Exhibit
      10.11





PENN MILLERS INSURANCE
COMPANY





AMERICAN MILLERS INSURANCE
COMPANY





UMBRELLA QUOTA SHARE
REINSURANCE CONTRACT





EFFECTIVE JANUARY 1,
2010





INDEX




ARTICLE
                  
                  SUBJECT
                  
                  PAGEARTICLE
      1
                  
                  BUSINESS
      COVERED
                  
                  1ARTICLE
      2
                  
                  COMMENCEMENT
      AND TERMINATION
                  
                  2ARTICLE
      3
                  
                  PORTFOLIO
      ASSUMPTION
                  
                  3ARTICLE
      4
                  
                  SPECIAL
      TERMINATION
                  
                  3ARTICLE
      5
                  
                  EXCLUSIONS
                  
                  5ARTICLE
      6
                  
                  REINSURANCE
      COVERAGE
                  
                  8ARTICLE
      7
                  
                  PREMIUM
      AND COMMISSION
                  
                  9ARTICLE
      8
                  
                  REPORTS
      AND REMITTANCES
                  
                  10ARTICLE
      9
                  
                  NET
      LOSS
                  
                  12ARTICLE
      10
                  
                  EXTRA-CONTRACTUAL
      OBLIGATIONS/LOSS EXCESS OF POLICY LIMITS
                  
                  13ARTICLE
      11
                  
                  TERRORISM
      RECOVERY
                  
                  14ARTICLE
      12
                  
                  NET
      RETAINED LINE
                  
                  14ARTICLE
      13
                  
                  ERRORS
      AND OMISSIONS
                  
                  15ARTICLE
      14
                  
                  OFFSET
                  
                  15ARTICLE
      15
                  
                  CURRENCY
                  
                  15ARTICLE
      16
                  
                  FEDERAL
      EXCISE TAX AND OTHER TAXES
                  
                  16ARTICLE
      17
                  
                  ACCESS
      TO RECORDS
                  
                  16ARTICLE
      18
                  
                  INSOLVENCY
                  
                  17ARTICLE
      19
                  
                  ARBITRATION
                  
                  18ARTICLE
      20
                  
                  SERVICE
      OF SUIT
                  
                  21ARTICLE
      21
                  
                  CONFIDENTIALITY
                  
                  22ARTICLE
      22
                  
                  PRIVACY
                  
                  23ARTICLE
      23
                  
                  RESERVES
                  
                  24ARTICLE
      24
                  
                  LATE
      PAYMENTS
                  
                  27ARTICLE
      25
                  
                  MODE
      OF EXECUTION
                  
                  28ARTICLE
      26
                  
                  VARIOUS
      OTHER TERMS
                  
                  28ARTICLE
      27
                  
                  INTERMEDIARY
                  
                  31




ATTACHMENTS:





INSOLVENCY
FUNDS EXCLUSION





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      No. G24405.10
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NUCLEAR
INCIDENT EXCLUSION CLAUSE-LIABILITY-REINSURANCE U.S.A.(BRMA
35A)


NUCLEAR
INCIDENT EXCLUSION CLAUSE-LIABILITY-REINSURANCE CANADA(BRMA
35D)





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PENN MILLERS INSURANCE
COMPANY





AMERICAN MILLERS INSURANCE
COMPANY





UMBRELLA QUOTA SHARE
REINSURANCE CONTRACT





EFFECTIVE JANUARY 1,
2010





ARTICLE
1





BUSINESS
COVERED





A.           This
Contract applies to all Loss Occurrences that occur with a date of loss during
the term of this Contract and arising from those Policies, except as hereinafter
excluded, classified by the Company as excess/commercial umbrella liability that
are in force at the inception of, and written with a Policy period (new or
renewal) effective during the term of this Contract, including renewals
(“Business Covered”).





B.           As
respects all Business Covered hereof, where the coverage has been agreed upon
between the Company and the Reinsurer, this Contract shall cover self-insured
obligations of the Company assumed by it as a self-insurer including
self-insured obligations in excess of any valid and collectible insurance
available to the Company to the same extent as if all types of insurance covered
by this Contract were afforded under the broadest forms of Policies issued by
the Company provided, such self-insured obligations are within the scope of
underwriting criteria furnished by the Company to the Reinsurer.





C.           The
term “Policies”, whenever used herein, shall mean all binders, policies,
contracts, certificates and other obligations, whether oral or written, of
insurance or reinsurance that are Business Covered, underwritten and bound by
the Company in accordance with the Company’s current Commercial Umbrella
Underwriting and Rating guidelines (including amendments as agreed to by the
Reinsurer) as part of their Corporate Information Catalogue, except as excluded
under the Article entitled EXCLUSIONS.





D.           The
reinsurance of all Business Covered hereunder shall be subject in all respects
to the same risks, terms, clauses, conditions, interpretations, alterations,
modifications, cancellations and waivers as the respective insurances (or
reinsurances) of the Company’s Policies and the Reinsurer shall pay losses as
may be paid thereon, subject to the liability of the Company and the terms and
conditions of this Contract.





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ARTICLE
2





COMMENCEMENT AND
TERMINATION





A.           This
Contract shall incept at 12:01 a.m., Eastern Standard Time, January 1, 2010, and
shall remain in force until 12:01 a.m., Eastern Standard Time, January 1,
2011.





B.           At
termination, at the Company’s option:





1.           The
Reinsurers shall remain liable for all Policies in force at termination of this
Contract; however, the liability of the Reinsurers shall cease with respect to
losses occurring subsequent to the first anniversary, natural expiration or
cancellation of each Policy ceded, whichever first occurs, but in no event for
any losses occurring more than eighteen (18) months after each such termination;
(“Run-Off”) or





2.           The
Reinsurers shall be relieved of all liability hereunder for any losses occurring
with a date of loss subsequent to termination of this Contract
(“Cut-Off”).





The Company shall notify the Reinsurer
not more than thirty (30) days after termination whether such termination shall
be on a Cut-Off or Run-Off basis.





C.           The
Company shall pay reinsurance premium for any Run-Off period in accordance with
the Article entitled PREMIUM
AND COMMISSION of this Contract. If the Company elects the Cut-Off
option, the Reinsurers shall refund to the Company any unearned reinsurance
premium applicable to the unexpired liability (calculated on a pro rata basis)
less any commission allowed by the Reinsurers thereon at conclusion of the
Run-Off if B(1) above is elected, or at termination if option B(2) above is
elected. The Reinsurers shall continue to be liable for their proportionate
share of the outstanding losses (reported or unreported) on Policies ceded
hereunder with a date of loss prior to the conclusion of the Run-Off, or
termination, as the case may be.





D.           Should
any subject Policy be extended, continued, or renewed due to regulatory or other
legal restrictions, this Contract shall automatically provide extended coverage
at the request of the Company until those Policies are actually terminated by
the Company. The Reinsurer shall be entitled to reinsurance premium on such
Policies as calculated by the Company in accordance with the terms of this
Contract. This provision shall not apply and the Reinsurer will not be liable
for longer than the Run-Off period elected above, in the event that the Company
has secured reinsurance for the Business Covered that reinsures inforce Policies
on substantially similar terms as to risk retained and ceded, or has advised the
Reinsurer that the Company intends to hold the business net and for its own
account.





E.           Should
this Contract terminate while a Loss Occurrence is in progress, the entire loss
arising out of the Loss Occurrence shall be subject to this Contract and its
terms and conditions.





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ARTICLE
3





PORTFOLIO
ASSUMPTION





A.           If
agreed by the Company and the Reinsurer, at the end of each underwriting year
(i.e. January 1) all unexpired liability in respect of the business ceded
hereunder and the unearned premium applicable thereto shall be transferred to
the following underwriting year.





B.           Furthermore,
if agreed by the Company and the Reinsurer, the Reinsurer will accept a
portfolio transfer from previous underwriting years on the basis described in
the preceding paragraph.





ARTICLE
4





SPECIAL
TERMINATION





A.           The
Company or the Reinsurer may terminate, or commute Obligations arising under
this Contract in accordance with Paragraph C. below, upon the happening of any
one of the following circumstances at any time by the giving of thirty (30) days
prior written notice to the other party:





1.           A
party ceases active underwriting operations or a State Insurance Department or
other legal authority orders the Reinsurer to cease writing business in all
jurisdictions; or





2.           The
Reinsurer has filed a plan to enter into a Scheme of Arrangement or similar
procedure. “Scheme of Arrangement” is defined as a legislative or regulatory
process that provides a solvent Reinsurer the opportunity to settle its
obligations with the Company either (i) without the Company’s unrestrained
consent or (ii) prior to the Company having the ability to determine, with exact
certainty, the actual amount of the obligations still outstanding and ultimately
due to the Company. or





3.           A
party has: (a) become insolvent, (b) been placed under supervision (voluntarily
or involuntarily), (c) been placed into liquidation or receivership, or (d) had
instituted against it proceedings for the appointment of a supervisor, receiver,
liquidator, rehabilitator, conservator or trustee in bankruptcy, or other agent
known by whatever name, to take possession of its assets or control of its
operations; or





4.           A
reduction in the Reinsurer’s surplus, risk-based capital or financial strength
rating occurs:





a.           As
respects Reinsurers domiciled in the United States of America, (i) the
Reinsurer’s policyholders’ surplus (“PHS”) has been reduced by, whichever is
greater, thirty percent (30%) of the amount of PHS at the inception of this
Contract or thirty percent (30%) of the amount of PHS stated in its last filed
quarterly or annual statutory statement with its state of domicile; or (ii) the
Reinsurer’s total adjusted capital is less than two hundred percent (200%) of
its authorized control level risk-based capital; or (iii) the Reinsurer’s A.M.
Best’s insurer financial strength rating becomes less than
“A-”.





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b.           As
respects Reinsurers domiciled outside the United States of America, other than
Lloyd’s Syndicates (i) the Reinsurer’s Capital & Surplus (“C&S”) has
been involuntarily reduced by, whichever is greater, thirty percent (30%) of the
published currency amount of C&S at the inception of this Contract or thirty
percent (30%) of the published currency amount of C&S stated in its last
filed financial statement with its local regulatory authority; or (ii) as
respects Lloyd’s Syndicates, the Reinsurer’s total stamp capacity has been
reduced by more than thirty percent (30%) of the amount of total stamp capacity
which stood at the inception of this Contract. (This provision does not apply to
any Lloyd’s Syndicate that voluntarily reduces its total stamp capacity.) or
(iii) the Reinsurer’s A.M. Best’s insurer financial strength rating becomes less
than “A-” or the Reinsurer’s Standard & Poor’s Insurance Rating becomes less
than “BBB”. or





5.           A
party has entered into a definitive agreement to (a) become merged with,
acquired or controlled by any company, corporation or individual(s) not
controlling or affiliated with the party’s operations previously; or (b)
directly or indirectly assign all or essentially all of its entire liability for
obligations under this Contract to another party without the other party’s prior
written consent; or





6.           There
is either:





a.           a
severance or obstruction of free and unfettered communication and/or normal
commercial or financial intercourse between the United States of America and the
country in which the Reinsurer is incorporated or has its principal office as a
result of war, currency regulations or any circumstances arising out of
political, financial or economic uncertainty; or





b.           a
severance (of any kind) of any two (2) or more of the following executives of
the Reinsurer from active employment of the Reinsurer during the most recent
forty five (45) day period: chief underwriting officer, chief actuary, chief
executive officer or chief financial officer. This condition does not apply
whenever the severance in employment is for the publicly announced purpose of
the individual’s assuming within thirty (30) days a known position with another
identified firm in the (re)insurance industry or related field.





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B.           In
the event the Company elects termination, the Company shall with the notice of
termination specify that termination will be on a Run-Off basis or a Cut-Off
basis. In the event that the Company elects to Cut-Off and thus relieve the
Reinsurer for losses occurring subsequent to the Reinsurer’s specified
termination date, the Reinsurer shall within thirty (30) days of the termination
date return the liability for the unearned portion of any ceded premium paid
hereunder, calculated as of the termination date, and cash in that amount (less
any applicable ceding commission allowed thereon) and the minimum premium
provisions, if any, shall be waived. If the Company elects “Run-Off”, the
Reinsurer shall remain liable to the Company under this Contract with respect to
losses arising from Policies placed into effect and ceded hereunder with
effective dates (new or renewal Policy period) prior to the termination date
until those Policies naturally expire, are cancelled or non-renewed or their
next annual anniversary, provided such period shall not exceed eighteen (18)
months from the date of termination elected under this Article.





C.           If
both parties agree to commute, then within sixty (60) days after such agreement,
the Company shall submit a statement of valuation of the total of the net
present value (“capitalized”) of the ceded (1) Net Loss Reserves, (2) Loss
Adjustment Expense Reserves, and (3) unearned premium reserve, after deduction
for any ceding commission allowed thereon, (the “Valuation Statement”). If
agreement cannot be reached, the effort can be abandoned or alternately the
Company and the Reinsurers may mutually appoint an actuary or appraiser to
investigate, determine the capitalized value of the reserves to be returned to
the Company. Such actuary shall be an independent and neutral actuary, Casualty
Actuarial Society, experienced in such matters and the mutually agreed actuary
shall render a decision. In the event that the Company and the Reinsurer are
unable to agree upon a single actuary within thirty (30) days, the parties shall
ask the then current President of the Casualty Actuarial Society to appoint an
actuary with those qualifications within another thirty (30) days. The decision
of the actuary will be final and binding on both parties. The Company and the
Reinsurer shall share equally the fees and expenses of the actuary. Upon payment
of the amount so agreed or determined by the actuary to the Company, the
Reinsurer and the Company shall each be completely released from all liability
to each other under this Contract.





ARTICLE
5





EXCLUSIONS





This Contract shall not
cover:





A.           The
following General Categories:





1.           War,
as excluded by the provisions of the Company’s original
Policy(ies).





2.           Liability
as a member or subscriber of any Pool, Association or Syndicate.





3.           Insolvency
Funds as per the attached Insolvency Funds Exclusion Clause.





4.           Nuclear
Incident Exclusion Clauses which are attached and made part of this
Contract:





a.           Nuclear
Incident Exclusion Clause - Liability - Reinsurance - U.S.A (BRMA
35A).





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b.           Nuclear
Incident Exclusion Clause - Liability - Reinsurance - Canada (BRMA
35D).





5.           Business
accepted by the Company as reinsurance; except business accepted from
intra-company transactions.





B.           The
following Insurance Coverages:





1.           Terrorism
as provided in the Company’s Umbrella Underwriting and Rating Guidelines as of
January 1, 2003 and as revised by mutual agreement between the Company and
Reinsurer, or as referred to and approved by the Reinsurer.





This Contract shall not cover loss
resulting from an act of Certified or Non-Certified terrorism, as defined in the
Article entitled REINSURANCE
COVERAGE of this Contract, that involves the use, release, or escape of
nuclear materials, or directly or indirectly results in nuclear reaction or
radiation or radioactive contamination; or that is carried out by means of the
dispersal or application of pathogenic or poisonous biological or chemical
materials that are released.





2.           Loss or liability, whether direct or
indirect, arising from the hazard of asbestos including the manufacturing,
mining, storage, distribution, transportation, fabrication, installation or
removal of asbestos or products containing asbestos.





3.           Loss
or liability excluded by the Standard Pollution Exclusion(s) promulgated by the
Insured Services Office for both Commercial General Liability and Commercial
Automobile Liability Policies;





Notwithstanding
the above, the Reinsurers agree that this exclusion shall not apply to original
Policies written in any state where the Standard ISO Pollution Exclusion(s) have
not been approved or are not permitted to be included in or attached to original
Policies.





Further,
the Reinsurers agree that this exclusion shall not apply in any case where the
Company has attached the Standard ISO Pollution Exclusion(s) to an original
Policy but has sustained a Loss as a result of that exclusion being deemed
invalid or inapplicable by a court of law.





Notwithstanding
all of the foregoing, Reinsurers agree that this exclusion does not apply to
environmental restoration coverage provided under an MCS-90 Endorsement attached
to a commercial automobile Policy written in accordance with the Motor Carrier
Act of 1980.





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Furthermore,
Reinsurers agree that this exclusion does not apply to over spraying of
anhydrous ammonia, fertilizers and agricultural chemicals, nor shall this
exclusion apply to operations involving anhydrous ammonia, liquefied petroleum
gas (LPG), or propane (including the transportation thereof) where the Company
has attached the Solutions 2000 Liability PMAG-16 (01 05) Pollution Exclusion
Amendment to an original Policy.  Furthermore, this exclusion does not
apply to pollutants from mobile equipment where the Company has attached the
Solutions 2000 Liability PMAG-16 (01 05) Pollution Exclusion Amendment to an
original Policy.





Furthermore,
Reinsurers agree that this exclusion does not apply to over spraying of
anhydrous ammonia, fertilizers and agricultural chemicals, nor shall this
exclusion apply to operations involving anhydrous ammonia, liquefied petroleum
gas (LPG), or propane (including the transportation thereof) where the Company
has attached the Solutions 2000 Liability PMAG-18 (01 05) Pollution Exclusion
Amendment to an original Policy.  Furthermore, this exclusion does not
apply to pollutants from a covered auto where the Company has attached the
Solutions 2000 Liability PMAG-18 (01 05) Pollution Exclusion Amendment to an
original Policy.





Furthermore,
Reinsurers agree that this exclusion does not apply to operations meeting all
standards of any statute, ordinance, regulation or license requirement of any
federal, state or local government which apply to those operations, where the
Company has attached the Solutions 2000 Liability PMAG - 04 (07 98) “Pesticide
or Fertilizer Applicator Amended Exclusions with Amendment of Limits of
Insurance” to an original Policy.  Furthermore, this exclusion does
not apply to fields on which the insured, or any contractor or subcontractor
working on the behalf of the insured, is performing operations, where the
Company has attached the Solutions 2000 Liability PMAG - 04 (07 98) “Pesticide
or Fertilizer Applicator Amended Exclusions with Amendment of Limits of
Insurance” to an original Policy.





4.           tobacco
manufacturers/companies





5.           pharmaceutical
and medical device manufacturers





C.           If
the Company is bound without knowledge of and contrary to the instructions of
the Company’s supervisory underwriting personnel, on any business falling within
the scope of one or more of the exclusions set forth in this Article these
exclusions, except paragraphs A(1), A(2), A(3), A(4), A(5), B(1), B(2) and B(5)
shall be suspended with respect to such business until sixty (60) days after any
Home Office underwriting supervisor of the Company acquires knowledge of such
business.





D.           Upon
receipt of such knowledge, the Company shall promptly advise the Reinsurer of
the scope of the Insured’s activities and the Reinsurer shall have the right
to:





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Reinstate the exclusion involved upon
expiration of the aforementioned sixty (60) days waiting period, or waive such
exclusion by Special Acceptance.





The Reinsurer shall promptly advise the
Company as to which of the above options set forth in this Paragraph shall
apply.





Any exclusion listed above (except
B(2), B(5) and loss described in the second Paragraph of Paragraph B(1)) shall
be automatically waived as respects a Policy issued by the Company on a risk
with respect to which only a minor or incidental part of the operations covered
involves the exclusion. An incidental part of an insured’s regular operations
shall mean not greater than ten percent (10%) of the insured’s regular
operations.





ARTICLE
6





REINSURANCE
COVERAGE





A.           The
Company shall cede and the Reinsurer shall accept and be liable to, indemnify
and reinsure the Company for a quota share participation of the Company’s Net
Loss for in force, new and renewal excess/commercial umbrella
Policies:





For the first one million dollars
($1,000,000) of the Company’s Net Loss as respects each Policy, each Loss
Occurrence:





The Reinsurers shall participate for
seventy five percent (75%) of the Company’s Net Loss as respects each Policy,
each Loss Occurrence.





For the next four million dollars
($4,000,000) of the Company’s Net Loss as respects each Policy, each Loss
Occurrence:





The Reinsurers shall participate for
one hundred percent (100%) of the Company’s Net Loss as respects each Policy,
each Loss Occurrence.





B.           Terrorism:





1.           Notwithstanding
the foregoing Paragraph A. in this Article, the Reinsurers’ liability for a loss
involving any Act of Terrorism, irrespective of the number and kinds of perils
involved, shall be limited to one million dollars ($1,000,000) of Net Loss in
the aggregate for all Loss Occurrences taking place during the term of this
Contract.





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2.           An
“Act of Terrorism” shall mean any act, including both Certified Acts of
Terrorism in accordance with the Terrorism Risk Insurance Act of 2002, the
Terrorism Risk Insurance Extension Act of 2005 and the Terrorism Risk
Insurance Program Reauthorization Act of 2007 (“TRIPRA”)and any
subsequent extension and those not so certified, or preparation in respect of
action, or threat of action designed to influence the government de jure or de
facto of any nation or any political division thereof, or in pursuit of any
political, religious, ideological, or similar purpose to intimidate the public
or a section of the public of any nation by any person or group(s) of persons
whether acting alone or on behalf of or in connection with any organization(s)
or government(s) de jure or de facto, and which:





a.       
     involves violence against one or more persons;
or


b.       
     involves damage to property; or


c.      
      endangers life other than that of the person
committing the action; or


d.      
      creates a risk to health or safety of the
public or a section of the public; or


e.      
      is designed to interfere with or to disrupt
an electronic system; or


f.       
     involves loss, damage, cost, or expense directly
or indirectly caused by, contributed to by, resulting from, or arising out of or
in connection with any action in controlling, preventing, suppressing,
retaliating against, or responding to any act of terrorism.





Loss or damage occasioned by riot,
strikes, civil commotion, vandalism or malicious mischief as those terms have
been interpreted by United States Courts to apply to insurance Policies shall
not be construed to be an “Act of Terrorism”.





ARTICLE
7





PREMIUM AND
COMMISSION





A.           As
premium for the Reinsurance Coverage provided hereunder, the Company shall cede
and pay to the Reinsurers their proportionate share of the unearned premium on
the business in force at the inception of this Contract for the business
described herein. Additionally, the Company shall cede to the Reinsurers their
proportionate share of the net subject written premium on all Policies written
or renewed with an effective date on or after the inception of this
Contract.





B.           The
Reinsurers shall allow the Company a thirty two percent (32%) ceding commission
on all premiums ceded to the Reinsurers hereunder. The Company shall allow the
Reinsurers return commission on return premiums at the same rate.





C.           “Net
Subject Written Premium” as used in this Contract shall mean the gross written
premium of the Company for the Business Covered, plus additions, less return
premium for cancellations and reductions, and less premium for reinsurance that
inures to the benefit of this Contract.





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ARTICLE
8





REPORTS AND
REMITTANCES





A.           The
Company shall furnish the Reinsurers with bordereaux due at the end of each
ninety (90) day period, summarizing the ceded premium, net of any applicable
return premium and ceding commission, such reports to include the following
items:





1.           Name
of Insured


2.           Policy
Number


3.           Policy
Limits


4.           Effective/expiration
dates


5.           Premium
written for the first one million dollars ($1,000,000) of limits


6.           Premium
written for limits excess of one million dollars ($1,000,000) up to four million
dollars ($4,000,000)


7.           Ceding
commission on premium written


8.           Premium
due Reinsurer





B.           The
Company shall promptly notify the Reinsurer of each claim which may involve the
reinsurance provided hereunder and of all subsequent developments relating
thereto, stating the amount claimed and estimate of the Company’s Net Loss and
Loss Adjustment Expenses.





C.           The
Company shall advise the Reinsurer of all claims which:





1.           Are
reserved by the Company for an amount in excess of fifty percent (50%) of the
underlying Policy limit, or





2.           Any
loss involving the following injuries (regardless of incurred loss or reserve
amount);





a.          
 Originate from fatal injuries;


b.           
Originate from the following kinds of bodily injury:





i.  
         Brain injuries resulting
in impairment of physical function;


ii.  
         Spinal injuries resulting
in a partial or total paralysis of upper or lower extremities;


iii.          Amputation
or permanent loss of use of upper or lower extremities;


iv.          Severe
burn injuries;


v.           Loss
of sight in one or both eyes;


vi.          Sexual
molestation and/or rape.





c.          
 Claims involving Extra-Contractual Obligations or Loss in Excess of Policy
Limits;


d.           
Any Declaratory Judgment Action.





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D.           The
Company shall have the responsibility to investigate, defend or negotiate
settlements of all claims and lawsuits related to Policies written by the
Company and reinsured under this Contract. The Reinsurer, at its own expense,
may associate with the Company in the defense of any claim, suit or other
proceeding which involves or is likely to involve the reinsurance provided under
this Contract, and the Company shall cooperate in every respect in the defense
of any such claim, suit or proceeding.





E.           The
Company shall report at the end of each ninety (90) day period, Net Losses paid,
Loss Adjustment Expense paid, monies recovered and net balance due either party.
The net balance shall be paid within sixty (60) days after the close of the
respective reporting period. Should payment due from the Reinsurers exceed one
hundred thousand dollars ($100,000) as respects any one Net Loss, the Company
may give the Reinsurers notice of payment made or its intention to make payment
on a certain date. If the Company has paid the loss, payment shall be made by
the Reinsurers immediately. If the Company intends to pay the loss by a certain
date and has submitted a reasonably satisfactory proof of loss or similar
document, payment shall be due from the Reinsurers twenty four (24) hours prior
to that date, provided the Reinsurers have a period of five (5) working days
after receipt of said notice to dispatch the payment. Cash loss amounts
specifically remitted by the Reinsurers as set forth herein shall be credited to
their next statement of account.





F.           The
Company shall have the right to settle all claims under its Policies. All loss
settlements made by the Company, whether under strict Policy conditions or by
way of compromise, that are the Business Covered and that are not an Ex-gratia
Settlement shall be final and binding subject to the liability of the Company
and the terms and conditions of this Contract. The Reinsurer shall follow the
liability of the Company (to the extent provided in this Contract) and shall pay
or allow, as the case may be, its share of each such settlement in accordance
with this Contract all amounts for which it is obligated as soon as possible,
but not later than ten (10) business days, of being furnished by the Company
with reasonable evidence of the amount due. Reasonable evidence of the amount
due shall consist of a certification by the Company, accompanied by proof of
loss documentation the Company customarily presents with its claims payment
requests, that the amount requested to be paid and submitted by the
certification, is, upon information and belief, due and payable to the Company
by the Reinsurers under the terms and conditions of this Contract.





G.           In
addition, the Company shall furnish the Reinsurers a periodic statement showing
the unearned premium, the total reserves for outstanding Net Losses including
Loss Adjustment Expense, and such other information as may be required by the
Reinsurers for completion of their NAIC annual statements.





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ARTICLE
9





NET LOSS





A.           The
term “Net Loss” shall mean the actual loss incurred by the Company from Business
Covered hereunder including (i) sums paid in settlement of claims and suits and
in satisfaction of judgments, (ii) prejudgment interest when added to a
judgment, (iii) ninety percent (90%) of any Extra-Contractual Obligations (iv)
ninety percent (90%) of any Losses Excess of Policy Limits, and (v) any interest
on judgments other than prejudgment interest when added to a judgment. In the
event that the Company’s original Policies and/or specific coverage parts of
their original Policies are issued on a cost inclusive basis, such loss
adjustment expenses shall be included within the Company’s Net Loss for the
purposes of recovery hereunder.





B.           All
salvages, recoveries, payments and reversals or reductions of verdicts or
judgments whether recovered, received or obtained prior or subsequent to loss
settlement under this Contract, including amounts recoverable under other
reinsurance whether collected or not, shall be applied as if recovered, received
or obtained prior to the aforesaid settlement and shall be deducted from the
actual losses sustained to arrive at the amount of the Net Loss. Nothing in this
Article shall be construed to mean losses are not recoverable until the Net Loss
to the Company finally has been ascertained.





C.           All
Loss Adjustment Expenses paid by the Company as a result of Net Losses covered
hereunder shall be divided between the Company and the Reinsurers, without
regard to the limit of this Contract, in proportion to their share of the Net
Loss. “Loss Adjustment Expenses” shall mean and include but not be limited to:
(i) expenses sustained in connection with adjustment, defense, settlement and
litigation of claims and suits, satisfaction of judgments, resistance to or
negotiations concerning a loss (which shall include the expenses and the pro
rata share of the salaries of the Company’s field employees according to the
time occupied in adjusting such loss and the expenses of the Company’s employees
while diverted from their normal duties to the service of field adjustment but
shall not include any salaries of officers or normal overhead expenses of the
Company), (ii) legal expenses and costs incurred in connection with coverage
questions regarding specific claims and legal actions, including Declaratory
Judgment Expenses, connected thereto, (iii) all interest on judgments other than
prejudgment interest when added to a judgment, and (iv) expenses sustained to
obtain recoveries, salvages or other reimbursements, or to secure the reversal
or reduction of a verdict or judgment.





D.           “Declaratory
Judgment Expenses” as used in this Contract shall mean legal expenses paid by
the Company in the investigation, analysis, evaluation, resolution or litigation
of coverage issues between the Company and its insured(s), under Policies
reinsured hereunder, for a specific loss or losses tendered under such Policies,
which loss or losses are not excluded under this Contract.





E.           In
the event there are any recoveries, salvages, or reimbursements recovered
subsequent to a loss settlement, or in the event a verdict or judgment is
reversed or reduced, the allocated Loss Adjustment Expenses incurred in
obtaining the recovery, salvage or reimbursement or in securing the reduction or
reversal shall be divided between the Company and the Reinsurers in proportion
to their share of the benefit therefrom, with the expenses incurred up to the
time of the loss settlement or the original verdict or judgment being divided in
proportion to the share of the Company and the Reinsurers in the original loss
settlement or verdict or judgment.





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ARTICLE
10





EXTRA-CONTRACTUAL
OBLIGATIONS/LOSS EXCESS OF POLICY LIMITS





A.           “Extra-Contractual
Obligations” means those liabilities not covered under any other provision of
this Contract, other than Loss Excess of Policy Limits, including but not
limited to compensatory, consequential, punitive, or exemplary damages together
with any legal costs and expenses incurred in connection therewith, paid as
damages or in settlement by the Company arising from an allegation or claim of
its insured, its insured’s assignee, or other third party, which alleges
negligence, gross negligence, bad faith or other tortious conduct on the part of
the Company in the handling, adjustment, rejection, defense or settlement of a
claim under a Policy that is the Business Covered.





B.           “Loss
Excess of Policy Limits” means any amount of loss, together with any legal costs
and expenses incurred in connection therewith, paid as damages or in settlement
by the Company in excess of its Policy Limits, but otherwise within the
coverage terms of the Policy, arising from an allegation or claim of its
insured, its insured’s assignee, or other third party, which alleges negligence,
gross negligence, bad faith or other tortious conduct on the part of the Company
in the handling of a claim under a Policy or bond that is the Business Covered,
in rejecting a settlement within the Policy Limits, in discharging a duty to
defend or prepare the defense in the trial of an action against its insured, or
in discharging its duty to prepare or prosecute an appeal consequent upon such
an action. For the avoidance of doubt, the decision by the Company to
settle a claim for an amount within the coverage of the Policy but not within
the Policy Limit when the Company has reasonable basis to believe that it may
have legal liability to its insured or assignee or other third party on the
claim will be deemed a Loss Excess of Policy Limits. The Company will provide
Reinsurers an explanation relating to the Company’s motivation for
settlement and use its best efforts to obtain the Reinsurers’prior counsel and
concurrence in the Company’s action. A reasonable
basis shall mean it is more likely than not a trial would result in a verdict
excess of the Policy Limits, in the opinion of counsel assigned to defend the
insured or otherwise retained by the Company.





C.           An
Extra-Contractual Obligation or a Loss Excess of Policy Limits shall be deemed
to have occurred on the same date as the loss covered under the Company’s
original Policy and shall be considered part of the original loss (subject to
other terms of this Contract).





D.           Neither
an Extra-Contractual Obligation nor a Loss Excess of Policy Limits shall include
a loss incurred by the Company as the result of any fraudulent or criminal act
directed against the Company by any officer or director of the Company acting
individually or collectively or in collusion with any other organization or
party involved in the presentation, defense, or settlement of any claim under
this Contract.





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E.           Recoveries,
whether collectible or not, including any retentions and/or deductibles, from
any other form of insurance or reinsurance which protect the Company against any
loss or liability covered under this Article shall inure to the benefit of the
Reinsurers and shall be deducted from the total amount of any Extra-Contractual
Obligation and/or Loss Excess of Policy Limits in determining the amount of
Extra-Contractual Obligation and/or Loss Excess of Policy Limits that shall be
indemnified under this Article.





F.           The
Company shall be indemnified in accordance with this Article to the extent
permitted by applicable law.





ARTICLE
11





TERRORISM
RECOVERY





A.           As
respects the Insured Losses of the Company for each Program Year, to the extent
the Company’s total reinsurance recoverables for Insured Losses, whether
collected or not, when combined with the financial assistance available to the
Company under the Act exceeds the aggregate amount of Insured Losses paid by the
Company, less any other recoveries or reimbursements, (the “Excess Recovery”), a
share of the Excess Recovery shall be allocated to the Company and the
Reinsurer. The Company’s share of the Excess Recovery shall be deemed to be an
amount equal to the proportion that the Company’s Insured Losses bear to the
Insurer’s total Insured Losses for each Program equal to the proportion that the
Reinsurer’s payment of Insured Losses under this Contract bears to the Company’s
total collected reinsurance recoverables for Insured Losses. The Company shall
provide the Reinsurer with all necessary data respecting the transactions
covered under this Article.





B.           The
method set forth herein for determining an Excess Recovery is intended to be
consistent with the United States Treasury Department’s construction and
application of Section 103 (g)(2) of the Act. To the extent it is inconsistent,
it shall be amended to conform with such construction and application,
nevertheless the Company shall be the sole judge as to the allocation of TRIA
Recoveries to this or to other reinsurance Contracts.





C.           
“Act” as used herein shall mean the Terrorism Risk Insurance Act of 2002, the
Terrorism Risk Insurance Extension Act of 2005, and the Terrorism Risk
Insurance Program Reauthorization Act of 2007 (“TRIPRA”) and any
subsequent amendment thereof or any regulations promulgated thereunder.
“Company” shall have the same meaning as “Insurer” under the Act and “Insured
Losses”, and “Program Year” shall follow the definitions as provided in the
Act.





ARTICLE
12





NET RETAINED
LINE





A.           This
Contract applies only to that portion of any Policy which the Company retains
net for its own account, and in calculating the amount of any loss hereunder and
also in computing the amount or amounts in excess of which this Contract
attaches, only loss or losses in respect of that portion of any Policy which the
Company retains net for its own account shall be included.





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B.           The
amount of the Reinsurers’ liability hereunder in respect of any loss or losses
shall not be increased by reason of the inability of the Company to collect from
any other Reinsurers, whether specific or general, any amounts which may have
become due from such Reinsurers, whether such inability arises from the
insolvency of such other Reinsurers or otherwise.





C.           Inter-company
reinsurance among the companies collectively called the “Company” shall be
entirely disregarded for all purposes of this Contract.





D.           Permission
is hereby granted the Company to carry (i) underlying reinsurance and (ii)
layers of catastrophe reinsurance both below and above this layer of coverage
and recoveries made on the latter shall be disregarded for all purposes of this
Contract and shall inure to the sole benefit of the Company.





ARTICLE
13





ERRORS AND
OMISSIONS





Inadvertent delays, errors or omissions
made by the Company in connection with this Contract shall not relieve the
Reinsurer from any liability which would have attached had such error or
omission not occurred, provided always that such error or omission shall be
rectified as soon as possible, provided that the liability of the Reinsurer
shall not extend beyond the coverage provided by this Contract nor to extend
coverage to Policies that are not the Business Covered hereunder. This Article
shall not apply to a sunset provision, if any in this Contract, nor to a
commutation made in connection with this Contract.





ARTICLE
14





OFFSET





The
Company and the Reinsurer shall have the right to offset any balance or amounts
due from one party to the other under the terms of this Contract. The party
asserting the right of offset may exercise such right any time whether the
balances due are on account of premiums or losses or otherwise and immediately
inform the Intermediary accordingly. In the event of the insolvency of any
party, offset shall be as permitted by applicable law.





ARTICLE
15





CURRENCY





A.           Whenever
the word “Dollars” or the “$” sign appears in this Contract, they shall be
construed to mean United States Dollars and all transactions under this Contract
shall be in United States Dollars.





B.           Amounts
paid or received by the Company in any other currency shall be converted to
United States Dollars at the rate of exchange at the date such transaction is
entered on the books of the Company.





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ARTICLE
16





FEDERAL EXCISE TAX AND OTHER
TAXES





A.           To
the extent that any portion of the reinsurance premium for this Contract is
subject to the Federal Excise Tax (as imposed under Section 4371 of the Internal
Revenue Code) and the Reinsurer is not exempt therefrom, the Reinsurers shall
allow for the purpose of paying the Federal Excise Tax, a deduction by the
Company of the applicable percentage of the premium payable hereon. In the event
of any return of premium becoming due hereunder, the Reinsurers shall deduct the
applicable same percentage from the return premium payable hereon and the
Company or its agent shall take steps to recover the tax from the United States
Government. In the event of any uncertainty, upon the written request of the
Company, the Reinsurer will immediately file a certificate signed by a senior
corporate officer of the Reinsurer certifying to its entitlement to the
exemption from the Federal Excise Tax with respect to one or more
transactions.





B.           In
consideration of the terms under which this Contract is issued, the Company
undertakes not to claim any deduction of the premium hereon when making Canadian
Tax returns or when making tax returns, other than Income or Profits Tax
returns, to any State or Territory of the United States of America or to the
District of Columbia.





ARTICLE
17





ACCESS TO
RECORDS





A.           The
Company shall place at the disposal of the Reinsurer at all reasonable times,
and the Reinsurer shall have the right to inspect (and make reasonable copies)
through its designated representatives during the term of this Contract and
thereafter, all non-privileged books, records and papers of the Company directly
related to any reinsurance hereunder, or the subject matter hereof, provided
that if the Reinsurer has ceased active market operations, this right of access
shall be subject to that Reinsurer being current in all payments owed the
Company that are not currently the subject of a formal dispute (such as the
initiation of an Arbitration or Mediation). For the purposes of this Article,
“non-privileged” refers to books, records and papers that are not subject to the
Attorney-client privilege and Attorney-work product doctrine.





B.           “Attorney-client
privilege” and “Attorney-work product” shall have the meanings ascribed to each
by statute and/or the court of final adjudication in the jurisdiction whose laws
govern the substantive law of a claim arising under a Policy reinsured under
this Contract.





C.           Notwithstanding
anything to the contrary in this Contract, for any claim or loss under a Policy
reinsured under this Contract, should the Reinsurer assert, pursuant to the
Common Interest Doctrine (“Doctrine”), that it has the right to examine any
document that the Company alleges is subject to the Attorney-client privilege or
the Attorney-work product privilege, upon the Reinsurer providing to the Company
substantiation of any law which reasonably supports the basis for the
Reinsurer’s conclusion that the Doctrine applies and the Doctrine will be upheld
as applying between the Company and the Reinsurer as against third parties
pursuant to the substantive law(s) which govern the claim or loss, the Company
shall give the Reinsurer access to such document.





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D.           Notwithstanding
any other provision to the contrary, once a claim and all directly related
claims are finally settled by the Company, the Reinsurer shall be entitled to
review all reasonable and applicable claims records that support a Company
request for payment of a claim hereunder for Net Loss for Business Covered
hereunder. In the event that the Reinsurer shall have paid an amount for Net
Loss to the Company and the records do not support the obligation of the
Reinsurer to have paid the claim, the Company shall promptly return any payment
made in error.





ARTICLE
18





INSOLVENCY




(This
Article shall be deemed to read as required to meet the statutory insolvency
clause requirements of the Company.)





A.           In
the event of insolvency or the appointment of a conservator, liquidator, or
statutory successor of the Company, the portion of any risk or obligation
assumed by the Reinsurer shall be payable to the conservator, liquidator, or
statutory successor on the basis of claims allowed against the insolvent Company
by any court of competent jurisdiction or by any conservator, liquidator, or
statutory successor of the Company having authority to allow such claims,
without diminution because of that insolvency, or because the conservator,
liquidator, or statutory successor has failed to pay all or a portion of any
claims.





B.           Payments
by the Reinsurer as above set forth shall be made directly to the Company or to
its conservator, liquidator, or statutory successor, except where this Contract
specifically provides another payee of such reinsurance or except as provided by
applicable law and regulation (such as subsection (a) of section 4118 of the New
York Insurance Laws) in the event of the insolvency of the Company.





C.           In
the event of the insolvency of the Company, the liquidator, receiver,
conservator or statutory successor of the Company shall give written notice to
the Reinsurer of the pendency of a claim against the insolvent Company on the
Policy or Policies reinsured within a reasonable time after such claim is filed
in the insolvency proceeding and during the pendency of such claim any Reinsurer
may investigate such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated any defense or defenses which it may deem
available to the Company or its liquidator, receiver, conservator or statutory
successor. The expense thus incurred by the Reinsurer shall be chargeable
subject to 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.





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D.           Where
two (2) or more Reinsurers are involved in the same claim and a majority in
interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of this Contract as though such expense
had been incurred by the Company.





ARTICLE
19





ARBITRATION





A.           Any
and all disputes between the Company and the Reinsurer arising out of, relating
to, or concerning this Contract, whether sounding in contract or tort and
whether arising during or after termination of this Contract, shall be submitted
to the decision of a board of arbitration composed of two (2) arbitrators and an
umpire (“Board”) meeting at a site in the city in which the principal
headquarters of the Company are located. The arbitration shall be conducted
under the Federal Arbitration Act and shall proceed as set forth
below.





B.           A
notice requesting arbitration, or any other notice made in connection therewith,
shall be in writing and be sent certified or registered mail, return receipt
requested to the affected parties. The notice requesting arbitration shall state
in particulars all issues to be resolved in the view of the claimant, shall
appoint the arbitrator selected by the claimant and shall set a tentative date
for the hearing, which date shall be no sooner than ninety (90) days and no
later than one hundred fifty (150) days from the date that the notice requesting
arbitration is mailed. Within thirty (30) days of receipt of claimant’s notice,
the respondent shall notify claimant of any additional issues to be resolved in
the arbitration and of the name of its appointed arbitrator.





C.           The
members of the Board shall be impartial, disinterested and not currently
representing any party participating in the arbitration, and shall be current or
former senior officers of insurance or reinsurance concerns, experienced in the
line(s) of business that are the subject of this Contract. The Company and the
Reinsurer as aforesaid shall each appoint an arbitrator and the two (2)
arbitrators shall choose an umpire before instituting the hearing. As time is of
the essence, if the respondent fails to appoint its arbitrator within thirty
(30) days after having received claimant’s written request for arbitration, the
claimant is authorized to and shall appoint the second arbitrator. If the two
(2) arbitrators fail to agree upon the appointment of an umpire within thirty
(30) days after notification of the appointment of the second arbitrator, within
ten (10) days thereof, the two (2) arbitrators shall request ARIAS U.S.
(“ARIAS”) to apply its procedures to appoint an umpire for the arbitration with
the qualifications set forth above in this Article. If the use of ARIAS
procedures fails to name an umpire, either party may apply to a court of
competent jurisdiction to appoint an umpire with the above required
qualifications. The umpire shall promptly notify in writing all parties to the
arbitration of his selection and of the scheduled date for the hearing. Upon
resignation or death of any member of the Board, a replacement shall be
appointed in the same fashion as the resigning or deceased member was
appointed.





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D.           The
claimant and respondent shall each submit initial briefs to the Board outlining
the facts, the issues in dispute and the basis, authority, and reasons for their
respective positions within thirty (30) days of the date of notice of
appointment of the umpire. The claimant and the respondent may submit a reply
brief to the Board within ten (10) days after filing of the initial brief(s).
Initial and reply briefs may be amended by the submitting party at any time, but
not later than ten (10) days prior to the date of commencement of the
arbitration hearing. Reasonable responses shall be allowed at the arbitration
hearing to new material contained in any amendments filed to the briefs but not
previously responded to.





E.           The
Board shall make a decision and award with regard to the terms expressed in this
Contract, the original intentions of the parties to the extent reasonably
ascertainable, and the custom and usage of the insurance and reinsurance
business that is the subject of this Contract. Notwithstanding any other
provision of this Contract, the Board shall have the right and obligation to
consider underwriting and submission-related documents in any dispute between
the parties.





F.           The
Board shall be relieved of all judicial formalities and the decision and award
shall be based upon a hearing in which evidence shall be allowed though the
formal rules of evidence shall not strictly apply. Cross examination and
rebuttal shall be allowed. The Board may request a post-hearing brief to be
submitted within twenty (20) days of the close of the hearing.





G.           The
Board shall render its decision and award in writing within thirty (30) days
following the close of the hearing or the submission of post-hearing briefs,
whichever is later, unless the parties consent to an extension. Every decision
by the Board shall be by a majority of the members of the Board and each
decision and award by the majority of the members of the Board shall be final
and binding upon all parties to the proceeding. Such decision shall be a
condition precedent to any right of legal action arising out of the arbitrated
dispute which either party may have against the other. However, the Board is not
authorized to award punitive, exemplary or enhanced compensatory
damages.





H.           The
Board may award (i) interest at a rate not in excess of that set forth in the
Article entitled LATE
PAYMENTS, calculated from the date the Board determines that any amounts
due the prevailing party should have been paid to the prevailing party, and (ii)
applicable Attorneys’ fees and costs.





I.           Either
party may apply to a court of competent jurisdiction for an order confirming any
decision and the award; a judgment of that Court shall thereupon be entered on
any decision or award. If such an order is issued, the Attorneys’ fees of the
party so applying and court costs will be paid by the party against whom
confirmation is sought.





J.           Except
in the event of a consolidated arbitration, each party shall bear the expense of
the one arbitrator appointed by or for it and shall jointly and equally bear
with the other party the expense of any stenographer requested, and of the
umpire. The remaining costs of the arbitration proceedings shall be finally
allocated by the Board.





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K.           Subject
to customary and recognized legal rules of privilege, each party participating
in the arbitration shall have the obligation to produce those documents and as
witnesses at the arbitration those of its employees, and those of its affiliates
as any other participating party reasonably requests, providing always that the
same witnesses and documents be obtainable and relevant to the issues before the
arbitration and not be unduly burdensome or excessive in the opinion of the
Board.





L.           The
parties may mutually agree as to pre-hearing discovery prior to the arbitration
hearing and in the absence of agreement, upon the request of any party,
pre-hearing discovery may be conducted as the Board shall determine in its sole
discretion to be in the interest of fairness, full disclosure, and a prompt
hearing, decision and award by the Board.





M.           The
Board shall be the final judge of the procedures of the Board, the conduct of
the arbitration, of the rules of evidence, the rules of privilege, discovery and
production and of excessiveness and relevancy of any witnesses and documents
upon the petition of any participating party. To the extent permitted by law,
the Board shall have the authority to issue subpoenas and other orders to
enforce their decisions. The Board shall also have the authority to issue
interim decisions or awards in the interest of fairness, full disclosure, and a
prompt and orderly hearing and decision and award by the Board.





N.           Upon
request made to the Board not later than ten (10) days after the umpire’s
appointment, the Board may order a consolidated hearing as respects common
issues between the Company and all affected Reinsurers participating in this
Contract if the Board is satisfied in its discretion that the issues in dispute
affect more than one Reinsurer and a consolidated hearing would be in the
interest of fairness, and a prompt and cost effective resolution of the issues
in dispute.





O.           If
the parties mutually agree to or the Board orders a consolidated hearing, all
other affected participating Reinsurers shall join and participate in the
arbitration under time frames established by the Board and will be bound by the
Board’s decision and award unless excused by the Board in its discretion. A
consolidated hearing shall not result in any change or modification of any
Reinsurer’s liability for its participation, that is several, but not joint
shall remain the same.





P.           Any
Reinsurer may decline to actively participate in a consolidated arbitration if
in advance of the hearing, that Reinsurer shall file with the Board a written
agreement in form satisfactory to the Board to be bound by the decision and
award of the Board in the same fashion and to the same degree as if it actively
participated in the arbitration.





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Q.           In
the event of an order of consolidation by the Board, the arbitrator appointed by
the original Reinsurer shall be subject to being, and may be, replaced within
thirty (30) days of the decision to have a consolidated arbitration by an
arbitrator named collectively by the Reinsurers or in the absence of agreement,
by the Lead Reinsurer, or if there is no Lead Reinsurer involved in the dispute,
the Reinsurer with the largest participation in this Contract affected by the
dispute. In the event two (2) or more Reinsurers affected by the dispute each
have the same largest participation, they shall agree among themselves as to the
replacement arbitrator, if any, to be appointed. The umpire shall be the final
determiner in the event of any dispute over replacement of that arbitrator. All
other aspects of the arbitration shall be conducted as provided for in this
Article provided that (1) each party actively participating in the consolidated
arbitration will have the right to its own attorney, position, and related
claims and defenses; (2) each party will not, in presenting its position, be
prevented from presenting its position by the position set forth by any other
party; and (3) the cost and expense of the arbitration, exclusive of Attorneys’
fees (which will be borne exclusively by the respective retaining party unless
otherwise determined by the Board) but including the expense of any stenographer
which shall be borne by each party actively participating in the consolidated
arbitration or as the Board shall determine to be fair and appropriate under the
circumstances.




ARTICLE
20





SERVICE OF
SUIT





A.           This
Article only applies to a Reinsurer domiciled outside of the United States
and/or unauthorized in any state, territory or district of the United States
having jurisdiction over the Company. Furthermore, this Article will not be read
to conflict with or override any obligations of the parties to arbitrate their
disputes under this Contract. This Article is intended as an aid to compelling
arbitration if called for by this Contract or enforcing any such arbitration or
arbitral award, not as an alternative to any Arbitration provision in this
Contract that is applicable for resolving disputes arising out of this
Contract.





B.           In
the event of any dispute, the Reinsurer, at the request of the Company, shall
submit to the jurisdiction of a court of competent jurisdiction within the
United States. Nothing in this Article constitutes or should be understood to
constitute a waiver of any obligation to arbitrate disputes arising from this
Contract or the Reinsurer’s rights to commence an action in any court of
competent jurisdiction in the United States, to remove an action to a United
States District Court, or to seek a transfer of a case to another court as
permitted by the laws of the United States or of any state in the United
States.





C.           The
Reinsurer, once the appropriate court is selected, whether such court is the one
originally chosen by the Company and accepted by the Reinsurer or is determined
by removal, transfer, or otherwise, as provided above, will comply with all
requirements necessary to give said court jurisdiction and, in any suit
instituted against any of them upon this Contract, will abide by the final
decision of such court or any appellate court in the event of an
appeal.





D.           Service
of process in any such suit against the Reinsurer may be made upon Mendes and
Mount, 750 Seventh Avenue, New York, New York 10019-6829, - or in substitution
therefore, the Firm identified by the Reinsurer on the Reinsurer’s signature
page to this Contract, - (“Firm”) and in any suit instituted, the Reinsurer
shall abide by the final decision of such court or of any appellate court in the
event of an appeal.





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E.           The
Firm is authorized and directed to accept service of process on behalf of the
Reinsurer in any such suit and/or upon the request of the Company to give a
written undertaking to the Company that they shall enter a general appearance
upon the Reinsurer’s behalf in the event such a suit shall be
instituted.





F.           Further,
as required by and pursuant to any statute of any state, territory or district
of the United States which makes provision therefore, the Reinsurer hereby
designates the Superintendent, Commissioner or Director of Insurance or other
officer specified for that purpose in the statute, or his successor or
successors in office, as their true and lawful attorney upon whom may be served
any lawful process in any action, suit or proceeding instituted by or on behalf
of the Company or any beneficiary hereunder arising out of this Contract, and
hereby designates the above-named as the person to whom the said officer is
authorized to mail such process or a true copy thereof.





ARTICLE
21





CONFIDENTIALITY





A.           The
information, data, statements, representations and other materials provided by
the Company or the Reinsurer to the other arising from consideration and
participation in this Contract whether contained in the reinsurance submission,
this Contract, or in materials or discussions arising from or related to this
Contract, may contain confidential or proprietary information as expressly
indicated by the Disclosing Party (“Disclosing Party”) in writing from time to
time to the other party of the respective parties (“Confidential Information”).
This Confidential Information is intended for the sole use of the parties to
this Contract (and their affiliates involved in management or operation of
assumed reinsurance business, retrocessionaires, prospective retrocessionaires,
intermediaries involved in such placements, respective auditors and legal
counsel) as may be necessary in analyzing and/or accepting a participation in
and/or executing their respective responsibilities under or related to this
Contract. Disclosing or using Confidential Information relating to this
Contract, without the prior written consent of the Disclosing Party, for any
purpose beyond (i) the scope of this Contract, (ii) the reasonable extent
necessary to perform rights and responsibilities expressly provided for under
this Contract, (iii) the reasonable extent necessary to administer, report to
and effect recoveries from retrocessional Reinsurers, (iv) the reporting to
regulatory or other governmental authorities as may be legally required or (v)
persons with a need to know the information, (all of the preceding persons or
entities who are legally obligated by either written agreement or otherwise to
maintain the confidentiality of the Confidential Information) is expressly
forbidden. Copying, duplicating, disclosing, or using Confidential Information
for any purpose beyond this expressed purpose is forbidden without the prior
written consent of the Disclosing Party.





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B.           Should
a party (“Receiving Party”) receive a third party demand pursuant to subpoena,
summons, or court or governmental order, to disclose Confidential Information
that has been provided by another party to this Contract, the Receiving Party
shall make commercially reasonable efforts to provide the Disclosing Party with
written notice of any subpoena, summons, or court or governmental order, at
least ten (10) days prior to such release or disclosure. Unless the Disclosing
Party has given its prior permission to release or disclose the Confidential
Information, the Receiving Party shall not comply with the subpoena prior to the
actual date required by the subpoena. If a protective order or appropriate
remedy is not obtained, the Receiving Party may disclose only that portion of
the Confidential Information that it is legally obligated to disclose. However,
notwithstanding anything to the contrary in this Contract, in no event, to the
extent permitted by law, shall this Article require the Receiving Party not to
comply with the subpoena, summons, or court or governmental order.





ARTICLE
22


PRIVACY





A.           Privacy Awareness.
The Company and the Reinsurer are aware of and in compliance with their
responsibilities and obligations under:





1.           The
Gramm-Leach-Bliley Act of 1999 (the “Act”) and applicable Federal and State laws
and regulations implementing the Act. The Company and the Reinsurer will only
use non-public personal information as permitted by law; and





2.           The
applicable provisions of the Health Insurance Portability and Accountability Act
(“HIPAA”) and the related requirements of any regulations promulgated thereunder
including without limitation the Federal Privacy Regulations as contained in 45
CFR Part 160 and 164 (the “Federal Privacy Regulations”). The Company and the
Reinsurer will only use protected health information as permitted by
law.





B.           Non-Disclosure. To
the extent required or prohibited by applicable law or regulation, the Reinsurer
shall not disclose any (a) Non-Public Personal Information or (b) protected
health information (as defined in 45 CFR 164.501) it receives from the Company
to anyone other
than:





1.           The
Reinsurer, the Reinsurer’s affiliates, legal counsel, auditors, consultants,
regulators, rating agencies and any other persons or entities to whom such
disclosure is required to effect, administer, or enforce a reinsurance contract;
or any retrocessional reinsurance contract applicable to the losses that are the
subject of this Contract, or





2.           Persons
or entities to whom disclosure is required by applicable law or
regulation.





C.           Non-Public Personal
Information. “Non-Public Personal Information” shall for the purpose of
this Contract mean financial or health information that personally identifies an
individual, including claimants under Policies reinsured under this Contract,
and which information is not otherwise available to the public.





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ARTICLE
23


RESERVES





A.           If,
at any time during the period of this Contract and thereafter the reinsurance
provided by a Reinsurer participating in this Contract does not qualify for full
statutory accounting credit for reinsurance by regulatory authorities having
jurisdiction over the Company (whether by reason of lack of license,
accreditation or otherwise) such that a financial penalty to the Company would
result on any statutory statement or report the Company is required to make or
file with insurance regulatory authorities (or a court of law in the event of
insolvency), the Reinsurer shall secure the Reinsurer’s share of Obligations for
which such full statutory credit is not granted by those authorities in a
manner, form, and amount acceptable to the Company and to all applicable
insurance regulatory authorities in accordance with this Article.





B.           The
Reinsurer shall secure such Obligations, within thirty (30) days after the
receipt of the Company’s written request regarding the Reinsurer’s share of
Obligations under this Contract (but not later than December 31) of each year by
either:





1.           Clean,
irrevocable, and unconditional evergreen letter(s) of credit issued and
confirmed, if confirmation is required by the applicable insurance regulatory
authorities, by a qualified United States financial institution as defined under
the Insurance Law of the Company’s domiciliary state and acceptable to the
Company and to insurance regulatory authorities;





2.           A
trust account meeting at least the standards of New York’s Insurance Regulation
114 and the Insurance Law of the Company’s domiciliary state; or





3.           Cash
advances or funds withheld or a combination of both, which will be under the
exclusive control of the Company (“Funds Deposit”).





C.           The
“Obligations” referred to herein means, subject to the preceding paragraphs, the
then current (as of the end of each calendar quarter) sum of any:





1.           amount
of the ceded unearned premium reserve for which the Reinsurer is responsible to
the Company;





2.           amount
of Net Losses and Loss Adjustment Expenses and other amounts paid by the Company
for which the Reinsurer is responsible to the Company but has not yet
paid;





3.           amount
of ceded reserves for Net Losses and Loss Adjustment Expenses for which the
Reinsurer is responsible to the Company;





4.           amount
of return and refund premiums paid by the Company for which the Reinsurer is
responsible to the Company but has not yet paid.





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D.           The
Company, or its successors in interest, may draw, at any time and from time to
time, upon the:





1.           Established
letter of credit (or subsequent cash deposit);





2.           Established
trust account (or subsequent cash deposit); or





3.           Funds
Deposit;





without
diminution or restriction because of the insolvency of either the Company or the
Reinsurer for one or more of the following purposes set forth
below.





E.           Draws
shall be made only for the following purposes:





1.           To
make payment to and reimburse the Company for the Reinsurer’s share of Net Loss
and Loss Adjustment Expense and other amounts paid by the Company under its
Policies and for which the Reinsurer is responsible under this Contract that is
due to the Company but unpaid by the Reinsurer including but not limited to the
Reinsurer’s share of premium refunds and returns; and





2.           To
obtain a cash advance of the entire amount of the remaining balance under any
letter of credit in the event that the Company:





a.           has
received notice of non-renewal or expiration of the letter of credit or trust
account;





b.           has
not received assurances satisfactory to the Company of any required increase in
the amount of the letter of credit or trust account, or its replacement or other
continuation of the letter of credit or trust account at least thirty (30) days
before its stated expiration date;





c.           has
been made aware that others may attempt to attach or otherwise place in jeopardy
the security represented by the letter of credit or trust account;
or





d.           has
concluded that the trustee or issuing (or confirming) bank’s financial condition
is such that the value of the security represented by the letter of credit or
trust account may be in jeopardy;





and under
any of those circumstances where the Reinsurer’s entire Obligations, or part
thereof, under this Contract remain unliquidated and undischarged at least
thirty (30) days prior to the stated expiration date or at the time the Company
learns of the possible jeopardy to the security represented by the letter of
credit or trust account.





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F.           If
the Company draws on the letter of credit or trust account to obtain a cash
advance, the Company will hold the amount of the cash advance so obtained in the
name of the Company in any qualified United States financial institution as
defined under the Insurance Law of the Company’s domiciliary state in trust
solely to secure the Obligations referred to above and for the use and purposes
enumerated above and to return any balance thereof to the
Reinsurer:





1.           Upon
the complete and final liquidation and discharge of all of the Reinsurer’s
Obligations to the Company under this Contract; or





2.           In
the event the Reinsurer subsequently provides alternate or replacement security
consistent with the terms hereof and acceptable to the Company.





G.           The
Company will prepare and forward at annual intervals or more frequently as
determined by the Company, but not more frequently than quarterly to the
Reinsurer a statement for the purposes of this Article, showing the Reinsurer’s
share of Obligations as set forth above. If the Reinsurer’s share thereof
exceeds the then existing balance of the security provided, the Reinsurer will,
within fifteen (15) days of receipt of the Company’s statement, but never later
than December 31 of any year, increase the amount of the letter of credit, (or
subsequent cash deposit), trust account or Funds Deposit to the required amount
of the Reinsurer’s share of Obligations set forth in the Company’s statement,
but never later than December 31 of any year. If the Reinsurer’s share thereof
is less than the then existing balance of the security provided, the Company
will release the excess thereof to the Reinsurer upon the Reinsurer’s written
request. The Reinsurer will not attempt to prevent the Company from holding the
security provided or Funds Deposit so long as the Company is acting in
accordance with this Article. The Company shall pay interest earned on the
deposited amounts to the Reinsurers as the parties shall have agreed at the time
of the deposit.





H.           Any
assets deposited to a trust account will be valued according to their current
fair market value and will consist only of cash (U.S. legal tender),
certificates of deposit issued by a qualified United States financial
institution as defined under the Insurance Law of the Company’s domiciliary
state and payable in cash, and investments of the types no less conservative
than those specified in Section 1404 (a)(1)(2)(3)(8) and (10) of the New York
Insurance Law and which are admitted assets under the Insurance Law of the
Company’s domiciliary state. Investments issued by the parent, subsidiary, or
affiliate of either the Company or the Reinsurer will not be eligible
investments. All assets so deposited will be accompanied by all necessary
assignments, endorsements in blank, or transfer of legal title to the trustee in
order that the Company may negotiate any such assets without the requirement of
consent or signature from the Reinsurer or any other entity.





I.           All
settlements of account between the Company and the Reinsurer will be made in
cash or its equivalent. All income earned and received by the amount held in an
established trust account will be added to the principal.





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J.           The
Company’s “successors in interest” will include those by operation of law,
including without limitation, any liquidator, rehabilitator, receiver, or
conservator.





K.           The
Reinsurer will take any other reasonable steps that may be required for the
Company to take full credit on its statutory financial statements for the
reinsurance provided by this Contract.





ARTICLE
24





LATE
PAYMENTS





A.           Payments
from the Reinsurer to the Company for coverage providing pro rata forms of
reinsurance shall have a due date as expressed in the Article entitled REPORTS
AND REMITTANCES. Payments from the Reinsurer to the Company for coverage
providing excess of loss reinsurance shall have as a due date the date on which
the proof of loss or demand for payment is received by the Reinsurer. Payment
not received within sixty (60) days of the due date shall be deemed overdue (the
“Overdue Date”). Payments due from the Reinsurer to the Company will not be
considered overdue if the Reinsurer requests, in writing, that such payment be
made by drawing on a letter of credit or other similar method of funding that
has been established for this Contract, provided that there is an adequate
balance in place, and further provided that such advice to draw is received by
the Company within the sixty (60) day deadline set forth above. Payments from
the Company to the Reinsurer will have a due date as the date specified in this
Contract and will be overdue sixty (60) days thereafter. Premium adjustments
will be overdue sixty (60) days from the Contract due date or one hundred twenty
(120) days after the expiration or renewal date, whichever is
greater.





B.           In
the event that this Contract provides excess of loss reinsurance, the Company
will provide the Reinsurer with a reasonable proof of loss and a copy of the
claim adjuster’s report(s) or any other reasonable evidence of indemnification.
If subsequent to receipt of this evidence, the information contained therein is
unreasonably insufficient or not in substantial accordance with the contractual
conditions of this Contract, then the payment due date as specified above will
be deemed to be the date upon which the Reinsurer received the additional
information necessary to approve payment of the claim and the claim is presented
in a reasonably acceptable manner. This paragraph is only for the purpose of
establishing when a claim payment is overdue, and will not alter the provisions
of the Article entitled REPORTS
AND REMITTANCES or other pertinent contractual stipulations of this
Contract.





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C.           If
payment is made of overdue amounts within thirty (30) days of the Overdue Date,
overdue amounts will bear simple interest from the Overdue Date at a rate
determined by the annualized one month London Interbank Offered Rate for the
first business day of the calendar month in which the amount becomes overdue, as
published in The Wall
Street Journal, plus two hundred (200) basis points to be calculated
weekly. If payment is made of overdue amounts more than thirty (30) days after
the Overdue Date, overdue amounts will bear simple interest from the Overdue
Date at a rate determined by the annualized one month London Interbank Offered
Rate for the first business day of the calendar month in which the amount
becomes overdue, as published in The Wall Street
Journal, plus four hundred (400) basis points to be calculated on a
weekly basis, but in no event less than eight percent (8%) simple interest. If
the sum of the compensating additional amount computed in respect of any overdue
payment is less than one quarter of one percent (0.25%) of the amount overdue,
or one thousand dollars ($1,000), whichever is greater, and/or the overdue
period is one week or less, then the interest amount shall be waived. The basis
point standards referred to above shall be doubled if the late payment is due
from a Reinsurer who is no longer an active reinsurance market. Interest shall
cease to accrue upon the party’s payment of an overdue amount to the
Intermediary.





ARTICLE
25





MODE OF
EXECUTION





A.           This
Contract may be executed by:





1.           an
original written ink signature of paper documents;





2.           an
exchange of facsimile copies showing the original written ink signature of paper
documents;





3.           electronic
signature technology employing computer software and a digital signature or
digitizer pen pad to capture a person’s handwritten signature in such a manner
that the signature is unique to the person signing, is under the sole control of
the person signing, is capable of verification to authenticate the signature and
is linked to the document signed in such a manner that if the data is changed,
such signature is invalidated.





B.         
  The use of any one or a combination of these methods of execution
shall constitute a legally binding and valid signing of this
Contract.





ARTICLE
26





VARIOUS OTHER
TERMS





A.           This
Contract shall be binding upon and inure to the benefit of the Company and
Reinsurer and their respective successors and assigns provided, however, that
this Contract may not be assigned by either party without the prior written
consent of the other which consent may be withheld by either party in its sole
unfettered discretion. This provision shall not be construed to preclude the
assignment by the Company of reinsurance recoverables to another party for
collection.





B.           The
territorial limits of this Contract shall be identical with those of the
Company’s Policies.





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C.           This
Contract shall constitute the entire agreement between the parties with respect
to the Business Covered hereunder. There are no understandings between the
parties other than as expressed in this Contract. Any change or modification of
this Contract shall be null and void unless made by amendment to the Contract
and signed by both parties.





D.           Except
as may be provided in the Article entitled ARBITRATION,
this Contract shall be governed by and construed according to the laws of the
Commonwealth of Pennsylvania, exclusive of that state’s rules with respect to
conflicts of law.





E.           The
headings preceding the text of the Articles and paragraphs of this Contract are
intended and inserted solely for the convenience of reference and shall not
affect the meaning, interpretation, construction or effect of this
Contract.





F.           This
Contract is solely between the Company and the Reinsurer, and in no instance
shall any insured, claimant or other third party have any rights under this
Contract.





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





H.           The
failure of the Company or Reinsurer to insist on strict compliance with this
Contract or to exercise any right or remedy shall not constitute a waiver of any
rights contained in this Contract nor estop the parties from thereafter
demanding full and complete compliance nor prevent the parties from exercising
any remedy.





I.           Each
party shall be excused for any reasonable failure or delay in performing any of
its respective obligations under this Contract, if such failure or delay is
caused by Force Majeure. “Force Majeure” shall mean any act of God, strike,
lockout, act of public enemy, any accident, explosion, fire, storm, earthquake,
flood, drought, peril of sea, riot, embargo, war or foreign, federal, state or
municipal order or directive issued by a court or other authorized official,
seizure, requisition or allocation, any failure or delay of transportation,
shortage of or inability to obtain supplies, equipment, fuel or labor or any
other circumstance or event beyond the reasonable control of the party relying
upon such circumstance or event; provided, however, that no such Force Majeure
circumstance or event shall excuse any failure or delay beyond a period
exceeding thirty (30) days from the date such performance would have been due
but for such circumstance or event.





J.           All
Articles of this Contract shall survive the termination of this Contract until
all Obligations between the parties have been finally settled.





K.           This
Contract may be executed by the parties hereto in any number of counterparts,
and by each of the parties hereto in separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.





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L.           Whenever
the word “Company” is used in this Contract, such term shall mean each and all
affiliated companies which are or may hereafter be under common control provided
notice be given to the Reinsurers of any newly affiliated companies which may
hereafter come under common control as soon as practicable, with full
particulars as to how such affiliation is likely to affect this Contract. In the
event that either party maintains that such affiliation calls for altering the
terms of this Contract and an agreement for alteration not being arrived at,
then the Business Covered of such newly affiliated company is covered at
existing terms for a period not to exceed (90) ninety days after notice by
either party that it does not wish to cover the business of the newly affiliated
company at the existing terms.





M.           The
term “Reinsurer” shall refer to each Reinsurer participating severally and not
jointly in this Contract. The subscribing (Re)insurers’ obligations under
contracts of (re)insurance to which they subscribe are several and not joint and
are limited solely to the extent of their individual subscriptions. The
subscribing (Re)insurers are not responsible for the subscription of any
co-subscribing (Re) insurer who for any reason does not satisfy all or part of
its obligations.





N.           For
purposes of sending and receiving notices and payments required by this Contract
other than in respect of the Articles entitled SERVICE
OF SUIT and RESERVES
herein, the reinsured company that is set forth first in the definition of
“Company” is deemed the agent of all other reinsured companies referenced
herein. In no event, however, shall any reinsured company be deemed the agent of
another with respect to the terms of the Article entitled INSOLVENCY.





O.           Whenever
the content of this Contract requires, the gender of all words shall include the
masculine, feminine and neuter, and the number of all words shall include the
singular and the plural. This Contract shall be construed without regard to
any presumption or other rule requiring construction against the party causing
this Contract to be drafted.





P.           The
Company shall furnish the Reinsurer, in accordance with regulatory requirements,
periodic reporting of premiums and losses that relate to the Business Covered in
this Contract as may be needed for Reinsurers’ completion of financial
statements to regulatory authorities.





Q.           When
so requested in writing, the Company shall afford the Reinsurer or its
representatives an opportunity to be associated with the Company, at the expense
of the Reinsurer, in the defense of any claim, suit or proceeding involving this
reinsurance, and the Company and the Reinsurer shall cooperate in every respect
in the defense of such claim, suit or proceeding, provided the Company shall
have the right to make any decision in the event of disagreement over any matter
of defense or settlement.





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ARTICLE
27





INTERMEDIARY





A.           Towers
Watson Pennsylvania Inc. (“Towers Watson”) is hereby recognized as the
Intermediary negotiating this Contract for all business hereunder. All
communications (including but not limited to notices, statements, premium,
return premium, commissions, taxes, losses, loss adjustment expense, salvages
and loss settlements) relating thereto shall be transmitted to the Company or
the Reinsurer through Towers Watson, Centre Square East, 1500 Market Street,
Philadelphia, Pennsylvania, 19102-4790. Payments by the Company to the
Intermediary shall be deemed to constitute payment to the Reinsurer. Payments by
the Reinsurer to the Intermediary shall be deemed to constitute payment to the
Company only to the extent that such payments are actually received by the
Company.  In acting as Intermediary for this Contract, the
Intermediary shall (i) comply with all aspects of New York Regulation 98 and
shall (ii) be entitled to withdraw funds in accordance with section 32.3(a)(3)
of that Regulation including commissions, excise tax and interest received on
its premium and loss accounts, and shall also (iii) return to the Reinsurer any
brokerage allowed by the Reinsurer and taken on premium ceded to the Reinsurer
but refunded or returned to the Company.





B.           Whenever
notice is required within this Contract, such notice may be given by certified
mail, registered mail, or overnight express mail. Notice shall be deemed to be
given on the date received by the receiving party.





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INSOLVENCY FUNDS
EXCLUSION





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.





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NUCLEAR
INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE U.S.A.


(BRMA
35A)








1.           This
reinsurance does not cover any loss or liability accruing to the Company as a
member of, or subscriber to, any association of insurers or reinsurers formed
for the purpose of covering nuclear energy risks or as a direct or indirect
reinsurer of any such member, subscriber or association.





2.           Without
in any way restricting the operation of paragraph 1 of this Clause, it is
understood and agreed that for all purposes of this reinsurance all the original
Policies of the Company (new, renewal and replacement) of the classes specified
in Clause II of this paragraph 2 from the time specified in Clause III in this
paragraph 2 shall be deemed to include the following provision (specified as the
Limited Exclusion Provision):





Limited
      Exclusion Provision*





I.
                It
      is agreed that the policy does not apply under any liability coverage,
      to (injury,
      sickness, disease, death or destruction (bodily
      injury or property
damage


with
      respect to which an insured under the policy is also an insured under a
      nuclear energy liability policy issued by Nuclear Energy Liability
      Insurance Association, Mutual Atomic Energy Liability Underwriters or
      Nuclear Insurance Association of Canada, or would be an insured under any
      such policy but for its termination upon exhaustion of its limit of
      liability.





II.
            Family
      Automobile Policies (liability only), Special Automobile Policies (private
      passenger automobiles, liability only), Farmers Comprehensive Personal
      Liability Policies (liability only), Comprehensive Personal Liability
      Policies (liability only) or  Policies of a similar nature; and
      the liability portion of combination forms related to the four classes of
      Policies stated above, such as the Comprehensive Dwelling Policy and the
      applicable types of Homeowners
Policies.





III.
            The
      inception dates and thereafter of all original Policies as described in II
      above, whether new, renewal or replacement, being Policies which
      either





(a)
            become
      effective on or after 1st May, 1960,
or


(b)
            become
      effective before that date and contain the Limited Exclusion Provision set
      out above;





provided
      this paragraph 2 shall not be applicable to Family Automobile Policies,
      Special Automobile Policies, or Policies or combination Policies of a
      similar nature, issued by the Company on New York risks, until 90 days
      following approval of the Limited Exclusion Provision by the Governmental
      Authority having jurisdiction
thereof.





3.           Except
for those classes of Policies specified in Clause II of paragraph 2 and without
in any way restricting the operation of paragraph 1 of this Clause, it is
understood and agreed that for all purposes of this reinsurance the original
liability Policies of the Company (new, renewal and replacement) affording the
following coverages:





Owners,
      Landlords and Tenants Liability, Contractual Liability, Elevator
      Liability, Owners or Contractors (including railroad), Protective
      Liability, Manufacturers and Contractors Liability, Product Liability,
      Professional and Malpractice Liability, Storekeepers Liability, Garage
      Liability, Automobile Liability (including Massachusetts Motor Vehicle or
      Garage Liability)





shall be
deemed to include, with respect to such coverages, from the time specified in
Clause V of this paragraph 3, the following provision (specified as the Broad
Exclusion Provision):





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Broad
Exclusion Provision*





It
      is agreed that the policy does not
apply:





I.
              Under
      any Liability Coverage, to (injury,
      sickness, disease, death or
destruction


(bodily
injury or property damage


(a)
            with
      respect to which an insured under the policy is also an insured under a
      nuclear energy liability policy issued by Nuclear Energy Liability
      Insurance Association, Mutual Atomic Energy Liability Underwriters or
      Nuclear Insurance Association of Canada, or would be an insured under any
      such policy but for its termination upon exhaustion of its limit of
      liability; or





(b)
            resulting
      from the hazardous properties of nuclear material and with respect to
      which (1) any person or organization is required to maintain financial
      protection pursuant to the Atomic Energy Act of 1954, or any law
      amendatory thereof, or (2) the insured is, or had this policy not been
      issued would be, entitled to indemnity from the United States of America,
      or any agency thereof, under any agreement entered into by the United
      States of America, or any agency thereof, with any person or
      organization.





II.
                        Under
      any Medical Payments Coverage, or under any Supplementary Payments
      Provision relating to   immediate  medical or surgical relief(first
      aid


to
expenses incurred with respect
to (bodily
injury, sickness, disease or death


(bodily
injury resulting from the hazardous properties of nuclear material and
arising out of the   operation of a nuclear facility by any person
or organization.





III.
            Under
      any Liability Coverage, to
            (injury,
      sickness, disease, death or
destruction


(bodily
      injury or property damageresulting
      from the hazardous properties of nuclear material,
  if





(a)
            the
      nuclear material (1) is at any nuclear facility owned by, or operated by
      or on behalf of, an insured, or (2) has been discharged or dispersed
      therefrom;





(b)
            the
      nuclear material is contained in spent fuel or waste at any time
      possessed, handled, used, processed, stored, transported or disposed of by
      or on behalf of an insured; or





(c)
              the
      (injury,
      sickness, disease, death or
destruction


(bodily
injury or property damagearises
out of the furnishing by an insured of services, materials, parts or equipment
in connection with the planning, construction, maintenance, operation or use of
any nuclear facility, but if such facility is located within the United States
of America, its territories, or possessions or Canada, this exclusion (c)
applies only
to                                        
(injury
to or destruction of property at such nuclear facility


(property damage
to such nuclear facility and any property thereat.





IV.
            As
      used in this endorsement:





“Hazardous
      properties” include radioactive, toxic or explosive
      properties;  “nuclear material” means source material, special
      nuclear material or byproduct material; “source material”, “special
      nuclear material”, and “byproduct material” have the meanings given them
      in the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent
      fuel” means any fuel element or fuel component, solid or liquid, which has
      been used or exposed to radiation in a nuclear reactor; “waste” means any
      waste material (1) containing byproduct material other than tailings or
      wastes produced by the extraction or concentration of uranium or thorium
      from any ore processed primarily for its source material content, and (2)
      resulting from the operation by any person or organization of any nuclear
      facility included under the first two paragraphs of the definition of
      nuclear facility; “nuclear facility”
means:





(a)
            any
      nuclear reactor,





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(b)
            any
      equipment or device designed or used for (1) separating the isotopes of
      uranium or plutonium, (2) processing or utilizing spent fuel, or (3)
      handling, processing or packaging
waste,





(c)
            any
      equipment or device used for the processing, fabricating or alloying of
      special nuclear material if at any time the total amount of such material
      in the custody of the insured at the premises where such equipment or
      device is located consists of or contains more than 25 grams of plutonium
      or uranium 233 or any combination thereof, or more than 250 grams of
      uranium 235,





(d)
            any
      structure, basin, excavation, premises or place prepared or used for the
      storage or disposal of waste,





and
includes the site on which any of the foregoing is located, all operations
conducted on such site and all premises used for such operations; “nuclear
reactor” means any apparatus designed or used to sustain nuclear fission in a
self-supporting chain reaction or to contain a critical mass of fissionable
material;





(With
respect to injury to or destruction of property, the word “injury” or
“destruction”


(“property
damage” includes all forms of radioactive contamination of
property.


(includes
all forms of radioactive contamination of property.





V.
            The
      inception dates and thereafter of all original  Policies
      affording coverages specified in this paragraph 3, whether new, renewal or
      replacement, being Policies which become effective on or after 1st May,
      1960, provided this paragraph 3 shall not be applicable
  to:





(a)
            Garage
      and Automobile Policies issued by the Company on New York risks,
      or


(b)
            statutory
      liability insurance required under Chapter 90, General Laws of
      Massachusetts,





until
      90 days following approval of the Broad Exclusion Provision by the
      Governmental Authority having jurisdiction
  thereof.





4.           Without
in any way restricting the operation of paragraph 1 of this Clause, it is
understood and agreed that paragraphs 2 and 3 above are not applicable to
original liability Policies of the Company in Canada and that with respect to
such Policies this Clause shall be deemed to include the Nuclear Energy
Liability Exclusion Provisions adopted by the Canadian Underwriters’ Association
or the Independent Insurance Conference of Canada.





*NOTE:  The words
printed in italics in the Limited Exclusion Provision and in the Broad Exclusion
Provision shall apply only in relation to original liability Policies which
include a Limited Exclusion Provision or a Broad Exclusion Provision containing
those words.





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NUCLEAR
INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE


CANADA
(BRMA 35D)








1.           This
Agreement does not cover any loss or liability accruing to the Company as a
member of, or subscriber to, any association of insurers or reinsurers formed
for the purpose of covering nuclear energy risks or as a direct or indirect
reinsurer of any such member, subscriber or association.





2.           Without
in any way restricting the operation of paragraph 1 of this clause, it is agreed
that for all purposes of this Agreement all the original liability contracts of
the Company, whether new, renewal or replacement, of the following classes,
namely:





Personal
      Liability


Farmers’
      Liability


Storekeepers’
      Liability





which
become effective on or after 31st December 1984, shall be deemed to include,
from their inception dates and thereafter, the following provision:





Limited
      Exclusion Provision





This
      Policy does not apply to bodily injury or property damage with respect to
      which the Insured is also insured under a contract of nuclear energy
      liability insurance (whether the Insured is unnamed in such contract and
      whether or not it is legally enforceable by the Insured) issued by the
      Nuclear Insurance Association of Canada or any other group or pool of
      insurers or would be an Insured under any such Policy but for its
      termination upon exhaustion of its limits of
  liability.





With
      respect to property, loss of use of such property shall be deemed to be
      property damage.





3.           Without
in any way restricting the operation of paragraph 1 of this clause, it is agreed
that for all purposes of this Agreement all the original liability contracts of
the Company, whether new, renewal or replacement, of any class whatsoever (other
than Personal Liability, Farmers’ Liability, Storekeepers’ Liability or
Automobile Liability contracts), which become effective on or after 31st
December 1984, shall be deemed to include from their inception dates and
thereafter, the following provision:





Broad
      Exclusion Provision





It
      is agreed that this Policy does not
apply:





(a)
            To
      liability imposed by or arising under the Nuclear Liability Act;
      nor





(b)
            To
      bodily injury or property damage with respect to which an Insured under
      this Policy is also insured under a contract of nuclear energy liability
      insurance (whether the Insured is unnamed in such contract and whether or
      not it is legally enforceable by the Insured) issued by the Nuclear
      Insurance Association of Canada or any other insurer or group or pool of
      insurers or would be an Insured under any such Policy but for its
      termination upon exhaustion of its limit of liability;
  nor





(c)
            To
      bodily injury or property damage resulting directly or indirectly from the
      nuclear energy hazard arising from:





i)
            the
      ownership, maintenance, operation or use of a nuclear facility by or on
      behalf of an Insured.





ii)
            the
      furnishing by an Insured of services, materials, parts or equipment in
      connection with the planning, construction, maintenance, operation or use
      of any nuclear facility; and





iii)
            the
      possession, consumption, use, handling, disposal or transportation of
      fissionable substances, or of other radioactive material (except
      radioactive isotopes, away from a nuclear facility, which have reached the
      final stage of fabrication so as to be useable for any scientific,
      medical, agricultural, commercial or industrial purpose) used,
      distributed, handled or sold by an
Insured.





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As used
in this Policy:





1.           The
term “nuclear energy hazard” means the radioactive, toxic, explosive or other
hazardous properties of radioactive material.





2.           The
term “radioactive material” means uranium, thorium, plutonium, neptunium, their
respective derivatives and compounds, radioactive isotopes of other elements and
any other substances that the Atomic Energy Control Board may, by regulation,
designate as being prescribed substances capable of releasing atomic energy, or
as being requisite for the production, use or application of atomic
energy.





3.
            The
      term “nuclear facility” means:





(a)
            Any
      apparatus designed or used to sustain nuclear fission in a self-supporting
      chain reaction or to contain a critical mass of plutonium, thorium and
      uranium or any one or more of them;





(b)
            Any
      equipment or device designed or used for (1) separating the isotopes of
      plutonium, thorium and uranium or any one or more of them, (2) processing
      or utilizing spent fuel, or (3) handling, processing or packaging
      waste;





(c)
            Any
      equipment or device used for the processing, fabricating or alloying of
      plutonium, thorium or uranium enriched in the isotope uranium 233 or in
      the isotope uranium 235, or any one or more of them if at any time the
      total amount of such material in the custody of the Insured at the
      premises where such equipment or device is located consists of or contains
      more than 25 grams of plutonium or uranium 233 or any combination thereof,
      or more than 250 grams of uranium
235;





(d)
            Any
      structure, basin, excavation, premises or place prepared or used for the
      storage or disposal of waste radioactive
  material;





and
includes the site on which any of the foregoing is located, together with all
operations conducted thereon and all premises used for such
operations.





4.           The
term “fissionable substance” means any prescribed substance that is, or from
which can be obtained, a substance capable of releasing atomic energy by nuclear
fission.





5.           With
respect to property, loss of use of such property shall be deemed to be property
damage.





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