exv10w9



 






Exhibit
10.9




STATE BOARD OF ADMINISTRATION

OF FLORIDA

1801 Hermitage Boulevard-Suite 100

Tallahassee, Florida 332308

(850) 488-4406




Post Office Box 13300

32317-3300




REIMBURSEMENT CONTRACT

Effective: June 1, 2005

(Contract)




between




MOBILE USA INSURANCE COMPANY

Pinellas Park, FL




NAIC # 32760




and




THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) WHICH ADMINISTERS THE FLORIDA HURRICANE
CATASTROPHE FUND (FHCF)



PREAMBLE



The Legislature of the State of Florida has enacted Section 215.555, Florida Statutes “Statute”,
which directs the SBA to administer the FHCF. This Contract is subject to the Statute and to any
administrative rule adopted pursuant thereto, and is not intended to be in conflict therewith.



In consideration of the promises set forth in this Contract, the parties agree as follows:



ARTICLE I — SCOPE OF AGREEMENT



As a condition precedent to the SBA’s obligations under this Contract, the Company, an Authorized
Insurer or an entity writing Covered Policies under Section 627.351, Florida Statutes, in the State
of Florida, shall report to the SBA in a specified format the business it writes which is described
in this Contract as Covered Policies.



The terms of this Contract shall determine the rights and obligations of the parties. This Contract
provides reimbursement to the Company under certain circumstances, as described herein, and does
not provide or extend insurance or reinsurance coverage to any person, firm, corporation or other
entity. The SBA shall reimburse the Company for its Ultimate Net Loss on Covered Policies in excess
of the Company’s Retention as a result of each Loss Occurrence commencing during the Contract Year,
to the extent funds are available, all as hereinafter defined.





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ARTICLE II — PARTIES TO THE CONTRACT



This Contract is solely between the Company and the SBA which administers the FHCF. In no instance
shall any insured of the Company or any claimant against an insured of the Company, or any other
third party, have any rights under this Contract, except as provided in Article XIV. The SBA will
only disburse funds to the Company, except as provided for in Article XIV of this Contract.




ARTICLE III — TERM



This Contract shall apply to Loss Occurrences which commence during the period from 12:01 a.m.,
Eastern Time, June 1, 2005, to 12:01 a.m., Eastern Time, June 1, 2006 (Contract Year).



The Company must designate a coverage level, make the required selections, and return this fully
executed Contract (two originals) to the FHCF Administrator so that the Contract is received by the
FHCF Administrator no later than 5 p.m., Central Time, June 1, 2005. Failure to do so will result
in a referral to the Office of Insurance Regulation within the Department of Financial Services for
administrative action. Furthermore, the Company’s coverage level under this Contract will be deemed
as follows:




(1) For Companies that are a member of a National Association of Insurance Commissioners
(NAIC) group, the same coverage level selected by the other Companies of the same NAIC group
shall be deemed. If executed Contracts for none of the members of an NAIC group have been
received by the FHCF Administrator, the coverage level from the prior Contract Year shall be
deemed.



(2) For Companies that are not a member of an NAIC group under which other Companies are
active participants in the FHCF, the coverage level from the prior Contract Year shall be

deemed.



(3) For New Participants that are a member of an NAIC group, the same coverage level selected
by the other Companies of the same NAIC group shall be deemed.



(4) For New Participants, as that term is defined in Article V(21) herein, that are not a member of
an NAIC group under which other Companies are active participants in the FHCF, the 45% coverage
level shall be deemed.


Pursuant to the terms of this Contract, the SBA shall not be liable for Loss Occurrences which
commence after the effective time and date of expiration or termination. Should this Contract
expire or terminate while a Loss Occurrence covered hereunder is in progress, the SBA shall be
responsible for such Loss Occurrence in progress in the same manner and to the same extent it would
have been responsible had the Contract expired the day following the conclusion of the Loss
Occurrence in progress.




ARTICLE IV — LIABILITY OF THE FHCF





	(1)	 	The SBA shall reimburse the Company, with respect to each Loss Occurrence commencing during the Contract Year for the “Reimbursement Percentage” elected, this percentage times the
amount of Ultimate Net Loss paid by the Company in excess of the Company’s Retention, plus 5%
of the reimbursed losses for Loss Adjustment Expense Reimbursement.
	 
	(2)	 	The Reimbursement Percentage will be 45% or 75% or 90%, at the Company’s option as elected under ARTICLE XVIII herein.
	 
	(3)	 	The aggregate liability of the FHCF with respect to all Reimbursement Contracts covering this contract year shall not exceed the limit set forth under Section 215.555(4)(c)1., Florida
Statutes. For specifics regarding loss reimbursement calculations, see section (3)(c) of
ARTICLE X herein.
	 
	(4)	 	Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources.
	 
	(5)	 	After the end of each calendar year, the SBA shall notify insurers of the estimated Borrowing Capacity and the Balance of the Fund as of December 31. In May and October of each year, the




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	 	 	SBA shall publish in the Florida Administrative Weekly a statement of the FHCF’s estimated
Borrowing Capacity and the projected Balance of the Fund as of December 31.






	(6)	 	The obligation of the SBA with respect to all Contracts covering a particular Contract Year
shall not exceed the Balance of the Fund as of December 31 of that Contract Year, together with the
maximum amount the SBA is able to raise through the issuance of revenue bonds or other means
available to the SBA under Section 215.555, Florida Statutes, up to the limit in accordance with
Section 215.555(4)(c)1., Florida Statutes. The obligations and the liability of the SBA are more
fully described in Rule 19-8.013, Florida Administrative Code (F.A.C.). If Reimbursement
Premiums are used for debt service in the event of a temporary shortfall in the collection of
emergency assessments, then the amount of the Premiums so used will be reimbursed to the SBA
when sufficient emergency assessments are received.





ARTICLE V — DEFINITIONS





	(1)	 	Actual Claims-Paying Capacity of the FHCF






This term means the sum of the Balance of the Fund as of December 31 of a Contract Year, plus any
reinsurance purchased by the FHCF, plus the amount the SBA is able to raise through the issuance of
revenue bonds up to the limit in accordance with Section 215.555(4)(c)1. and (6), Florida Statutes.




	(2)	 	Actuarially Indicated






This term means, with respect to Premiums paid by Companies for reimbursement provided by the
FHCF, an amount determined in accordance with the definition provided in Section 215.555(2)(a),
Florida Statutes.




	(3)	 	Additional Living Expense (ALE)






ALE losses covered by the FHCF are not to exceed 40 percent of the insured value of a Residential
Structure or its contents based on the coverage provided in the policy. Fair rental value, loss of use,
loss of rents, or business interruption losses are not covered by the FHCF.




	(4)	 	Administrator






This term means the entity with which the SBA contracts to perform administrative tasks associated
with the operations of the FHCF. The Administrator is Paragon Strategic Solutions Inc., 3600
American Boulevard West, Suite 700, Minneapolis, Minnesota 55431. The telephone number is
(800) 689-3863, and the facsimile number is (800) 264-0492.




	(5)	 	Authorized Insurer






This term is defined in Section 624.09(1), Florida Statutes.




	(6)	 	Borrowing Capacity






This term means the amount of funds which are able to be raised by the issuance of revenue bonds or
through other financing mechanisms, less bond issuance expenses and reserves.




	(7)	 	Citizens Property Insurance Corporation (Citizens)






This term means the entity formed under Section 627.351(6), Florida Statutes and refers to both
Citizens Property Insurance Corporation High Risk Account and Citizens Property Insurance
Corporation Personal Lines and Commercial Lines Accounts.




	(8)	 	Contract






This term means this Reimbursement Contract for the current Contract Year.




	(9)	 	Covered Event






This term means any one storm declared to be a hurricane by the National Hurricane Center, which
causes insured losses in Florida, both while it is still a hurricane and throughout any subsequent
downgrades in storm status by the National Hurricane Center. Any storm, including a tropical
storm, which does not become a hurricane is not a Covered Event.




	(10)	 	Covered Policy or Covered Policies






	 	(a)	 	Covered Policy, as defined in Section 215.555(2)(c), Florida Statutes, is further clarified to
mean only that portion of a binder, policy or contract of insurance that insures real or personal
property located in the State of Florida to the extent such policy insures a Residential Structure,




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	 	 	 	as defined in definition (27) herein, or the contents of a Residential Structure, located in the
State of Florida, or ALE coverage as defined in definition (3) herein.
	 
	 	(b)	 	Due to the specialized nature of the definition of Covered Policies, Covered Policies are not
limited to only one line of business in the Company’s annual statement required to be filed by Section 624.424, Florida Statutes. Instead, Covered Policies are found in several lines of
business on the Company’s annual statement. Covered Policies will at a minimum be reported
in the Company’s statutory annual statement as:






	 	—	 	Fire
	 
	 	—	 	Allied Lines
	 
	 	—	 	Farmowners Multiple Peril
	 
	 	—	 	Homeowners Multiple Peril
	 
	 	—	 	Commercial Multiple Peril (non liability portion, covering condominiums and
apartments)
	 
	 	—	 	Inland Marine






Note that where particular insurance exposures, e.g. mobile homes, are reported on an annual

statement is not dispositive of whether or not the exposure is a Covered Policy.




	 	(c)	 	This definition applies only to the first-party property section of a policy pertaining strictly to the structure, its contents, appurtenant structures, or ALE coverage.
	 
	 	(d)	 	Covered Policy also includes any collateral protection insurance policy covering personal residences which protects both the borrower’s and the lender’s financial interest, in an
amount
at least equal to the coverage for the dwelling in place under the lapsed homeowner’s
policy, if
such policy can be accurately reported as required in Section 215.555(5), Florida Statutes.
A
Company will be deemed to be able to accurately report data if the required data, as
specified in
the Premium Formula adopted in Section 215.555(5), Florida Statutes, is available.






(e)    See Article VI of this Contract for specific exclusions.




	(11)	 	Deductible Buy-Back Policies






This term means a specific policy that provides coverage to a policyholder for some portion of the
policyholder’s deductible under a policy issued by another insurer.




	(12)	 	Estimated Claims-Paying Capacity of the FHCF






This term means the sum of the projected Balance of the Fund as of December 31 of a Contract
Year, plus any reinsurance purchased by the FHCF, plus the most recent estimate of the
Borrowing
Capacity of the FHCF, determined pursuant to Section 215.555(4)(c), Florida Statutes.




	(13)	 	Excess Policies






This term, for the purposes of this Contract, means a policy that provides insurance
protection for
large commercial property risks that provides a layer of coverage above a primary layer (which is
insured by a different insurer) that acts much the same as a very large deductible.




	(14)	 	Florida Department of Financial Services (Department)






This term means the Florida regulatory agency, created pursuant to Section 20.121, Florida
Statutes, which is charged with regulating the Florida insurance market and administering the
Florida Insurance Code.




	(15)	 	Florida Insurance Code




This term means those chapters identified in Section 624.01, Florida Statutes, which are designated
as the Florida Insurance Code.





	(16)	 	Formula or the Premium Formula






This term means the Formula approved by the SBA for the purpose of determining the Actuarially
Indicated Premium to be paid to the FHCF. The Premium Formula is defined as an approach or
methodology which leads to the creation of premium rates. The resulting rates are therefore
incorporated as part of the Premium Formula.



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	(17)	 	Fund Balance or Balance of the Fund as of December 31






These terms mean the “Net assets: Unrestricted” as indicated on the unconsolidated FHCF
Statement of Net Assets for the then current Contract Year, to which is added: reported FHCF
losses (including Loss Adjustment Expense) for the then current Contract Year, whether paid or
unpaid by FHCF, as of December 31, and from which is subtracted: any reinsurance recovered
prior
to, or recoverable as of, December 31; any obligations paid or expected to be paid with bonding
proceeds or receipts from emergency assessments; amounts needed for administration for the then
current State of Florida fiscal year which have not been spent and which are not reflected on
the
FHCF Statement of Net Assets; and the amount of undispersed mitigation funds appropriated for
the then current State of Florida fiscal year.




	(18)	 	Insurer Group






For purposes of the coverage option election in Section 215.555(4)(b), Florida Statutes,
Insurer
Group means the group designation assigned by the National Association of Insurance
Commissioners (NAIC) for purposes of filing consolidated financial statements. A Company is a
member of a group as designated by the NAIC until such Company is assigned another group
designation or is no longer a member of a group recognized by the NAIC.




	(19)	 	Loss Occurrence






This term means the sum of individual insured losses incurred under Covered Policies resulting
from the same Covered Event. “Losses” means direct incurred losses under Covered Policies and
excludes Loss Adjustment Expenses.




	(20)	 	Loss Adjustment Expense Reimbursement






	 	(a)	 	Loss Adjustment Expense Reimbursement shall be 5% of the reimbursed losses under this
Contract as provided in Article IV, pursuant to Section 215.555(4)(b)1., Florida Statutes.
	 
	 	(b)	 	To the extent that loss reimbursements are limited to the Payout Multiple applied to each
Company, the 5% Loss Adjustment Expense is included in the total Payout Multiple applied to
each Company.






	(21)	 	New Participant(s)






This term means all Companies which begin writing Covered Policies on or after the
beginning of
the Contract Year. A Company that removes exposure from either Citizens entity, as that
term is
defined in (7) above, pursuant to an assumption agreement effective on or after June 1 and had

written no other Covered Policies before June 1 is also considered a New Participant.




	(22)	 	Office of Insurance Regulation






This term means that office within the Department of Financial Services and which was created
in Section 20.121(3), Florida Statutes.




	(23)	 	Payout Multiple






This term means the multiple as calculated in accordance with Section 215.555(4)(c), Florida
Statutes, which is derived by dividing the Claims-Paying Capacity of the FHCF by the total
industry Reimbursement Premium for the FHCF for the Contract Year billed as of December 31 of
the Contract Year. The final Payout Multiple is determined once Reimbursement Premiums have
been billed as of December 31 and the amount of bond proceeds has been determined.




	(24)	 	Premium





     This term means the same as Reimbursement Premium.




	(25)	 	Projected Payout Multiple






The Projected Payout Multiple is used to calculate a Company’s projected payout pursuant
to
Section 215.555(4)(d)2.b., Florida Statutes. The Projected Payout Multiple is derived by
dividing
the estimated single season Claims-Paying Capacity of the FHCF by the estimated total
industry
Reimbursement Premium for the FHCF for the Contract Year. The Company’s Reimbursement
Premium as paid to the SBA for the Contract Year is multiplied by the Projected Payout Multiple
to
estimate the Company’s coverage from the FHCF for the Contract Year.



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	(26)	 	Reimbursement Premium






This term means the Premium determined by multiplying each $1,000 of insured value reported by
the Company in accordance with Section 215.555(5)(b), Florida Statutes, by the rate as derived
from the Premium Formula, as described in Rule 19-8.028, F.A.C.




	(27)	 	Residential Structures






This term means dwelling units used as a home or residence for other than transient occupancy,
as
that term is defined in Section 83.43(10), Florida Statutes. These include the primary
structure and
appurtenant structures insured under the same policy and any other structures covered under
endorsements associated with a policy covering a residential structure, the principal function
of
which at the time of loss was as a primary or secondary residence. Covered Residential
Structures
do not include any structures listed under Article VI herein.




	(28)	 	Retention






The Company’s Retention means the amount of hurricane losses incurred by the Company below
which the Company is not entitled to reimbursement from the FHCF. The Company is eligible for
reimbursement only after its paid covered losses exceed its full Retention for each event. The
Company’s Retention is established in accordance with the provisions of Section 215.555(2)(e),
Florida Statutes, and shall be determined by multiplying the Retention Multiple by the
Company’s
Reimbursement Premium for the Contract Year.




	(29)	 	Retention Multiple






	 	(a)	 	The Retention Multiple is applied to the Company’s Reimbursement Premium to determine
the Company’s Retention. The Retention Multiple for the 2005-2006 Contract Year shall be
equal to $4.5 billion, adjusted based upon the reported exposure for the 2004/2005
Contract
Year divided by the estimated total industry Reimbursement Premium at the 90%

reimbursement percentage level for the Contract Year as determined by the SBA.
	 
	 	(b)	 	The Retention Multiple as determined under (29)(a) above shall be adjusted to reflect the
reimbursement percentage elected by the Company under this Contract as follows:






	 	1.	 	If the Company elects a 90% reimbursement percentage, the adjusted Retention Multiple
is
100% of the amount determined under (29)(a) above;
	 
	 	2.	 	If the Company elects a 75% reimbursement percentage, the adjusted Retention Multiple
is
120% of the amount determined under (29)(a) above; or
	 
	 	3.	 	If the Company elects a 45% reimbursement percentage, the adjusted Retention Multiple
is
200% of the amount determined under (29)(a) above.






	(30)	 	Ultimate Net Loss






	 	(a)	 	This term means all losses of the Company under Covered Policies, prior to the application
of
the Company’s FHCF Retention and reimbursement percentage, and excluding loss
adjustment expense, arising from each Loss Occurrence during the Contract Year, provided,
however, that the Company’s loss shall be determined in accordance with the deductible
levels
reported to the FHCF for the exposure sustaining the loss.
	 
	 	(b)	 	Salvages and all other recoveries, excluding reinsurance recoveries, shall be first
deducted
from such loss to arrive at the amount of liability attaching hereunder.
	 
	 	(c)	 	All salvages, recoveries or payments recovered or received subsequent to a loss settlement
under this Contract shall be applied as if recovered or received prior to the aforesaid
settlement
and all necessary adjustments shall be made by the parties hereto.
	 
	 	(d)	 	Nothing in this clause shall be construed to mean that losses under this Contract are not
recoverable until the Company’s Ultimate Net Loss has been ascertained.
	 
	 	(e)	 	The SBA shall be subrogated to the rights of the Company to the extent of its reimbursement
of the Company. The Company agrees to assist and cooperate with the SBA in all respects as
regards such subrogation. The Company further agrees to undertake such actions as may be
necessary to enforce its rights of salvage and subrogation, and its rights, if any,
against other
insurers as respects any claim, loss, or payment arising out of a Covered Event.




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ARTICLE VI – EXCLUSIONS



This Contract does not provide reimbursement for:





	(1)	 	Any losses not defined as being within the scope of a Covered Policy.
	 
	(2)	 	Any policy which excludes wind or hurricane coverage.
	 
	(3)	 	Any Excess Policy or Deductible Buy-Back Policy that requires individual ratemaking.
	 
	(4)	 	Any liability of the Company attributable to losses for fair rental value, loss of use, loss of
rents, or
business interruption.
	 
	(5)	 	Any collateral protection policy that does not meet the definition of Covered Policy as defined
in
Article V(10)(d) herein.
	 
	(6)	 	Any reinsurance assumed by the Company.

(7) Any exposure for: hotels, motels, timeshares, or other similar structures that are rented out
daily,
weekly, or monthly; homeowner associations, if no habitational structures are insured under the
policy; shelters, camps or retreats; vacant properties insured under a commercial policy; and
boats or
related equipment insured under a separate policy or endorsement.
	 
	(8)	 	Commercial healthcare facilities and nursing homes; however, a nursing home which is an
integral
part of a retirement community consisting primarily of habitational structures that are not
nursing
homes will not be subject to this exclusion.
	 
	(9)	 	Any exposure under commercial policies covering only appurtenant structures or structures that
do
not function as a habitational structure (e.g. a policy covering only the pool of an apartment
complex).
	 
	(10)	 	Personal contents in a commercial storage facility covered under a policy that covers only
those
personal contents.
	 
	(11)	 	Policies covering only Additional Living Expense.
	 
	(12)	 	Any liability of the Company for extra contractual obligations and excess of original policy
limits
liabilities.
	 
	(13)	 	Losses in excess of the sum of the Balance of the Fund as of December 31 of the Contract Year
and
the amount the SBA is able to raise through the issuance of revenue bonds or by the use of
other
financing mechanisms, up to the limit pursuant to Section 215.555(4)(c), Florida Statutes.
	 
	(14)	 	Any liability assumed by the Company from Pools, Associations, and Syndicates. Exception:
Covered Policies assumed from Citizens under the terms and conditions of an executed assumption
agreement between the Authorized Insurer and Citizens are covered by this Contract.
	 
	(15)	 	All liability of the Company arising by contract, operation of law, or otherwise, from its
participation
or membership, whether voluntary or involuntary, in any insolvency fund. “Insolvency fund”
includes any guaranty fund, insolvency fund, plan, pool, association, fund or other
arrangement,
howsoever denominated, established or governed, which provides for any assessment of or payment
or assumption by the Company of part or all of any claim, debt, charge, fee, or other
obligation of an
insurer, or its successors or assigns, which has been declared by any competent authority to be
insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other
obligation in whole or in part.
	 
	(16)	 	Any liability of the Company for loss or damage caused by or resulting from nuclear reaction,
nuclear radiation, or radioactive contamination from any cause, whether direct or indirect,
proximate
or remote, and regardless of any other cause or event contributing concurrently or in any other
sequence to the loss.
	 
	(17)	 	The FHCF does not provide coverage for water damage which is generally excluded under property
insurance contracts and has been defined to mean flood, surface water, waves, tidal water,
overflow
of a body of water, storm surge, or spray from any of these, whether or not driven by wind.
	 
	(18)	 	Specialized Fine Arts Risks as defined in Rule 19-8.028(4)(d), F.A.C.




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ARTICLE VII — MANAGEMENT OF CLAIMS AND LOSSES



The Company shall investigate and settle or defend all claims and losses. All payments of claims or
losses by the Company within the terms and limits of the appropriate coverage parts of Covered
Policies
shall be binding on the SBA, subject to the terms of this Contract, including the provisions in
Article XIII
relating to inspection of records and examinations.




ARTICLE VIII – LOSS REIMBURSEMENT ADJUSTMENTS





	(1)	 	Offsets






The SBA reserves the right to offset amounts payable to the SBA from the Company against any
reimbursement or advance amounts due and payable to the Company from the SBA as a result of the
liability of the SBA.




	(2)	 	Reimbursement Adjustments






Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the right to seek the
return of
excess loss reimbursements or advances which have been paid to the Company along with interest
thereon. Excess loss reimbursements or advances are those payments or advances made to the
Company by the SBA that are in excess of the Company’s coverage under the Contract Year.
Excess loss reimbursements or advances may result from adjustments to the Projected Payout
Multiple or the Payout Multiple, incorrect exposure (Data Call) submissions or resubmissions,
incorrect calculations of Reimbursement Premiums or Retentions, incorrect Proof of Loss
Reports,
incorrect calculation of reinsurance recoveries, or subsequent readjustment of policyholder
claims,
including subrogation and salvage, or any combination of the foregoing. The Company will be
sent
an invoice showing the due date for adjustments along with the interest due thereon through the
due
date. The applicable interest rate for interest credits, and for interest charges for
adjustments beyond
the Company’s control, will be the average rate earned by the SBA for the FHCF for the first
five
months of the Contract Year. The applicable interest rate for interest charges due to
adjustments
resulting from incorrect exposure submissions or Proof of Loss Reports will accrue at this rate
plus
5%. Interest will continue to accrue if not paid by the due date.



ARTICLE IX — REIMBURSEMENT PREMIUM





	(1)	 	The Company shall, in a timely manner, pay the SBA its Reimbursement Premium for the Contract
Year. The Reimbursement Premium for the Contract Year shall be calculated in accordance with
Section 215.555, Florida Statutes, with any rules promulgated thereunder, and with Article
X(2).
	 
	(2)	 	Since the calculation of the Actuarially Indicated Premium assumes that the Companies will pay
their Reimbursement Premiums timely, interest charges will accrue under the following
circumstances. A Company may choose to estimate its own Premium installments. However, if the
Company’s estimation is less than the provisional Premium billed, an interest charge will
accrue on
the difference between the estimated Premium and the final Premium. If a Company estimates its
first installment, the Administrator shall bill that estimated Premium as the second
installment as
well, which will be considered as an estimate by the Company. No interest will accrue regarding
any provisional Premium if paid as billed by the FHCF’s Administrator, except in the case of an
estimated second installment as set forth in this Article. Also, if a Company makes an
estimation
that is higher than the provisional Premium billed but is less than the final Premium, interest
will not
accrue. If the Premium payment is not received from a Company when it is due, an interest
charge
will accrue on a daily basis until the payment is received. Interest will also accrue on
Premiums
resulting from submissions or resubmissions finalized after December 1 of the Contract Year. An
interest credit will be applied for any Premium which is overpaid as either an estimate or as a
provisional Premium. Interest shall not be credited past December 1 of the Contract Year. The
applicable interest rate for interest credits will be the average rate earned by the SBA for
the FHCF




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	 	 	for the first five months of the Contract Year. The applicable interest rate for interest
charges will
accrue at this rate plus 5%.





ARTICLE X — REPORTS AND REMITTANCES





	(1)	 	Exposures






	 	(a)	 	If the Company writes Covered Policies before June 1 of the Contract Year, the Company
shall
report to the SBA, unless otherwise provided in Rule 19-8.029, F.A.C., no later than the
statutorily required date of September 1 of the Contract Year, by ZIP Code or other limited
geographical area as specified by the SBA, its insured values under Covered Policies as of
June 30 of the Contract Year as outlined in the annual reporting of insured values form,
FHCFD1A (Data Call) adopted for the Contract Year under Rule 19-8.029, F.A.C., and other
data or information in the format specified by the SBA.
	 
	 	(b)	 	If the Company first begins writing Covered Policies on or after June 1 but prior to
December 1
of the Contract Year, the Company shall report to the SBA, no later than March 1 of the
Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its
insured values under Covered Policies as of December 31 of the Contract Year as outlined in
the Supplemental Instructions for New Participants section of the Data Call adopted for the
Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format
specified by the SBA.
	 
	 	(c)	 	If the Company first begins writing Covered Policies on or after December 1 but through and
including May 31 of the Contract Year, the Company shall not report its exposure data for
the
Contract Year to the SBA.
	 
	 	(d)	 	The requirement that a report is due on a certain date means that the report shall be in
the
physical possession of the FHCF’s Administrator in Minneapolis no later than 5 p.m. on the
due date. If the applicable due date is a Saturday, Sunday or legal holiday, then the
actual due
date will be the day immediately following the applicable due date which is not a Saturday,
Sunday or legal holiday. For purposes of the timeliness of the submission, neither the
United
States Postal Service postmark nor a postage meter date is in any way determinative.
Reports
sent to the SBA in Tallahassee, Florida, will be returned to the sender. Reports not in the
physical possession of the FHCF’s Administrator by 5 p.m., Central Time, on the applicable
due date are late.
	 
	 	(e)	 	Pursuant to the provisions of Section 215.557, Florida Statutes, the reports of insured
values
under Covered Policies by ZIP Code submitted to the SBA pursuant to Section 215.555,
Florida
Statutes, are confidential and exempt from the provisions of Section 119.07(1), Florida
Statutes,
and Section 24(a), Art. I of the State Constitution.






	(2)	 	Reimbursement Premium






	 	(a)	 	If the Company writes Covered Policies before June 1 of the Contract Year, the Company
shall
pay the FHCF its Reimbursement Premium in installments due on or before August 1,
October 1, and December 1 of the Contract Year in amounts to be determined by the FHCF.
However, if the Company’s Reimbursement Premium for the prior Contract Year was less than
$5,000, the Company’s full provisional Reimbursement Premium, in an amount equal to the
Reimbursement Premium paid in the prior year, shall be due in full on or before August 1 of
the
Contract Year. The Company will be invoiced for amounts due, if any, beyond the provisional
Reimbursement Premium payment, on or before December 1 of the Contract Year. In addition,
if a company has been placed under regulatory supervision by a State or control of the
Company has been transferred through any legal or regulatory proceeding to a state
regulator or
court appointed receiver or rehabilitator (referred to in the aggregate as “State action”),
the full
annual provisional Reimbursement Premium as billed and any outstanding balances will be due
on August 1, or the date that such State action occurs after August 1 and before May 31 of
the
Contract Year.




9









 






	 	(b)	 	A New Participant that first begins writing Covered Policies on or after June 1 but prior to
December 1 of the Contract Year shall pay the FHCF a provisional Reimbursement Premium of
$1,000 upon execution of this Contract. The Administrator shall calculate the Company’s
actual
Reimbursement Premium for the period based on its actual exposure as of December 31 of the
Contract Year, as reported on or before March 1. To recognize that New Participants have
limited exposure during this period, the actual Premium as determined by processing the
Company’s exposure data shall then be divided in half, the provisional Premium shall be
credited, and the resulting amount shall be the total Premium due for the Company for the
remainder of the Contract Year. However, if that amount is less than $1,000, then the
Company shall pay $1,000. The Premium payment is due no later than May 1 of the Contract
Year. The Company’s Retention and coverage will be determined based on the total Premium
due as calculated above.
	 
	 	(c)	 	A New Participant that first begins writing Covered Policies on or after December 1 but
through and including May 31 of the Contract Year shall pay the FHCF a Reimbursement

Premium of $1,000 upon execution of this Contract.
	 
	 	(d)	 	The requirement that the Reimbursement Premium is due on a certain date means that the
Premium shall be in the physical possession of the FHCF no later than 5 p.m., Eastern Time,
on
the due date applicable to the particular installment. If remitted by check to the FHCF’s
Post
Office Box, the check shall be physically in the Post Office Box 550261, Tampa, FL 33655-
0261, as set out on the invoice sent to the Company. If remitted by check by hand delivery,
the
check shall be physically on the premises of the FHCF’s bank in Tampa, Florida, as set out
on
the invoice sent to the Company. If remitted electronically, the wire transfer shall have
been
completed to the FHCF’s account at its bank in Tampa, Florida, as set out on the invoice
sent to
the Company. If the applicable due date is a Saturday, Sunday or legal holiday, then the
actual
due date will be the day immediately following the applicable due date which is not a
Saturday,
Sunday or legal holiday. For purposes of the timeliness of the remittance, neither the
United
States Postal Service postmark nor a postage meter date is in any way determinative.
Premium
checks sent to the SBA in Tallahassee, Florida, or to the FHCF’s Administrator in
Minneapolis,
Minnesota, will be returned to the sender. Reimbursement Premiums not in the physical
possession of the FHCF by 5 p.m., Eastern Time, on the applicable due date are late.
	 
	 	(e)	 	Except as required by Section 215.555(7)(c), Florida Statutes, or as described in the
following
sentence, Reimbursement Premiums, together with earnings thereon, received in a given
Contract Year will be used only to pay for losses attributable to Covered Events occurring
in
that Contract Year or for losses attributable to Covered Events in subsequent Contract
Years
and will not be used to pay for past losses or for debt service on revenue bonds. Pursuant
to
Section 215.555(6)(a)1., Florida Statutes, Premiums, or earnings thereon, may be used for
payments relating to revenue bonds in the event Emergency Assessments are insufficient. If
Premiums are used for debt service, then the amount of the Premiums so used shall be
returned,
without interest, to the Fund when Emergency Assessments remain available after making
payment relating to the revenue bonds and any other purposes for which Emergency
Assessments were levied.






	(3)	 	Claims and Losses






	 	(a)	 	In General






	 	1.	 	Claims and losses resulting from Loss Occurrences commencing during the Contract Year
shall be reported by the Company and reimbursed by the FHCF as provided herein and in
accordance with the Statute, this Contract, and any rules adopted pursuant to the Statute.
For a Company participating in a quota share primary insurance agreement(s) with Citizens
Property Insurance Corporation High Risk Account, Citizens and the Company shall report
only their respective portion of losses under the quota share primary insurance
agreement(s). Pursuant to Section 215.555(4)(c), Florida Statutes, the SBA is obligated to




10









 






	 	 	 	pay for losses not to exceed the Actual Claims-Paying Capacity of the FHCF, up to the limit
in accordance with Section 215.555(4)(c)1., Florida Statutes, for any one Contract
Year.






	 	(b)	 	Loss Reports






	 	1.	 	At the direction of the SBA, the Company shall report its projected Ultimate Net Loss from
each Loss Occurrence to provide information to the SBA in determining any potential
liability for possible reimbursable losses under the Contract on the Interim Loss
Report,
Form FHCF-L1A, as adopted in Rule 19-8.029, F.A.C.
	 
	 	2.	 	FHCF loss reimbursements will be issued based on Ultimate Net Loss information reported
by the Company on the Proof of Loss Report, Form FHCF-L1B, as adopted in Rule 19-
8.029, F.A.C. To qualify for reimbursement, the Proof of Loss Report must have the
original signatures of two executive officers authorized by the Company to sign the report.
While a Company may submit a Proof of Loss Report requesting reimbursement at any
time following a Loss Occurrence, all Companies shall submit a mandatory Proof of Loss
Report for each Loss Occurrence no earlier than December 15 and no later than December
31 of the Contract Year during which the Covered Event(s) occurs using the most current
data available, regardless of the amount of Ultimate Net Loss or the amount of loss
reimbursements or advances already received. Reports may be faxed only if the Company
does not qualify for a reimbursement.
	 
	 	3.	 	Quarterly thereafter until all claims and losses resulting from a Loss Occurrence are fully
discharged or the Company has received its full coverage under the Contract Year in
which
the Loss Occurrence(s) occurred, the Company shall submit updated Proof of Loss Reports
for each Loss Occurrence, as applicable. If the Company’s Retention must be
recalculated
as the result of an exposure resubmission, and if the recalculated Retention changes
the
FHCF’s reimbursement obligations, then the Company shall submit additional Proof of
Loss Reports for recalculation of the FHCF’s obligations.
	 
	 	4.	 	Annually thereafter, all Companies shall submit a mandatory year-end Proof of Loss Report
for each Loss Occurrence, as applicable, using the most current data available. This
Proof
of Loss Report shall be filed no earlier than December 15 and no later than December 31
of
each year and shall continue until the earlier of the expiration of the commutation
period
described in (3)(d) below or until all claims and losses resulting from the Loss
Occurrence
are fully discharged including any adjustments to such losses due to salvage or other
recoveries.
	 
	 	5.	 	The SBA, except as noted below, will determine and pay, within 30 days or as soon as
practicable after receiving Proof of Loss Reports, the reimbursement amount due based
on
losses paid by the Company to date and adjustments to this amount based on subsequent
quarterly information. The adjustments to reimbursement amounts shall require the SBA
to
pay, or the Company to return, amounts reflecting the most recent determination of
losses.
The FHCF shall have the right to conduct a claims examination prior to the issuance of
any
advances or reimbursements submitted by Companies that have been placed under
regulatory supervision by a State or where control has been transferred through any
legal or
regulatory proceeding to a state regulator or court appointed receiver or
rehabilitator.
	 
	 	6.	 	If a Covered Event occurs during the Contract Year, but after December 31, at the direction
of the SBA, Companies shall file an Interim Loss Report within 30 days after the
Covered
Event and Proof of Loss Reports quarterly thereafter. Subparagraphs 2-5 above regarding
Proof of Loss Reports shall apply.
	 
	 	7.	 	All Proof of Loss Reports received will be compared with the FHCF’s exposure data to
establish the facial reasonableness of the reports. The SBA may also review the results
of
current and prior Contract Year exposure and loss examinations to determine the
reasonableness of the reported losses. Except as noted in paragraph 4. above, Companies
meeting these tests for reasonableness will be scheduled for reimbursement. Companies
not meeting these tests for reasonableness will be handled on a case-by-case basis and
will




11









 






	 	 	 	be contacted to provide specific information regarding their individual book of
business.
The discovery of errors in a Company’s reported exposure under the Data Call may
require
a resubmission of the current Contract Year Data Call which, as the Data Call impacts
the
Company’s premium, retention, and coverage for the Contract Year, will be required
before
the Company’s request for reimbursement or an advance will be fully processed by the
Administrator.






	 	(c)	 	Loss Reimbursement Calculations






	 	1.	 	In general, the Company’s paid Ultimate Net Losses must exceed its full FHCF Retention
	 
	 	 	 	for a specific Covered Event before any reimbursement is payable from the FHCF for that
Covered Event. Each Company sustaining reimbursable losses will receive the amount of
reimbursement due under the Contract up to the amount of the Company’s payout. If more
than one Covered Event occurs in any one Contract Year, any reimbursements due from the
FHCF shall take into account the Company’s Retention for each Covered Event. However,
the Company’s reimbursements from the FHCF for all Covered Events occurring during the
Contract Year shall not exceed, in aggregate, the Projected Payout Multiple or Payout
Multiple, as applicable, times the individual Company’s Reimbursement Premium for the
Contract Year.
	 
	 	2.	 	In determining reimbursements under this Contract, the SBA shall:






	 	a.	 	First, reimburse Companies qualified as limited apportionment companies under
Section 627.351(2)(b)3., Florida Statutes, for the amount (if any) of reimbursement
due under the individual Company’s Contract, but not to exceed the lesser of $10
million or an amount equal to 10 times the individual Company’s Reimbursement
Premium for the Contract Year. This provision does not apply if the projected Balance
of the Fund as of December 31 of the Contract Year, exclusive of any bonding
capacity of the FHCF, exceeds $2 billion. Further, if the Company is a member of an
NAIC group, the Company may not receive reimbursement under this provision if any
other member of the NAIC group has received reimbursement under this provision.
	 
	 	b.	 	Next, reimburse each of the Companies for the amount (if any) of reimbursement due
under the individual Company’s Contract, but not to exceed for all Loss Occurrences,
an amount equal to the Projected Payout Multiple or the Payout Multiple, as
applicable, times the individual Company’s Reimbursement Premium for the Contract
Year. For a limited apportionment company, any amount payable under this provision
shall be reduced by the amount (if any) payable under (a) above.
	 
	 	c.	 	Thereafter, pursuant to Section 215.555(4)(d)2.c., Florida Statutes, establish the
prorated reimbursement level at the highest level for which any remaining fund
balance or bond proceeds (as limited by Section 215.555(4)(c), Florida Statutes) are
sufficient to reimburse entities created pursuant to Section 627.351(6), Florida
Statutes, for reimbursable losses exceeding the amounts payable pursuant to (b) above
for the Contract Year. The proration shall be determined based on each entity’s share
of their aggregate reimbursable losses exceeding the amounts payable pursuant to (b)
above. Any additional reimbursements pursuant to this paragraph shall not include
losses under an entity’s FHCF Retention and will be at the 90% Reimbursement
Percentage. In order to determine the amount available for additional reimbursements,
the SBA will review reported loss information from all Companies and determine that
all Companies which received payments for reimbursable losses but which did not
exceed their projected payout have settled all, or substantially all, of their claims
eligible for reimbursement. The SBA will then determine the remaining amount of
Claims-Paying Capacity available for such additional reimbursements. Such
additional reimbursement amounts shall not be limited due to the transitional
provision
created for the 2004-2005 Contract Year.




12









 












	 	3.	 	Reserve established. When a Covered Event occurs in a subsequent Contract Year when
reimbursable losses are still being paid for a Covered Event in a previous Contract Year, the
SBA will establish a reserve for the outstanding reimbursable losses for the previous
Contract Year, based on the length of time the losses have been outstanding, the amount of
losses already paid, the percentage of incurred losses still unpaid, and any other factors
specific to the loss development of the Covered Events involved.






	 	(d)	 	Commutation






	 	1.	 	Not less than 36 months or more than 60 months after the end of the Contract Year, the
Company shall report to the FHCF all claims and losses, both reported and unreported, for
the Contract Year which are not finally settled and which may be reimbursable losses
under
this Contract. The Company and the SBA or their respective representatives may, by
mutual agreement, determine the capitalized value of all claims and losses, both reported
and unreported, resulting from Loss Occurrences commencing during the Contract Year,
and the Company shall provide the SBA with a copy of a written opinion on such
capitalized value by the Company’s certifying actuary. Payment by the SBA of its portion
of any amount or amounts so mutually agreed and certified by the Company’s certifying
actuary shall constitute a complete and final release of the SBA in respect of all claims
and
losses, both reported and unreported, under this Contract.
	 
	 	2.	 	If agreement on capitalized value cannot be reached within 60 days after the Company
reports its claims and losses to the FHCF, the Company and the SBA may mutually appoint
an actuary or appraiser to investigate, determine and capitalize such claims or losses.
If
both parties then agree, the SBA shall pay its portion of the amount so determined to be
the
capitalized value of such claims or losses.
	 
	 	3.	 	If the parties fail to agree, then any difference shall be settled by a panel of three
actuaries,
one to be chosen by each party and the third by the two so chosen. If either party does
not
appoint an actuary within 30 days, the other party may appoint two actuaries. If the two
actuaries fail to agree on the selection of a third actuary within 30 days of their
appointment, each of them shall name two, of whom the other shall decline one and the
decision shall be made by drawing lots. All the actuaries shall be regularly engaged in
the
valuation of property claims and losses and shall be members of the Casualty Actuarial
Society and of the American Academy of Actuaries. None of the actuaries shall be under
the control of either party to this Contract. Each party shall submit its case to its
actuary
within 30 days of the appointment of the third actuary. The decision in writing of any
two
actuaries, when filed with the parties hereto, shall be final and binding on both
parties.
	 
	 	4.	 	The reasonable and customary expense of the actuaries and of the commutation (as a result
of 2. and 3. above) shall be equally divided between the two parties. Said commutation
shall take place in Tallahassee, Florida, unless some other place is mutually agreed upon
by
the Company and the SBA.






	(4)	 	Advances






	 	(a)	 	In accordance with Section 215.555(4)(e), Florida Statutes, the SBA may make advances for
loss reimbursements as defined herein, at market interest rates, to the Company in
accordance
with Section 215.555(4)(e), Florida Statutes. An advance is an early reimbursement which
allows the Company to continue to pay claims in a timely manner. Advances will be made
based on the Company’s Ultimate Net Loss, on an incurred basis, as reported on a Proof of
Loss Report, and shall include Loss Adjustment Expense Reimbursement as calculated by the
FHCF. In order to be eligible for an advance, the Company must submit its exposure data for
the Contract Year as required under paragraph (1) of this Article. Except as noted below,
advances, if approved, will be made as soon as practicable after the SBA receives a written
request, signed by two officers of the Company, for an advance of a specific amount and any
other information required for the specific type of advance under subparagraph (c) below.
All




13









 






	 	 	 	reimbursements due to a Company shall be offset against any amount of outstanding advances
plus the interest due thereon.
	 
	 	(b)	 	The market interest rate shall be the average rate earned by the SBA for the FHCF for the
first
five months of the Contract Year. All interest charged will commence on the date the SBA
issues a check for an advance and will cease on the date upon which the FHCF has received
the
Company’s Proof of Loss Report(s) for the Covered Event(s) for which the Company qualifies
for reimbursement(s). If such reimbursement(s) are less than the amount of outstanding
advance(s) issued to the Company, interest will continue to accrue on the outstanding
balance
of the advance(s) until subsequent Proof of Loss Reports qualify the Company for
reimbursement under any Covered Event equal to or exceeding the amount of any outstanding
advance(s). If an advance is offset entirely by loss reimbursements before the average rate
earned for the first five months of the Contract Year can be determined, the interest on
the
advance(s) shall be invoiced once the interest rate has been determined. Interest shall be
billed
on a periodic basis. If it is determined that the Company received funds in excess of those
to
which it was entitled, the interest as to those sums will not cease on the date of the
receipt of
the Proof of Loss Report but will continue until the Company reimburses the FHCF for the
overpayment. If it is determined that an excess reimbursement or advance has occurred
before
the average rate earned for the first five months of the Contract Year can be determined,
the
Company shall be invoiced for the amount of the excess reimbursement or advance, and the
interest thereon will be invoiced once the interest rate has been determined.
	 
	 	(c)	 	The specific type of advances enumerated in the Section 215.555, Florida Statutes, follow.






	 	1.	 	Advances to Companies to prevent insolvency, as defined under Article XIV of this
Contract.






	 	a.	 	Section 215.555(4)(e)1., Florida Statutes, provides that the SBA shall advance to the
Company amounts necessary to maintain the solvency of the Company, up to 50
percent of the SBA’s estimate of the reimbursement due to the Company.
	 
	 	b.	 	In addition to the requirements outlined in subparagraph (4)(a) above, the
requirements
for an advance to a Company to prevent insolvency are that the Company demonstrates
that it is likely to qualify for reimbursement, that the Company demonstrates that the
immediate receipt of moneys from the SBA is likely to prevent the Company from
becoming insolvent, and that the Company provides the following information:






	 	 	 	i.Current assets;
	 
	 	 	 	ii.Current liabilities other than liabilities due to the Covered Event;
	 
	 	 	 	iii.Current surplus as to policyholders;
	 
	 	 	 	iv.Estimate of other expected liabilities not due to the Covered Event; and
	 
	 	 	 	v.Amount of reinsurance available to pay claims for the Covered Event under other
reinsurance treaties.






	 	c.	 	The SBA’s final decision regarding an application for an advance to prevent insolvency
shall be based on whether or not, considering the totality of the circumstances,
including the SBA’s obligations to provide reimbursement for all Covered Events
occurring during the Contract Year, granting an advance is essential to allowing the
entity to continue to pay additional claims for a Covered Event in a timely manner.






	 	2.	 	Advances to entities created pursuant to Section 627.351(6), Florida Statutes.






	 	a.	 	Section 215.555(4)(e)2., Florida Statutes, provides that the SBA may advance to an
entity created pursuant to Section 627.351(6), Florida Statutes, up to 90% of the lesser
of the SBA’s estimate of the reimbursement due or the entity’s share of the actual
aggregate Reimbursement Premium for that Contract Year, multiplied by the current
available liquid assets of the FHCF.
	 
	 	b.	 	In addition to the requirements outlined in subparagraph (4)(a) above, the
requirements
for an advance to entities created pursuant to Section 627.351(6), Florida Statutes are




14









 






	 	 	 	that the entity must demonstrate to the SBA that the advance is essential to allow the
entity to pay claims for a Covered Event.






	 	3.	 	Advances to limited apportionment companies.
Section 215.555(4)(e)3., Florida Statutes, provides that the SBA may advance the amount
of estimated reimbursement payable to limited apportionment companies.






	 	(d)	 	In determining whether or not to grant an advance, the SBA:






	 	1.	 	Must determine whether its assets are sufficient and sufficiently liquid to fulfill its
obligations to other Companies prior to granting an advance;
	 
	 	2.	 	Shall review and consider all the information submitted by such Companies;
	 
	 	3.	 	Shall review such Companies’ compliance with all requirements of Section 215.555,
Florida Statutes;
	 
	 	4.	 	Shall consult with all relevant regulatory agencies to seek all relevant information;
	 
	 	5.	 	Shall review the damage caused by the Covered Event and when that Covered Event
occurred; and
	 
	 	6.	 	Shall consider any other factors deemed relevant.






	 	(e)	 	In situations where a Company has been placed under regulatory supervision by a State, or
where control has been transferred through any legal or regulatory proceeding to a state
regulator, court appointed receiver or rehabilitator, or a state insurance guarantee
association,
all requirements of the Company outlined herein shall remain applicable and must be met prior
to the issuance of any advance of reimbursements for which the Company may be eligible to
receive under the Contract.
	 
	 	(f)	 	Any amount advanced by the SBA shall be used by the Company only to pay claims of its
policyholders for the Covered Event or Covered Events which have precipitated the immediate

need to continue to pay additional claims as they become due.






	(5)	 	Delinquent Premium Payments






Failure to submit a Premium or Premium installment when due is a violation of the terms of this
Contract and Section 215.555, Florida Statutes. Interest on late payments shall be due as set
forth in
Article IX(2) of this Contract.




	(6)	 	Inadequate Data Submissions






If exposure data or other information required to be reported by the Company under the terms
of this
Contract is not received by the FHCF in the format specified by the FHCF and is inadequate to
the
extent that the FHCF requires resubmission of data, the Company will be required to pay the
FHCF a
resubmission fee of $1,000. The $1,000 fee is also applicable to exposure resubmissions made
as a
result of examinations of the Company’s exposure and claims data. A resubmission of exposure
data
may delay the processing of the Company’s request for reimbursement or an advance.




	(7)	 	Delinquent Submissions






Failure to submit an exposure submission or resubmission when due is a violation of the terms
of
this Contract and Section 215.555, Florida Statutes.



ARTICLE XI — TAXES



In consideration of the terms under which this Contract is issued, the Company agrees to make no
deduction in respect of the Premium herein when making premium tax returns to the appropriate
authorities. Should any taxes be levied on the Company in respect of the Premium herein, the
Company
agrees to make no claim upon the SBA for reimbursement in respect of such taxes.




ARTICLE XII — ERRORS AND OMISSIONS



Any inadvertent delay, omission, or error on the part of the SBA shall not be held to relieve the
Company
from any liability which would attach to it hereunder if such delay, omission, or error had not
been made.




15









 








ARTICLE XIII — INSPECTION OF RECORDS



The Company shall allow the SBA to inspect, examine, and verify, at reasonable times, all records
of the
Company relating to the Covered Policies under this Contract, including Company files concerning
claims, losses, or legal proceedings regarding subrogation or claims recoveries which involve this
Contract, including premium, loss records and reports involving exposure data on Covered Policies
and
applicable ceded reinsurance contracts. This right by the SBA to inspect, examine, and verify shall
survive the completion and closure of an exposure examination or loss examination file and the
termination of the Contract. The Company shall have no right to re-open an exposure or loss
examination
file once closed and the findings have been accepted by the Company; any re-opening shall be at the
sole
discretion of the SBA. All discovered errors, inadvertent omissions, and typographical errors
associated
with the data reporting of insured values, discovered prior to the closing of the file and
acceptance of the
examination findings by the Company, shall be corrected to reflect the proper values. The Company
shall
retain its records in accordance with the requirements for records retention regarding exposure
reports and
claims reports outlined herein, and in any administrative rules adopted pursuant to Section
215.555,
Florida Statutes. Companies writing covered collateral protection policies, as defined in
definition
(10)(d) of Article V herein, must be able to provide documentation that the policy covers personal
residences, protects both the borrower’s and lender’s interest, and that the coverage is in an
amount at
least equal to the coverage for the dwelling in place under the lapsed homeowner’s policy.





	(1)	 	Examination Requirements for Exposure Verification






The Company shall retain complete and accurate records, in policy level detail, of all exposure
data
submitted to the SBA in any Contract Year until the SBA has completed its examination of the
Company’s exposure submissions. The Company shall also retain complete and accurate records of
any completed exposure examination for any Contract Year in which the Company incurred losses
until the completion of the loss reimbursement examination for that Contract Year. The records
to be
retained shall include the exam file which supports the exposure reported to the SBA and any
other
information which would allow for a complete examination of the Company’s reported exposure
data. The exam file shall be prepared according to the SBA Exam File Specifications outlined in
the
Data Call. The Company must also have available, at the time of the examination, a copy of its
underwriting manual, a copy of its rating manual, and staff to respond to the questions of the
SBA or
its agents. The Company is also required to retain declarations pages and policy applications
to
support reported exposure. To meet the requirement that the application must be retained, the
Company may retain either the actual application or may retain the actual application in an
electronic format.




	(2)	 	Examination Requirements for Loss Reports






The Company shall retain complete and accurate records of all reported losses and/or advances
submitted to the SBA until the SBA has completed its examination of the Company’s reimbursable
losses. The records to be retained are set forth as part of the Proof of Loss Report, Form
FHCF-L1B,
adopted in Rule 19-8.029, F.A.C. The Company must also retain the required exposure exam file
for
the Contract Year in which the loss occurred, and must have available any other information
which
would allow for a complete examination of the Company’s losses.




	(3)	 	Examination Procedures






	 	(a)	 	The FHCF will send an examination notice to the Company providing the commencement date
of the examination, the site of the examination, any accommodation requirements of the
examiner, and the reports and data which must be assembled by the Company and forwarded
to the FHCF upon request. The Company shall be prepared to choose one location in which to
be examined, unless otherwise specified by the SBA.
	 
	 	(b)	 	The reports and data are required to be forwarded to the FHCF as set forth in an
examination
notice letter. The information is then forwarded to the examiner. If the FHCF receives
accurate and complete records as requested, the examiner will contact the Company to inform
the Company as to what policies or other documentation will be required once the examiner is




16









 






	 	 	 	on site. Any records not required to be provided to the examiner in advance shall be made
available at the time the examiner arrives on site.
	 
	 	(c)	 	At the conclusion of the examiner’s work and the management review of the examiner’s
report, findings, recommendations, and work papers, the FHCF will forward a preliminary
draft of the examination report to the Company and require a response from the Company by a
date certain as to the examination findings and recommendations.
	 
	 	(d)	 	If the Company accepts the examination findings and recommendations, and there is no
recommendation for resubmission of the Company’s exposure data, the examination report

will be finalized and the exam file closed.
	 
	 	(e)	 	If the Company disputes the examiner’s findings, the
areas in dispute will be resolved by a
meeting or a conference call between the Company and FHCF management.
	 
	 	(f)1.	 	The recommendation of a loss reimbursement examination could require the Company to
resubmit its loss reports or exposure data.






	 	2.	 	If the recommendation of the examiner is to resubmit the Company’s exposure data for the
Contract Year in question, then the FHCF will send the Company a letter outlining the
process
for resubmission and including a deadline to resubmit. The resubmission will include a data
file to be submitted to the FHCF’s Administrator and an exam file to be submitted to the
offices of the SBA. The resubmission is also required to be accompanied by a detailed
written
description of the specific changes made to the resubmitted data. Once the resubmission is
received by the FHCF’s Administrator, the FHCF’s Administrator calculates a revised
Reimbursement Premium for the Contract Year which has been examined. The SBA shall
then review the resubmission with respect to the examiner’s findings, and accept the
resubmission or contact the Company with any questions regarding the resubmission. Once
the SBA has accepted the resubmission as a sufficient response to the examiner’s findings,
the
FHCF’s Administrator will send the Company an invoice for any Reimbursement Premium
and interest due or to refund Reimbursement Premium, as the case may be. Once the
resubmission has been approved, the exam file is closed.
	 
	 	3.	 	If the recommendation of the examiner is either to resubmit the Company’s exposure data for
the Contract Year in question or giving the option to pay the estimated Premium difference,
then the FHCF will send the Company a letter outlining the process for resubmission or for
paying the estimated Premium difference and including a deadline for the resubmission or the
payment to be received by the FHCF’s Administrator. If the Company chooses to resubmit,
the same procedures outlined in Article XIII(3)(f)2. apply.






	 	(g)	 	If the Company continues to dispute the examiner’s findings and/or recommendations and no
resolution of the disputed matters is obtained through discussions between the Company and
FHCF management, then the process within the SBA is at an end and further administrative
remedies may be obtained under Chapter 120, Florida Statutes.
	 
	 	(h)	 	The examiner’s list of errors is made available in the examination report sent to the
Company.
Given that the examination was based on a sample of the Company’s policies rather than the
whole universe of the Company’s Covered Policy exposure, the error list is not intended to
provide a complete list of errors but is intended to indicate what Covered Policy
information
needs to be reviewed and corrected throughout the Company’s book of Covered Policy
business to ensure more complete and accurate reporting in the resubmission if required and
for any future submissions.






	(4)	 	Costs of the Examinations






The costs of the examinations shall be borne by the SBA. However, in order to remove any
incentive for a Company to delay preparations for an examination, the SBA shall be reimbursed
by
the Company for any examination expenses incurred in addition to the usual and customary costs,
which additional expenses were incurred as a result of the Company’s failure, despite proper
notice,
to be prepared for the examination or as a result of a Company’s failure to provide requested



17









 






information. All requested information must be complete and accurate. The Company shall be
notified of any administrative remedies which may be obtained under Chapter 120, Florida
Statutes.



ARTICLE XIV — INSOLVENCY OF THE COMPANY



Company shall notify the FHCF immediately upon becoming insolvent. Pursuant to Section
215.555(4)(g), Florida Statutes, the FHCF is required to pay the “net amount of all reimbursement
moneys” due an insolvent insurer to the Florida Insurance Guaranty Association for the benefit of
Florida
policyholders. For the purpose of this Contract, a Company is insolvent when an order of
liquidation with
a finding of insolvency has been entered by a court of competent jurisdiction.




ARTICLE XV — TERMINATION



The FHCF and the obligations of both parties under this Contract can be terminated only as may be
provided by law or applicable rules.




ARTICLE XVI — VIOLATIONS



Pursuant to the provisions of Section 215.555(10), Florida Statutes, any violation of the terms of
this
Contract by the Company constitutes a violation of the Insurance Code of the State of the Florida.
Pursuant to the provisions of Section 215.555(11), Florida Statutes, the SBA is authorized to take
any
action necessary to enforce any administrative rules adopted pursuant to Section 215.555, Florida
Statutes, and the provisions and requirements of this Contract.




ARTICLE XVII — APPLICABLE LAW





	(1)	 	Applicable Law: This Contract shall be governed by and construed according to the laws of the
State of Florida in respect of any matter relating to or arising out of this Contract.
	 
	(2)	 	Notice of Rights: Pursuant to Chapter 120, Florida Statutes, and the Uniform Rules of
Procedure,
codified as Chapters 28-101 through 28-111, F.A.C., a person whose substantial interests are
affected by a decision of the SBA regarding the FHCF may request a hearing within 21 days shall
have waived his or her right to a hearing. The hearing may be a formal hearing or an informal
hearing pursuant to the provisions of Sections 120.569 and 120.57, Florida Statutes. The
petition
must be filed (received) in the office of the Agency Clerk, General Counsel’s Office, State
Board of
Administration of Florida, P.O. Box 13300, Tallahassee, FL 32317-3300, within the 21 day
period.




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ARTICLE XVIII – REIMBURSEMENT CONTRACT ELECTIONS




Reimbursement Percentage



For purposes of determining reimbursement (if any) due the Company under this Contract and in
accordance with the Statute, the Company has the option to elect a 45% or 75% or 90% reimbursement
percentage under this Contract. If the Company is a member of an NAIC group, all members must elect
the same reimbursement percentage, and the individual executing this Contract on behalf of the
Company,
by placing his or her initials in the box under (a) below, affirms that the Company has elected the
same
reimbursement percentage as all members of its NAIC group. If the Company is an entity created
pursuant to Section 627.351, Florida Statutes, the Company must elect the 90% reimbursement
percentage. The Company shall not be permitted to change its reimbursement percentage during the
Contract Year. The Company shall be permitted to change its reimbursement percentage at the
beginning
of a new Contract Year, but may not reduce its reimbursement percentage if a Covered Event required
the
issuance of revenue bonds, until the bonds have been fully repaid.



The Reimbursement Percentage elected by the Company for the prior Contract Year effective
June 1, 2004 was as follows: Mobile USA Insurance Company – 90%





	(a)	 	NAIC Group Affirmation: Initial the following box if the Company is part of an NAIC Group:





TBM





	(b)	 	Reimbursement Percentage Election: The Company hereby elects the following Reimbursement
Percentage for the Contract Year from 12:01 a.m., Eastern Time, June 1, 2005, to 12:01 a.m.,
Eastern
Time, June 1, 2006, (the individual executing this Contract on behalf of the Company shall
place his
or her initials in the box to the left of the percentage elected for the Company):





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	45%

	 	OR
	 	 	75	%	 	OR
	 	TBM
	 	 	90	%






Reporting Exposure for a Single Structure, with a Mix of Commercial Habitational and
Commercial Non-Habitational Exposure, Written on a Commercial Policy



This section is applicable to all Companies which either have exposure for single structures with a
mix of
commercial habitational and commercial non-habitational exposure written under a Commercial Policy,
or have the authority to write such policies. If the Company does not have the authority to write
this type
of exposure, this section does not apply; initial the N/A box on the next page, which completes
this
ARTICLE. If the Company does write, or has the authority to write, this type of exposure, please
read
and complete the remainder of this ARTICLE.




Commercial-Residential Class Code



If a single structure is used for both habitational and non-habitational purposes and the structure
has a
commercial-residential class code (based on a classification plan on file with and reviewed by the
Administrator), the entire exposure for the structure should be reported to the FHCF under the Data
Call,
and the FHCF will reimburse losses for the entire structure as well.





19









 








Commercial Non-Residential/Business Class Code



If a single structure is used for both habitational and non-habitational purposes and the structure
has a
commercial non-residential or business class code (based on a classification plan on file with and
reviewed by the Administrator), the habitational portion of that structure should be identified and
reported
to the FHCF under the Data Call.



However, in recognition of the unusual nature of commercial structures with incidental habitational
exposure and the hardship some companies may face in having to carve out such incidental
habitational
exposure, as well as the losses to such structures, the FHCF will accommodate these companies by
allowing them to exclude the entire exposure for the single structure from their Data Call
submission,
providing the following two conditions are met:





	(1)	 	The decision to not carve out and report the incidental habitational exposure shall apply to
all such structures insured by the Company; and
	 
	(2)	 	If the incidental habitational exposure is not reported to the FHCF, the Company agrees it
shall not report losses to the structure and the FHCF shall not reimburse any losses to the structure.




Initial the CARVING box below if the Company is able to carve out and report its incidental
habitational
exposure, OR, if this requirement presents a hardship, the Company must communicate its decision to
not
carve out and to not report the incidental exposure by having the individual executing this
Contract on
behalf of the Company placing his or her initials in the NOT CARVING box below. If the Company
does not currently write such policies, but has the authority to write such policies after the
start date of
this Contract, the decision to carve or not carve out the incidental habitational exposure must be
indicated
below.




	 	 	 	 	 	 	 	 	 
	 

	 	OR
	 	TBM
	 	OR	 	 
	 
	 	 	 	 	 	 	 	 
	CARVING

	 	 	 	NOT CARVING
	 	 	 	NA





By initialing the CARVING or NOT CARVING box above, the Company is making an irrevocable
decision for the corresponding Contract Year Data Call submission and any subsequent resubmissions.



Important Note: Since this election will impact your Data Call submission, please share this
decision with the individual(s) responsible for compiling your Data Call
submission.






20









 



ARTICLE XIX – SIGNATURES




Approved by:




	 	 	 	 	 
	Florida Hurricane Catastrophe Fund	 	 
	By:

	 	State Board of Administration of the State of Florida	 	 
	By:
	 	 	 	 
	 

	 	 
	 	 
	 

	 	Coleman Stipanovich
	 	Date
	 

	 	Executive Director	 	 
	 
	 	 	 	 
	Approved as to legality:	 	 
	By:
	 	 	 	 
	 

	 	 
	 	 
	 

	 	Linda Lettera
	 	Date
	 

	 	General Counsel	 	 
	 

	 	FL Bar ID#311911	 	 
	 
	 	 	 	 
	Mobile USA Insurance Company	 	 
	 	 	 
	 

	 	Company	 	 
	 
	 	 	 	 
	By:

	 	   T. Bruce Meyer, Sr VP& Treasurer
	 	5/18/2005
	 

	 	 
	 	 
	 

	 	      Name/Title
	 	Date