exv10w3





EXHIBIT
10.3


PHILADELPHIA INDEMNITY

INSURANCE COMPANY

PHILADELPHIA INSURANCE COMPANY




Agreement No. P304




GENERAL REINSURANCE CORPORATION

A Berkshire Hathaway Company





 









 








TABLE OF CONTENTS




to


PROPERTY FACULTATIVE AGREEMENT OF REINSURANCE

NO. P304

between

PHILADELPHIA INDEMNITY INSURANCE COMPANY

PHILADELPHIA INSURANCE COMPANY

and

GENERAL REINSURANCE CORPORATION




	 	 	 	 	 	 	 	 	 
	Article	 	 	 	 	 	Page #	 
	 
	 	 	 	 	 	 	 	 
	Article I
	 	—	 	SCOPE OF AGREEMENT 	 	 	1	 
	Article II
	 	—	 	PARTIES TO THE AGREEMENT 	 	 	1	 
	Article III
	 	—	 	COMMENCEMENT AND TERMINATION 	 	 	1	 
	Article IV
	 	—	 	BUSINESS SUBJECT TO THIS AGREEMENT 	 	 	2	 
	Article V
	 	—	 	LIABILITY OF THE REINSURER 	 	 	2	 
	Article VI
	 	—	 	ALLOCATION OF ADJUSTMENT EXPENSE 	 	 	3	 
	Article VII
	 	—	 	DEFINITIONS 	 	 	3	 
	Article VIII
	 	—	 	EXCLUSIONS 	 	 	5	 
	Article IX
	 	—	 	OTHER REINSURANCE 	 	 	8	 
	Article X
	 	—	 	REINSURANCE PREMIUM 	 	 	9	 
	Article XI
	 	—	 	RISK REPORTS AND REMITTANCES 	 	 	9	 
	Article XII
	 	—	 	REPORTS AND CLAIM REMITTANCES 	 	 	10	 
	Article XIII
	 	—	 	ERRORS AND OMISSIONS 	 	 	11	 
	Article XIV
	 	—	 	SPECIAL ACCEPTANCES 	 	 	11	 
	Article XV
	 	—	 	MANAGEMENT OF CLAIMS AND LOSSES 	 	 	11	 
	Article XVI
	 	—	 	RECOVERIES 	 	 	11	 
	Article XVII
	 	—	 	TRIA EXCESS RECOVERY 	 	 	11	 
	Article XVIII
	 	—	 	RESERVES AND TAXES 	 	 	12	 
	Article XIX
	 	—	 	OFFSET 	 	 	12	 
	Article XX
	 	—	 	INSPECTION OF RECORDS 	 	 	12	 
	Article XXI
	 	—	 	ARBITRATION 	 	 	13	 
	Article XXII
	 	—	 	INSOLVENCY OF THE COMPANY 	 	 	13	 
	Article XXIII
	 	—	 	ENTIRE AGREEMENT 	 	 	14	 






Attachments




Appendix A

Nuclear Incident Exclusion Clause — Physical Damage




GENERAL REINSURANCE CORPORATION




 









 





PROPERTY FACULTATIVE AGREEMENT OF REINSURANCE

NO. P304




between




PHILADELPHIA INDEMNITY INSURANCE COMPANY

PHILADELPHIA INSURANCE COMPANY

One Bala Plaza, Suite 100

Bala Cynwyd, Pennsylvania 19004

(herein collectively referred to as the “Company”)




and




GENERAL REINSURANCE CORPORATION

a Delaware corporation

having its principal offices at

Financial Centre

695 East Main Street P.O. Box 10350

Stamford, Connecticut 06904-2350

(herein referred to as the “Reinsurer”)



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




Article I — SCOPE OF AGREEMENT



As a condition precedent to the Reinsurer’s obligations under this Agreement, the Company shall
cede to the Reinsurer, subject to the terms of the article entitled RISK REPORTS AND REMITTANCES,
the business described in the article entitled BUSINESS SUBJECT TO THIS AGREEMENT, and the
Reinsurer shall accept such business as reinsurance from the Company. The terms of this Agreement
shall determine the rights and obligations of the parties.




Article II — PARTIES TO THE AGREEMENT



This Agreement is solely between the Company and the Reinsurer. When more than one Company is
named as a party to this Agreement, the first Company named shall be the agent of the other
companies as to all matters pertaining to this. Agreement. Performance of the obligations of each
party under this Agreement shall be rendered solely to the other party. However, if the Company
becomes insolvent, the liability of the Reinsurer shall be modified to the extent set forth in the
article entitled INSOLVENCY OF THE COMPANY. In no instance shall any insured of the Company or any
claimant against an insured of the Company have any rights under this Agreement.




Article III
— COMMENCEMENT AND TERMINATION



This Agreement shall apply to claims and losses insured under new and renewal policies of the
Company becoming effective at and after 12:01 A.M., January 1, 2008 and shall continue in force
until terminated.




GENERAL REINSURANCE CORPORATION

A Berkshire Hathaway Company





 











 




Either party may terminate this Agreement by sending to the other, by certified mail to its
principal office, notice stating the time and date when, not less than 90 days after the date of
mailing of such notice, termination shall be effective. Upon termination of this Agreement, the
Reinsurer shall continue to be liable, with respect to policies in force at the time and date of
termination, for claims and losses resulting from Occurrences taking place until the expiration,
cancellation, or next anniversary date, not to exceed one year, of each such policy of the
Company, whichever occurs first.



When all reinsurance is expired or terminated, the Reinsurer shall return to the Company the
reinsurance premium unearned, if any, calculated on the monthly pro rata basis.




Article IV — BUSINESS SUBJECT TO THIS AGREEMENT



Subject to the terms of the article entitled RISK REPORTS AND REMITTANCES, this Agreement shall
apply to Property Business written by the Company, which is defined as insurance which is
classified in the NAIC form of annual statement as fire, allied lines, inland marine, commercial
multiple peril (property coverages), homeowners multiple peril (property coverages) or automobile
physical damage (comprehensive and collision), except those lines specifically excluded in the
section entitled EXCLUSIONS, on Risks wherever located in the 50 states of the United States of
America including the District of Columbia.



The business subject to this Agreement shall be defined further as Property Business as written on
the Company’s policy forms on file with the Reinsurer.




Article V — LIABILITY OF THE REINSURER



The Reinsurer shall pay to the Company, with respect to each Risk of the Company ceded hereunder,
the amount of Net Loss sustained by the Company in excess of the Company Retention but not
exceeding the Limits of Liability of the Reinsurer as set forth in the Schedule of Reinsurance or
the amount of reinsurance ceded to the Reinsurer on the monthly bordereau report, whichever is
less. However, in no event shall Net Loss include payments made by the Company under “unlimited” or
“non ceded” coverages unless specific limits of liability have been included in the total amount of
insurance reported and ceded on the monthly bordereau reports.




SCHEDULE OF REINSURANCE




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Limits of Liability
	Class of Business	 	Company Retention	 	of the Reinsurer
	 
	 
	Property Business
	 	 	 	 	 	 	 	 
	Risks located in Florida, Hawaii
or Harris County, Texas
	 	$	75,000,000	 	 	$	30,000,000	 
	 
	All other Risks
	 	$	75,000,000	 	 	$	50,000,000	 
	 
	Wood Frame Builders Risks
	 	$	25,000,000	 	 	$	25,000,000	 






GENERAL REINSURANCE CORPORATION




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The liability of the Reinsurer shall not exceed $50,000,000 under this Agreement and all
individual facultative certificates issued by the Reinsurer to the Company during each Agreement
Year that this Agreement is in effect with respect to all Net Loss and Adjustment Expenses
combined arising out of all loss or damage directly or indirectly arising out of, caused by, or
resulting from all Terrorism Occurrences taking place during each Agreement, Year regardless of
any other cause or event contributing to such loss or damage in any way or at any time, or whether
such loss or damage is accidental or intentional.




Article VI — ALLOCATION OF ADJUSTMENT EXPENSE



In addition to payments for its share of Net Loss, the Reinsurer shall pay to the Company a share
of Adjustment Expenses proportionate to the Reinsurer’s share of Net Loss.




Article VII — DEFINITIONS





	 	(a)	 	Company Retention
	 
	 	 	 	This term shall mean the amount the Company and its treaty reinsurers shall
retain for their own account; however, this requirement shall be satisfied if
this amount is retained by the Company or its affiliated companies under
common management or common ownership.
	 
	 	 	 	Recoveries from catastrophe reinsurance shall be deemed not to reduce the
amount required with respect to the Company Retention.
	 
	 	(b)	 	Net Loss
	 
	 	 	 	This term shall mean all payments by the Company within the terms and limits
of its policies in settlement of claims or losses after deduction of salvage
and other recoveries and after deduction of amounts due from all other
reinsurance, except catastrophe reinsurance and except treaty reinsurance
within the Company Retention, whether collectible or not. This term shall not
include Adjustment Expense. If the Company becomes insolvent, this definition
shall be modified to the extent set forth in the article entitled INSOLVENCY
OF THE COMPANY.
	 
	 	(c)	 	Adjustment Expense
	 
	 	 	 	This term shall mean expenditures by the Company within the terms of its
policies in the direct defense of claims and as allocated to an individual
claim or loss (other than for office expenses and for the salaries and
expenses of employees of the Company or of any subsidiary or related or wholly
owned company of the Company) made in connection with the disposition of a
claim, loss, or legal proceeding including investigation, negotiation, and
legal expenses; court costs; prejudgment interest; and postjudgment interest.
	 
	 	(d)	 	Risk
	 
	 	 	 	The Company shall establish what constitutes one Risk provided:





GENERAL REINSURANCE CORPORATION




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	 	(1)	 	A Building and its contents, including time element coverages, shall never
be considered more than one Risk;
	 
	 	(2)	 	When two or more Buildings and their contents are situated at the same
general location, the Company shall identify on its records at the time of
acceptance by the Company those individual Buildings and their contents that are
considered to constitute each Risk; if such identification is not made, each
Building and its contents shall be considered to be a separate Risk;
	 
	 	(3)	 	Multiple general locations shall never be combined and considered one Risk.






	 	(e)	 	Building
	 
	 	 	 	This term shall mean each separately roofed structure enclosed within exterior walls.
	 
	 	(f)	 	Total Insured Value
	 
	 	 	 	This term shall mean the sum total of property values for the Risk ceded according to the
policy form written.
	 
	 	(g)	 	Terrorism Occurrence






	 	(1)	 	An Act of Terrorism means an activity, including the threat of an
activity or any preparation for an activity, that (a) causes either (i) damage to
property, or (ii) injury to persons; and (b) appears to be intended to: (i)
intimidate or coerce a civilian population, or (ii) disrupt any segment of an
economy, or (iii) influence the policy of a government by intimidation or
coercion, or (iv) affect the conduct of a government by destruction,
assassination, kidnapping or hostage-taking, or (v) advance a political,
religious or ideological cause; provided, however, that an Act of Terrorism for
purposes of this definition shall not include any act or threat as described
above perpetrated by an official, employee or agent of a foreign state acting for
or on behalf of such state.
	 
	 	(2)	 	An Act of Terrorism is also deemed to include any act authorized by a
governmental authority for the purpose of preventing, terminating, countering or
responding to any act or threat of terrorism or for the purpose of preventing or
minimizing the consequences of any act or threat of terrorism.






	 	(h)	 	Agreement Year
	 
	 	 	 	This term shall mean each twelve month period commencing on January 1st.





GENERAL REINSURANCE CORPORATION





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Article VIII — EXCLUSIONS




This Agreement shall not apply to:




	 	(a)	 	Business assumed by the Company other than reinsurance assumed from
affiliated companies;
	 
	 	(b)	 	Nuclear incident per the Nuclear Incident Exclusion — Physical Damage -
Reinsurance attached hereto;
	 
	 	(c)	 	Any loss or liability accruing to the Company directly or indirectly from
any insurance written by or through any pool or association including pools or
associations in which membership by the Company is required under any statutes or
regulations;
	 
	 	(d)	 	Any liability of the Company arising from its participation or membership in
any insolvency fund;
	 
	 	(e)	 	Any loss or damage directly or indirectly arising out of, caused by, or
resulting from war, including undeclared or civil war; warlike action by a military
force, including action in hindering or defending against an actual or expected
attack, by any government, sovereign or other authority using military personnel or
other agents; or insurrection, rebellion, revolution, usurped power or action taken
by governmental authority in hindering or defending against any of these. War
includes any activity that would be included as an Act of Terrorism, but for the fact
that such activity was perpetrated by an official, employee or agent of a foreign
state acting for or on behalf of such state. Such loss or damage is excluded
regardless of (i) any other cause or event contributing to such loss or damage in any
way or at any time, or (ii) whether such loss or damage is accidental or intentional.
	 
	 	(f)	 	Business written on a layered basis, whether primary or excess of loss and
business written on a co-indemnity, co-insurance or shared basis;
	 
	 	(g)	 	Business not written 100% by the Company;
	 
	 	(h)	 	Risks or policies written with a deductible or franchise of more than
$100,000; however, this exclusion shall not apply to Risks or policies which provide
a percentage deductible or franchise in connection with windstorm;
	 
	 	(i)	 	Wood Frame Builders Risks which have a Total Insured Value of more than
$50,000,000 and all other Risks which have a Total Insured Value of more than
$200,000,000, unless submitted to the Reinsurer for special acceptance and accepted
by the Reinsurer in accordance with the provisions of the article entitled SPECIAL
ACCEPTANCES;
	 
	 	(j)	 	Insurance against:






	 	(1)	 	Any earth movement (other than sinkhole collapse), such as
earthquake, landslide, mine subsidence or earth sinking, rising





GENERAL
REINSURANCE CORPORATION








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	 	 	 	or shifting; however, this exclusion shall not apply to ensuing loss by fire or
explosion not otherwise excluded;
	 
	 	(2)	 	Volcanic eruption, explosion or effusion; however, this exclusion shall not
apply to ensuing loss by fire or volcanic action not otherwise excluded.






Except for Risks located in the State of California, this exclusion shall not apply to the
coverages of accounts receivable, fine arts, valuable papers or electronic data processing
equipment, media and extra expense when the perils set forth in (1) and (2) above are
written in conjunction with otherwise eligible perils;




	 	(k)	 	Insurance against flood, surface water, waves, tidal waves, overflow of any body of water,
or their spray, all whether driven by wind or not;
	 
	 	(I)	 	Difference in conditions insurance and similar kinds of insurance, howsoever styled;
	 
	 	(m)	 	Insurance against earthquake sprinkler leakage;
	 
	 	(n)	 	Loss, damage, costs or expenses arising out of the release, discharge, dispersal, or escape
of pollutants; the extraction, removal, clean up, containment, monitoring, or detoxification
of pollutants; or the removal, restoration, or replacement of polluted land or water, but this
exclusion does not preclude coverage for loss, damage, costs, or expenses which are covered
under Insurance Services Office basic wordings promulgated on or after April 1, 1986. However,
this exclusion does not apply to any Risk located in a jurisdiction which has not approved the
Insurance Services Office wordings or where other regulatory constraints prohibit the Company
from implementing such wordings. If the Company elects to file an endorsement independent of
ISO, such endorsement will be deemed a suitable substitute provided the Company has submitted
the wording to the Reinsurer and received the Reinsurer’s prior approval. Nevertheless, if the
insured elects to purchase any “buy back” or additional coverage options, such options shall
not be covered hereunder even if such options are provided by or covered under ISO wordings;
	 
	 	(o)	 	Any loss or damage caused by or resulting from:






	 	(1)	 	Explosion of steam boilers, steam pipes, steam engines or steam turbines
owned by, leased by or operated under the control of the insured; however, this
exclusion shall not apply to loss or damage resulting from fire or combustion
explosion, nor to loss or damage caused by or resulting from the explosion of
gases or fuel within the furnace of any fired vessel or within the flues or
passages through which the gases of combustion pass;
	 
	 	(2)	 	Artificially generated electric current, including electric arcing, that
disturbs electrical devices, appliances or wires; however,





GENERAL
REINSURANCE CORPORATION




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	 	 	 	this exclusion shall not apply to ensuing loss by fire not otherwise excluded;
	 
	 	(3)	 	Mechanical breakdown, including rupture or bursting caused by centrifugal
force; however, this exclusion shall not apply to any resulting loss or damage
caused by elevator collision;






	 	(p)	 	Vacant or unoccupied properties;
	 
	 	(q)	 	Losses with respect to overhead transmission and distribution lines (including those used by
cable operators and telecommunications providers) and their supporting structures, other than
those on or within 1,000 feet of the insured premises. However, public utilities extension
and/or suppliers extension and/or contingent business interruption coverage are not subject
to this exclusion, provided these are not part of a transmitters’ or distributors’ policy;
	 
	 	(r)	 	Petrochemical Risks, including oil refining and processing, petrochemical operations,
pipelines, tank farms, gas processing, and any hydrocarbon processing;
	 
	 	(s)	 	Railroad property;
	 
	 	(t)	 	Offshore property Risks;
	 
	 	(u)	 	Mobile homes unless written as part of a commercial multiple peril policy;
	 
	 	(v)	 	Watercraft, other than watercraft insured under a standard homeowners policy;
	 
	 	(w)	 	Insurance on growing crops;
	 
	 	(x)	 	Inland marine business with respect to the following:






	 	(1)	 	All bridges, dams, tunnels, piers and wharves;
	 
	 	(2)	 	Cargo insurance when written as such with respect to ocean, lake, or inland
waterways vessels;
	 
	 	(3)	 	Faulty film, tape, processing and editing insurance and cast insurance;
	 
	 	(4)	 	Drilling rigs for natural fuels;
	 
	 	(5)	 	Furriers’ customers policies;
	 
	 	(6)	 	Garment contractors policies;
	 
	 	(7)	 	Insurance on livestock under so-called “mortality policies”;

	 
	 	(8)	 	Jewelers’ block policies and furriers’ block policies;





GENERAL REINSURANCE CORPORATION






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	 	(9)	 	Mining equipment while underground;
	 
	 	(10)	 	Transit;
	 
	 	(11)	 	Radio, television, telephone towers or other towers used
in communications;
	 
	 	(12)	 	Registered mail and armored car insurance;






	 	(y)	 	Risks that involve the manufacture or fabrication of chips and or
integrated circuits that operate in a clean room environment.
	 
	 	(z)	 	Risks which have an insurable value of $5,000,000 or more on any of
the following coverages:






	 	(1)	 	Accounts receivable;
	 
	 	(2)	 	Valuable papers;
	 
	 	(3)	 	Fine arts;
	 
	 	(4)	 	Electronic data processing equipment, media,
and extra expense;






	 	(aa)	 	Business classified as fidelity;
	 
	 	(bb)	 	Credit insurance;
	 
	 	(cc)	 	Mortgage impairment insurance and similar kinds of insurance,
howsoever styled, providing coverage to an insured with respect to its
mortgagee interest in property or its owner interest in foreclosed property;
	 
	 	(dd)	 	Contingent business interruption insurance;
	 
	 	(ee)	 	Risks located on the keys and islands listed in Appendix A attached
hereto;
	 
	 	(ff)	 	Risks located within 1,000 feet of tidal waters in Hawaii and Risks
located within one mile of tidal water including the Intracoastal Waterway, as
respects the Gulf of Mexico from Brownsville, Texas to Key West, Florida and
the Atlantic Ocean from Key West, Florida through Cape Cod, Massachusetts and
Risks excluded by the Company’s “2008 Property Guidelines-Florida” edition
1-2008 and the Company’s “Windstorm Underwriting Guidelines” edition 11-2007.





Article IX — OTHER REINSURANCE



The obligations of the Company to reinsure business falling within the scope of this Agreement and
of the Reinsurer to accept such reinsurance are mandatory and no other reinsurance (either
facultative or treaty) is permitted, except treaty reinsurance within the Company




GENERAL
REINSURANCE CORPORATION




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




Article X
— REINSURANCE PREMIUM



The Company shall pay to the Reinsurer, with respect to each Risk reinsured hereunder, a
reinsurance premium calculated per the “Extranet Tool” provided to the Company by the Reinsurer.




Article XI — RISK REPORTS AND REMITTANCES



Risks subject to this Agreement shall be reported by the Company to the Reinsurer no later than
185 days after the close of the month in which the Company’s liability attaches, increases, or
renews.



If the Company fails to notify the Reinsurer within 185 days after the close of the month in which
the Company’s liability attaches, increases, or renews, of an otherwise eligible Risk, the Risk
may be specially accepted in accordance with the article entitled SPECIAL ACCEPTANCES.



The bordereau report provided through the “Extranet Tool” shall include for each Risk ceded:





	 	(1)	 	Name(s) of insured(s);
	 
	 	(2)	 	Location(s);
	 
	 	(3)	 	Policy number(s);
	 
	 	(4)	 	Transaction description (new, renewal, endorsement);
	 
	 	(5)	 	Reinsurance term (multi year policies must be ceded annually to this
Agreement);
	 
	 	(6)	 	Total Insured Value;
	 
	 	(7)	 	Construction;
	 
	 	(8)	 	Sprinklered or non sprinklered;
	 
	 	(9)	 	ISO protection class;
	 
	 	(10)	 	Risk occupancy;
	 
	 	(11)	 	Company Retention;
	 
	 	(12)	 	Reinsurance limit;
	 
	 	(13)	 	Pro rata ceded premium.





GENERAL REINSURANCE CORPORATION




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The amount due the Reinsurer shall be remitted within 45 days after the close of the month.




Article XII — REPORTS AND CLAIM REMITTANCES





	 	(a)	 	Claims and Losses
	 
	 	 	 	The Company shall report promptly to the Reinsurer, but within no more than 25
days, each claim or loss which, in the Company’s opinion, may involve the
reinsurance afforded by this Agreement. The Company shall advise the Reinsurer
of the estimated amount of Net Loss and Adjustment Expense in connection with
each such claim or loss and of any subsequent changes in such estimates.
	 
	 	 	 	Promptly upon receipt of a definitive statement of Net Loss and Adjustment
Expense from the Company, but within no more than 25 days, the Reinsurer shall
promptly pay to the Company the Reinsurer’s portion of Net Loss and the
Reinsurer’s portion of Adjustment Expense, if any. Any subsequent changes in
the amount of Net Loss and/or Adjustment Expense shall be reported by the
Company to the Reinsurer and the amount due either party shall be remitted
promptly, but within no more than 25 days.
	 
	 	(b)	 	P.C.S. Catastrophe Bulletins
	 
	 	 	 	The Company shall furnish to the Reinsurer, upon request, the following
information with respect to each catastrophe set forth in the Catastrophe
Bulletins published by the Property Claim Services:






	 	(1)	 	The preliminary estimates of the amount recoverable
from the Reinsurer;
	 
	 	(2)	 	The Reinsurer’s portion of claims, losses and
Adjustment Expenses paid less salvage recovered during each calendar
quarter;
	 
	 	(3)	 	The Reinsurer’s portion of reserves for claims,
losses, and Adjustment Expenses at the end of each calendar quarter.






	 	(c)	 	General
	 
	 	 	 	In addition to the reports required by (a) and (b) above, the Company shall
furnish such other information as may be required by the Reinsurer for the
completion of the Reinsurer’s quarterly and annual statements and internal
records.
	 
	 	 	 	All reports shall be rendered on forms or in format acceptable to the Company
and the Reinsurer.





GENERAL REINSURANCE CORPORATION





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Article XIII — ERRORS AND OMISSIONS




The Reinsurer shall not be relieved of liability because of an error or accidental omission, that
is transcriptional in nature, of the Company, in reporting any claim or loss or any business
reinsured under this Agreement, provided that the Risk(s) involving such error or accidental
omission is (are) reported to the Reinsurer in accordance with the article entitled RISK REPORTS
AND REMITTANCES and provided that such error or accidental omission is rectified immediately
after discovery.



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



Article XIV —  SPECIAL ACCEPTANCES




Business not within the terms of this Agreement may be submitted to the Reinsurer for special
acceptance and, if accepted by the Reinsurer, shall be subject to all of the terms of this
Agreement except as modified by the special acceptance.



Article XV —  MANAGEMENT OF CLAIMS AND LOSSES




The Company shall investigate and settle or defend all claims and losses. When requested by the
Reinsurer, the Company shall permit the Reinsurer, at the expense of the Reinsurer, to be
associated with the Company in the defense or control of any claim, loss, or legal proceeding
which involves or is likely to involve the Reinsurer. All payments of claims or losses by the
Company within the terms and limits of its policies which are within the limits set forth in this
Agreement shall be binding on the Reinsurer, subject to the terms of this Agreement.



Article XVI —  RECOVERIES




The Company shall pay to or credit the Reinsurer with the Reinsurer’s portion of any recovery
obtained from salvage, subrogation, or other insurance. Adjustment Expense for recoveries shall be
deducted from the amount recovered. However, if the Adjustment Expense incurred in obtaining
recoveries exceeds the amount recovered, if any, the excess Adjustment Expense shall be
apportioned between the parties in proportion to the liability of each party for the loss before
the recovery was obtained.



The Reinsurer shall be subrogated to the rights of the Company to the extent of its loss payments
to the Company. The Company agrees to enforce its rights of salvage, subrogation, and its rights
against insurers or to assign these rights to the Reinsurer.



Recoveries shall be distributed to the parties in an order inverse to that in which their
liabilities accrued.



Article XVII —  TRIA EXCESS RECOVERY




As respects any “Insured Loss”, as defined in the Terrorism Risk Insurance Act of 2002 as
subsequently amended (the “Act”), for which the Reinsurer makes a payment to the Company under this
Agreement, the following provisions shall apply:




GENERAL REINSURANCE CORPORATION




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	1.	 	These provisions shall apply separately to each “Program Year” (as defined in the Act).
	 
	2.	 	The term “Affiliated Companies” shall mean the Company named in this Agreement and all of its
affiliates (as “affiliate” is defined under the Act).
	 
	3.	 	If the sum of:






	 	(a)	 	Financial assistance provided under the Act to the Affiliated
Companies with respect to all Insured Loss that applies to the Program Year;
and
	 
	 	(b)	 	Amounts recovered by or credited to the Affiliated Companies under
all reinsurance which the Affiliated Companies purchase, including but not
limited to this reinsurance, all other treaty reinsurance and all
facultative, in respect of any of the Affiliated Companies’ Insured Loss that
applies to the Program Year,






exceeds the amount of the Affiliated Companies’ gross Insured Loss that applies to the
Program Year, this excess shall be the “Excess Amount”.




The Reinsurer’s proportion of the Excess Amount shall be in the ratio that the Reinsurer’s
part of Insured Loss payable under this Agreement bears to the sum of the Affiliated
Companies’ total collectable reinsurance recoverables for all Insured Loss.




Upon receipt of payment under the Act by Affiliated Companies, the Company shall pay to or
credit the Reinsurer under this Agreement with its share of the Excess Amount as set forth
in the preceding paragraph.



Article XVIII —  RESERVES AND TAXES




The Reinsurer shall maintain the required reserves as to the Reinsurer’s portion of unearned
premium, claims, losses, and Adjustment Expense.



The Company shall be liable for all premium taxes on premium ceded to the Reinsurer under this
Agreement. If the Reinsurer is obligated to pay any premium taxes on this premium, the Company
shall reimburse the Reinsurer; however, the Company shall not be required to pay taxes twice on
the same premium.



Article XIX —  OFFSET




The Company or the Reinsurer may offset any balance, whether on account of premium, commission,
claims or losses, adjustment expense, salvage, or otherwise, due from one party to the other under
this Agreement or under any other agreement heretofore or hereafter entered into between the
Company and the Reinsurer.



Article XX  — INSPECTION OF RECORDS




The Company shall allow the Reinsurer to inspect, at reasonable times, the records of the Company
relevant to the business reinsured under this Agreement, including Company files



GENERAL REINSURANCE CORPORATION




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concerning claims, losses, or legal proceedings which involve or are likely to involve the
Reinsurer. The Reinsurer’s right of inspection shall continue after the termination of this
Agreement.



Article XXI
— ARBITRATION




All unresolved differences of opinion between the Company and the Reinsurer relating to this
Agreement, including its formation and validity, shall be submitted to arbitration consisting of
one arbitrator chosen by the Company, one arbitrator chosen by the Reinsurer, and a third
arbitrator chosen by the first two arbitrators.



The party demanding arbitration shall communicate its demand for arbitration to the other party by
registered or certified mail, identifying the nature of the dispute and the name of its
arbitrator, and the other party shall then be bound to name its arbitrator within 30 days after
receipt of the demand.



Failure or refusal of the other party to so name its arbitrator shall empower the demanding party
to name the second arbitrator. If the first two arbitrators are unable to agree upon a third
arbitrator after the second arbitrator is named, each arbitrator shall name three candidates, two
of whom shall be declined by the other arbitrator, and the choice shall be made between the two
remaining candidates by drawing lots. The arbitrators shall be disinterested and shall be active
or retired officers of property or casualty insurance or reinsurance companies.



The arbitrators shall adopt their own rules and procedures and are relieved from judicial
formalities. In addition to considering the rules of law and the customs and practices of the
insurance and reinsurance business, the arbitrators shall make their award with a view to
effecting the intent of this Agreement.



The decision of the majority of the arbitrators shall be in writing and shall be final and binding
upon the parties.



Each party shall bear the cost of its own arbitrator and shall jointly and equally bear with the
other party the expense of the third arbitrator and other costs of the arbitration. In the event
both arbitrators are chosen by one party, the fees of all arbitrators shall be equally divided
between the parties.



The arbitration shall be held at the times and places agreed upon by the arbitrators.



Article XXII
—  INSOLVENCY OF THE COMPANY




In the event of the insolvency of the Company, the reinsurance proceeds will be paid to the Company
or the liquidator, with reasonable provision for verification, on the basis of the claim allowed in
the insolvency proceeding without diminution by reason of the inability of the Company to pay all
or part of the claim, except as otherwise specified in the statutes of any state having
jurisdiction of the insolvency proceedings or except where the Agreement, or other written
agreement, specifically provides another payee of such reinsurance in the event of insolvency.



GENERAL REINSURANCE CORPORATION




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The
Reinsurer shall be given written notice of the pendency of each claim against the Company on
the policy(ies) reinsured hereunder within a reasonable time after such claim is filed in the
insolvency proceedings. The Reinsurer shall have the right to investigate each such claim and to
interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any
defenses which it may deem available to the Company or its liquidator. The expense thus incurred
by the Reinsurer shall be chargeable, subject to court approval, against the insolvent Company as
part of the expense of liquidation to the extent of a proportionate share of the benefit which may
accrue to the Company solely as a result of the defense undertaken by the Reinsurer.



Article XXIII
—  ENTIRE AGREEMENT




This Agreement constitutes the entire Agreement between the parties with respect to the business
reinsured hereunder. Any change or modification to this Agreement shall be made by written
amendment to this Agreement and signed by the parties hereto.



IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate.



this 1ST day of August, 2008.



	 	 	 	 	 
	 	PHILADELPHIA INDEMNITY INSURANCE

COMPANY

PHILADELPHIA INSURANCE COMPANY

 	 
	 	/s/
Christopher J. Maguire
 	 
	 	EVP & COO 	 
	 	Title 	 
	 


Attest:
/s/  William A. McKenna           





and this 28 day of July, 2008.



	 	 	 	 	 
	 	GENERAL REINSURANCE CORPORATION

 	 
	 	/s/ Andrew Castro 	 
	 	Vice President 	 
	 	Title 	 
	 




Attest:
/s/ Lavren McDermott           


Agreement No. P304

GENERAL REINSURANCE CORPORATION




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APPENDIX A



Attached to and made a part of

AGREEMENT NO. P304




EXCLUDED KEYS AND ISLANDS







ALABAMA:




     Aux Herbes Island

     Dauphin island




FLORIDA:




     Amelia Island

     Anclote Island

     Anna Marie Island

     Big Pine Key

     Big Torch Key

     Bush Key

     Cabbage Key

     Captiva Island

     Caladesi Island

     Casey Key

     Cayo Costa Island

     Cedar Key

     Coquina Key

     Crooked Key

     Cudjoe Key

     Elliott Key

     Estero Island

     Gasparilla Island

     Hog Island

     Honeymoon Island

     Hutchinson Island

     J.N. Ding Darling NWR

     Johnston Key

     Jupiter Island

     Key Biscayne

     Key Largo

     Key West

     Long Key

     Longboat Key

     Lower Matecumbe Key

     Marco Island

     Merritt Island

     Meed Keys

     Mullet Key

     No Name Key

     North Captiva Island

     Old Rhodes Key

     Oyster Keys

     Piney Island

     Plantation Key

     St. George Island




     St.
Vincent Island

     Sand Keys

     Santa Rosa Island

     Sanibel Island

     Siesta Key

     Snead Island

     Snipe Keys

     Stock Island

     Sugarloaf Key

     Ten Thousands Islands

     Treasure Island

     Upper Matecumbe Key

     Vaca Key




GEORGIA:




     Cumberland Island

     Jekyll Island

     Ossabaw Island

     St. Catherines Island

     St. Simons Island

     Sapelo Island

     Skidaway Island

     Tybee Island

     Wassaw Island




LOUISIANA:




Breton Island

Chandeleur Island

Curlew Island

Freemason Island

Grand Gosier Island

Grand Isle

Grand Terre Island

Isle au Pitre

Marsh Island

North Island

Shell Keys




MISSISSIPPI:




Cat Island

Horn Island

Petit Bois Island

Ship Island




GENERAL
REINSURANCE CORPORATION

















 





NORTH CAROLINA:



Cedar Island

Durant Island

Harkers Island

Knotts Island

Mackay Island

Ocean Isle Island

Ocracoke Island

Pea Island

Roanoke Island (Nags Head)

Portsmounth Island

Smith Island




SOUTH CAROLINA:



Cape Island

Capers Island

Cedar Island

Daufuskie Island

Dewees Island

Edisto Island

Fripp Island

Folly Island

Hilton Head Island

Hunting Island

Isle of Palms

John Island

Kiawah Island

Morgan Island

Morris Island

Murphy Island

North Island

Pritchards Island

Seabrook Island

South Island

The Grand Strand




TEXAS:



Brazos Island

Galveston Island

High Island

Matagorda Island Mustang

Island

Padre Island

San Jose Island

South Padre Island




VIRGINIA:



Cedar Island

Cobb Island

Fishermans Island

Hog Island

Metomkin Island

Myrite Island

Parramore Island

Plum Tree Island

Ship Shoal Island

Tangier Island

Wallops Island

Wreck Island




Appendix A

Agreement No. P304

GENERAL REINSURANCE CORPORATION




Page 2 of 2









 





NUCLEAR INCIDENT EXCLUSION CLAUSE — PHYSICAL DAMAGE — REINSURANCE — USA




     (1) This Agreement does not cover any loss or liability accruing to the Company directly or
indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed
for the purpose of covering Atomic or Nuclear Energy risks.



     (2) Without in any way restricting the operation of paragraph (1) of this Clause, this
Agreement does not cover any loss or liability accruing to the Company, directly or indirectly
and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including
business interruption or consequential loss arising out of such Physical Damage) to:




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





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




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





     (4) Without in any way restricting the operations of paragraphs (1),(2) and (3) hereof, this
Agreement does not cover any loss or liability by radioactive contamination accruing to the
Company, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive
contamination is a named hazard specifically insured against.



     (5) It is understood and agreed that this Clause shall not extend to risks using radioactive
isotopes in any form where the nuclear exposure is not considered by the Company to be the primary
hazard.



     (6) The term “special nuclear material” shall have the meaning given it in the Atomic Energy
Act of 1954 or by any law amendatory thereof.



     (7) The Company to be sole judge of what constitutes:




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




Note: Without in any way restricting the operation of paragraph (1) hereof, it is understood
and agreed that:





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





N.M.A. 1119




GENERAL REINSURANCE CORPORATION