is
acceptable to the Company and to the insurance regulatory authorities involved.




For the purpose of this Contract, the Lloyd’s U.S. Credit for Reinsurance Trust Fund shall be
considered an acceptable funding instrument.




	B.	 	With regard to funding in whole or in part by letters of credit, it is agreed that each
letter of credit will be in a form acceptable to insurance regulatory authorities involved,
will be issued for a term of at least one year and will include an “evergreen clause,” which
automatically extends the term for at least one additional year at each expiration date unless
written notice of non-renewal is given to the Company not less than 30 days prior to said
expiration date. The Company and the Reinsurer further agree, notwithstanding anything to the
contrary in this Contract, that said letters of credit may be drawn upon by the Company or its
successors in interest at any time, without diminution because of the insolvency of the
Company or the Reinsurer, but only for one or more of the following purposes:






	 	1.	 	To reimburse itself for the Reinsurer’s share of losses and/or loss adjustment
expense paid under the terms of policies reinsured hereunder, unless paid in cash by the
Reinsurer;
	 
	 	2.	 	To reimburse itself for the Reinsurer’s share of any other amounts claimed to be
due hereunder, unless paid in cash by the Reinsurer;
	 
	 	3.	 	To fund a cash account in an amount equal to the Reinsurer’s portion of the
unearned deposit premium and/or the Reinsurer’s share of ceded outstanding loss and loss
adjustment expense reserves (including incurred but not reported loss reserves for known
loss occurrences established by the Company) funded by means of a letter of credit which
is under non-renewal notice, if said letter of credit has not been renewed or replaced by
the Reinsurer 10 days prior to its expiration date;
	 
	 	4.	 	To refund to the Reinsurer any sum in excess of the actual amount required to fund
the Reinsurer’s portion of the unearned deposit premium and/or the Reinsurer’s share of
the Company’s ceded outstanding loss and loss adjustment expense reserves (including
incurred but not reported loss reserves for known loss occurrences established by the
Company), if so requested by the Reinsurer; and
	 
	 	5.	 	To reimburse itself for the Reinsurer’s portion of the unearned deposit premium
paid to the Reinsurer.






It is understood and agreed that with respect to subparagraphs 3, 4 and 5 of this paragraph,
the provisions pertaining to reimbursement for unearned deposit premium apply only in the
circumstance of a rating-related obligation of the Reinsurer to fund the unearned portion of
the deposit premium; the remaining



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provisions of subparagraphs 3, 4 and 5 of this paragraph, as well as the provisions of
subparagraphs 1 and 2 of this paragraph, apply in any and all circumstances the Reinsurer is
required to provide funding under paragraph A of this Article.




In the event the amount drawn by the Company on any letter of credit is in excess of the actual
amount required for B(1) or B(3), or in the case of B(2), the actual amount determined to be
due, the Company shall promptly return to the Reinsurer the excess amount so drawn.



Insolvency





	A.	 	In the event of the insolvency of one or more of the reinsured companies, this reinsurance
shall be payable directly to the company or to its liquidator, receiver, conservator or
statutory successor on the basis of the liability of the company without diminution because of
the insolvency of the company or because the liquidator, receiver, conservator or statutory
successor of the company has failed to pay all or a portion of any claim. It is agreed,
however, that the liquidator, receiver, conservator or statutory successor of the company
shall give written notice to the Reinsurer of the pendency of a claim against the company
indicating the policy or bond reinsured which claim would involve a possible liability on the
part of the Reinsurer within a reasonable time after such claim is filed in the conservation
or liquidation proceeding or in the receivership, and that during the pendency of such claim,
the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses that it may deem available to
the company or its liquidator, receiver, conservator or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to the approval of the Court, against
the company as part of the expense of conservation or liquidation to the extent of a pro rata
share of the benefit which may accrue to the company solely as a result of the defense
undertaken by the Reinsurer.
	 
	B.	 	Where two or more reinsurers are involved in the same claim and a majority in interest elect
to interpose defense to such claim, the expense shall be apportioned in accordance with the
terms of this Contract as though such expense had been incurred by the company.
	 
	C.	 	It is further understood and agreed that, in the event of the insolvency of one or more of
the reinsured companies, the reinsurance under this Contract shall be payable directly by the
Reinsurer to the company or to its liquidator, receiver or statutory successor, except as
provided by Section 4118(a) of the New York Insurance Law or except (1) where this Contract
specifically provides another payee of such reinsurance in the event of the insolvency of the
company or (2) where the Reinsurer with the consent of the direct insured or insureds has
assumed such policy obligations of the company as direct obligations of the Reinsurer to the
payees under such policies and in substitution for the obligations of the company to such
payees.





Arbitration





	A.	 	As a condition precedent to any right of action hereunder, any dispute or difference between
the Company and any Reinsurer relating to the interpretation or performance of this Contract,
including its formation or validity, or any transaction under this Contract, whether arising
before or after termination, shall be submitted to arbitration.
	 
	B.	 	If more than one reinsurer is involved in the same dispute, all such reinsurers shall
constitute and act as one party for purposes of this Article provided that communication shall
be made by the Company to each of the reinsurers constituting the one party, and provided,
however, that nothing therein shall impair the rights of such reinsurers to assert several,
rather than joint, defenses or claims, nor be construed as changing the liability of the
Reinsurer under the terms of this Contract from several to joint.
	 
	C.	 	Upon written request of any party, each party shall choose an arbitrator and the two chosen
shall select a third arbitrator. If either party refuses or neglects to appoint an arbitrator
within 30 days after receipt of the written request for arbitration, the requesting party may
appoint a second arbitrator. If the two arbitrators fail to agree on the selection of a third
arbitrator within 30 days of their appointment, the Company shall petition the American
Arbitration Association to appoint the third arbitrator. If the American Arbitration
Association fails to appoint the third arbitrator within 30 days after it has been requested
to do so, either party may request a justice of a court of general jurisdiction of the state
in which the arbitration is to be held




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to appoint the third arbitrator. All arbitrators shall be active or retired officers of
insurance or reinsurance companies, or Lloyd’s London Underwriters, and disinterested in the
outcome of the arbitration. Each party shall submit its case to the arbitrators within 30 days
of the appointment of the third arbitrator.




	D.	 	The parties hereby waive all objections to the method of selection of the arbitrators, it
being the intention of both sides that all the arbitrators be chosen from those submitted by
the parties.
	 
	E.	 	The arbitrators shall have the power to determine all procedural rules for the holding of the
arbitration including but not limited to inspection of documents, examination of witnesses and
any other matter relating to the conduct of the arbitration. The arbitrators shall interpret
this Contract as an honorable engagement and not as merely a legal obligation; they are
relieved of all judicial formalities and may abstain from following the strict rules of law.
The arbitrators may award interest and costs. Each party shall bear the expense of its own
arbitrator and shall share equally with the other party the expenses of the third arbitrator
and of the arbitration.
	 
	F.	 	The decision in writing of the majority of the arbitrators shall be final and binding upon
both parties. Judgment may be entered upon the final decision of the arbitrators in any court
having jurisdiction. The arbitration shall take place in Bala Cynwyd, Pennsylvania, unless
otherwise mutually agreed between the Company and the Reinsurer.
	 
	G.	 	This Article shall remain in full force and effect in the event any other provision of this
Contract shall be found invalid or non-binding.
	 
	H.	 	All time limitations stated in this Article may be amended by mutual consent of the parties,
and will be amended automatically to the extent made necessary by any circumstances beyond the
control of the parties.





Agency Agreement



If more than one reinsured company is named as a party to this Contract, the first named company
shall be deemed the agent of the other reinsured companies for purposes of sending or receiving
notices required by the terms and conditions of this Contract, and for purposes of remitting or
receiving any monies due any party.




Governing Law



This Contract shall be governed as to performance, administration and interpretation by the laws of
the State of Florida exclusive of the rules with respect to conflicts of law, except as to rules
with respect to credit for reinsurance in which case the applicable rules of all states shall
apply.




Confidentiality



The Reinsurer, except with the express prior written consent of the Company, shall not directly or
indirectly, communicate, disclose or divulge to any third party, any knowledge or information that
may be acquired either directly or indirectly as a result of the inspection of the Company’s books,
records and papers. The restrictions as outlined in this Article shall not apply to communication
or disclosures that the Reinsurer is required to make to its statutory auditors, retrocessionaires,
legal counsel, arbitrators involved in any arbitration procedures under this Contract or
disclosures required upon subpoena or other dully-issued order of a court or other governmental
agency or regulatory authority.




Severability



If any provision of this Contract should be invalid under applicable laws, the latter shall control
but only to the extent of the conflict without affecting the remaining provisions of this Contract.




Service of Suit



(Applicable if the Reinsurer is not domiciled in the United States of America, and/or is not
authorized in any State, Territory or District of the United States where authorization is required
by insurance regulatory




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authorities. This Article is not intended to conflict with or override the parties’ obligations to
arbitrate their disputes in accordance with the Arbitration Article)





	 	A.	 	It is agreed that in the event the Reinsurer fails to pay any amount claimed to be due
hereunder, the Reinsurer, at the request of the Company, will submit to the jurisdiction of
any court of competent jurisdiction within the United States. Nothing in this Article
constitutes or should be understood to constitute a waiver of the Reinsurer’s rights to
commence an action in any court of competent jurisdiction in the United States, to remove
an action to a United States District Court, or to seek a transfer of a case to another
court as permitted by the laws of the United States or of any state in the United States.
	 
	 	B.	 	Further, pursuant to any statute of any state, territory or district of the United
States which makes provision therefore, the Reinsurer hereby designates the party named in
its Interests and Liabilities Agreement, or if no party is named therein, the
Superintendent, Commissioner or Director of Insurance or other officer specified for that
purpose in the statute, or his successor or successors in office, as its true and lawful
attorney upon whom may be served any lawful process in any action, suit or proceeding
instituted by or on behalf of the Company or any beneficiary hereunder arising out of this
Contract.






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Schedule A




Reinstatement
Premium Protection Reinsurance Contract

Effective June 1, 2005




Issued
to




Liberty American Insurance Group, Inc.

Pinellas Park, Florida




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Condo/	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Reinsurer’s	 	 	 	 	 	 	Number of	 	 	 	 	 	 	 	 	 	 	 	 	 	Dwelling/	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Per	 	 	 	 	 	 	Full	 	 	 	 	 	Annual	 	 	MHO	 	 	Homeowner/	 	Annual	 	 	Quarterly	 	 	 	 	 
	 	 	Coverage	 	Occurrence	 	 	Company’s	 	 	Reinstate-	 	Reinsurer’s	 	 	Minimum	 	 	Premium	 	 	Premium	 	Deposit	 	 	Deposit	 	 	 	 	 
	Layer	 	Percent	 	Limit	 	 	Retention	 	 	ments	 	Annual Limit	 	 	Premium	 	 	Rate	 	 	Rate	 	Premium	 	 	Premium	 	 	 	 	 
	 
	First	 	100%	 	$	3,500,000	 	 	$	3,500,000	 	 	1	 	$	7,000,000	 	 	$	1,260,000	 	 	 	3.644	%	 	1.855%	 	$	1,575,000	 	 	$	393,750	 	 	 	 	 
	Second	 	100%	 	$	13,000,000	 	 	$	7,000,000	 	 	1	 	$	26,000,000	 	 	$	3,640,000	 	 	 	10.526	%	 	5.358%	 	$	4,550,000	 	 	$	1,137,500	 	 	 	 	 
	Third	 	100%	 	$	15,000,000	 	 	$	20,000,000	 	 	1	 	$	30,000,000	 	 	$	2,940,000	 	 	 	8.502	%	 	4.327%	 	$	3,675,000	 	 	$	918,750	 	 	 	 	 
	Fourth	 	100%	 	$	25,000,000	 	 	$	35,000,000	 	 	1	 	$	50,000,000	 	 	$	2,400,000	 	 	 	6.940	%	 	3.532%	 	$	3,000,000	 	 	$	750,000	 	 	 	 	 
	Fifth	 	100%	 	$	60,000,000	 	 	$	60,000,000	 	 	1	 	$	120,000,000	 	 	$	4,320,000	 	 	 	12.492	%	 	6.358%	 	$	5,400,000	 	 	$	1,350,000	 	 	 	 	 
	Sixth	 	100%	 	$	65,000,000	 	 	$	120,000,000	 	 	1	 	$	130,000,000	 	 	$	3,640,000	 	 	 	10.526	%	 	5.358%	 	$	4,550,000	 	 	$	1,137,500	 	 	 	 	 






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