Exhibit 10.54


CastlePoint Insurance
Company as Reinsured

Tower Insurance Company of New York as Reinsurer


 


AGGREGATE
EXCESS OF LOSS


AGREEMENT


Effective
July 1, 2007


 


	
  ARTICLE

  	
   

  	
   

  	
   

  	
  PAGE

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  BUSINESS COVERED

  	
   

  	
  2

  	
   

  
	
  2

  	
   

  	
  COMMENCEMENT AND
  TERMINATION

  	
   

  	
  2

  	
   

  
	
  3

  	
   

  	
  TERRITORY

  	
   

  	
  3

  	
   

  
	
  4

  	
   

  	
  EXCLUSIONS

  	
   

  	
  3

  	
   

  
	
  5

  	
   

  	
  COVERAGE

  	
   

  	
  4

  	
   

  
	
  6

  	
   

  	
  NET RETAINED LINES

  	
   

  	
  4

  	
   

  
	
  7

  	
   

  	
  REINSURANCE PREMIUM

  	
   

  	
  4

  	
   

  
	
  8

  	
   

  	
  ACCOUNTS AND LOSS
  SETTLEMENTS

  	
   

  	
  4

  	
   

  
	
  9

  	
   

  	
  CURRENCY

  	
   

  	
  5

  	
   

  
	
  10

  	
   

  	
  TAXES

  	
   

  	
  5

  	
   

  
	
  11

  	
   

  	
  RESERVES

  	
   

  	
  6

  	
   

  
	
  12

  	
   

  	
  OFFSET

  	
   

  	
  10

  	
   

  
	
  13

  	
   

  	
  ERRORS AND OMISSIONS

  	
   

  	
  10

  	
   

  
	
  14

  	
   

  	
  ACCESS TO RECORDS

  	
   

  	
  10

  	
   

  
	
  15

  	
   

  	
  INSOLVENCY

  	
   

  	
  10

  	
   

  
	
  16

  	
   

  	
  CONFIDENTIALITY

  	
   

  	
  11

  	
   

  
	
  17

  	
   

  	
  ARBITRATION

  	
   

  	
  11

  	
   

  
	
  18

  	
   

  	
  SERVICE OF SUIT

  	
   

  	
  12

  	
   

  
	
  19

  	
   

  	
  GOVERNING LAW

  	
   

  	
  13

  	
   

  
	
  20

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  13

  	
   

  



 





















 


AGGREGATE
EXCESS OF LOSS


AGREEMENT


 


(Hereinafter referred to as the “Agreement”)


 


Between


 


CASTLEPOINT
INSURANCE COMPANY


 


 (Hereinafter referred to
as the “Company”)


 


And


 


TOWER
INSURANCE COMPANY OF NEW YORK


New
York, New York


 


(Hereinafter referred to as the “Reinsurer”)


 


 


 


ARTICLE 1 - BUSINESS COVERED


 


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


 


ARTICLE 2 — COMMENCEMENT AND
TERMINATION


 


A.            This
Agreement is initially effective for a six month period from 12:01 a.m., Eastern
Standard Time, July 1, 2007, (the “Effective Date”) to December 31, 2007.  Either party may terminate the Agreement as
of December 31, 2007 by giving 60 days written notice by certified or
registered mail. After the initial period, this Agreement will be effective for
12 month periods and each party will have the option to cancel at any December
31 by giving 90 days written notice to the other party by certified or
registered mail.


 


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


 


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


 


 


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(a)           A
State Insurance Department or other legal authority orders the other party to
cease writing business, or;


 


(b)           The
other party has become insolvent or has been placed into liquidation or
receivership (whether voluntary or involuntary), or there has been instituted
against it proceedings for the appointment of a receiver, liquidator,
rehabilitator, conservator, or trustee in bankruptcy, or other agent known by
whatever name, to take possession of its assets or control of its operations,
or


 


(c)           The
other party’s statutory policyholders’ surplus has been reduced by either 50%
of the amount of surplus at the inception of this Agreement or 50% of the
amount at the latest anniversary, whichever is greater, or has lost any part
of, or has reduced its paid-up capital, or


 


(d)           The
other party has become merged with, acquired or controlled by any company,
corporation, or individual(s) not controlling the party’s operations
previously, or


 


(e)      The
other party has reinsured its entire liability under this Agreement without the
terminating party’s prior written consent, or


 


(f)            The
Company ceases to retain any of the risks of the Business Covered.


 


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


 


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


 


ARTICLE 3 - TERRITORY


 


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


 


ARTICLE 4 - EXCLUSIONS


 


This Agreement shall not apply to and
specifically excludes:


 


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


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


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


 


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


 


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


 


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  4.

  	
   

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

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Earthquake,
  when written as such;

  
	
   

  	
   

  	
   

  
	
  6.

  	
   

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

  
	
   

  	
   

  	
   

  
	
  7.

  	
   

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

  
	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Insolvency
  Risks and Financial Guarantee;

  
	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Asbestos
  liabilities of any nature;

  
	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  Pollution
  liabilities of any nature;

  
	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  Assumed
  reinsurance with the exception of inter-affiliate reinsurance.

  



 


 


ARTICLE 5 - COVERAGE


 


The Reinsurer shall indemnify the Company for
85% of the paid portion of all Ultimate Net Loss and Loss Adjustment Expenses
arising out of the Company’s Brokerage Business on a provisional basis adjusted
to the actual percentage of the Reinsurer’s Brokerage Business over the total
Brokerage Business written by the Company and companies of the Tower Group Inc.
collectively, as calculated within 30 days from each December 31, in excess of 52.5%
of the Company’s Net Earned Premium as defined in Article 8.


 


ARTICLE 6 - NET RETAINED LINES


 


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


 


ARTICLE 7 - REINSURANCE PREMIUM


 


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


 


ARTICLE 8 - ACCOUNTS AND LOSS
SETTLEMENTS


 


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


 


1.             Net Earned Premium;


 


2.             Ultimate Net Loss and Loss Adjustment Expenses paid;


 


 


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3.             Ultimate Net Loss and Loss Adjustment Expenses
outstanding (including IBNR).


 


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


 


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


 


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


 


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


 


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


 


ARTICLE 9 - CURRENCY


 


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


 


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


 


ARTICLE 10 - TAXES


 


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


 


5





















 


ARTICLE 11 — RESERVES


 


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


 


B.            The
Reinsurer shall secure such Obligations by either:


 


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


 


2.             A trust account meeting the requirements of New York
Regulation 114.


 


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


 


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


 


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


 


3.                                       The amount of
ceded reserves for Losses and Loss Adjustment Expenses (including, ceded
reserves for losses incurred but not reported) for which the Reinsurer is
responsible to the Company; and


 


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


 


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


 


1.                                       Each Letter of
Credit will be issued for a term of at least one year and will include an “evergreen
clause”, which automatically extends the term for at least one additional year
at each expiration date unless written notice of non-renewal is given to the
Company not less than 30 days prior to said expiration date.


 


2.                                       The Letter of
Credit must be issued or confirmed by a bank which is authorized to issue
letters of credit, which is either a member of the Federal Reserve System or is
a New York State chartered bank, and which in all other respects satisfies the
definition of a “Qualified Bank” under Section 79.1(e) of New York Insurance
Regulation 133.  If the Letter of Credit
is issued by a bank authorized to issue letters of credit but which is not such
a “Qualified Bank”, then the Letter of Credit must be


 


6





















 


confirmed by such a bank and
the Letter of Credit must meet all of the conditions set forth in Section 79.4
of New York Insurance Regulation 133.


 


3.                                       The Reinsurer
and the Company agree that the Company may draw upon the Letter(s) of Credit at
any time, notwithstanding any other provisions in the Agreement, provided such
assets are applied and utilized by the Company or any successor of the Company
by operation of law, including, without limitation, any liquidator,
rehabilitator, receiver or conservator of the Company, without diminution
because of the insolvency of the Company or the Reinsurer, only for the
following purposes:


 


(i)
                                  to reimburse
the Company for the Reinsurer’s share of premiums returned to the owners of
policies reinsured under this Agreement on account of cancellations of such
policies;


 


(ii)
                               to reimburse
the Company for the Reinsurer’s share of surrenders and benefits or losses paid
by the Company under the terms and provisions of the policies reinsured under
this Agreement;


 


(iii)
                            to fund an
account with the Company in an amount at least equal to the deduction, for
reinsurance ceded, from the Company’s liabilities for policies ceded under this
Agreement.  Such amount shall include,
but not be limited to, amounts for policy reserves for claims and losses
incurred (including losses incurred but not reported), loss adjustment
expenses, and unearned premiums; and


 


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


 


4.                                       The Company
shall immediately return to the Reinsurer any amounts drawn down on the Letter
of Credit that are subsequently determined not to be due.


 


5.                                       The issuing
bank shall have no responsibility whatsoever in connection with the propriety
of withdrawals made by the Company of the disposition of funds withdrawn,
except to ensure that withdrawals are made only upon the order of properly
authorized representatives of the Company.


 


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


 


1.                                       It is agreed
that the Reinsurer shall enter into a trust agreement (the “Trust Agreement”)
in a form acceptable to the Company and establish a trust account (the “Trust
Account”) for the sole benefit of the Company with a trustee (the “Trustee”),
which shall be at the time the Trust is established, and shall continue to be,
either a member of the Federal Reserve System or a New York state chartered
bank and which shall not be a parent, subsidiary or affiliate of the Reinsurer
or the Company.


 


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2.                                       The Reinsurer
agrees to deposit and maintain in said Trust Account assets to be held in trust
by the Trustee for the benefit of the Company as security for the payment of
the Reinsurer’s Obligations to the Company under the Agreement.  Such assets shall be maintained in the Trust
Account by the Reinsurer as long as the Reinsurer continues to remain liable
for such Obligations.


 


3.                                       The Reinsurer
agrees that the assets deposited into the Trust Account shall be valued
according to their current fair market value and shall consist only of currency
of the United States of America, certificates of deposit issued by a United
States bank and payable in United States legal tender, and investments of the
types specified in paragraphs (1), (2), (3), (8) and (10) of Section 1404(a) of
the New York Insurance Law, provided such investments are issued by an
institution that is not the parent, subsidiary or affiliate of either the
Grantor or the Beneficiary (“Authorized Investments”).


 


4.                                       The Reinsurer,
prior to depositing assets with the Trustee, shall execute all assignments and
endorsements in blank, and shall transfer legal title to the Trustee of all
shares, obligations or any other assets requiring assignments, in order that
the Company, or the Trustee upon direction of the Company, may whenever
necessary negotiate any such assets without consent or signature from the
Reinsurer or any other entity.


 


5.                                       All settlements
of account under the Trust Agreement between the Company and Reinsurer shall be
made in cash or its equivalent.


 


6.                                       The Reinsurer
and the Company agree that the assets in the Trust Account may be withdrawn by
the Company at any time, notwithstanding any other provisions in the Agreement,
provided such assets are applied and utilized by the Company or any successor
of the Company by operation of law, including, without limitation, any
liquidator, rehabilitator, receiver or conservator of the Company, without
diminution because of the insolvency of the Company or the Reinsurer, only for
the following purposes:


 


(i)                                     to reimburse
the Company for the Reinsurer’s share of any Losses and Loss Adjustment
Expenses paid by the Company but not received from the Reinsurer or for
unearned premiums due to the Company but not otherwise paid by the Reinsurer
under the Agreement; or


 


(ii)                                  to make payment
to the Reinsurer of any amounts held in the Trust Account that exceed 102% of
the Reinsurer’s Obligations (less the balance of credit available under any
Letter(s) of Credit) hereunder; or


 


(iii)                               where the
Company has received notification of termination of the Trust Account, and
where the Reinsurer’s entire Obligations under the Agreement remain
unliquidated and undischarged ten (10)


 


8





















 


days prior to such
termination, to withdraw amounts equal to such Obligations (less the balance of
credit available under any Letter(s) of Credit) and deposit such amounts in a
separate account, in the name of the Company, in any United States bank or
trust company, apart from its general assets, in trust for such uses and
purposes specified in sub-paragraphs (i) and (ii) above as may remain executory
after such withdrawal and for any period after such termination.


 


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


 


(i)
                                  the Reinsurer
shall, at the time of withdrawal, replace the withdrawn assets with other
Authorized Investments having a market value equal to the market value of the
assets withdrawn,


 


(ii)                                  after such
withdrawal and transfer, the market value of the Trust Account is no less than
102% of the Reinsurer’s Obligations (less the balance of credit available under
any Letter(s) of Credit).


 


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


 


8.                                       In the event
that the Company withdraws assets from the Trust Account for the purposes set
forth in Paragraph (6)(i) above in excess of actual amounts required to meet
the Reinsurer’s Obligations to the Company (less the balance of credit
available under any Letter(s) of Credit), or in excess of amounts determined to
be due and under Paragraph (6)(iii) above, the Company will return such excess
to the Reinsurer.


 


9.                                       The Company
will prepare and forward at annual intervals or more frequently as determined
by the Company, but not more frequently than quarterly to the Reinsurer a
statement for the purposes of this Article, showing the Reinsurer’s share of
Obligations as set forth above.  If the
Reinsurer’s share thereof exceeds the then existing balance of the security
provided, the Reinsurer will, within fifteen (15) days of receipt of the
Company’s statement, but never later than December 31 of any year, increase the
amount of the letter of credit, or Trust Account to the required amount of the
Reinsurer’s share of Obligations set forth in the Company’s statement, but
never later than December 31 of any year. 
If the then existing balance of the security provided exceeds an amount
equal to 100% of the Reinsurer’s share thereof, the Company will release the
excess thereof to the Reinsurer upon the Reinsurer’s written request.


 


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


 


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ARTICLE 12 - OFFSET


 


The Company and the Reinsurer shall have the
right to offset any balance or amounts due from one party to the other under
the terms of this Agreement.  The party
asserting the right of offset may exercise such right any time whether the
balances due are on account of premiums or losses or otherwise. In the event of
insolvency of any of the parties of this Agreement that is a New York domestic
insurer, offsets shall be allowed strictly as provided for and in accordance
with the provisions of Section 7427 of the New York Insurance Law.


 


ARTICLE 13 - ERRORS AND OMISSIONS


 


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


 


ARTICLE 14 - ACCESS TO RECORDS


 


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


 


ARTICLE 15 - INSOLVENCY


 


A.            In
the event of insolvency and the appointment of a conservator, liquidator, or
statutory successor of the Company, the portion of any risk or obligation
assumed by the Reinsurer shall be payable to the conservator, liquidator, or
statutory successor on the basis of claims allowed against the insolvent
company by any court of Company having authority to allow such claims, without
diminution because of that insolvency, or because the conservator, liquidator,
or statutory successor has failed to pay all or a portion of any claims.  Payments by the Reinsurer as set forth in
this subdivision shall be made directly to the Company or to its conservator,
liquidator, or statutory successor, except where, to the extent permitted by
law, (a) this Agreement of reinsurance specifically provides another payee of
such reinsurance in the event of the insolvency of the ceding insurer or (b)
the Reinsurer with the consent of the direct insured(s) has assumed the Policy
obligations of the Company as direct obligations of the Reinsurer to the payees
under such Policies and in substitution for the obligations of the Company to
such payees, or (c) except as provided by applicable law and regulation (such
as subsection (a) of section 4118 of the New York Insurance laws) in the event
of the insolvency of the Company.


 


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


 


10





















 


liquidator, receiver, conservator or
statutory successor. The expense thus incurred by the Reinsurer shall be
chargeable subject to court approval against the insolvent Company as part of
the expense of liquidation to the extent of a proportionate share of the
benefit which may accrue to the Company solely as a result of the defense
undertaken by the Reinsurer.  Where two
or more Reinsurers are involved in the same claim and a majority in interest
elect to interpose defense to such claim, the expense shall be apportioned in
accordance with the terms of this Agreement as though such expense had been
incurred by the Company.


 


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


 


ARTICLE 16 - CONFIDENTIALITY


 


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


 


ARTICLE 17 - ARBITRATION


 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE 18 - SERVICE OF SUIT


 


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


 


It is agreed that in the event of the failure
of the Reinsurer hereon to pay any amount claimed to be due hereunder, the
Reinsurer hereon, at the request of the Company, shall submit to the
jurisdiction of a court of competent jurisdiction within the United States.  Nothing in this Article constitutes or should
be understood to constitute a waiver of the Reinsurer’s right to commence an
action in any court of competent jurisdiction in the United States, to remove
an action to a United States District Court, or to seek a transfer of a case to
another court as permitted by the laws of the United States or of any state in
the United States.  It is further agreed
that service of process in such suit may be made upon Mendes and Mount, 750
Seventh Avenue, New York, New York 10019-6829, and that in any suit instituted,
the Reinsurer shall abide by the final decision of such court or of any
Appellate Court in the event of an appeal.


 


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


 


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


 


12





















 


ARTICLE 19 - GOVERNING LAW


 


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


 


ARTICLE 20 - MISCELLANEOUS


 


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


 


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


 


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


 


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


 


E.             This
Agreement may be amended, modified or supplemented only by a written instrument
executed by all Parties hereto.


 


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


 


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


 


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


 


13





















 


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


 


 


 


Signed this                                    day
of                                                ,
2007,


 


For and on behalf of CastlePoint Insurance
Company in confirmation of the terms, conditions and Reinsurer hereon


 


	
  By:

  	
   

  	
   

  
	
   

  	
  (Signature)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Print
  Name)

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  



 


 


 


 


Signed this                                    day
of                                                ,
2007,


 


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


 


	
  By:

  	
   

  	
   

  
	
   

  	
  (Signature)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Print
  Name)

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  



 


14





















 


NUCLEAR
INCIDENT EXCLUSION CLAUSE


PHYSICAL DAMAGE — REINSURANCE — USA


 


 


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


 


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


 


I.                                         Nuclear reactor
power plants including all auxiliary property on the site, or


 


II.                                     Any other
nuclear reactor installation, including laboratories handling radioactive
materials in connection with reactor installations, and “critical facilities”
as such, or


 


III.                                 Installations
for fabricating complete fuel elements or for processing substantial quantities
of “special nuclear material”, and for reprocessing, salvaging, chemically
separating, storing or disposing of “spent” nuclear fuel or waste materials, or


 


IV.                                 Installations
other than those listed in paragraph (2) III above using substantial quantities
of radioactive isotopes or other products of nuclear fission.


 


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


 


(a)                                  where the
Reassured does not have knowledge of such nuclear reactor power plant or
nuclear installation, or


 


(b)                                 where said
insurance contains a provision excluding coverage for damage to property caused
by or resulting from radioactive contamination, however caused.  However on and after 1st January
1960, this sub-paragraph (b) shall only apply provided the said radioactive
contamination exclusion provision has been approved by the Governmental
Authority having jurisdiction thereof.


 


4.                                       Without in any
way restricting the operations of paragraphs (1), (2) and (3) hereof, this


 


15





















 


Contract does not cover any loss or liability
by radioactive contamination accruing to the Reassured, directly or indirectly,
and whether as Insurer or Reinsurer, when such radioactive contamination is a
named hazard specifically insured against.


 


5.                                       It is
understood and agreed that this Clause shall not extend to risks using
radioactive


isotopes in any form where the nuclear
exposure is not considered by the Reassured to be the primary hazard.


 


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


 


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


 


(a)                                  substantial
quantities, and


 


(b)                                 the extent of
installation, plant or site


 


 


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


 


(a)                                  all policies
issued by the Reassured on or before 31st December 1957 shall be free from the
application of the other provisions of this Clause until expiry date or 31st
December 1960 whichever first occurs whereupon all the provisions of this
Clause shall apply.


 


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


 


16





















 


NUCLEAR
INCIDENT EXCLUSION CLAUSE


LIABILITY
— REINSURANCE — U.S.A.


 


 


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


 


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


 


Limited Exclusion Provision*


 


I.                                         It is agreed
that the policy does not apply under any liability coverage, to


(injury, sickness, disease, death or destruction


(bodily
injury or property damage


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


 


II.                                     Family
Automobile Policies (liability only), Special Automobile Policies


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


 


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


 


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


 


(b)                                 become effective
before that date and contain the Limited Exclusion Provision set out above;
provided this paragraph (2) shall not be applicable to Family Automobile
Policies, Special Automobile Policies or policies or combination policies of a
similar nature, issued by the Cedent on New York risks, until 90 days following
approval of the Limited Exclusion Provision by the Governmental Authority
having jurisdiction thereof.


 


3.                                       Except for
those classes of policies specified in Clause II of paragraph (2) and without
in any way restricting the operation of paragraph (1) of this Clause, it is
understood and agreed that for all purposes of this Agreement the original
liability


 


17





















 


policies
of the Cedent (new, renewal and replacement) affording the following coverages:


 


 


Owners,
Landlords and Tenants Liability, Contractual Liability,


Elevator
Liability, Owners or Contractors (including railroad),


Protective
Liability, Manufacturers and Contractors Liability,


Product
Liability, Professional and Malpractice Liability,


Storekeepers
Liability, Garage Liability, Automobile Liability


(including
Massachusetts Motor Vehicle or Garage Liability)


 


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


 


Broad
Exclusion Provision*


 


It is agreed that the policy
does not apply:


 


I.                                         Under any
Liability Coverage, to


(injury,
sickness, disease, death or destruction


(bodily
injury or property damage


 


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


 


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


 


II.                                     Under any
Medical Payments Coverage, or under any Supplementary Payments Provision
relating to


(immediate
medical or surgical relief,


(first
aid,


to
expenses incurred with respect to


(bodily
injury, sickness, disease or death


(bodily
injury


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


 


III.                                 Under any
Liability Coverage, to


 


18





















 


(injury,
sickness, disease, death or destruction


(bodily
injury or property damage


resulting
from the hazardous properties of nuclear material if


 


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


 


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


 


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


(the
bodily injury or property damage


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


(injury
to or destruction of property at such nuclear facility


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


 


IV.                                 As used in this
endorsement:


“hazardous properties” include radioactive, toxic or explosive properties;
“nuclear material” means source material, special nuclear material or
by-product material; “source material”, “special nuclear material” and “by-product
material” have the meanings given to them in the Atomic Energy Act of 1954 or
in any law amendatory thereof; “spent fuel” means any fuel element or fuel
component, solid or liquid, which has been used or exposed to radiation in a
nuclear reactor; “waste” means any waste material (1) containing by-product
material and (2) resulting from the operation by any person or organization of
any nuclear facility included within the definition of nuclear facility under
paragraph (a) or (b) thereof; “nuclear facility” means


 


(a)                                  any nuclear
reactor,


 


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


 


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


 


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


 


19





















 


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


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


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


(includes
all forms of radioactive contamination of property.


 


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


 


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


 


(ii)                                  Statutory
liability insurance required under Chapter 90, General Laws of Massachusetts,
until 90 days following approval of the Board Exclusion Provision by the
Governmental Authority having jurisdiction thereof.


 


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


 






 


 


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


 


20

















 


WAR
RISK EXCLUSION CLAUSE (REINSURANCE)


 


 


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


 


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


 


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


 


21

















 


INSOLVENCY
FUND EXCLUSION CLAUSE 


 


 


This Agreement excludes all liability of the
Ceding Company arising by contract, operation of law or otherwise, from its
participation or membership, whether voluntary or involuntary, in any insolvency
fund.  “Insolvency Fund” includes any
guarantee fund, insolvency fund, plan, pool, association, fund or other
arrangement, howsoever denominated, established or governed, which provides for
any assessment of or payment or assumption by the Ceding Company of part or all
of any claim, debt, charge, fee or other obligation of an insurer or its
successors or assigns which has been declared by any competent authority to be
insolvent or which is otherwise deemed unable to meet any claim, debt, charge,
fee or other obligation in whole or in part.


 


22

















 


POOLS,
ASSOCIATIONS AND SYNDICATES EXCLUSION CLAUSE


 


 


Section A:


 


Excluding:


 


(a)                                  All business
derived directly or indirectly from any Pool, 
Association, or Syndicate which maintains its own reinsurance
facilities.


 


(b)                                 Any Pool or
Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the
purpose of insurance property whether on a country-wide basis or in respect of
designated areas.  This exclusion shall
not apply to so-called Automobile Insurance Plans or other Pools formed to
provide coverage for Automobile Physical Damage.


 


 


Section B:


 


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


 


                Industrial
Risk Insurers,


                Associated
Factory Mutuals Improved Risk Mutuals


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


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


                United
States Aircraft Insurance Group, Canadian Aircraft Insurance Group,


                Associated
Aviation Underwriters, American Aviation Underwriters


 


Section B does not apply:


 


(a)                                  Where the Total
Insured Value over all interests of the risk in question is less than
$250,000,000.


 


(b)                                 To interests
traditionally underwritten as Inland Marine or stock and/or contents written on
a blanket basis.


 


(c)                                  To Contingent
Business Interruption, except when the Company is aware that the key location
is known at the time to be insured in any Pool, Association, or Syndicate named
above other than as provided for under Section B(a).


 


23

















 


(d)                                 To risks as
follows:


 


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


 


 


Section C:


 


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


 


(1)                                  The following
so-called “Coastal Pools”:


 


Alabama Insurance
Underwriting Association


Florida Windstorm
Underwriting Association


Louisiana Insurance
Underwriting Association


Mississippi Windstorm
Underwriting Association


North Carolina Insurance
Underwriting Association


South Carolina Windstorm and
Hail Underwriting Association


Texas Catastrophe Property
Insurance Association


 


                                                                                AND


 


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


 


(i)                                     The inability
of any other participant in such “Coastal Pool” and/or “Fair Plan” and/or “Rural
Risk Plan” to meet its liability.


 


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


 


24