**Exhibit 4.53****THIS FRONTING AND ADMINISTRATION AGREEMENT**is made on the 25 day of April 2007between:**(1)** **CONVERIUM AG**, a company incorporated in Switzerland whose registered office is at GeneralGuisan-Quai 26, 8022 Zürich, Switzerland (***Converium***);**(2)** **MÜNCHENER RÜCKVERSICHERUNGS-GESELLSCHAFT AKTIENGESELLSCHAFT IN MÜNCHEN**, whose registeredoffice is at Königinstraße, 107, 80802 München, Germany (***Munich Re***);**(3)** **NATIONAL INDEMNITY COMPANY,**a company incorporated in Nebraska, United States of America,whose registered office is at 3024 Harney Street, Omaha, Nebraska, USA 68131 (***NationalIndemnity***);**(4)** **GLOBAL AEROSPACE UNDERWRITING MANAGERS LIMITED**(registered number 2512067) whose registeredoffice is at Fitzwilliam House, 10 St. Mary Axe, London EC3A 8EQ (***Global***); and**Whereas**:(A) An aviation and aerospace underwriting pool (the ***Pool***) has been established between certaininsurance and reinsurance companies including Converium, Munich Re, National Indemnity and Globalin respect of risks written after the date of the Pool Members’ Agreement (as hereinafter defined)and attaching on or after 1 January 2003, and in respect of which *inter alia*Converium appointsGlobal as its agent for writing insurance and reinsurance in respect of certain risks and toprovide administration and management services in respect of the Pool.(B) Converium intends to appoint National Indemnity and Munich Re (or members of their Groups) toprovide fronting insurance for Converium in respect of Relevant Risks which incept in the Period(all terms as hereinafter defined). The intention is that, unless otherwise stated, in respect ofeach risk which would be written in the name of Converium under the terms of the Pool Members’Agreement, National Indemnity or a member of its Group will front 50 per cent. of such risk andMunich Re or a member of its Group will front 50 per cent. of such risk. In certain jurisdictionswhere there is currently fronting in place in respect of National Indemnity’s or Munich Re’sparticipation in the Pool, the fronter (being those persons listed in column 4 of Part II if any ofSchedule 2 and Schedule 3) has agreed to extend the fronting that is currently in place so that itcovers (in each case) 50 per cent of each risk in such jurisdiction which would be written in thename of Converium under the Pool Members’ Agreement.(C) Accordingly, this Agreement constitutes a Fronting Arrangement for the purposes of the PoolMembers’ Agreement and sets out the basis on which (1) National Indemnity and Munich Re or membersof their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 will appoint Global tounderwrite, administer and
 

 
manage such Relevant Risks and (2) all business written in the name of National Indemnity andMunich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 underthis Agreement will be fully reinsured by Converium.**Now it is hereby agreed**as follows:**1.****Definitions**1.1 Unless otherwise defined in this Agreement and unless the context otherwise requires, allwords and phrases shall have the meaning ascribed to them in the Pool Members’ Agreement.***Agent***means Global as the context requires;***Agreement***means this Agreement as amended from time to time;***Business***means the business of writing Fronting Insurance Contracts as agent for NationalIndemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I ofSchedule 3 in their capacity as fronting insurers for Converium and managing such business onbehalf of National Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2or Part I of Schedule 3 and doing such other things ancillary or incidental thereto in any suchcase as may from time to time be permitted or required by or pursuant to this Agreement and for theavoidance of doubt, Business excludes that portion of any risk reflecting the participation ofNational Indemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part Iof Schedule 3 under the Pool Members’ Agreement and that portion of any risk which is written onbehalf of Munich Re or National Indemnity by the persons set out in column 4 of Part II if any ofSchedule 2 or Schedule 3 respectively;***Business Day***means any day (not being a Saturday or Sunday) on which banks are open for thetransaction of general banking business in London;***Confidential Information***means:(a) all information obtained by a party as a result of negotiating and entering into thisAgreement;(b) all financial or other information received by a party pursuant to this Agreement in respectof Global;(c) all financial or other information received by a party pursuant to this Agreement in respectof Converium;(d) all financial or other information received by a party pursuant to this Agreement in respectof National Indemnity or Munich Re; and(e) information as to the terms of this Agreement or of any agreement referred to in it andinformation relating to the performance by any party of its obligations under this Agreementor any agreement referred to in it;
Page 2 

 
***Claim***means, in relation to any Reinsured Risk, the notification, by the insured (or asapplicable reinsured) of an actual or potential claim under such Reinsured Risk and, for theavoidance of doubt, a ***Claim***shall be deemed to have been made where there is a settlement,compromise, commutation and/or policy buy back entered into by or on behalf of National Indemnity,Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 inrelation to the Reinsured Risks (or any of them);***Claims-Related Extra Contractual Obligation***means any liability on the part of NationalIndemnity, Munich Re or members of their Groups set out in Part I of Schedule 2 or Part I ofSchedule 3 (or amount agreed to be paid by or on behalf of National Indemnity, Munich Re or membersof their Groups set out in Part I of Schedule 2 or Part I of Schedule 3 in respect of potential oralleged liability on the part of National Indemnity, Munich Re or members of their Groups set outin Part I of Schedule 2 or Part I of Schedule 3) which has arisen in connection with or whichrelates in any way to the conduct of a claim and/or the conduct of the Business where suchliability (or potential or alleged liability) has arisen because of or relates in any way to anyReinsured Risk in respect of which a Fronting Insurance Contract has been written in such person’sname save to the extent that any Claims-Related Extra Contractual Obligation results from fraud ofNational Indemnity or a member of its Group, or Munich Re or a member of its Group;***duly authorised***means:(a) in the United Kingdom, duly authorised to carry on general insurance business under theFinancial Services and Markets Act 2000; and(b) in any other jurisdiction, duly authorised, licensed or otherwise approved or permitted,under the laws of the applicable jurisdiction, to underwrite or carry on general insurancebusiness covering Specified Risks in accordance with the relevant laws or regulations of suchjurisdiction;***Due***means with respect to any sum or amount of money that such sum or amount has beendemanded by or from the Agent and ***Due Premium***means that amount of written premium that has beendemanded by the Agent from an ***Original Insured***, being the insured party to any relevant FrontingInsurance Contract, for and on behalf of Munich Re and /or National Indemnity, as appropriate, byway of bill, invoice or other enforceable demand, and in respect of which the Agent has assigned adate by when such Original Insured must actually pay the amount of premium demanded (***Due Date***) andcalculated in all cases as at the relevant Due Date(s).***Fronting Insurance Contract***means a contract of insurance and/or reinsurance which is writtenby Global pursuant to this Agreement on behalf of National Indemnity or Munich Re or the relevantmember of such person’s Group (solely in its capacity as fronting insurer for Converium) in respectof the proportion of the Relevant Risks set out in Clause 2.3(b) attaching during the Periodprovided that Fronting Insurance
Page 3 

 
Contracts shall not relate to the percentage of each policy issued under the Pool Members’Agreement representing Munich Re’s or National Indemnity’s interest under the Pool Members’Agreement;**GAI means GLOBAL AEROSPACE, INC.**(formerly known as ASSOCIATED AVIATION UNDERWRITERS, INC.) aDelaware corporation.***Group***means in relation to a company, that company and any company which is a holding companyof that company or a subsidiary of that company or of such holding company;***holding company***has the meaning ascribed thereto by Section 736 of the Companies Act 1985;***Incurred Position***means, in relation to Converium, such amount as may be determined inaccordance with Clause 15 as being the greater of:(a) ***Due Premium***(in relation to the relevant Reinsured Risks less any (i) due reinsurancepremiums ceded in respect of reinsurance taken out in accordance with the Pool Business Plan(as defined in the Pool Members’ Agreement) as amended from time to time or otherwise takenout by the Agents on behalf of the Members of the Pool as a whole; (ii) original commissionsin relation to such Reinsured Risks; and (iii) taxes on the premiums relating to suchReinsured Risks, ((a) less each of (i), (ii) and (iii) being the ***Net Premiums***) multiplied by150 per cent;(b) 120 per cent. of outstanding claims amounts attributable to relevant Reinsured Risks(including reserves for claims incurred but not reported maintained by National Indemnity orMunich Re or the relevant member of such person’s Group (as the case may be) in respect ofrelevant Reinsured Risks) written in the name of National Indemnity or Munich Re or therelevant member of such person’s Group less amounts recoverable in respect of reinsurancetaken out in accordance with the Pool Business Plan (as defined in the Pool Members’Agreement) as amended from time to time or otherwise taken out by the Agents on behalf of theMembers of the Pool as a whole ; or(c) $12,900,000.00 plus the Net Premiums in relation to the relevant Reinsured Risks;**provided that**: (i) if in relation to Converium, it has its financial strength ratingupgraded to A- or above by S&P or if such rating is not available, above suchcomparable rating as may be reasonably agreed between the parties the referencesto “150” and “120” above shall be read as “100” save that nothing in thisproviso shall be construed to reduce the Incurred Position below the minimumpercentage which is required to allow Munich Re, National Indemnity or therelevant member of its Group to
Page 4 

 
   receive credit for the Reinsurance to which the security relates under the laws ofthe jurisdiction in which such person is domiciled; and  (ii) proviso (i) above shall only apply during such periods asStandard & Poor’s financial strength rating of Converium is A- or above (or ifsuch rating is not available, such comparable rating as may be reasonably agreedbetween Converium, Munich Re and National Indemnity). Converium shall make suchadditional deposits to and or increase any relevant LOC(s) in the MR Fund, asappropriate, and the NICO Fund in the event that Standard & Poor’s financialstrength rating of Converium falls below A- subsequent to termination of thisAgreement under Clause 10.1 so as to comply with the requirements of Clause 13or Clause 14 (as appropriate) without regard to proviso (i) above;The Incurred Position shall be calculated by the Agent within 20 business days of the end ofeach quarter, one quarter in arrears or upon written request by any of the parties hereto, within25 business days of the receipt of such written request.***Letter of Credit (“LOC”)***means a clean, unconditional and irrevocable Letter of Credit issuedon behalf of Converium by a bank with a credit rating by Standard and Poors of AA or above (or ifsuch rating is not available, such other comparable rating as may be reasonably agreed between theperson in whose favour such Letter of Credit is written and Converium) for the benefit of NationalIndemnity or Munich Re (or the applicable member of such person’s Group) (as the case may be) in anamount to be determined from time to time in accordance with Clause 13 or Clause 14 (asappropriate) provided that the bank issuing any Letter of Credit must be one that would permit (a)National Indemnity or the relevant member of its Group to receive credit for the Reinsurance towhich that Letter of Credit relates under the laws of the jurisdiction in which such person isdomiciled; or (b) Munich Re or the relevant member of its Group to receive credit for theReinsurance to which that Letter of Credit relates under the laws of Germany;***Letter of Credit Notice***means a notice issued by National Indemnity or Munich Re (as the casemay be) from time to time requiring Converium to either: (a) arrange or cause to be arranged theissue and/or delivery of a Letter of Credit and/or to increase the amount of any such Letter ofCredit; or (b) deposit additional funds in the MR Fund or the NICO Fund;***Net Premiums***has the meaning given to it in the definition of Incurred Position;***Overriding Commission***means the overriding commission payable in accordance with Clause 6, theamount of which shall be calculated in accordance with Schedule 1;***Period***means the period beginning at 12:01 am BST on 1 July 2007 and ending at 12.01 a.m. BSTon 1 January 2008;
Page 5 

 
***Pool Members’ Agreement***means the Agreement between GAI, Global and various insurancecompanies and reinsurance companies including National Indemnity, Munich Re and Converium dated 27November 2002 for the formation of an aviation and aerospace underwriting pool under the managementof Global and GAI;***Premium***shall have the meaning given to it in Clause 5.1;***profit***shall mean, subject to the provisions of Schedule 4 or Schedule 5, for the purposes ofClauses 13.5, 13.12 to 13.14, 14.5 and 14.12 to 14.14:(a) the Due Premiums in respect of the relevant Reinsured Risks;   LESS (b) paid claims in respect of the relevant Reinsured Risks as at 31 December 2010;   LESS (c) outstanding claims which have been notified to Global or any of its subsidiaries in relationto relevant Reinsured Risks as at 31 December 2010;   LESS (d) the reserves held for incurred but not reported claims in respect of relevant Reinsured Risksas at 31 December 2010 by Munich Re or National Indemnity or a relevant number of suchperson’s group, calculated by Munich Re or National Indemnity (or such person’s respectiveappointee) (as appropriate) in accordance with actuarial best practice and guidance producedby relevant actuarial bodies in the relevant country (and subject to the dispute resolutionmechanism in Clause 6),in the case of (a) to (c) as produced by Global’s computer systems;***Regulatory Action***means:(a) any order of a court of competent jurisdiction; (b) any order made, decision given or final view expressed by a competent national,supranational, governmental or regulatory authority or agency; or (c) any enactment of a legislative body; (i) which prohibits or restricts to a material extent the carrying on of the Business or thearrangements contemplated by this Agreement; or (ii) in consequence of which any of the parties would incur fines or a liability in damageswere this Agreement to be performed in accordance with its terms;***Reinsurance***has the meaning given to it in Clause 3;
Page 6 

 
***Reinsured Risks***means that percentage of any and all contracts of insurance, reinsurance orretrocession written by either Agent in the name of Munich Re, National Indemnity (or members oftheir Groups set out in Part I of Schedule 2 or Part I of Schedule 3) solely in its capacity asfronting insurer for Converium under, pursuant to or in connection with (or purportedly under,pursuant to or in connection with) this Agreement (as such contracts may be amended from time totime) and irrespective of whether the acceptance of such contract was within the scope of theauthority granted to the Agent by Munich Re or National Indemnity or members of their Groups setout in Part I of Schedule 2 or Part I of Schedule 3 under the terms of this Agreement or within thescope of (or in accordance with the terms of) the Pool Members’ Agreement and ***Reinsured Risk***shallbe construed accordingly. For the avoidance of doubt, Reinsured Risks shall not include thepercentage of each policy issued under the Pool Members’ Agreement representing Munich Re’s orNational Indemnity’s interest under the Pool Members’ Agreement;***Relevant Risks***means Specified Risks relating to those countries set out in Part I of Schedule2 in the case of Munich Re and the members of its Group and Part I of Schedule 3 in the case ofNational Indemnity and the members of its Group, which are insurance or reinsurance risks;***Respective Proportion***has the meaning given to it in the Pool Members’ Agreement;***Specified Risks***means aerospace, aviation and all related and incidental insurance andreinsurance risks;***subsidiary***and ***wholly-owned subsidiary***shall have the meanings given thereto in Section 736 ofthe Companies Act 1985; and***Taxation***means all forms of taxation and statutory, governmental, state, provincial, localgovernmental or municipal impositions, duties, contribution and levies and all penalties, charges,costs and interest relating thereto.1.2 References to Recitals, Clauses, Schedules and parties are, except where otherwiseprovided, to Recitals, Clauses, Schedules or parties to this Agreement. The Schedules formpart of this Agreement and have the same force and effect as if set out in the body of thisAgreement.1.3 References to a statutory provision include such provision and any regulations made inpursuance thereof as from time to time modified or re-enacted whether before or after the dateof this Agreement so far as such modification or re-enactment applies or is capable of applyingto any transactions entered into pursuant to this Agreement or to which this Agreement relatesand (so far as the same may be relevant) shall include any statutory provisions or regulationswhich such provisions or regulations have directly or indirectly replaced.1.4 The headings and index hereto are inserted for convenience only and shall not affect theconstruction of this Agreement.
Page 7 

 
1.5 References to Converium, Munich Re (and any member of its Group), National Indemnity (andany member of its Group) or to the Agents or any of them mean and include their respectivesuccessors in title and permitted assigns.1.6 Where the context so admits, references to the singular shall be deemed to include theplural and vice versa.1.7 References to Schedule 2 or Schedule 3 shall be to that Schedule as amended in accordancewith the terms of Schedule 2 or Schedule 3 (respectively) at the relevant time.**2.** **Appointment of Global and GAI to write Fronting Insurance**2.1 Each of Munich Re and National Indemnity (for itself and as agent for each member of itsGroup set out in Part I of Schedule 2 or Part I of Schedule 3 respectively) hereby severallyappoints Global to act as agent for it or such member of its Group as is set out in Part I ofSchedule 2 or Part I of Schedule 3 in the relevant jurisdiction indicated in those Schedules(which appointment Global hereby accepts and acknowledges): (a) to underwrite and/or bind and/or effect Fronting InsuranceContracts in the name of each of such persons in accordance with the terms ofthis Agreement; and  (b) to administer the Fronting Insurance Contracts and anyreinsurance of them including (without limitation) providing those servicesspecified in paragraphs 1.2 and 2 of Schedule 3 of the Pool Members’ Agreementin relation to the Fronting Insurance Contracts2.2 The Agent in performing its services under this Agreement shall act as agent (and describeitself as acting as agent) for Munich Re or the relevant member of its Group when actingpursuant to its appointment by Munich Re or a member of its Group or National Indemnity or therelevant member of its Group when acting pursuant to its appointment by National Indemnity or amember of its Group.2.3 The appointment by each of Munich Re and National Indemnity and the relevant members oftheir Groups of Global to act as its agent to underwrite and/or bind and/or effect FrontingInsurance Contracts in the name of Munich Re or National Indemnity or the relevant member ofits Group is limited to the negotiation and/or underwriting and/or binding and/or effecting ofFronting Insurance Contracts: (a) in those countries set out against such person’s name in Part Iof Schedule 2 or Part I of Schedule 3;  (b) in respect of the percentage set out against such person’s namein Part I of Schedule 2 or Part I of Schedule 3 of Converium’s RespectiveProportion of the Relevant Risk;
Page 8 

 
 (c) which are bound and/or effected prior to the expiration of thePeriod;  (d) which incept in the Period (provided that where a policy relatingto a Relevant Risk was written prior to the Period and is cancelled butre-written on the same terms save for the fact that Converium is replaced as anunderwriter by Munich Re and National Indemnity for the Period, such policyshall be deemed to incept in the Period);  (e) the period of which does not, in any case, exceed 12 months plusodd time not exceeding 15 months in all;  (f) the terms of which, where written on a risks attaching basis, donot allow for any risks to attach where the period of such risks exceeds 12months plus odd time not exceeding 15 months in all;  (g) which are in respect of Relevant Risks; and  (h) which are within the scope of the insurance and reinsurancecontracts the Agents are authorised to write under the Pool Members’ Agreement.2.4 Global shall not have any entitlement whatsoever to remuneration from Munich Re, NationalIndemnity or the members of their Groups and none of Munich Re, National Indemnity or themembers of their Groups shall have any obligation whatsoever to remunerate the Agents inrespect of the assumption and performance of the Agents’ obligations under this Agreement.2.5 Either Agent may (subject to prior notification of Converium, Munich Re and NationalIndemnity) appoint a wholly-owned subsidiary of Global, which has been appointed pursuant toClause 10 of the Pool Members’ Agreement, for the purposes of providing all or some of theservices under this Agreement in relation to such part of the Business as the board ofdirectors of the relevant Agent may determine and shall give prior notice of such appointmentto each of Converium, Munich Re and National Indemnity. Such subsidiary shall, as soon asreasonably practicable, become a party to this Agreement by executing a Deed of Adherence inthe form (or substantially in the form) set out in Annexure 1.2.6 The appointment by Munich Re, National Indemnity or the relevant member of their Group ofthe relevant Agent as its agent under Clause 2.1 shall be extended to the subsidiary, as ifreferences to Global were references to such subsidiary, in each case in relation only to suchservices and/or to such parts of the Business as is determined by the board of directors of therelevant Agent.2.7 Any appointment of a subsidiary under Clause 2.5 shall terminate upon such subsidiaryceasing to be a wholly-owned subsidiary of Global.**2A.** **Extension ofNational Indemnity and Munich Re Fronting Lines
Page 9 

 
2A.1 Munich Re’s Respective Proportion of Specified Risks written in the jurisdictions set out inPart II if any of Schedule 2 is fronted by the company set out opposite such jurisdiction in PartII if any of Schedule 2 (together the ***MR Fronters***). Munich Re agrees to use its reasonableendeavours to amend its agreements with the MR Fronters so that each MR Fronter also writes fiftyper cent (50%) of Converium’s Respective Proportion of Specified Risks in the jurisdiction set outopposite it in Part II if any of Schedule 2 (the MR ***Converium Risks***), which shall then be 100%quota share reinsured by Munich Re.2A.2 Converium agrees that to the extent MR Converium Risks are written by the MR Fronters on termspreviously agreed with Converium in writing and provided that Munich Re and each member of itsGroup pays to Converium all amounts received by it from the MR Fronters in relation to themfronting Converium Risks it will:(a) pay overriding commissions previously notified to and agreed by Converium in writing due to theMR Fronters in respect of the Converium Risks;(b) provide any security previously notified to and agreed by Converium in writing required by theMR Fronters in relation to the Converium Risks (which security shall be provided from the MR Fundpro rata to the applicable exposure); and(c) reinsure Munich Re’s reinsurance of the MR Converium Risks on an equivalent basis to that setout in Clause 3.2A.3 Converium shall pay Munich Re commission (the ***MR Fronted Commission***) for reinsuring theConverium Risks on the basis set out in Clauses 2A.4 to 2A.6.2A.4 The amount of MR Fronted Commission payable by Converium shall be calculated by reference tothe total gross premium income written by the Agents in the period in question in respect of eachMR Converium Risk after deduction of (i) any original commission or taxes on premiums payablethereunder but before the deduction of amounts, if any, payable to the Agents under the terms ofthe Pool Members’ Agreement and (ii) any premiums payable by the Agents for reinsurance in relationto the Pool (such amount being referred to as the ***MR Relevant Net Premium Income***).2A.5 The amount of MR Fronted Commission payable by Converium to Munich Re shall be calculated bymultiplying the MR Relevant Net Premium Income attributable to MR Converium Risks covered bypolicies written by MR Fronters by 1 per cent. (or by such percentage as may be agreed from time totime between Munich Re and Converium in writing).2A.6 The amount of MR Fronted Commission attributable to any calendar quarter shall be due andpayable on (i) the last business day of the immediately following calendar quarter, or (ii) thedate on which a cash distribution is paid by the Agents to Converium under the Pool Members’Agreement with respect to business written in such calendar quarter, whichever is earlier and shallbe deducted by Munich Re from the MR Fund on that date.
Page 10 

 
2A.7 National Indemnity’s Respective Proportion of Specified Risks written in the jurisdictions setout in Part II if any of Schedule 3 is fronted by the company set out opposite such jurisdiction inPart II if any of Schedule 3 (together the ***NIC Fronters***). National Indemnity agrees to use itsreasonable endeavours to amend its agreements with the NIC Fronters so that each NIC Fronter alsowrites fifty per cent (50%) of Converium’s Respective Proportion of Specified Risks in thejurisdiction set out opposite it in Part II if any of Schedule 3 (the ***NIC Converium Risks***), whichshall then be reinsured by National Indemnity.2A.8 Converium agrees that to the extent the NIC Converium Risks are written by the NIC Fronters onterms previously agreed with Converium in writing and provided that National Indemnity and eachmember of its Group pays to Converium all amounts received by it from the NIC Fronters in relationto them fronting NIC Converium Risks it will:(a) pay overriding commissions previously notified to and agreed by Converium in writing due to theNIC Fronters in respect of the NIC Converium Risks;(b) provide any security previously notified to and agreed by Converium in writing required by theNIC Fronters in relation to the NIC Converium Risks (which security shall be provided from the NICFund pro rata to the applicable exposure); and(c) reinsure National Indemnity’s reinsurance of the NIC Converium Risks on an equivalent basis tothat set out in Clause 3.2A.9 Converium shall pay National Indemnity commission (the ***NIC Fronted Commission***) for reinsuringthe NIC Converium Risks on the basis set out in Clauses 2A.10 to 2A.12.2A.10 The amount of NIC Fronted Commission payable by Converium shall be calculated by reference tothe total gross premium income written by the Agents in the period in question in respect of eachNIC Converium Risk after deduction of (i) any original commission or taxes on premiums payablethereunder but before the deduction of amounts, if any, payable to the Agents under the terms ofthe Pool Members’ Agreement and (ii) any premiums payable by the Agents for reinsurance in relationto the Pool (such amount being referred to as the ***NIC Relevant Net Premium Income*****).**2A.11 The amount of NIC Fronted Commission payable by Converium to National Indemnity shall becalculated by multiplying the NIC Relevant Net Premium Income attributable to NIC Converium Riskscovered by policies written by NIC Fronters by 1 per cent. (or by such percentage as may be agreedfrom time to time between National Indemnity and Converium in writing).2A.12 The amount of NIC Fronted Commission attributable to any calendar quarter shall be due andpayable on (i) the last business day of the immediately following calendar quarter, or (ii) thedate on which a cash distribution is paid by the Agents to Converium under the Pool Members’Agreement with respect to business written in
Page 11 

 
such calendar quarter, whichever is earlier and shall be deducted by National Indemnity from theNICO Fund on that date.**3.** **Converium’s Reinsurance and Indemnity Obligations**3.1 Immediately upon, and with effect from, the acceptance and/or binding of a Reinsured Riskby the Agents (or either of them), Munich Re or the relevant member of its Group and NationalIndemnity or the relevant member of its Group shall cede to Converium and Converium agrees toaccept by way of reinsurance the quota share percentage set out against such person’s name inPart I of Schedule 2 or Part I of Schedule 3 of Converium’s Respective Proportion of theRelevant Risk (the total amount ceded pursuant to this Clause 3.1 shall be the ***Reinsurance***andthe amount ceded in relation to a particular Reinsured Risk by a particular entity shall be the***Reinsurance relating to that Reinsured Risk***). Such cession and acceptance shall be effectedimmediately and automatically on, and with effect from, the acceptance and/or binding of theReinsured Risk in question.3.2 In consideration of Munich Re and National Indemnity agreeing to enter into this Agreement,Converium agrees to reinsure and indemnify Munich Re, National Indemnity or the relevant memberof its Group, without limit in time or amount, in respect of the Ultimate Net Loss of MunichRe, National Indemnity or the relevant member of its Group in respect of, or relating to, eachReinsured Risk in respect of which a Fronting Insurance Contract is written in such person’sname. This Agreement shall only apply to the portion of a risk reflecting Converium’sparticipation in the Pool Members’ Agreement and in respect of Munich Re, National Indemnityand each member of such person’s Group shall only apply to the portion of such risk actuallyfronted by such person.3.3 The term ***Ultimate Net Loss***, as used herein, shall mean all amounts paid or agreed to bepaid (including by way of set-off, release or any other form of consideration) by Munich Re,National Indemnity or the relevant member of such person’s Group listed in Part I of Schedule 2or Part I of Schedule 3 (or the Agent(s) on behalf of Munich Re, National Indemnity or therelevant member of such person’s Group listed in Part I of Schedule 2 or Part I of Schedule 3)in respect of or in relation to Claims and/or Claims-Related Extra Contractual Obligationsrelating, in any way, to a Reinsured Risk (or any or all Reinsured Risks) and shall include,without limit, all adjustment expenses arising from the evaluation, assessment, investigationand/or settlement of claims other than the salaries of employees and office expenses of MunichRe or any member of its Group (in the case of Ultimate Net Losses relating to Munich Re or anymember of its Group) or National Indemnity or any member of its Group (in the case of UltimateNet Losses relating to National Indemnity or any member of its Group) provided that Converiumshall be entitled to all amounts physically received by way of recoveries/salvages. It isfurther understood and agreed that: (a) any of Munich Re, National Indemnity or the relevant member ofsuch person’s Group listed in Part I of Schedule 2 or Part I of Schedule 3 shallbe entitled to recover any part of its Ultimate Net
Page 12 

 
   Loss once that has been ascertained without having to wait until its totalUltimate Net Loss has been ascertained; and  (b) for the avoidance of doubt, notwithstanding any other provisionof this Agreement, it is understood and agreed that neither Munich Re, NationalIndemnity nor the relevant member of such person’s Group listed in Part I ofSchedule 2 or Part I of Schedule 3 shall be required to actually pay (in thesense of making a physical disbursement of money or monies worth) any amounts inrespect of which indemnity is claimed in order to trigger Converium’s indemnityobligations hereunder.3.4 If the terms of any reinsurance taken out by the Agents for the benefit of Munich Re,National Indemnity or a member of such person’s Group in relation to the Pool (a ***PoolReinsurance***) cover part or all of any Relevant Risk, the Reinsurance provided for in thisClause 3 shall not extend to such part of that Relevant Risk provided that to the extent theAgents are not able to recover under the Pool Reinsurance the Ultimate Net Loss in respect ofsuch Relevant Risk for any reason other than as a result of a negligent or fraudulent act byMunich Re, National Indemnity or a member of such person’s Group (provided that for theavoidance of doubt a negligent or fraudulent act by the Agent or any person appointed by theAgent to act as agent of Munich Re or National Indemnity shall not be deemed a negligent orfraudulent act by Munich Re, National Indemnity or a member of such person’s Group for thepurposes of this clause unless the Agent was instructed to undertake such act by Munich Re orNational Indemnity or a member of such person’s Group (other than by instruction approved byConverium), Converium shall reinsure such Ultimate Net Loss pursuant to this Clause 3.3.5 The Agents, Munich Re and National Indemnity shall (and shall procure that each relevantmember of such person’s Group shall) take such reasonable action as is necessary to allow theAgents to make a successful claim under any relevant Pool Reinsurance.3.6 Converium shall, in all respects, follow the fortunes of Munich Re or National Indemnity orthe member of such person’s group in whose name the relevant Fronting Insurance Contract iswritten in relation to all matters falling within the scope of the Reinsurance and theReinsurance shall be construed in such a way as to give effect to the parties’ intention that,to the greatest extent permissible by law: (a) Munich Re, National Indemnity and the members of their Groupsshould retain no economic interest in the Reinsured Risks after the applicationof this Reinsurance; and  (b) the economic fortunes of Converium in relation to the ReinsuredRisks should exactly mirror those of Munich Re or National Indemnity or themember of such person’s Group in whose name the relevant Fronting InsuranceContract is written.
Page 13 

 
3.7 Accordingly, and without prejudice to the generality of Clause 3.6, Converium shall beunconditionally bound to follow all settlements, compromises, commutations, policy buy-backs orother agreements of any nature whatsoever entered into, or agreed, on behalf of Munich Re,National Indemnity or the members of their Groups by the Agents in relation to the FrontingInsurance Contracts including any and all ex gratia payments without regard to the question ofwhether Munich Re, National Indemnity or the members of their Groups had any liabilitywhatsoever (whether arguable or otherwise) in respect of such settlements, compromises, etc.3.8 The parties acknowledge and agree that the obligations of Converium to indemnify: (a) Munich Re or a member of its Group in whose name the relevantFronting Insurance Contract is written under this Agreement shall not in any waybe affected by any actual or alleged breaches by the Agents or NationalIndemnity of the terms of this Agreement, the Pool Members’ Agreement or of anyduties (whether in contract tort or equity) owed by the Agents or NationalIndemnity to Converium or Munich Re or the members of their Groups.  (b) National Indemnity or a member of its Group in whose name therelevant Fronting Insurance Contract is written under this Agreement shall notin any way be affected by any actual or alleged breaches by the Agents or MunichRe of the terms of this Agreement, the Pool Members’ Agreement or of any duties(whether in contract tort or equity) owed by the Agents or Munich Re toConverium or National Indemnity or the members of their Groups.**4.** **Duties & Waivers**4.1 Converium acknowledges and agrees that this Agreement is being entered into by the partiessolely as a Fronting Arrangement for the purposes of the Pool Members’ Agreement in order tofacilitate the participation by Converium in the underwriting of risks pursuant to the PoolMembers’ Agreement and that Converium would in any event have participated directly in suchrisks pursuant to the terms of the Pool Members’ Agreement. Accordingly, subject to Clause4.3, Converium agrees: (a) that it has been afforded the opportunity to conduct its owninvestigations and due diligence in relation to all matters relevant and/ormaterial to this Agreement and the Pool Members’ Agreement (including theReinsurance and the Reinsured Risks);  (b) that neither Munich Re, National Indemnity nor the member of suchperson’s Group in whose name a Fronting Insurance Contract is written nor itsagents nor any person acting on its behalf assumes, shall accept, and owe, anyduty of care, whether in contract or in tort, nor fiduciary duties to Converiumin relation
Page 14 

 
   to any matters falling within the scope of this Agreement or the Reinsuranceand none of Munich Re, National Indemnity or the member of such person’sGroup in whose name a Fronting Insurance Contract is written shall accept,or have, any vicarious liability for any acts or omissions of the Agents inrelation thereto;  (c) to waive any duty of disclosure on the part of Munich Re,National Indemnity or any member of such person’s Group in whose name a relevantFronting Insurance Contract is written and/or its agents and/or any other personacting on behalf of Munich Re, National Indemnity or the member of such person’sGroup in whose name the relevant Fronting Insurance Contract is written inrelation to the Reinsurance and/or the subject-matter of this Agreement(including, but not limited to, each and every Reinsured Risk and/or the cessionthereof);  (d) to acknowledge and accept the validity of each Fronting InsuranceContract underwritten by an Agent on behalf of Munich Re, National Indemnity orthe members of their Groups set out in Part I of Schedule 2 and Part I ofSchedule 3 for the benefit of Converium pursuant to (or in purported pursuanceof) this Agreement;  (e) to waive and/or otherwise exclude any right (or remedy) that itmight have, whether now or in the future, to seek or otherwise claim damages inrespect of, or to avoid, rescind or otherwise challenge the validity of anyFronting Insurance Contract and/or the Reinsurance and/or the cession of, anyReinsured Risk on any grounds including: (i) misrepresentation and/or non-disclosure of material facts(whether innocent, or negligent); and/or  (ii) any breach (or alleged breach) of any duty of utmost good faithby Munich Re, National Indemnity or the members of their Groups set out in PartI of Schedule 2 and Part I of Schedule 3 (or any person acting on behalf ofMunich Re, National Indemnity or the members of their Groups set out in Schedule2 or Schedule 3); and (f) save to the extent otherwise provided for in this Agreement,Converium shall indemnify and keep indemnified Munich Re, National Indemnity orthe members of their Groups set out in Part I of Schedule 2 and Part I ofSchedule 3 in respect of any claim, loss or liability of any kind (includingwithout limitation any liability to the Agents (or either of them) under thePool Members’ Agreement) in respect of or in connection with the conduct (orpurported conduct) of the Business.
Page 15 

 
4.2 Unless the contrary is expressly stated, no terms of this Agreement and/or Reinsurancewhich are expressed to be warranties (or which might be otherwise have been construed aswarranties but for this Clause 4.2) shall take effect as warranties within the meaning of theMarine Insurance Act 1906 (which for the purposes of information only provides, in generalcircumstances, for the discharge of liability should a warranty be breached) but shall,instead, be construed and take effect as innominate terms.4.3 For the avoidance of doubt, however, nothing in this Clause 4 is intended to affect and/orwaive and/or otherwise exclude any rights or remedies which Converium might have, whether nowor in the future, arising out of, or relating to, fraud on the part of any of Munich Re,National Indemnity or the members of their Groups set out in Part I of Schedule 2 and Part I ofSchedule 3 themselves (as opposed to fraud of the Agents, or either of them, on behalf ofMunich Re, National Indemnity or the members of their Groups set out in Part I of Schedule 2and Part I of Schedule 3), provided that the parties agree that no fraud on the part of: (a) National Indemnity or a member of its Group shall impact theobligations of Converium to Munich Re or a member of its Group; and  (b) Munich Re or a member of its Group shall impact the obligationsof Converium to National Indemnity.**5.** **Premiums and Pool Payments**5.1 Subject to Clause 6, each of Munich Re and National Indemnity agrees for itself and asagent for each member of its Group set out in Part I of Schedule 2 and Part I of Schedule 3respectively that Converium shall be entitled to all amounts actually received by the Agents(or either of them) in respect of premiums payable under the terms and conditions of theReinsured Risks including, for the avoidance of doubt, any and all adjustment and/orreinstatement premiums but after the deduction of any commissions or brokerage or otherdeductions payable or to be deducted therefrom (***Premiums***) provided that all amounts payable toConverium pursuant to Clause 7 of the Pool Members’ Agreement less all amounts payable byConverium under Clause 7.5 of the Pool Members’ Agreement (and less all amounts due to NationalIndemnity or Munich Re, respectively, under Clause 6 as Overriding Commission) shall be paid: (a) as to fifty per cent directly to National Indemnity (or suchmember of its Group listed in Part I of Schedule 3 as National Indemnity shalladvise Converium and the Agents) in relation to Reinsurance Risks covered byFronting Insurance Contracts written in the name of National Indemnity or anymember of its Group set out in Part I of Schedule 3 to be held as set out inClause 14.2.5.2 The Agents shall hold such proportion of the Premiums that is equivalent to any OverridingCommission payable (or potentially payable) by Converium to:
Page 16 

 
 (a) Munich Re or any member of its Group and shall pay such amount toMunich Re in accordance with Clause 6 and shall only pay to Converium theremaining amount;  (b) National Indemnity or any member of its Group and shall pay suchamount to National Indemnity (or such member of its Group listed in Part I ofSchedule 3 as National Indemnity shall advise Converium and the Agents inwriting prior to such payment being made) in accordance with Clause 6 and shallonly pay the remaining amount as specified in Clause 5.1(a).5.3 All amounts payable by Converium to the Agents pursuant to Clause 7 of the Pool Members’Agreement shall, except in the case where the MR Fund contains sufficient monies, when theamounts shall be paid as to fifty per cent from the MR Fund, be paid by Converium as to fiftyper cent directly to the Agents and as to fifty per cent from the NIC Fund, provided thatNational Indemnity shall not be obligated to make any payment described in Clauses 14.17(b) or(c) which would cause the NIC Fund to be reduced below $ 12,900,000.00 (or, if lower andClause 14.8 applies, the amount required to be held in the NIC Fund pursuant to Clause 14.8).Any shortfall in amounts payable by Converium to the Agents pursuant to Clause 7 of the PoolMembers’ Agreement by reason of either of the foregoing provisos shall be paid by Converium.**6.** **Overriding Commission**6.1 In consideration of Munich Re and the members of its Group set out in Part I of Schedule 2agreeing to front for Converium in respect of the Reinsured Risks, Converium agrees to paycommission to Munich Re for itself and as agent for such member of its Group (***Munich ReOverriding Commission***) in respect of each Reinsured Risk covered by Fronting InsuranceContracts written by such persons.6.2 In consideration of National Indemnity and the members of its Group set out in Part I ofSchedule 3 agreeing to front for Converium in respect of the Reinsured Risks, Converium agreesto pay commission to National Indemnity (or such member of National Indemnity’s Group listed inPart I of Schedule 3 as National Indemnity shall advise Converium and the Agents) for itselfand as agent for such members of its Group (***NIC Overriding Commission***and together with MunichRe Overriding Commission, ***Overriding Commission***) in respect of each Reinsured Risk covered byFronting Insurance Contracts written by such persons.6.3 Subject always to Clause 6.4, the relevant Agent shall calculate the amount of OverridingCommission payable in respect of all Premiums written in respect of the relevant ReinsuredRisks and shall: (a) deduct and withhold such amounts from the Premiums payable as setout in Clause 5.1; and
Page 17 

 
 (b) account for, and pay, such amounts to Munich Re or NationalIndemnity (or such member of its Group listed in Part I of Schedule 3 asNational Indemnity shall advise Converium and the Agents in writing prior tosuch payment being made) in accordance with Schedule 1.6.4 Converium’s obligation to pay Overriding Commission to Munich Re or National Indemnityshall be discharged only by the actual receipt by Munich Re or National Indemnity (or suchmember of National Indemnity’s Group listed in Part I of Schedule 3 as National Indemnity shalladvise Converium and the Agents) of the amounts due and not by the deduction or withholding bythe Agents (or any of them) of amounts calculated to be due in respect of Overriding Commissionprovided that such payment obligation shall be discharged to the extent that the OverridingCommission (or part thereof) payable to Munich Re or National Indemnity is set-off againstmonies due and payable by Munich Re or National Indemnity to the relevant Agent in connectionwith the Pool. The receipt of Overriding Commission by Munich Re or National Indemnity inrespect of Fronting Insurance Contracts written by members of such person’s Group shalldischarge Converium’s obligations in respect thereof and Converium shall not be concerned as tothe application of such amounts.**7.** **Claims**7.1 The Agents shall manage and perform the administration of the Reinsured Risks and thenegotiation and settlement of Claims thereunder and, in doing so, shall act as agent of MunichRe, National Indemnity (and the members of their Groups set out in Part I of Schedule 2 andPart I of Schedule 3) and Converium.7.2 Without prejudice to the generality of Clause 7.1, all decisions made by the Agents inrelation to the administration of the Reinsured Risks and the negotiation and/or settlement ofClaims thereunder shall be made as agents for Munich Re, National Indemnity (and the members oftheir Groups set out in Part I of Schedule 2 and Part I of Schedule 3) and Converium and shallbe deemed to be in the knowledge of all of them (to the greatest extent permitted or allowableby law).7.3 As between Converium and any of Munich Re, National Indemnity and the members of theirGroups set out in Part I of Schedule 2 and Part I of Schedule 3, Munich Re, National Indemnityand the members of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3 shallhave no obligation to provide or disburse funds in respect of any obligations arising under orin relation to Reinsured Risks. Such funds shall be provided by Converium and, accordingly,Converium shall ensure that, at all times, sufficient funds are provided to the Agents toenable all obligations under or in relation to each Reinsured Risk to be met as and when theyfall due.7.4 Any and all funds provided by Converium pursuant to Clause 7.3 shall, until physicallydisbursed to the relevant insured or reinsured under the relevant Reinsured Risk or claimantagainst such insured, be held by the Agents as agent for Converium and payment of such funds byConverium to the Agents shall not
Page 18 

 
constitute a discharge of, or operate to discharge, the obligations of Converium to Munich Re,National Indemnity or any members of their Groups set out in Part I of Schedule 2 and Part I ofSchedule 3 under the terms of the Reinsurance, which obligations shall be discharged only by(and to the extent of): (a) physical disbursements of relevant amounts to insureds and/orreinsureds under the Reinsured Risks or claimant against such insured; and/or  (b) physical disbursement to Munich Re, National Indemnity or anymembers of their Groups set out in Part I of Schedule 2 and Part I of Schedule 3of amounts due under the Reinsurance to Munich Re, National Indemnity or anymembers of their Groups set out in Part I of Schedule 2 and Part I of Schedule3.**8.** **Accounts and Information**8.1 Each Agent agrees to provide accounting and other information to Munich Re, NationalIndemnity or Converium in the form and in the manner that may be reasonably required by MunichRe, National Indemnity or Converium from time to time by giving notice as provided for inClause 03.8.2 Each of the Agents shall keep, in such forms as may be agreed from time to time with (a)Munich Re and Converium in relation to Relevant Risks for which Munich Re or a member of itsGroup provides Fronting Insurance Contracts or (b) National Indemnity and Converium in relationto Relevant Risks for which National Indemnity or a member of its Group provides FrontingInsurance Contracts, books, records, underwriting statistics and accounts of all transactionsunder this Agreement.8.3 Munich Re, National Indemnity or Converium may, subject to any confidentiality obligationsof either Agent, at all reasonable times and on reasonable notice appoint its officers,employees agents, or auditors to inspect, examine and verify at the offices of either Agent(and to take copies of such books and records) all such accounts, records, books, vouchers,correspondence and papers relating to any of the functions performed by the relevant Agentunder this Agreement insofar as they relate to the affairs of Munich Re or the members of itsGroup set out in Part I of Schedule 2 or National Indemnity or the members of its Group set outin Part I of Schedule 3 or Converium or a member of its Group respectively, including withoutlimitation the application of any money belonging to them paid or received by the relevantAgent and the operation of bank accounts of such persons by the relevant Agent pursuant to thisAgreement, and each of the Agents shall whenever reasonably required at any time during normalbusiness hours give such officers, employees, servants or agents access to its offices for suchpurposes.8.4 Each of National Indemnity and Munich Re undertakes to agree to supply, to the extentpermissible under any applicable law or regulatory requirements, such information as eitherAgent shall reasonably request from time to time in order to facilitate the management of theBusiness or the arrangements referred to
Page 19 

 
in Clause 2A (but shall not be obliged to provide any information relating to any business ofeach of National Indemnity and Munich Re or any member of its Group to the extent it does notrelate to the Business or the arrangements referred to in Clause 2A).**9.** **Relationship between the Parties**9.1 Nothing in this Agreement shall create or constitute a partnership between the partieshereto or any of them nor, save as expressly provided herein, constitute any one the agent ofanother and no party shall do or suffer anything to be done whereby it shall or may berepresented that it is the partner or agent of any other party hereto (save as aforesaid)unless such party is appointed partner or agent of another party subject to the consent inwriting of every other party to this Agreement.9.2 The relationship between the parties to this Agreement is as described in this Agreement.Neither that relationship nor the services to be provided by Global nor any other matter shallgive rise to any fiduciary or equitable obligations which would hinder Global from acting ascontemplated under the terms of this Agreement.**10.** **Termination**10.1 For the purposes of this Clause 10, a ***Trigger Event***shall be deemed to have occurred inrelation to a party if: (a) it ceases to be duly authorised (or has any suspension,restriction or other limitation imposed in respect of its authority, licence,approval or permission) in respect of Specified Risks in the jurisdiction inwhich it is incorporated or has its principal place of business (***homejurisdiction***);  (b) it goes into liquidation whether compulsorily or voluntarily(otherwise than a voluntary and solvent liquidation for the purpose ofreconstruction or amalgamation pursuant to a scheme previously agreed betweenthe parties);  (c) it enters into any composition with its creditors generally orsuffers any similar action in consequence of default by it in its obligations inrespect of any indebtedness for borrowed moneys;  (d) an administration order shall be made in respect of such party;  (e) it stops or threatens to stop payment or ceases or threatens tocease to carry on its business (otherwise than in connection with or inpursuance of a winding-up for the purpose of a reconstruction or amalgamationpursuant to a scheme previously agreed between the parties) or is deemed for thepurpose of Section 123 of the Insolvency Act 1986 to be unable to pay its debts;
Page 20 

 
 (f) it has an administrative receiver or other receiver or othersimilar official appointed over all (or substantially all) of its undertakingand assets;  (g) it suffers any action similar to any of the events described inClauses 10.1(a) to (f) under the laws of any competent jurisdiction;  (h) it has its financial strength rating downgraded below BBB+ (or inthe case of Converium BBB) by Standard & Poor’s Rating Service (***S&P***) or if suchrating is not available, below such comparable rating as may be reasonablyagreed between the parties, or it requests or agrees that S&P should cease torate it;  (i) Converium is subject to a change of control as defined in Clause15.2 (f) of the Pool Members’ Agreement.10.2 In the event that a Trigger Event occurs in relation to any of Munich Re or a member ofits Group set out in Part I of Schedule 2 or National Indemnity or a member of its Group setout in Part I of Schedule 3, the Agents or either of them may suspend entirely with immediateeffect the appointment by the relevant person (the ***defaulter***) pursuant to Clause 2.1(a), inwhich case the parties shall seek to agree a basis upon which such suspension might be liftedand the appointment reinstated. From the time of any such suspension until the time suchagreement is reached, Clause 10.3 shall apply.10.3 If this Clause 10.3 applies (by reason of Clause 10.2 or 10.7), neither of the Agentsshall (nor shall they have any authority to): (a) accept Fronting Insurance Contracts in the name of the defaulteror the person invoking this Clause 10.3 pursuant to Clause 10.7 (asappropriate);  (b) provide quotations or enter into (or continue) any negotiationsrelating to the possible acceptance of, Fronting Insurance Contracts in the nameof the defaulter or the person invoking this Clause 10.3 pursuant to Clause 10.7(as appropriate); or  (c) agree any amendments to the terms of or otherwise agree anyendorsements to any Fronting Insurance Contract which would, or would bereasonably likely to, increase materially the gross exposure of the defaulterunder the Fronting Insurance Contract in question.10.4 In the event that any of Munich Re, National Indemnity or a member of such person’s Groupset out in Part I of Schedule 2 or Part I of Schedule 3 ceases to be duly authorised (or hasany suspension, restriction or other limitation imposed in respect of its authority, licence,approval or permission) in respect of any Relevant Risk in a jurisdiction set out against suchperson’s name in Part I of Schedule 2 or Part I of Schedule 3 (an ***Applicable Territory***) incircumstances
Page 21 

 
where Clause 10.1(a) does not apply to such person (a ***Non-Authorisation Event***), then theappointment by such person (the ***non-authorised person***) pursuant to Clause 2.1(a) in relation toany relevant Applicable Territory shall be suspended with immediate effect, in which case theparties shall seek to agree the basis upon which such suspension might be lifted and therelevant part of the appointment reinstated. From the time of any such suspension until thetime such agreement is reached, Clause 10.6 shall apply.10.5 If Clause 10.4 applies, as an alternative to suspension pursuant to Clause 10.4, Munich Reor National Indemnity shall have the right to appoint an alternate member of its respectiveGroup meeting the requirements of the Pool Members’ Agreement to replace a non-authorizedperson by notice to Converium and Agents. If Munich Re or National Indemnity appoint analternative pursuant to this Clause 10.5, Munich Re or National Indemnity shall procure thatthe alternative member of its Group shall enter into an agreement by which it agrees to bebound by this Agreement as if it were the entity it replaces.10.6 If this Clause 10.6 applies (by reason of Clause 10.4), neither of the Agents shall (norshall they have any authority to): (a) accept Fronting Insurance Contracts in the name of thenon-authorised person in or relating to the Applicable Territory in question;  (b) provide quotations for, or enter into (or continue) anynegotiations relating to the possible acceptance of, Fronting InsuranceContracts in the name of the non-authorised person relating to the ApplicableTerritory in question; or  (c) agree any amendments to the terms of or otherwise agree anyendorsements to any Fronting Insurance Contract in the name of thenon-authorised person previously written (and which relates to the ApplicableTerritory in question) which would, or would be reasonably likely to, increasematerially the gross exposure of the non-authorised person under the FrontingInsurance Contract in question.10.7 In the event that: (a) Converium ceases lawfully to be able to reinsure any FrontingInsurance Contracts;  (b) Converium’s participation in the arrangements established by thePool Members’ Agreement is terminated; or  (c) a Trigger Event occurs in relation to Converium,then any person making an appointment pursuant to Clause 2.1(a) shall be able to suspend allappointments or, Converium or either Agent shall be entitled, by written notice to the otherparties, to suspend all appointments pursuant to Clause 2.1(a) in
Page 22 

 
which case the parties shall seek to agree the basis upon which such suspension might be lifted andthe relevant part of the appointment reinstated. From the time of any such suspension until thetime such agreement is reached, Clause 10.3 shall apply.10.8 For the avoidance of doubt, the Agents’ administrative obligations under Clause 2.1(b) andtheir duties of management and administration of the Reinsured Risks and the negotiation andsettlement of Claims under Clause 7 shall not cease by reason of the suspension or termination,in whole or in part, of an appointment pursuant to Clause 2.1(a) (except to the extent thatcontinuing to perform the administrative obligations would be inconsistent with such suspensionor termination or that the parties so agree).10.9 Each party shall notify the other parties upon becoming aware of a Trigger Event inrelation to any of Munich Re, National Indemnity or the members of their Groups set out in PartI of Schedule 2 or Part I of Schedule 3 or Converium at any time.10.10 Each of Munich Re and National Indemnity shall notify the other parties upon becomingaware that the Non-Authorisation Event under Clause 10.4 applies to it or any member of itsGroup set out in Part I of Schedule 2 or Part I of Schedule 3 at any time.10.11 Converium shall notify the other parties upon becoming aware that Clause 10.7(a), (b) or(c) applies to it, at any time.10.12 Suspension and/or termination of the appointment pursuant to Clause 2.1(a) in whatevermanner shall in no way affect or limit any accrued rights which any party to this Agreement mayhave against the others pursuant to this Agreement or any rights expressly stated to survivetermination of this Agreement.10.13 Except to the extent that any of (a) Munich Re or (b) National Indemnity, and Converiumagree otherwise (such agreement to be in writing and notified to the Agents), neither theReinsurance, nor the obligations of any of Munich Re, National Indemnity or the members oftheir Groups set out in Part I of Schedule 2 or Part I of Schedule 3 or Converium, shallterminate if this Agreement or any part of it is terminated or suspended.10.14 The appointment of the Agents (or either of them) pursuant to Clause 2.1(a) shallterminate automatically at any time when a termination of the appointment of the Agent(s) toprovide services under the Pool Members’ Agreement takes effect. Neither Munich Re nor anymember of its Group, National Indemnity or any member of its Group nor Converium shall berequired to make any payment to the Agents (or either of them) in the event of such atermination save as provided for in the Pool Members’ Agreement.10.15 The appointment pursuant to Clause 2.1 may not be terminated save as expressly providedfor in this Agreement.
Page 23 

 
10.16 For the avoidance of doubt, the occurrence of a Trigger Event or a Non-AuthorisationEvent shall not constitute a breach of this Agreement and, save in the case of fraud, a personto which a Trigger Event applies shall have no liability pursuant to this Agreement, whether indamages or otherwise, arising from or in connection with any such event, apart from any losssuffered by the Agents and/or Converium (excluding indirect, special or consequential loss orloss of profit, goodwill or business opportunity) directly resulting from a failure by a personto which a Trigger Event applies to notify Global that such an event applies to it inaccordance with Clause 10.8 or 10.9 (as the case may be) and the Agents continue to writeinsurance business on behalf of such person under this Agreement.**11.** **Confidentiality**11.1 Every party hereto shall hold in confidence and shall not divulge to any other party orany third party any Confidential Information nor make any public or press announcementregarding this Agreement or matters connected herewith except as provided in Clause 11.2, 11.3,11.4 or (as the case may be) Clause 11.5.11.2 Notwithstanding the provisions of Clause 11.1, any party may disclose ConfidentialInformation: (a) in respect of any party to any other party with the prior writtenconsent of the first party;  (b) with the consent of the other parties (such consent not to beunreasonably withheld or delayed);  (c) if and to the extent required by law or for the purpose of anyjudicial proceedings;  (d) if and to the extent required or permitted by this Agreement;  (e) if and to the extent required by any securities exchange orregulatory or governmental body or tax authority to which that party or a memberof its Group is subject, wherever situated;  (f) to any member of its Group and to its officers and employees orthose of such member, in any such case to the extent that such person needs toknow such information in order to manage or monitor its business or in theperformance of his or its duties;  (g) to its professional advisers, auditors and bankers; or  (h) if and to the extent the information has come into the publicdomain through no fault of that party.
Page 24 

 
11.3 Notwithstanding Clause 11.1: (a) each Agent shall, be entitled to provide extracts of thisAgreement to such banks, reinsurers and brokers and other managing agents ofreinsurers in the ordinary course of business as it reasonably deems necessaryfor the purpose of carrying out the Business;  (b) any party may give a copy of this Agreement, or a summary of it,to any insurance company which is a member of any insurance pool constituted bythe Pool Members’ Agreement but not a party hereto.11.4 Each party shall procure that any person to whom Confidential Information is disclosedpursuant to Clauses 11.2(f) or (g) complies with the restrictions set out in this Clause 11 asif such person were a party to this Agreement**.**11.5 The provisions of this Clause 11 shall remain in full force and effect notwithstanding thetermination of this Agreement and each party shall remain bound by the provisions of thisClause 11 for only a period of five years following cessation by both Agents of the provisionof any services to Munich Re or National Indemnity (or any member of such person’s Group)pursuant to this Agreement.11.6 Neither Global nor GAI shall be obliged to disclose to any other party or, in making anydecision or taking any action in relation to the Business or the management thereof, to takeinto consideration information the disclosure of which by Global or (as the case may be) by GAIto any other party would or might be a breach of duty or confidence to any other personexcluding the details of any cover written and any other information which another partyrequires to be in compliance with applicable law.**12.** **Undertakings**12.1 Global shall use all reasonable care and skill in the performance of their respectiveobligations under this Agreement and shall comply with all applicable laws relating thereto.12.2 Each of Munich Re and National Indemnity severally agrees, warrants and undertakes to eachof the Agents and Converium that (i) it and each member of its Group listed in Part I ofSchedule 2 or Part I of Schedule 3 (respectively) has (and so long as the appointment of therelevant Agent remains in force under this Agreement shall continue to have) power to employeach of the Agents; (ii) it and each member of its Group listed in Part I of Schedule 2 or PartI of Schedule 3 (respectively) has and will have all necessary consents, powers and authoritiesto authorise each of the Agents to act as its agent as contemplated by this Agreement; (iii) ithas all necessary consents, powers and authorities to enter into this Agreement in accordancewith its terms; and (iv) it has been validly appointed by each member of its Group listed inPart I of Schedule 2 or Part I of Schedule 3 (respectively) as agent for the purposes of makingthe appointment on behalf of
Page 25 

 
such person in Clause 2.1 and any other purpose necessary pursuant to this Agreement.12.3 Converium agrees, warrants and undertakes to the Agent, Munich Re and National Indemnitythat it has (and so long as the appointment of the Agent remains in force under the PoolMembers’ Agreement shall continue to have) power to employ the Agent and has and will have allnecessary consents, powers and authorities: (i) to enter into this Agreement in accordancewith its terms (including, without limitation, the Reinsurance); and (ii) to authorise theAgent to act as its agent as contemplated by this Agreement.12.4 Subject to Munich Re or National Indemnity being fully reimbursed or indemnified (underClause 3 or otherwise) by Converium for any loss or liability it may incur, Munich Re orNational Indemnity hereby undertakes to ratify (and to procure that any relevant member of itsGroup ratifies) every act performed or thing done by each of the Agents which shall hereafterbe performed or done in exercise or purported exercise of the powers conferred or to beconferred upon the Agent by this Agreement provided only that such acts are in accordance withthe terms of this Agreement and within the scope of the authority granted to the Agenthereunder.12.5 Each of Munich Re and National Indemnity represents and warrants to the Agents andNational Indemnity that those members of its Group marked * in Part I of Schedule 2 or Part Iof Schedule 3 is duly authorised to write all Relevant Risks in the United Kingdom andundertakes to take all reasonable steps to ensure such authorisations are maintained during theduration of this Agreement.12.6 Each of Munich Re and National Indemnity undertakes to notify the Agent and Converium inwriting as soon as reasonably practicable of any changes as to the authorisations (whether inrelation to any Applicable Territory or the United Kingdom) which it or the members of itsGroup listed in Part I of Schedule 2 or Part I of Schedule 3 has, or expects to obtain, fromtime to time.**13.** **Munich Re Security**13.1 Converium shall on or before the 2nd July 2007 (or such later date as Munich Remay specify) pay to Munich Re the sum of $ 12,900,000.00 , or arrange or cause to be arrangedthe issue and delivery to Munich Re of a LOC in the same sum, to be held on the basis set outin Clause 13.3.13.2 Any amounts paid or LOC’s issued and delivered pursuant to Clauses , 13.1, 13.4, 13.6 or13.9 (or because of the definition of Incurred Position) shall be paid to the account of MunichRe notified to Converium in writing by Munich Re from time to time.13.3 The amounts held pursuant to Clause 13.2 shall be known as the ***MR Fund***. Such amountsshall be held by Munich Re as trustee for Converium provided that Munich Re shall be entitledto make payments from such account and /or LOC(s), as the case may be, in order to pay amountswhich are due:
Page 26 

 
 (a) or claimed to be due under Reinsured Risks in respect of whichFronting Insurance Contracts have been written by it or members of its Group;  (b) to it or members of its Group from Converium under the terms ofthe Reinsurance;  (c) to it or members of its Group from Converium in respect ofOverriding Commission; and/or  (d) pursuant to Clause 2A.13.4 At any time prior to 31 December 2010 that the MR Fund (together with the amount of anyclaims paid by the Agents or Munich Re in relation to the Reinsured Risks) is less than thefifty per cent (50%) of the Incurred Position, within ten Business Days of receiving noticefrom Munich Re or the Agents (or, if later, the date on which the Incurred Position isdetermined in accordance with Schedule 6), Converium shall pay to Munich Re such additionalamount, or arrange or cause to be arranged the issue and delivery to Munich Re of a LOC in suchamount, or increase or cause to be increased any existing LOC in the MR Fund by such additionalamount as shall be required for the MR Fund to equal fifty per cent (50%) of the IncurredPosition.13.5 Munich Re shall pay to Converium within ten Business Days of 31 March 2011 (or, if later,the date on which the profit is determined in accordance with Schedule 4), the profit arisingon any Fronting Insurance Contracts written by Munich Re or any member of its Group calculatedon the basis set out in Clause 13.12, or allow any LOC or LOC’s that has or have been issuedand delivered to Munich Re in accordance with Clauses, 13.1, 13.4, 13.6 or 13.9 (or because ofthe definition of Incurred Position) to be reduced, in the aggregate, by an amount equivalentto such profit. Nothing in this Clause 13.5 shall be construed to require Munich Re to pay anyamount or reduce the LOC’s delivered to Munich Re in accordance with and pursuant toConverium’s obligations under this Agreement that would cause the MR Fund to be less than thegreater of (a) and (b) below: (a) the sum of: (i) 100 per cent. of outstanding claims reserves, including reservesfor claims incurred but not reported, maintained by Munich Re or the relevantmember of its Group in accordance with applicable law or regulation in respectof relevant Reinsured Risks written in the name of such person (the ***MRReserves***); plus  (ii) the greater of: (A) $12,900,000.00 ; and  (B) 20% of the MR Reserves; or
Page 27 

 
 (b) the minimum amount which is required to allow Munich Re or suchmember of its Group to receive credit for the Reinsurance of the FrontingInsurance Contracts written by it under the laws of the jurisdiction in whichsuch person is domiciled.The greater of (a) or (b) above shall be referred to as the ***Post Profit Incurred Position***.13.6 At any time after 31 December 2010 but prior to 31 December 2014 that the MR Fund is lessthan the Post Profit Incurred Position, within ten Business Days of receiving notice fromMunich Re or Agents (or, if later, the date on which the Post Profit Incurred Position isdetermined in accordance with Schedule 6), Converium shall pay to Munich Re such additionalamount as shall be required for the MR Fund to equal the Post Profit Incurred Position.13.7 Munich Re shall pay to Converium, or allow any LOC or LOC’s that has or have been issuedand delivered to Munich Re in accordance with clauses, 13.1, 13.4, 13.6 or 13.9 (or because ofthe definition of Incurred Position) to be reduced, in the aggregate, by an equivalent amount,within ten Business Days of 31 March 2015 (or, if later, within ten Business Days of the dateon which the MR Reserves are determined in accordance with Schedule 6 for that date), theamount required to reduce the MR Fund to the greater of: (a) the MR Reserves; or(b) the minimum amount which is required to allow Munich Re or such memberof its Group to receive credit for the Reinsurance of the Fronting InsuranceContracts written by it under the laws of the jurisdiction in which suchperson is domiciled.13.8 At any time after 31 March 2015 that the MR Fund is less than the greater of: (a) the MR Reserves; or  (b) the minimum amount required to allow Munich Re or such member ofits Group to receive credit for the Reinsurance of the Fronting InsuranceContracts written by it under the laws of the jurisdiction in which such personis domiciled,Munich Re may serve a Letter of Credit Notice which shall state the amount of additional securityrequired to increase the MR Fund to the greater of (a) and (b) above.13.9 Within ten Business Days of receipt of notice pursuant to Clause 13.8 (or, if later, thedate on which the MR Reserves are determined in accordance with Schedule 6), Converium mayeither:
Page 28 

 
 (a) arrange or cause to be arranged the issue and delivery to MunichRe of a Letter of Credit in the amount set out in the Letter of Credit Noticefor the benefit of Munich Re; or  (b) deposit the required additional funds in the MR Fund.If Converium elects to provide a Letter of Credit in response to the Letter of Credit Notice,Converium shall, if practicable and if agreed by Munich Re, be entitled to provide the necessarysecurity by increasing, or causing to be increased, the amount of any existing Letter of Credit bythe amount of the Letter of Credit Notice rather than by issuing and delivering, or causing to beissued and delivered, a new Letter of Credit). For the avoidance of doubt, nothing in this Clauseshall be construed as limiting the number of Letter of Credit Notices that may be served from timeto time by Munich Re.13.10 Within ten Business Days of the end of each quarter following 31 December 2014, Munich Reshall pay to Converium the amount, if any, by which the MR Fund exceeds the greater of: (a) the MR Reserves; and  (b) the amount required to allow Munich Re or such member of itsGroup to receive credit for the Reinsurance of the fronting Insurance Contractswritten by it under the laws of the jurisdiction in which such person isdomiciled.13.11 In applying Clauses 13.8, 13.9 and 13.10, all currencies shall be converted to US$ at therelevant exchange rate used by (or to be used by) the Agents for the purpose of the auditedaccounts produced for the Pool for the year most recently ended. Clauses 13.4 through 13.10may be terminated by the agreement Munich Re and Converium without the consent of the otherparties.13.12 Global shall, by no later than 31 March 2011 deliver to Munich Re and Converium itscalculation of the profit attributable to the Fronting Insurance Contracts written by Munich Reand the members of its Group calculated on a basis consistent with that used for the purposesof the audited accounts produced for the Pool in the year ended on 31 December 2010 (the ***MRStatement***). The MR Statement shall be accompanied by sufficient information to allow Munich Reand Converium to understand how the profit set out in the MR Statement has been calculated andthe basis upon which it has been calculated (including without limitation the calculation ofthe MR IBNR). The process in Clause 15.1 and Schedule 4 shall apply in relation to the MRStatement.13.13 In determining profit, Global shall: (a) calculate each of the items in (a) to (d) inclusive of thedefinition of profit using each of US$, Canadian $, € and GBP by allocatingall relevant premiums, claims and reserves to one only of such currencies inaccordance with Global’s current practice, for the
Page 29 

 
   avoidance of doubt profit shall be paid out in each of the four currencies;and  (b) use the incurred but not reported reserves as reported by MunichRe and applicable members of its Group for the Reinsured Risks (the ***MR IBNR***).13.14 If the calculation of profit in any of the four currencies shows a loss, then Globalshall calculate the total profit attributable to the Fronting Insurance Contracts in US$ byconverting to US$ at the relevant exchange rate used by the Agents for the purpose of theaudited accounts produced for the Pool for the year ended 31 December 2010 (the ***Exchange Rate***)(such amount being the ***Total $ Distribution***).13.15 If Clause 13.14 applies, the amount of any distribution pursuant to Clause 13.5 (usingthe Exchange Rate to calculate the amount of the distribution) shall be limited to the Total $Distribution and the distribution in one or more of the currencies not in deficit shall bereduced to ensure that the Total $ Distribution is not exceeded (the distribution of currenciesin which there was a profit shall be reduced by an equal percentage so that the distributionequals the Total $ Distribution at the Exchange Rate).13.16 Global shall, by no later than 31 March 2015 deliver to Munich Re and Converium itscalculation of outstanding reserves on claims reported on Reinsured Risks and Munich Re’scalculation of outstanding reserves on incurred but not reported claims on Reinsured Risks asof the prior 31 December together with the actuarial calculation of those reserves andsufficient information to allow Converium, and Munich Re to understand how the reserves wereset. This process shall be repeated within 90 days of the end of each calendar quarter so longas Clause 13.10 remains in effect.13.17 The amounts required to be held in the MR Fund shall be reduced by: (a) fifty per cent of the amount of any Letter of Credit establishedby Converium pursuant to Clause 15.5(c)(iii) (or, with the consent of Munich ReClause 15.5(c)(iv)) of the Pool Members’ Agreement which relates to theReinsured Risks;  (b) fifty per cent of any amount paid by (or on behalf of) Converiumtowards the fund held by the Agents on behalf of the Pool in relation claims onbusiness written during the Period; and  (c) fifty per cent of the amount of any reinsurance premiums paid by(or on behalf of) Converium in relation to reinsurance taken out by the Agentsin relation to the business of the Pool written during the Period,provided that the MR Fund shall not be reduced below $12,900,000.00 (or, if lower and Clause 13.8applies, the amount required to be held in the MR Fund pursuant to Clause 13.8) as a result of theoperation of Clauses 13.17(b) or (c).
Page 30 

 
13.18 To the extent that the MR Fund consists of monies Munich Re shall pay to Converium anamount equal to the interest which is deemed to have accrued on that part of the MR Fund in thequarter to 31 March, 30 June, 30 September and 31 December in each year within two BusinessDays of such date. The amount of such interest shall be calculated on a daily basis. Interestshall accrue on the amounts in the MR Fund in each quarter at a rate equal to the “yield on theone year US Treasury Notes” on the first Business Day after the 31 March, 30 June, 30 Septemberor 31 December ending the previous quarter as shown in the ***Wall Street Journal***for the close ofthat first Business Day of the calendar quarter. For the purposes of the foregoing sentence,the “one year US Treasury Yield” shall mean the annual yield on the U. S. Treasury Bond or Notematuring on the day nearest the first anniversary of that first Business Day of that calendarquarter. If there are two bonds or notes that are equally near the third anniversary, theannual yield of the instruments will be averaged. No interest shall be paid by Munich Re toConverium in respect of any LOC issued and delivered to Munich Re in accordance with andpursuant to Converium’s obligations under this Agreement.13.19 References in this Clause 13 to reserves for claims incurred but not reported shall meanthe amount of such reserves required to be kept in accordance with actuarial best practice inthe relevant jurisdiction and the guidance produced by relevant actuarial bodies. Converiumshall be provided with sufficient information at all times to understand how such reserves havebeen calculated and the basis on which they have been calculated. Converium may challenge thecalculation of any such reserve as set out in Schedule 6 and until such dispute is resolved inaccordance with Schedule 6, the provision of this Clause 13 for which the reserves wereprovided shall have no effect.**14.****National Indemnity Security**14.1 Converium shall on or before 2nd July 2007 (or such later date as National Indemnity mayspecify) pay to National Indemnity the sum of $12,900,000.00 to be held on the basis set outin Clause 14.3.14.2 Any amounts paid pursuant to Clauses 5.1(a), 14.1, 14.4, 14.6 or 14.9 or because of thedefinition of Incurred Position, shall be paid to the account of National Indemnity notified toConverium in writing by National Indemnity from time to time.14.3 The amounts held pursuant to Clause 14.2 shall be known as the ***NICO Fund***. Such amountsshall be held by National Indemnity as trustee for Converium provided that National Indemnityshall be entitled to make payments from such account in order to pay amounts which are due: (a) or claimed to be due under Reinsured Risks in respect of whichFronting Insurance Contracts have been written by it or members of its Group;  (b) to it or members of its Group from Converium under the terms ofthe Reinsurance;
Page 31 

 
 (c) to it or members of its Group from Converium in respect ofOverriding Commission; and/or  (d) pursuant to Clause 2A.14.4 At any time prior to 31 December 2010 that the NICO Fund together with the amount of anyclaims paid by the Agents or National Indemnity in relation to the Reinsured Risks is less thanfifty per cent (50%) of the Incurred Position, within ten Business Days of receiving noticefrom National Indemnity or the Agents (or, if later, the date on which the Incurred Position isdetermined in accordance with Schedule 6), Converium shall pay to National Indemnity suchadditional amount as shall be required for the NICO Fund to equal fifty per cent (50%) of theIncurred Position.14.5 National Indemnity shall pay to Converium within ten Business Days of 31 March 2011 (or,if later, the date on which the profit is determined in accordance with Schedule 5), the profitarising on any Fronting Insurance Contracts written by National Indemnity or any member of itsGroup calculated on the basis set out in Clause 14.12. Nothing in this clause shall beconstrued to require National Indemnity to pay any amount which would cause the NICO Fund to beless than the greater of (a) and (b) below: (a) the sum of: (i) 100 per cent. of outstanding claims reserves, including reservesfor claims incurred but not reported maintained by National Indemnity or therelevant member of its Group in accordance with applicable laws in respect ofrelevant Reinsured Risks written in the name of the relevant person (the ***NICReserves***); plus  (ii) the greater of: (A) $12,900,000.00 ; and  (B) 20% of the NIC Reserves; and (b) the minimum amount which is required to allow National Indemnityor such member of its Group to receive credit for the Reinsurance of theFronting Insurance Contracts written by it under the laws of the jurisdiction inwhich each person is domiciled.The greater of (a) or (b) above shall be referred to as the ***NIC Post Profit Incurred Position***.14.6 At any time after 31 December 2010 but prior to 31 December 2014 that the NICO Fund isless than the NIC Post Profit Incurred Position, within ten Business Days of receiving noticefrom National Indemnity or Agents (or, if later, the date on which the Post Profit IncurredPosition is determined in accordance with Schedule 6), Converium shall pay to NationalIndemnity such additional
Page 32 

 
amount as shall be required for the NICO Fund to equal the Post Profit Incurred Position.14.7 National Indemnity shall pay to Converium within ten Business Days of 31 March 2015 (or,if later, within ten Business Days of the date on which the NIC Reserves are determined inaccordance with Schedule 6 for that date), an amount as shall be required to reduce the NICFund to the greater of: (a) the NIC Reserves; or  (b) the minimum amount which is required to allow National Indemnityor such member of its Group to receive credit for the Reinsurance of theFronting Insurance Contracts written by it under the laws of the jurisdiction inwhich such person is domiciled.14.8 At any time after 31 March 2015 that the NICO Fund is less than the greater of: (a) the NIC Reserves; or (b) the minimum amount required to allow National Indemnity or suchmember of its Group to receive credit for the Reinsurance of the FrontingInsurance Contracts written by it under the laws of the jurisdiction in whichsuch person is domiciled,National Indemnity may serve a Letter of Credit Notice which shall state the amount of additionalsecurity required to increase the NICO Fund to the greater of (a) and (b) above.14.9 Within ten Business Days of receipt of a notice pursuant to Clause 14.8 (or, if later, thedate on which the NIC Reserves are determined in accordance with Schedule 6), Converium mayeither: (a) arrange or cause to be arranged the issue and delivery toNational Indemnity of a Letter of Credit in the amount set out in the Letter ofCredit Notice for the benefit of National Indemnity; or  (b) deposit the required additional funds in the NICO Fund.If Converium elects to provide a Letter of Credit in response to the Letter of Credit Notice,Converium shall, if practicable and if agreed by NICO, be entitled to provide the necessarysecurity by increasing, or causing to be increased, the amount of any existing Letter of Credit bythe amount of the Letter of Credit Notice rather than by issuing and delivering, or causing to beissued and delivered, a new Letter of Credit). For the avoidance of doubt, nothing in this Clauseshall be construed as limiting the number of Letter of Credit Notices that may be served from timeto time by NICO.
Page 33 

 
14.10 Within ten Business Days of the end of each quarter following 31 December 2014, NationalIndemnity shall pay to Converium the amount, if any, by which the NICO Fund exceeds the greaterof: (a) the NIC Reserves; and  (b) the amount required to allow National Indemnity or such member ofits Group to receive credit for the Reinsurance of the Fronting InsuranceContracts written by it under the laws of the jurisdiction in which such personis domiciled.14.11 In applying Clauses 14.8, 14.9 and 14.10, all currencies shall be converted to US$ at therelevant exchange rate used by (or to be used by) the Agents for the purpose of the auditedaccounts produced for the Pool for the year most recently ended. Clauses 14.4 through 14.10 maybe terminated by National Indemnity and Converium without the consent of the other parties.14.12 Global shall, by no later than 31 March 2011 deliver to National Indemnity and Converiumits calculation of the profit attributable to the Fronting Insurance Contracts written byNational Indemnity and the members of its Group calculated on a basis consistent with that usedfor the purposes of the audited accounts produced for the Pool in the three years ended on 31December 2010 (the ***NIC Statement***). The National Indemnity Statement shall be accompanied bysufficient information to allow National Indemnity and Converium to understand how the profitset out in the NIC Statement has been calculated and the basis upon which it has beencalculated (including without limitation the calculation of the NIC IBNR). The process inClause 15.2 and Schedule 5 shall apply in relation to the NIC Statement.14.13 In determining profit, Global shall: (a) calculate each of the items in (a) to (d) inclusive of thedefinition of profit using each of US$, Canadian $, € and GBP by allocatingall relevant premiums, claims and reserves to one only of such currencies inaccordance with Global’s current practice, for the avoidance of doubt profitshall be paid out in each of the four currencies; and  (b) use the incurred but not reported reserves as reported byNational Indemnity and applicable members of its Group for the Reinsured Risks(the ***NIC IBNR***).14.14 If the calculation of profit in any of the four currencies shows a loss, then Globalshall calculate the total profit attributable to the Fronting Insurance Contracts in US$ byconverting to US$ at the relevant exchange rate used by the Agents for the purpose of theaudited accounts produced for the Pool for the year ended 31 December 2010 (the ***Exchange Rate***)(such amount being the ***Total $ Distribution***).
Page 34 

 
14.15 If Clause 14.14 applies, the amount of any distribution pursuant to Clause 14.5 (usingthe Exchange Rate to calculate the amount of the distribution) shall be limited to the Total $Distribution and the distribution in one or more of the currencies not in deficit shall bereduced to ensure that the Total $ Distribution is not exceeded (the distribution of currenciesin which there was a profit shall be reduced by an equal percentage so that the distributionequals the Total $ Distribution at the Exchange Rate).14.16 Global shall, by no later than 31 March 2015 deliver to National Indemnity and Converiumits calculation of outstanding reserves on claims reported on Reinsured Risks and NationalIndemnity’s calculation of outstanding reserves on incurred but not reported claims onReinsured Risks as of the prior 31 December together with the actuarial calculation of thosereserves and sufficient information to allow Converium, and National Indemnity to understandhow the reserves were set. This process shall be repeated within 90 days of the end of eachcalendar quarter so long as Clause 14.10 remains in effect.14.17 The amounts required to be held in the NIC Fund shall be reduced by: (a) fifty percent of the amount of the Letter of Credit establishedby Converium pursuant to Clause 15.5(c)(iii) (or, with the consent of NIC Clause15.5(c)(iv)) of the Pool Members’ Agreement which relates to the ReinsuredRisks;  (b) fifty per cent of any amount paid by (or on behalf of) Converiumtowards the fund held by the [Agents on behalf of the] Pool in relation claimson business written during the Period; and  (c) fifty per cent of the amount of any reinsurance premiums paid by(or on behalf of) Converium in relation to reinsurance taken out by the Agentsin relation to the business of the Pool written during the Periodprovided that the NIC Fund shall not be reduced below $12,900,000.00 (or if lower and Clause 14.8applies, the amount required to be held in the NIC Fund pursuant to Clause 14.8) as a result of theoperation of Clauses 14.17(b) or (c).14.18 National Indemnity shall pay to Converium an amount equal to the interest which is deemedto have accrued on the NIC Fund in the quarter to 31 March, 30 June, 30 September and 31December in each year within two Business Days of such date. The amount of such interest shallbe calculated on a daily basis. Interest shall accrue on the amounts in the NIC Fund in eachquarter at a rate equal to the “yield on the one year US Treasury Notes” on the first BusinessDay after the 31 March, 30 June, 30 September or 31 December ending the previous quarter asshown in the ***Wall Street Journal***for the close of that first Business Day of the calendarquarter. For the purposes of the foregoing sentence, the “one year US Treasury Yield” shallmean the annual yield on the U.S. Treasury Bond or Note maturing on the day nearest the firstanniversary of that first Business Day of that calendar quarter. If there are two bonds ornotes that are equally near the third anniversary, the annual yield of the instruments will beaveraged.
Page 35 

 
14.19 References in this Clause 14 to reserves for claims incurred but not reported shall meanthe amount of such reserves required to be kept in accordance with actuarial best practice inthe relevant jurisdiction and guidance produced by relevant actuarial bodies in thejurisdiction. Converium shall be provided with sufficient information at all times tounderstand how such reserves have been calculated and the basis on which they have beencalculated. Converium may challenge the calculation of any such reserve as set out in Schedule6 and until such dispute is resolved in accordance with Schedule 6, the provision of thisClause 14 for which the reserves were provided shall have no effect.**15.****Dispute Resolution**15.1 Within thirty (30) days of receipt of Global’s calculations under Clause 13, eitherConverium or Munich Re may challenge Global’s calculations under Clause 13. In that event, thedispute shall be settled as provided in Schedule 6 or in the case of the calculation of profit,Schedule 4.15.2 Within thirty (30) days of receipt of Global’s calculations under Clause 14, eitherConverium or National Indemnity may challenge Agents’ calculations under Clause 14. In thatevent, the dispute shall be settled as provided in Schedule 6 or in the case of the calculationof profit, Schedule 5.**16.****Letters of Credit and Authority**16.1 Notwithstanding any other provision of this Agreement, National Indemnity or Munich Remay, at any time, draw down upon any Letter of Credit provided by or on behalf Converiumpursuant to Clause 13 or Clause 14, in order to: (a) fund the payment of amounts due or claimed to be due underReinsured Risks in respect of which Fronting Insurance Contracts have beenwritten by it or members of its Group;  (b) pay any amounts which are due to it or any member of its Groupfrom Converium under the terms of the Reinsurance; and/or  (c) pay any amounts which are due to it or any member of its Groupfrom Converium in respect of Overriding Commission.16.2 Any bank issuing a Letter of Credit relating to this Agreement shall be unconditionallyobliged to accede to any request made by or on behalf of Munich Re or National Indemnity (asappropriate) to draw down on such Letter of Credit provided only that such bank is satisfiedthat such request is made by, or with the proper authority of, Munich Re or National Indemnity(as appropriate) and/or its authorised representatives (who shall not include the Agent or anyreplacements).Each of Munich Re and National Indemnity hereby grants the Agent authority to act as theirrespective agents in taking all necessary action on its behalf to exercise its
Page 36 

 
rights under Clauses 13 and 14, including (without limitation) the service of a Letter of CreditNotice, but nothing herein shall be construed as granting the Agent any authority with respect todisputes under Clauses 15.1 or 15.2 or Schedules 4, 5 or 6.17. **Change of Control**In the event that Converium undergoes a change of control, such that 50.1% or more of the votingstock of Converium Holdings AG becomes owned by a single shareholder and the resulting mergedentity or group of entities has the same or a worse credit-rating issued to it by Standard andPoor’s than A-, or the then equivalent, at any time after the said change of control, then theparties hereto agree that the date of 31 December 2014 as set out in Articles 13.10 and 14.10herein shall be changed forthwith to 31 December 2015 and the payments provided for shall beeffected in accordance with that amended date.If the above provision has come into effect, then, if at any time after the said change of controlConverium or the merged entity or group of entities receives an improved credit rating fromStandard and Poor’s such that it has a credit rating of better than A- or the then equivalent, thenthe provisions of the above-mentioned Articles 13.10 and 14.10 shall be revert immediately toprovide for payments, if any due, to made at the end of each quarter following 31 December 2014.18. **SET-OFF**18.1 National Indemnity may set off any amount due to it from Converium against any amount owed byNational Indemnity or any member of its Group to Converium under this Agreement.18.2 Munich Re may set off any amount due to it from Converium against any amount owed by Munich Reor any member of its Group to Converium under this Agreement.**19.****Regulatory Matters**19.1 The parties shall co-operate with each other to ensure that all information necessary ordesirable for making (or responding to any requests for further information following) anyregulatory notification or filing made in respect of this Agreement, or any agreement, arrangementor concerted practice of which it forms part, is supplied to the party dealing with suchnotification or filing and that they are properly, accurately and promptly made.19.2 The parties will each procure that any other registrations, filings and/or submissionsrequired under the laws or regulations of any jurisdiction in respect of the Agreement or anyFronting Insurance Contract are made.**20.****Waiver of Obligations**20.1 Waiver by any party of any default by any other party in the performance of any obligation ofsuch other party hereunder shall not affect such party’s rights in respect of any other default norany subsequent default of the same or of a different
Page 37 

 
kind nor shall any delay or omission of any party to exercise any right arising from any defaultaffect or prejudice that party’s rights as to the same or any future default. Waiver by one partyof any default by any other party shall not constitute a waiver of such default on the part of oron behalf of any other party.20.2 Subject to Clause 20.3, no claim shall be made by Converium against any officer, employee,agent or sub-contractor of either Agent in respect of any matter arising in respect of thisAgreement, save in the case of criminal actions or omissions, fraud or wilful misconduct.20.3 Clause 20.2 shall not preclude the Agents from making claims against any of its agents orsub-contractors on behalf of Converium, National Indemnity or Munich Re or the members of theirGroups.**21.****Amendment and Representations**21.1 Any amendment to any term of this Agreement shall be in writing and signed by the authorisedrepresentatives of the parties hereto provided that rights and obligations between Converium and(a) Munich Re or (b) National Indemnity may be amended by written agreement between Converium andsuch person.21.2 This Agreement sets out the entire agreement and understanding between the parties in relationto the Business and the arrangements in Clause 2A. It is agreed that no party has entered intothis Agreement in reliance upon, or been induced to enter into this Agreement by, anyrepresentation, warranty or undertaking of any other party hereto (whether express or implied andwhether pursuant to statute or otherwise) which is not set out in this Agreement and to the extentthat it may have done so, it hereby waives (on behalf of itself and the members of its Group) allrights, remedies and claims it may have in respect thereto. A party may claim in contract forbreach of warranty under this Agreement but shall otherwise have no claim or remedy in respect ofmisrepresentation (whether negligent or otherwise, and whether made prior to, and/or in, thisAgreement) or untrue statement made by any other party provided that this Clause 0 shall notexclude any liability for, or remedy in respect of, any fraud including, without limitation,fraudulent misrepresentation by any party (or (where relevant) any member of its Group).**22.****Assignment**No party shall sell, transfer or encumber all or any of its rights or obligations under thisAgreement without the prior written consent of all the other parties.**23.****Notices and Communications**23.1 Notices under this Agreement shall be sent to a party at its address and for the attention ofthe individual set out in Clause 0 provided that a party may change its notice details on givingnotice to the other parties of the change in accordance with this Clause 03. That notice shallonly be effective on the date falling five clear Business Days after the notification has beenreceived or such later date as may be specified in the notice.
Page 38 

 
23.2 All notices or other communications required for the purposes of this Agreement shall be inEnglish and shall be given or sent by hand, facsimile, first class post or airmail to the partiesand shall be deemed to be received: (i) if given by hand, at the time of delivery; or (ii) if sentby facsimile; at the time when the sender receives from the recipient facsimile machine or from theaddressee of the notice confirmation of receipt of the whole of the facsimile; or (iii) if sent byfirst class post, 24 hours after posting; or (iv) if sent by airmail, 6 clear Business Days afterthe date of posting.23.3 Notices under this Agreement shall be sent to the following addresses or facsimile numbers forthe attention of the person indicated:     **Party** **Title of individual/address** **Facsimile Number**National Indemnity(for itself or asagent for anymember of itsGroup) Attention: General Counsel**