EX-10.57



 





EXHIBIT 10.57




MEMORANDUM OF AGREEMENT



The attached Aggregate Excess of Loss Agreement has been submitted for regulatory approval. The
participating companies below have agreed to the attached Aggregate Excess of Loss Agreement
pending regulatory approval.




	 	 	 
	     /s/ Francis M. Colalucci

	 	10/5/2007
	 

	 	 
	Tower Insurance Company of New York

	 	Date
	 
	 	 
	     /s/ Francis M. Colalucci

	 	10/5/2007
	 

	 	 
	Tower National Insurance Company

	 	Date
	 
	 	 
	     /s/ Patrick J. Haveron

	 	10/5/2007
	 

	 	 
	Preserver Insurance Company

	 	Date
	 
	 	 
	     /s/ Patrick J. Haveron

	 	10/5/2007
	 

	 	 
	North East Insurance Company

	 	Date
	 
	 	 
	     /s/ Patrick J. Haveron

	 	10/5/2007
	 

	 	 
	Mountain Valley Indemnity Company

	 	Date
	 
	 	 
	     /s/ Joel S. Weiner

	 	10/5/2007
	 

	 	 
	CastlePoint Insurance Company

	 	Date






 









 






AGGREGATE EXCESS OF LOSS

AGREEMENT




(Hereinafter referred to as the “Agreement”)




Between




TOWER INSURANCE COMPANY OF NEW YORK

TOWER NATIONAL INSURANCE COMPANY

PRESERVER INSURANCE COMPANY

MOUNTAIN VALLEY INDEMNITY COMPANY

NORTH EAST INSURANCE COMPANY




(Hereinafter collectively referred to as the “Company”)




And




CASTLEPOINT INSURANCE COMPANY




(Hereinafter referred to as the “Reinsurer”)



ARTICLE 1 — BUSINESS COVERED



The Reinsurer shall indemnify the Company, subject to the terms, conditions and exclusions set
forth in this Agreement, for the net liability in respect of Ultimate Net Loss and Loss Adjustment
Expenses on the Company’s new and renewal Brokerage Business. Brokerage Business shall mean broad
classes of business that are underwritten on an individual policy basis by an insurance company’s
underwriting staff through wholesale and retail agents, and for which most or all of the services
provided by the insurance company as part of the overall product offering.




ARTICLE
2 — COMMENCEMENT AND TERMINATION



A. This Agreement is initially effective for a three month period from 12:01 a.m., Eastern Standard
Time, October 1, 2007, (the “Effective Date”) to December 31, 2007. Either party may terminate the
Agreement as of December 31, 2007 by giving 60 days written notice by certified or registered mail.
After the initial period, this Agreement will be effective for 12 month periods and each party will
have the option to cancel at any time by giving 60 days written notice to the other party by
certified or registered mail.



B. The Company and the Reinsurer may agree to terminate this Agreement or some portion of the
Subject Business on a cut-off basis. Upon such termination, the Reinsurer shall incur no liability
for losses occurring or claims made subsequent to the effective date of termination and the
Reinsurer shall return to the Company its unearned premium reserve.



C. Either the Company or the Reinsurer may terminate this Agreement at any time by the giving of
thirty (30) days prior written notice to the other party upon the happening of any one of the
following circumstances:




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	 	(a)	 	A State Insurance Department or other legal authority orders the other party to
cease writing business, or;
	 
	 	(b)	 	The other party has become insolvent or has been placed into liquidation or
receivership (whether voluntary or involuntary), or there has been instituted against
it proceedings for the appointment of a receiver, liquidator, rehabilitator,
conservator, or trustee in bankruptcy, or other agent known by whatever name, to take
possession of its assets or control of its operations; the Company may terminate
immediately in the case of insolvency of the Reinsurer, or
	 
	 	(c)	 	The other party’s statutory policyholders’ surplus has been reduced by the
amount of surplus at the inception of this Agreement or 50% of the amount at the latest
anniversary, whichever is greater, or has lost any part of, or has reduced its paid-up
capital, or
	 
	 	(d)	 	The other party has become merged with, acquired or controlled by any company,
corporation, or individual(s) not controlling the party’s operations previously, or
	 
	 	(e)	 	The other party has reinsured its entire liability under this Agreement
without the terminating party’s prior written consent, or
	 
	 	(f)	 	The Company ceases to retain any of the risks of the Business Covered.




The Company may terminate this Agreement upon thirty (30) days notice if the A.M. Best Rating of
the Reinsurer falls below “A-“.



In the event of such termination under (c) or (d), the liability of the Reinsurer shall be
terminated in accordance with the termination provisions set forth in Paragraph C. above. However,
if the terminating party is the Company, the Company shall have the right, by the giving of prior
written notice, to terminate this Agreement on a cut-off basis as provided in Paragraph B. above.




ARTICLE 3 — TERRITORY



This Agreement shall follow the territorial limits of the Company’s policies.




ARTICLE 4 — EXCLUSIONS



This Agreement shall not apply to and specifically excludes:





	1.	 	Nuclear Incident, in accordance with the following clauses attached hereto:

               Nuclear Incident Exclusion Clause – Physical Damage – Reinsurance – U.S.A. – NMA
1119;

               Nuclear Incident Exclusion Clause – Liability – Reinsurance – U.S.A. – NMA 1590;






	2.	 	War Risks, in accordance with the War Risks Exclusion Clause appearing in the original
Policies;





3. Insolvency, in accordance with the Insolvency Funds Exclusion Clause attached hereto;





	4.	 	Liability assumed by the Company as a member of any pool, association or syndicate, in
accordance with the Pools, Associations and Syndicates Exclusion Clause attached hereto;






	5.	 	Earthquake, when written as such;




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	6.	 	Liability arising out of ownership, maintenance or use of any aircraft or flight operations;






	7.	 	Professional Liability, when written as such, however not to exclude when written as part of
a package policy or when written in conjunction with other policies issued by the Company;






	8.	 	Insolvency Risks and Financial Guarantee;






	9.	 	Asbestos liabilities of any nature;






	10.	 	Pollution liabilities of any nature;






	11.	 	Assumed reinsurance with the exception of inter-affiliate reinsurance.





ARTICLE 5 — COVERAGE



The Reinsurer shall indemnify the Company for 15% of the paid portion of all Ultimate Net Loss and
Loss Adjustment Expenses arising out of the Company’s Brokerage Business on a provisional basis to
be adjusted to the actual percentage of the Reinsurer’s Brokerage Business over the total Brokerage
Business written by the Company and CastlePoint Insurance Company through Tower Risk Management
collectively, as calculated within 30 days from each December 31, in excess of 52.5% of the
Company’s Net Earned Premium as defined in Article 8.




ARTICLE 6 — NET RETAINED LINES



This Agreement applies only to that portion of Business Covered which the Company retains net for
its own account after recoveries from specific excess reinsurance, property catastrophe reinsurance
and facultative reinsurance, if any.




ARTICLE 7 — REINSURANCE PREMIUM



The Company shall pay the Reinsurer a quarterly flat reinsurance premium equal to $750,000 payable
within 30 days from the end of each quarter.




ARTICLE 8 — ACCOUNTS AND LOSS SETTLEMENTS



A. Within 30 (thirty) days following the end of each calendar quarter, the Company shall report to
the Reinsurer, the amount of:





	 	1.	 	Net Earned Premium;
	 
	 	2.	 	Ultimate Net Loss and Loss Adjustment Expenses paid;
	 
	 	3.	 	Ultimate Net Loss and Loss Adjustment Expenses outstanding (including IBNR).




For the purpose of this Agreement, Net Earned Premium shall be defined as the Company’s gross
Brokerage premium less premiums paid for specific excess reinsurance, property catastrophe
reinsurance and facultative reinsurance, if any, which inure to the benefit of this Agreement, and
before any cessions to quota share reinsurance.




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If the ratio of 2. over 1. exceeds 52.5%, the Reinsurer shall pay the Company the difference no
later than 15 (fifteen) days following receipt of the quarterly report by direct wire transfer.



Reports shall continue until final settlement of all ceded Ultimate Net Loss and Loss Adjustment
Expenses hereunder.



Notwithstanding the above, the Company shall advise the Reinsurer promptly of all Ultimate Net
Losses, which, in the opinion of the Company, may result in a claim hereunder and of all subsequent
developments thereto which, in the opinion of the Company, may materially affect the position of
the Reinsurer. Inadvertent omission or oversight in dispatching such advises shall in no way
affect the liability of the Reinsurer. However, the Company shall notify the Reinsurer of such
omission or oversight promptly upon its discovery.



B. All Ultimate Net Loss settlements made by the Company on Business Covered, whether under policy
terms and conditions or by way of compromise, shall be in the sole discretion of the Company and
shall be unconditionally binding on the Reinsurer. Upon satisfactory proof of loss, the Reinsurer
shall pay or allow, as applicable, its proportional share of each such settlement in accordance
with this Agreement.




ARTICLE 9 — CURRENCY



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



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.




ARTICLE 10 — TAXES



In consideration of the terms under which this Agreement is issued, the Company undertakes not to
claim any deduction of the Reinsurance 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
11 — RESERVES



A. If any Reinsurer is unauthorized or otherwise unqualified in any state or other United States
jurisdiction, and if, without such security, a financial penalty to the Company would result on any
statutory statement or report it is required to make or file with insurance regulatory authorities
or a court of law in the event of insolvency, the Reinsurer will timely secure the Reinsurer’s
share of Obligations under this Agreement 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 by either:





	 	1.	 	Clean, irrevocable, and unconditional evergreen letter(s) of credit (“Letter(s)
of Credit”) meeting the requirements of New York Regulation 133; and/or
	 
	 	2.	 	A trust account meeting the requirements of New York Regulation 114.




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




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	 	1.	 	The amount of the ceded unearned premium reserve for which the Reinsurer is
responsible to the Company;
	 
	 	2.	 	The amount of 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.	 	The amount of ceded reserves for Losses and Loss Adjustment Expenses
(including, ceded reserves for losses incurred but not reported) for which the
Reinsurer is responsible to the Company; and
	 
	 	4.	 	The amount of return and refund premiums paid by the Company for which the
Reinsurer is responsible to the Company but has not yet paid.




D. To the extent that the Reinsurer elects to provide Letter(s) of Credit, the following shall
apply:





	 	1.	 	Each Letter of Credit will be issued for a term of at least one year and will
include an “evergreen clause”, which automatically extends the term for at least one
additional year at each expiration date unless written notice of non-renewal is given
to the Company not less than 30 days prior to said expiration date.
	 
	 	2.	 	The Letter of Credit must be issued or confirmed by a bank which is authorized
to issue letters of credit, which is either a member of the Federal Reserve System or
is a New York State chartered bank, and which in all other respects satisfies the
definition of a “Qualified Bank” under Section 79.1(e) of New York Insurance Regulation
133. If the Letter of Credit is issued by a bank authorized to issue letters of credit
but which is not such a “Qualified Bank”, then the Letter of Credit must be confirmed
by such a bank and the Letter of Credit must meet all of the conditions set forth in
Section 79.4 of New York Insurance Regulation 133.
	 
	 	3.	 	The Reinsurer and the Company agree that the Company may draw upon the
Letter(s) of Credit at any time, notwithstanding any other provisions in the Agreement,
provided such assets are applied and utilized by the Company or any successor of the
Company by operation of law, including, without limitation, any liquidator,
rehabilitator, receiver or conservator of the Company, without diminution because of
the insolvency of the Company or the Reinsurer, only for the following purposes:






	 	(i)	 	to reimburse the Company for the Reinsurer’s share of premiums
returned to the owners of policies reinsured under this Agreement on account of
cancellations of such policies;
	 
	 	(ii)	 	to reimburse the Company for the Reinsurer’s share of
surrenders and benefits or losses paid by the Company under the terms and
provisions of the policies reinsured under this Agreement;
	 
	 	(iii)	 	to fund an account with the Company in an amount at least
equal to the deduction, for reinsurance ceded, from the Company’s liabilities
for policies ceded under this Agreement. Such amount shall include, but not be
limited to, amounts for policy reserves for claims and losses incurred
(including losses incurred but not reported), loss adjustment expenses, and
unearned premiums; and




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	 	(iv)	 	to pay any other amounts the Company claims are due under this
Agreement.






	 	4.	 	The Company shall immediately return to the Reinsurer any amounts drawn down on
the Letter of Credit that are subsequently determined not to be due.
	 
	 	5.	 	The issuing bank shall have no responsibility whatsoever in connection with the
propriety of withdrawals made by the Company of the disposition of funds withdrawn,
except to ensure that withdrawals are made only upon the order of properly authorized
representatives of the Company.




E. To the extent that the Reinsurer elects to establish a trust account, the following shall apply.





	 	1.	 	It is agreed that the Reinsurer shall enter into a trust agreement (the “Trust
Agreement”) in a form acceptable to the Company and establish a trust account (the
“Trust Account”) for the sole benefit of the Company with a trustee (the “Trustee”),
which shall be at the time the Trust is established, and shall continue to be, either a
member of the Federal Reserve System or a New York state chartered bank and which shall
not be a parent, subsidiary or affiliate of the Reinsurer or the Company.
	 
	 	2.	 	The Reinsurer agrees to deposit and maintain in said Trust Account assets to be
held in trust by the Trustee for the benefit of the Company as security for the payment
of the Reinsurer’s Obligations to the Company under the Agreement. Such assets shall
be maintained in the Trust Account by the Reinsurer as long as the Reinsurer continues
to remain liable for such Obligations.
	 
	 	3.	 	The Reinsurer agrees that the assets deposited into the Trust Account shall be
valued according to their current fair market value and shall consist only of currency
of the United States of America, certificates of deposit issued by a United States bank
and payable in United States legal tender, and investments of the types specified in
paragraphs (1), (2), (3), (8) and (10) of Section 1404(a) of the New York Insurance
Law, provided such investments are issued by an institution that is not the parent,
subsidiary or affiliate of either the Grantor or the Beneficiary (“Authorized
Investments”).
	 
	 	4.	 	The Reinsurer, prior to depositing assets with the Trustee, shall execute all
assignments and endorsements in blank, and shall transfer legal title to the Trustee of
all shares, obligations or any other assets requiring assignments, in order that the
Company, or the Trustee upon direction of the Company, may whenever necessary negotiate
any such assets without consent or signature from the Reinsurer or any other entity.
	 
	 	5.	 	All settlements of account under the Trust Agreement between the Company and
Reinsurer shall be made in cash or its equivalent.
	 
	 	6.	 	The Reinsurer and the Company agree that the assets in the Trust Account may be
withdrawn by the Company at any time, notwithstanding any other provisions in the
Agreement, provided such assets are applied and utilized by the Company or any
successor of the Company by operation of law, including, without limitation, any
liquidator, rehabilitator, receiver or conservator of the Company, without diminution
because of the insolvency of the Company or the Reinsurer, only for the following
purposes:




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	 	(i)	 	to reimburse the Company for the Reinsurer’s share of any
Losses and Loss Adjustment Expenses paid by the Company but not received from
the Reinsurer or for unearned premiums due to the Company but not otherwise
paid by the Reinsurer under the Agreement; or
	 
	 	(ii)	 	to make payment to the Reinsurer of any amounts held in the
Trust Account that exceed 102% of the Reinsurer’s Obligations (less the balance
of credit available under any Letter(s) of Credit) hereunder; or
	 
	 	(iii)	 	where the Company has received notification of termination of
the Trust Account, and where the Reinsurer’s entire Obligations under the
Agreement remain unliquidated and undischarged ten (10) days prior to such
termination, to withdraw amounts equal to such Obligations (less the balance of
credit available under any Letter(s) of Credit) and deposit such amounts in a
separate account, in the name of the Company, in any United States bank or
trust company, apart from its general assets, in trust for such uses and
purposes specified in sub-paragraphs (i) and (ii) above as may remain executory
after such withdrawal and for any period after such termination.






	 	7.	 	The Reinsurer shall have the right to seek the Company’s approval to withdraw
all or any part of the assets from the Trust Account and transfer such assets to the
Reinsurer, provided that the withdrawal conforms to the following requirements:






	 	(i)	 	the Reinsurer shall, at the time of withdrawal, replace the
withdrawn assets with other Authorized Investments having a market value equal
to the market value of the assets withdrawn,
	 
	 	(ii)	 	after such withdrawal and transfer, the market value of the
Trust Account is no less than 102% of the Reinsurer’s Obligations (less the
balance of credit available under any Letter(s) of Credit).






	 	 	 	In the event that the Reinsurer seeks the Company’s approval hereunder, the Company
shall not unreasonably or arbitrarily withhold its approval.






	 	8.	 	In the event that the Company withdraws assets from the Trust Account for the
purposes set forth in Paragraph (6)(i) above in excess of actual amounts required to
meet the Reinsurer’s Obligations to the Company (less the balance of credit available
under any Letter(s) of Credit), or in excess of amounts determined to be due and under
Paragraph (6)(iii) above, the Company will return such excess to the Reinsurer.
	 
	 	9.	 	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 Trust Account 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 then existing balance of the security
provided exceeds an amount equal to 100% of the Reinsurer’s share thereof, the Company
will release the excess thereof to the Reinsurer upon the Reinsurer’s written request.




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F. 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 Agreement.




ARTICLE 12 — 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 Agreement. 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. In the event of insolvency of any of the parties of this Agreement that is a New York
domestic insurer, offsets shall be allowed strictly as provided for and in accordance with the
provisions of Section 7427 of the New York Insurance Law.




ARTICLE 13 — ERRORS AND OMISSIONS



Inadvertent delays, errors or omissions made by the Company in connection with this Agreement shall
not relieve the Reinsurer from any liability which would have attached had such delay, error or
omission not occurred, provided always that such delay, error or omission shall be rectified as
soon as possible after discovery by the Company’s home office.




ARTICLE 14 — ACCESS TO RECORDS



The Company shall place at the disposal of the Reinsurer at all reasonable times, and the Reinsurer
shall have the right to inspect through their designated representatives, during the Term of this
Agreement and thereafter, all books, records and papers of the Company in connection with any
reinsurance hereunder, or the subject matter hereof.




ARTICLE 15 — INSOLVENCY



A. In the event of insolvency and 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 the amounts of claim
allowed in the insolvency proceeding, 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.
Payments by the Reinsurer as set forth in this subdivision shall be made directly to the Company or
to its conservator, liquidator, or statutory successor, except where, to the extent permitted by
law, (a) this Agreement of reinsurance specifically provides another payee of such reinsurance in
the event of the insolvency of the ceding insurer or (b) the Reinsurer with the consent of the
direct insured(s) has assumed the Policy obligations of the Company as direct obligations of the
Reinsurer to the payees under such Policies and in substitution for the obligations of the Company
to such payees, or (c) 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.



B. 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


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proportionate share of the benefit which may accrue to the Company solely as a result of the
defense undertaken by the Reinsurer. Where two or more Reinsurers are involved in the same claim
and a majority in interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of this Agreement as though such expense had been incurred
by the Company.



C. Neither a claimant, original insured nor the policyholder shall have any rights against the
Reinsurer which are not specifically set forth in this Agreement, or in a specific agreement
between the Reinsurer and the original insured or policyholder.




ARTICLE 16 — CONFIDENTIALITY



The parties acknowledge there may be portions of this Agreement, the Reinsurance Agreement
submission or the marketing package that may contain confidential, proprietary information of the
Company. The Reinsurer shall maintain the confidentiality of such information concerning the
Company and its business and shall not disclose it to any third person without prior approval;
provided, however, that the Reinsurer may be required and is permitted under this Agreement to
disclose such information in answers to interrogatories, subpoenas or other legal/arbitration
processes, or in response to requests by governmental and regulatory agencies. In addition, the
Reinsurer may disclose such information to its accountants and to its outside legal counsel as may
be necessary.




ARTICLE 17 — ARBITRATION



Any dispute or other matter in question between the Company and the Reinsurer arising out of, or
relating to, the formation, interpretation, performance or breach of this Agreement, whether such
dispute arises before or after termination of this Agreement, shall be settled by arbitration.
Arbitration shall be initiated by the delivery of a written notice of demand for arbitration by one
party to the other within a reasonable time after the dispute has arisen.



If more than one reinsurer is involved in the same dispute, all such reinsurers shall constitute
and act as one party for the purposes of this Article, provided, however, that nothing herein shall
impair the rights of such reinsurers to assert several, rather than joint, defenses or claims, nor
be construed as changing the liability of the reinsurers under the terms of this Agreement from
several to joint.



Each party shall appoint an individual as arbitrator and the two so appointed shall then appoint a
third arbitrator. If either party refuses or neglects to appoint an arbitrator within 60 (sixty)
days, the other party may appoint the second arbitrator. If the two arbitrators do not agree on a
third arbitrator within 60 (sixty) days of their appointment, either party may petition the
American Arbitration Association to appoint a third arbitrator. The arbitrators shall be active or
former officers of insurance or reinsurance companies or Lloyd’s Underwriters; the arbitrators
shall not have a personal or financial interest in the result of the arbitration.



The arbitration hearings shall be held in New York, New York. Each party shall submit its case to
the arbitrators within 60 (sixty) days of the selection of the third arbitrator or within such
longer period as may be agreed by the arbitrators. The arbitrators shall not be obliged to follow
judicial formalities or the rules of evidence except to the extent required by governing law, that
is, the state law of the situs of the arbitration as herein agreed; they shall make their decisions
according to the practice of the reinsurance business. The decision rendered by a majority of the
arbitrators shall be final and binding on both parties. 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. Judgment upon the award rendered may be entered in any court having
jurisdiction thereof.




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Each party shall pay the fee and expenses of its own arbitrator and one-half of the fee and
expenses of the third arbitrator. All other expenses of the arbitration shall be equally divided
between the parties.



Except as provided above, arbitration shall be based, insofar as applicable, upon the procedures of
the American Arbitration Association.




ARTICLE 18 — SERVICE OF SUIT



(This Article only applies to reinsurers domiciled outside the United States and/or unauthorized in
any state, territory or district of the United States having jurisdiction over the Company.)



It is agreed that in the event of the failure of the Reinsurer hereon to pay any amount claimed to
be due hereunder, the Reinsurer hereon, 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 the Reinsurer’s right 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. It is further agreed that
service of process in such suit may be made upon Mendes and Mount, 750 Seventh Avenue, New York,
New York 10019-6829, and that 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.



The above-named are 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.



Further, pursuant to any statute of any state, territory or district of the United States which
makes provision therefor, the Reinsurer hereon 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 Agreement of reinsurance, 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 19 — GOVERNING LAW



This Agreement shall be governed as to performance, administration and interpretation by the laws
of the State of New York, exclusive of that state’s rules with respect to conflicts of laws, except
as to rules with respect to credit for reinsurance in which case the rules of each respective
reinsured’s domiciliary state shall apply.




ARTICLE 20 — MISCELLANEOUS



A. All notices required to be given hereunder shall be deemed to have been duly given by personally
delivering such notice in writing or by mailing it, Certified Mail, return receipt requested, with
postage prepaid. Any Party may change the address to which notices and other communications
hereunder are to be sent to such Party by giving the other Party written notice thereof in
accordance with this provision.




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B. This Agreement shall be binding upon the Parties hereto, together with their respective
successors and permitted assigns. Neither party may assign any of its rights or obligations under
this Agreement without the prior written consent of the other party.



C. This Agreement may be executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument.



D. This Agreement is the entire agreement between the parties and supersedes any and all previous
agreements, written or oral, and amendments thereto with respect to the subject matter hereof.



E. This Agreement may be amended, modified or supplemented only by a written instrument executed by
all Parties hereto and upon prior review and non-disapproval by the Superintendent of Insurance.



F. A waiver by the Company or the Reinsurer of any breach or default by the other party under this
Agreement shall not constitute a continuing waiver or a waiver by the Company or the Reinsurer of
any subsequent act in breach or of default hereunder.



G. Headings used in this Agreement are for reference purposes only and shall not be deemed a part
of this Agreement.



H. The Parties hereto intend all provisions of this Agreement to be enforced to the fullest extent
permitted. Accordingly, should a court of competent jurisdiction or arbitration panel determine
that the scope of any provision is too broad to be enforced as written, the Parties intend that the
court or arbitration panel should reform the provision to such narrower scope as it determines to
be enforceable under present or future law; such provision shall be fully severable; this Agreement
shall be construed and enforced as if such illegal, invalid, or unenforceable provision were never
a part hereof; and the remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance.



I. Each party to this Agreement agrees to honor the terms set forth herein as if the Agreement were
a separate agreement between the Reinsurer and each individual named Company. Balances payable or
recoverable by the Reinsurer or each individual named Company shall not serve to offset any
balances payable or recoverable to or from any other individual named Company. Reports and
remittances made to the Reinsurer in accordance with the applicable articles are to be in
sufficient detail to identify both the Reinsurer’s loss obligations due each individual named
Company and each individual named Company’s premium remittances under the report.



In Witness Whereof, the parties hereto have caused this Agreement to be executed in duplicate by
their duly authorized representatives:



Signed this                     day of                                         , 2007,



For and on behalf of Tower Insurance Company of New York; Tower National Insurance Company;
Preserver Insurance Company; Mountain Valley Indemnity Company; North East Insurance Company; in
confirmation of the terms, conditions and Reinsurer hereon




12









 








	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

(Signature)
	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	(Print Name)	 	 
	Title:
	 	 	 	 





Signed this                     day of                                         , 2007,



For and on behalf of CastlePoint Insurance Company for a 100% (one hundred percent) participation
of the terms and conditions hereon




	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

(Signature)
	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	(Print Name)	 	 
	Title:
	 	 	 	 






13









 






NUCLEAR INCIDENT EXCLUSION CLAUSE

PHYSICAL DAMAGE – REINSURANCE – USA




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



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




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





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




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





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



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



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



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     7. The Reassured to be sole judge of what constitutes:




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




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





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




15









 












NUCLEAR INCIDENT EXCLUSION CLAUSE

LIABILITY – REINSURANCE – U.S.A.





	1.	 	This Agreement does not cover any loss or liability accruing to the Cedent 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 Agreement all the original policies of the Cedent
(new, renewal and replacement) of the classes specified in Clause II of this paragraph (2)
from the time specified in Clause III of 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 limits 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
Cedent 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 Agreement the original liability policies of the Cedent (new,
renewal and replacement) affording the following coverages:






	 	 	 	Owners, Landlords and Tenants Liability, Contractual Liability,

Elevator Liability, Owners or Contractors (including railroad),




16









 






	 	 	 	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):






	 	 	 	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 damage

resulting 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 or by
or on behalf of an insured; or




17









 












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

(the bodily injury or property damage

arises 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 by-product material;
“source material”, “special nuclear material” and “by-product material” have the
meanings given to 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 by-product material and (2) resulting from the
operation by any person or organization of any nuclear facility included within the
definition of nuclear facility under paragraph (a) or (b) thereof; “nuclear
facility” means






	 	(a)	 	any nuclear reactor,
	 
	 	(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






	 	(i)	 	Garage and Automobile Policies issued by the Cedent on New York
risks, or




18









 






	 	(ii)	 	Statutory liability insurance required under Chapter 90,
General Laws of Massachusetts, until 90 days following approval of the Board
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 Cedent in Canada and that with respect of 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.






19









 






WAR RISK EXCLUSION CLAUSE (REINSURANCE)




     As regards interests which at time of loss or damage are on shore, no liability shall attach
hereto in respect of any loss or damage which is occasioned by war, invasion, hostilities, acts of
foreign enemies, civil war, rebellion, insurrection, military or usurped power, or martial law or
confiscation by order of any government or public authority.



     This War Exclusion Clause shall not, however, apply to interest which at time of loss or
damage are within the territorial limits of the United States of America (comprising the fifty
States of the Union and the District of Columbia, its territories and possessions, including the
Panama Canal Zone and the Commonwealth of Puerto Rico and including Bridges between the United
States of America and Mexico provided they are under United States ownership), Canada, St. Pierre
and Miquelon, provided such interests are insured under original policies, endorsements or binders
containing a standard war or hostilities or warlike operations exclusion clause.



     Nevertheless, this clause shall not be construed to apply to loss or damage occasioned by
riots, strikes, civil commotion, vandalism, malicious damage, including acts committed by agents of
any government, party or faction engaged in war, hostilities or other warlike operation, provided
such agents are acting secretly and not in connection with any operations of military or naval
armed forces in the country where the interests insured are situated.



20









 





INSOLVENCY FUND EXCLUSION CLAUSE 



This Agreement excludes all liability of the Ceding 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 guarantee 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 Ceding 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.




21









 








POOLS, ASSOCIATIONS AND SYNDICATES EXCLUSION CLAUSE




Section A:




Excluding:





	 	(a)	 	All business derived directly or indirectly from any Pool, Association, or
Syndicate which maintains its own reinsurance facilities.
	 
	 	(b)	 	Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968
for the purpose of insurance property whether on a country-wide basis or in respect of
designated areas. This exclusion shall not apply to so-called Automobile Insurance
Plans or other Pools formed to provide coverage for Automobile Physical Damage.





Section B:



It is agreed that business written by the Company for the same perils, which is known at the time
to be insured by, or in excess of underlying amounts placed in the following Pools, Associations or
Syndicates, whether by way of insurance or reinsurance, is excluded hereunder:



Industrial Risk Insurers,

Associated Factory Mutuals Improved Risk Mutuals

Any Pool, Association or Syndicate formed for the purpose of writing

Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs,

United States Aircraft Insurance Group, Canadian Aircraft Insurance Group,

Associated Aviation Underwriters, American Aviation Underwriters




Section B does not apply:





	 	(a)	 	Where the Total Insured Value over all interests of the risk in question is
less than $250,000,000.
	 
	 	(b)	 	To interests traditionally underwritten as Inland Marine or stock and/or
contents written on a blanket basis.
	 
	 	(c)	 	To Contingent Business Interruption, except when the Company is aware that the
key location is known at the time to be insured in any Pool, Association, or Syndicate
named above other than as provided for under Section B(a).




22









 












	 	(d)	 	To risks as follows:
	 
	 	 	 	Offices, Hotels, Apartments, Hospitals, Educational Establishments, Public
Utilities, (other than railroad schedules) and builder’s risks on the classes of
risks specified in this subsection (d) only. Where this clause attaches to
Catastrophe Excesses, the following Section C is added:





Section C:



Nevertheless the Reinsurer specifically agrees that liability accruing to the Company from its
participation in:





	 	(1)	 	The following so-called “Coastal Pools”:
	 
	 	 	 	Alabama Insurance Underwriting Association

Florida Windstorm Underwriting Association

Louisiana Insurance Underwriting Association

Mississippi Windstorm Underwriting Association

North Carolina Insurance Underwriting Association

South Carolina Windstorm and Hail Underwriting Association

Texas Catastrophe Property Insurance Association




AND





	 	(2)	 	All “Fair Plan” and “Rural Risk Plan” business for all perils otherwise
protected hereunder shall not be excluded, except, however, that this reinsurance does
not include any increase in such liability resulting from:






	 	(i)	 	The inability of any other participant in such “Coastal Pool”
and/or “Fair Plan” and/or “Rural Risk Plan” to meet its liability.
	 
	 	(ii)	 	Any claim against such “Coastal Pool” and/or “Fair Plan” and/or
“Rural Risk Plan” or any participant therein, including the Company, whether by
way of subrogation or otherwise, brought by or on behalf of any insolvency fund
(as defined in the Insolvency Fund Exclusion Clause incorporated in this
Contract).






23