1.

    


    Exhibit
10.10    

    


    PENN MILLERS INSURANCE
COMPANY

    


    AMERICAN MILLERS INSURANCE
COMPANY

    


    CASUALTY EXCESS OF LOSS
REINSURANCE CONTRACT

    


    EFFECTIVE JANUARY 1,
2010

    


    INDEX

    


    
      
        
          
            
              
                
                  
                    
                      	
                              ARTICLE

                            	 	
                              SUBJECT

                            	 	
                              PAGE

                            
	 
      	 	 
      	 	 
      	 
      
	
                              ARTICLE
      1

                            	 	
                              BUSINESS
      COVERED

                            	 	
                              1

                            	 
      
	
                              ARTICLE
      2

                            	 	
                              COMMENCEMENT
      AND TERMINATION

                            	 	
                              1

                            	 
      
	
                              ARTICLE
      3

                            	 	
                              SPECIAL
      TERMINATION

                            	 	
                              2

                            	 
      
	
                              ARTICLE
      4

                            	 	
                              EXCLUSIONS

                            	 	
                              4

                            	 
      
	
                              ARTICLE
      5

                            	 	
                              WARRANTY

                            	 	
                              10

                            	 
      
	
                              ARTICLE
      6

                            	 	
                              GENERAL
      CONDITIONS

                            	 	
                              11

                            	 
      
	
                              ARTICLE
      7

                            	 	
                              RETENTION
      AND LIMIT

                            	 	
                              11

                            	 
      
	
                              ARTICLE
      8

                            	 	
                              DEFINITION
      OF TERRORISM

                            	 	
                              11

                            	 
      
	
                              ARTICLE
      9

                            	 	
                              REINSTATEMENT

                            	 	
                              12

                            	 
      
	
                              ARTICLE
      10

                            	 	
                              PREMIUM

                            	 	
                              12

                            	 
      
	
                              ARTICLE
      11

                            	 	
                              DEFINITION
      OF LOSS OCCURRENCE

                            	 	
                              12

                            	 
      
	
                              ARTICLE
      12

                            	 	
                              NET
      LOSS

                            	 	
                              14

                            	 
      
	
                              ARTICLE
      13

                            	 	
                              EXTRA-CONTRACTUAL
      OBLIGATIONS/LOSS EXCESS OF POLICY LIMITS

                            	 	
                              16

                            	 
      
	
                              ARTICLE
      14

                            	 	
                              TERRORISM
      RECOVERY

                            	 	
                              17

                            	 
      
	
                              ARTICLE
      15

                            	 	
                              NET
      RETAINED LINE

                            	 	
                              18

                            	 
      
	
                              ARTICLE
      16

                            	 	
                              NOTICE
      OF LOSS AND LOSS SETTLEMENT

                            	 	
                              18

                            	 
      
	
                              ARTICLE
      17

                            	 	
                              COMMUTATION (As respects
      Workers’ Compensation Claims)

                            	 	
                              19

                            	 
      
	
                              ARTICLE
      18

                            	 	
                              ERRORS
      AND OMISSIONS

                            	 	
                              20

                            	 
      
	
                              ARTICLE
      19

                            	 	
                              OFFSET

                            	 	
                              20

                            	 
      
	
                              ARTICLE
      20

                            	 	
                              CURRENCY

                            	 	
                              21

                            	 
      
	
                              ARTICLE
      21

                            	 	
                              FEDERAL
      EXCISE TAX AND OTHER TAXES

                            	 	
                              21

                            	 
      
	
                              ARTICLE
      22

                            	 	
                              ACCESS
      TO RECORDS

                            	 	
                              21

                            	 
      
	
                              ARTICLE
      23

                            	 	
                              INSOLVENCY

                            	 	
                              22

                            	 
      
	
                              ARTICLE
      24

                            	 	
                              ARBITRATION

                            	 	
                              23

                            	 
      
	
                              ARTICLE
      25

                            	 	
                              SERVICE
      OF SUIT

                            	 	
                              26

                            	 
      
	
                              ARTICLE
      26

                            	 	
                              CONFIDENTIALITY

                            	 	
                              28

                            	 
      
	
                              ARTICLE
      27

                            	 	
                              PRIVACY

                            	 	
                              28

                            	 
      
	
                              ARTICLE
      28

                            	 	
                              LATE
      PAYMENTS

                            	 	
                              29

                            	 
      
	
                              ARTICLE
      29

                            	 	
                              RESERVES

                            	 	
                              30

                            	 
      
	
                              ARTICLE
      30

                            	 	
                              MODE
      OF EXECUTION

                            	 	
                              34

                            	 
      
	
                              ARTICLE
      31

                            	 	
                              VARIOUS
      OTHER TERMS

                            	 	
                              34

                            	 
      


                    

                  

                

              

            

          

        

      

    

    
      
        
          
            
              
                
                  
                    
                      	
                              ARTICLE
      32

                            	 	
                              INTERMEDIARY

                            	 	36	
                               

                            


                    

                  

                

              

            

          

        

      

    

    


    
      	
              
                
      

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    2.

    


    ATTACHMENTS

    


    
      NUCLEAR
INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE U.S.A. (BRMA
35A)

    

    EXHIBIT I
-      CASUALTY FIRST EXCESS OF LOSS
REINSURANCE

    EXHIBIT
II -     CASUALTY SECOND EXCESS OF LOSS
REINSURANCE

    


    
      	
              
                
      

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    1.

    


    PENN MILLERS INSURANCE
COMPANY

    


    AMERICAN MILLERS INSURANCE
COMPANY

    


    CASUALTY EXCESS OF LOSS
REINSURANCE CONTRACT

    


    EFFECTIVE JANUARY 1,
2010

    


    ARTICLE
1

    


    BUSINESS
COVERED

    


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

    


    B.           For
the purpose of this Contract, the term “Casualty Policies” shall mean the
Company’s Policies covering General Liability (including Products), Automobile
Liability (including Medical Payments, Uninsured Motorists and Underinsured
Motorists, and statutory liability arising under Policies providing coverage in
accordance with the law of states taking jurisdiction over losses), Workers’
Compensation (including Employers’ Liability, Common Law Liability and
Occupational Disease) Directors, Officers and Managers Liability/Directors and
Officers Indemnity Business, Errors and Omissions, Crime, and Surety including
Seedman Bonds, Employee Benefits Liability (covered on a claims-made basis) and
the liability portion of Commercial Multi-Peril Policies.

    


    C.           The
term “Policies”, whenever used herein, shall mean all binders, policies,
contracts, certificates and other obligations, whether oral or written, of
insurance or reinsurance that are Business Covered.

    


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

    


    ARTICLE
2

    


    COMMENCEMENT AND
TERMINATION

    


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

    


    
      	
              
                
      

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    2.

    


    B.           Should
this Contract terminate while a Loss Occurrence is in progress, Reinsurers shall
remain liable for all losses resulting from such Loss Occurrence as if the
entire loss had occurred during the term of this Contract.

    


    ARTICLE
3

    


    SPECIAL
TERMINATION

    


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

    


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

    


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

    


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

    


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


     

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

    


    
      	
              
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    3.

    


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

    


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

    


    6.           There
is either:

    


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

    


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

    


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

    


    
      	
              
                
      

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    4.

    


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

    


    ARTICLE
4

    


    EXCLUSIONS

    


    This Contract shall not
cover:

    


    
      	
               
      

            	
              A.

            	
              1.

            	
              Reinsurance
      treaty business, including pro rata and excess of loss, assumed by the
      Company, but not to include business from affiliated
      companies;

            


    

    


    2.           Business
written on a co-indemnity basis not controlled by the Company;

    


    3.           Loss
or liability excluded by the provisions of the “Nuclear Incident Exclusion
Clause - Liability – Reinsurance (BRMA 35A)” attached to and forming part of
this Contract;

    


    4.           Liability
assumed by the Company as a member of a Syndicate, Pool or Underwriting
Association; however, this does not apply to participation in assigned risk
plans;

    


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

    


    
      	
              
                
      

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    5.

    


    6.           Financial
Guarantee and Insolvency;

    


    7.           Loss
resulting from an act of Certified or Non-Certified Terrorism, as defined in the
Article entitled DEFINITION
OF TERRORISM of this Contract, that involves the use, release, or escape
of nuclear materials, or directly or indirectly results in nuclear reaction or
radiation or radioactive contamination; or that is carried out by means of the
dispersal or application of pathogenic or poisonous biological or chemical
materials that are released;

    


    8.           Regarding
interests which at time of loss or damage are on shore, 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 interests which at time of loss
or damage are within the territorial limits of the United States of America
(comprising the fifty (50) states of the Union and the District of Columbia and
including Bridges between the U.S.A. and Mexico, provided they are under United
States ownership), Canada, St. Pierre and Miquelon, provided such interests are
insured under Policies, endorsements, or binders containing a standard war or
hostilities or warlike operations exclusion clause.

    

    


    9.           Umbrella
Liability;

    


    10.         Public
Utilities;

    


    11.         Pharmaceutical
and Medical Device Manufacturers.

    


    12.         Operation,
navigation, or handling of ships, or vessels owned by the Insured other
than:

     

     
a.           Yachts,
small pleasure crafts, sports fishing vessels,

    


     
and

    


    
      	
              
                
      

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    6.

    


    b.           Vessels
operating exclusively in inland and/or coastal waters where legal liability on
such vessels is incidental to the coverage provided either under general
liability Policy or under a comprehensive form of Policy.

    


    13.           Ownership,
maintenance or use of aircraft and aircraft flight operations, but this
exclusion does not apply to Workers’ Compensation/Employers’ Liability
coverage;

    


    14.           Repair,
cleaning or demolition of any vessel or barge used as petroleum
tanker;

    


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

    


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

    


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

    


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

    


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

    


    
      	
              
                
      

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    7.

    


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

    


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

    


    16.          Manufacture,
handling, transit or use of explosives; unless incidental to routine Agriculture
operation;

    


    17.          Manufacture
of liquid petroleum gas or petroleum;

     

    18.          Buses
other than buses used to transport employees of the Insured or
property;

    


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

    


    20.          All
mining operations;

    


    21.          Products
guarantee and/or recall and/or integrity impairment when written as
such;

    


    22.          Blasting;

    


    23.          Nursing
Homes;

    


    
      	
              
                
      

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    8.

    


    24.          All
Workers’ Compensation business classified by the Company as Employee Leasing
Corporations, Professional Employment Organizations (PEO’s), Temporary Agencies,
Police, Firefighters and EMT Workers, whether professional or
volunteer;

    


    25.          Policies
issued as excess coverage, other than insurance or over a self-insured
retention;

    


    26.          Manufacturing
of fireworks, fuses, nitroglycerine, celluloid and pyroxylin;

    


    27.          Concerns
when engaged in the demolition of buildings more than three (3) stories in
height;

    


    28.          Operation
of animal shows, riding academies, circuses, carnivals, amusement parks or
amusement devices;

    


    29.          Municipalities,
when written as such, but this exclusion does not apply as
respects:

    


    a.           School
districts;

    b.           Municipally-owned
buildings or properties;

    c.           Municipalities
named as an additional Insured;

    


    30.          Auto
Liability;

    


    a.           As
a taxicab, public livery or bus;

    b.           Public
emergency vehicles such as fire trucks or police cars;

    c.           Ambulances;

    d.           Rent-a-car
and leasing operations;

    e.           Vehicles
carrying passengers for hire or reward;

    f.           Automobiles
used in organized speed contests including but not limited to racing, rallies,
and speed trials;

    g.           As
a long haul public freight carrier or common carrier, except for incidental
hauling of goods of others;

    


    However,
if any risks falling within the scope of the above exclusions are assigned to
the Company under an Assigned Risk Plan, the coverage afforded by this Contract
shall apply to such risks, but only for the Policy limits prescribed by said
Automobile Assigned Risk Plan;

    


    31.          Products
Liability:

    


    a.           The
manufacture, sale or retail or wholesale distribution of aircraft, aircraft
parts;

    b.           The
manufacture of extracts drugs, medicines, cosmetics or hair, scalp or skin
preparations;

    


    
      	
              
                
      

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    9.

    


    c.           The
manufacture of automobiles, buses, trucks and trailers, recreational vehicles,
motorcycles or the manufacture of components critical to vehicle
safety;

    d.           Products
liability written without an annual aggregate limit;

    


    32.          Malpractice
or Professional Liability, except:

    


    a.           Druggists’
Liability;

    b.           Printers’
Liability;

    c.           Barbers’
and Beauticians’ Liability (including nail salons);

    d.          Agricultural
Consultants’ Liability;

    e.           Funeral
Directors’ or Morticians’ Professional Liability;

    f.         
  Pastoral Professional Liability written in conjunction with a
liability risk;

    g.           Incidental
malpractice written in conjunction with a liability risk;

    h.          
Opticians;

    i.       
    Hearing Aid Providers

    j.        
   Florists.

    


    33.          Mold
Exclusion – attached, applicable to Exhibit II only;

    


    34.          Bridge
Construction—when over three (3) stories, over navigable waters, or over one
hundred (100) feet in length;

    


    35.          Construction
or maintenance of tunnels or subways more than fifty (50) feet in length, dams,
levees, cofferdams (except dams and levees constructed on farm premises which
are incidental to farm operations), or with respect to business classified as
commercial business, towers over two (2) stories high;

    


    36.          Elevator
construction and installation, except construction or installation of Grain
Elevator facilities or related equipment;

    


    37.          Occupational
Accident when written as such.

    


    38.          Applies
to Workers’ Compensation, and not Commercial General Liability
Coverage:

    


    Risks
having maritime exposures or exposures including but not limited
to:

    


    a.           Risks
subject to the U.S. Longshoremen’s and Harborworker’s Act (except incidental
which is defined as less than ten percent (10%) of Workers Compensation Policy
premium);

    b.           Operation
of docks, quays, wharves, or drydocks;

    


    
      	
              
                
      

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    10.

    


    c.           Operations
subject to Jones Act;

    d.           Operations
subject to the Outer Continental Shelf Act work.

    


    39.          Roofing
Contractors;

    


    40.          Scaffolding
installations (except residential and commercial up to three (3)
stories);

    


    41.          Tower,
steeple, chimney, or shaft construction and work.

    


    B.           If
any business falling within the scope of one or more of the exclusions is
assigned to the Company under an Assigned Risk Plan, such exclusion(s) shall not
apply to the portion of the limits of liability prescribed by the Assigned Risk
Plan which come within the Company’s retention and limits of liability of the
Reinsurer.

    


    C.           If
without the knowledge and contrary to the instructions of its supervisory
underwriting personnel, insurance coverages are provided involving one or more
of the above exclusions, except A(1), A(2), A(3), A(4), A(5), A(6), A(7), A(8),
A(11), A(15), A(16), A(19), A(24), and A(25) either by an inadvertent acceptance
or by an existing insured extending its operations, the reinsurance coverage
provided hereunder shall apply from inception and for a period of thirty (30)
days or longer if required by law, but not to exceed the lesser of eighteen (18)
months or Policy anniversary, after said supervisory underwriting personnel
receives knowledge thereof and promptly notifies the Reinsurers upon
discovery.

    


    D.           Any
exclusion listed above other than exclusions A(1), A(2), A(3), A(4), A(5), A(6),
A(7), A(8), A(11), A(15), A(16), A(19), A(24), and A(25), shall be automatically
waived as respects a Policy issued by the Company on a risk with respect to
which only a minor or incidental part of the operations covered involves the
exclusion. An incidental part of an insured’s regular operations shall mean not
greater than ten percent (10%) of the insured’s regular operations.

    


    E.           Notwithstanding
the exclusions set forth in the above paragraphs, the Reinsurers may grant a
Special Acceptance on a risk or operation excluded above or waive the
application or the exclusion to a specific insured for the term of the Policy
covered, after receiving an oral or written request from the
Company.

    


    ARTICLE
5

    


    WARRANTY

    


    For the purposes of this Contract, the
Company warrants that the maximum Policy limits are as follows:

    


    Commercial General
Liability

    


    Two
million dollars ($2,000,000) each Loss Occurrence or so deemed.

    Four
million dollars ($4,000,000) Products-Completed Operation Aggregate Limit or so
deemed.

    


    
      	
              
                
      

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    11.

    


    Business Automobile
Liability

    


    One
million dollars ($1,000,000) Combined Single Limit or so deemed.

    


    Directors,
Officers and Managers Liability

    Directors and Officers
Indemnity

    


    One
million dollars ($1,000,000)/one million dollars ($1,000,000)/one million
dollars ($1,000,000) or so deemed.

    


    Workers’ Compensation and
Employers’ Liability

    


    
      For the
purpose of determining the amount of loss sustained by the Company for accidents
under Workers’ Compensation and Employers’ Liability, it is deemed that the
amount of loss applicable to any one employee under this Contract shall not
exceed ten million dollars ($10,000,000).

    

    


    ARTICLE
6

    


    GENERAL
CONDITIONS

    


    For the
purposes of this Contract, the following general conditions shall
apply:

    


    —           As
respects Occupational Disease, retention and limit applies to each
employee.

    


    —           Recoveries
from the Minnesota Workers’ Compensation Reinsurance Association shall inure to
the benefit of Reinsurers hereunder.

    


    —           Employee
Benefits Liability and Directors, Officers and Managers business covered on a
claims-made basis.

    


    ARTICLE
7

    


    RETENTION AND
LIMIT

    


    See Exhibits I and II attached to and
forming part of this Contract.

    


    ARTICLE
8

    


    DEFINITION OF
TERRORISM

    


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

    


    
      	
              
                
      

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    12.

    


    1.           involves
violence against one or more persons; or

    2.           involves
damage to property; or

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

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

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

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

    


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

    


    ARTICLE
9

    


    REINSTATEMENT

    


    See Exhibits I and II attached to and
forming part of this Contract.

    


    ARTICLE
10

    


    PREMIUM

    


    See Exhibits I and II attached to and
forming part of this Contract.

    


    ARTICLE
11

    


    DEFINITION OF LOSS
OCCURRENCE

    


    A.           Except
as otherwise provided herein, the term “Loss Occurrence” or “Occurrence” means
an accident, incident, disaster, casualty, error, omission, wrongful act or
happening, or series of accidents, incidents, disasters, casualties, errors,
omissions, wrongful acts or happenings arising out of or following on one event.
Except where specifically provided otherwise in this Contract, each Loss
Occurrence shall be deemed to take place in its entirety as of the earliest date
of loss as determined by any Policy responding to the Loss Occurrence. Any
claims-made under an extended reporting period endorsement or any other extended
reporting and/or discovery period shall for the purposes of this Contract be
considered to be made on the last day of the Policy period immediately preceding
the extended reporting and/or discovery period.

    


    
      	
              
                
      

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    13.

    


    B.           If
only one Policy is involved in a Loss Occurrence, then the date of Loss shall be
as determined under that Policy. However, for the purpose of this Contract when
claims-made and/or losses discovered and/or Occurrence and/or accident Policies
are involved in the same Loss Occurrence with other claims-made and/or losses
discovered and/or Occurrence and/or accident Policies, the date of Loss for the
Loss Occurrence shall be determined as follows:

    


    1.           If
an Occurrence or accident Policy is identified as being involved, then the date
of “Loss” shall be the date as determined under the Occurrence or accident
Policy; or

    


    2.           If
no Occurrence or accident Policy is identified as being involved, then the date
of the “Loss Occurrence” shall be the date the first claim is made or discovered
under a claims-made or losses discovered Policy. If the first claim from a Loss
Occurrence is made under an extended reporting period endorsement, the date of
Loss for the Loss Occurrence shall be the date the first claim is made. If after
ten (10) years from the expiration date of this Contract, the Company identifies
an Occurrence Policy, the date of Loss for all claims-made and losses discovered
Policies shall remain as first established.

    


    C.           Continuous
or Repeated Injurious Exposure. As respects liability (bodily injury and
property damage) other than Automobile and Products, and at the option of the
Company, the term “Loss Occurrence” as used in this Contract shall also mean the
sum of all damages for bodily injury and property damage sustained by each
insured during a Policy period arising out of a continuous or repeated injurious
exposure to substantially the same general conditions. For purposes of this
definition, the date of Loss shall be deemed to be the inception or renewal date
of the Policy to which payment of the Loss is charged.

    


    D.           Products.
As respects Products liability, and at the option of the Company, the term “Loss
Occurrence” as used in this Contract shall also mean the sum of all damages for
bodily injury and property damage sustained by each insured during a Policy
period arising out of the use of the same kind of product made or produced by
the same manufacturer or producer. For purposes of this definition, the date of
Loss shall be deemed to be the inception or renewal date of the Policy to which
payment of the Loss is charged.

    


    E.           Occupational
Disease or Cumulative Injury. An Occupational Disease or cumulative injury
suffered by an employee shall also be deemed to be a “Loss Occurrence” within
the meaning of this Contract, and each case of an employee contracting such
disease or cumulative injury shall be considered as constituting a separate and
distinct occurrence.

    


    F.           The
date of Loss on which the Company has sustained an occupational disease or
cumulative injury Loss, as respects each employee, shall be deemed to be the
date of Loss under the original Policy as determined by the
Company.

    


    
      	
              
                
      

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    14.

    


    G.           As
respects two (2) or more occupational disease losses of one specific kind or
class or cumulative injury losses of one specific kind or class suffered by one
or more employees of one insured during the same Policy period, the date of any
Loss Occurrence shall be deemed to be the inception, anniversary or renewal date
of the Policy under which such Loss or losses are covered (or if such losses
arise under two (2) or more Policies, the inception, anniversary or renewal date
of the Policy chosen by the Company).

    


    H.           “Occupational
Disease” shall mean any bodily injury (including resulting death) or disease
suffered by an employee which fulfills all of the following
conditions:

    


    1.           It
is not traceable to a definite compensable accident occurring during the
employee’s present or past employment;

    2.           It
is not traceable to an event of twenty four (24) hours or less in
duration;

    3.           It
has been caused by exposure to conditions present in the workers’ occupational
environment;

    4.           It
has resulted in a disability or death.

    


    I.      
     “Cumulative Injury” means any bodily injury
(including resulting death) or disease suffered by an employee which fulfills
all of the following conditions:

    


    1.           It
is not traceable to a definite compensable accident occurring during the
employee’s present or past employment;

    2.           It
is not traceable to an event of twenty four (24) hours or less in
duration;

    3.           It
has occurred from, and has been aggravated by, a repetitive employment-related
activity.

    


    J.        
   “Loss” means the amount of Loss or liability paid by the
Company to or on behalf of its policyholder under the Policies.

    


    K.           For
purposes of this Contract, the term “Policy Period” shall mean a separate Policy
period of twelve (12) months or less commencing at the inception, anniversary or
renewal date of a Policy.

    


    ARTICLE
12

    


    NET LOSS

    


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

    


    
      	
              
                
      

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    15.

    


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

    


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

    


    D.           Notwithstanding
the preceding Paragraph C., Loss Adjustment Expenses as defined are covered on a
pro rata basis with the exception of Directors, Officers and Managers business,
as classified by the Company as such, where Loss Adjustment Expenses will be
included as part of the Net Loss, subject to a limit of the original
Policy.

    


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

    


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

    


    
      	
              
                
      

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    16.

    


    ARTICLE
13

    


    EXTRA-CONTRACTUAL
OBLIGATIONS/LOSS EXCESS OF POLICY LIMITS

    


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

    


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

    


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

    


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

    


    
      	
              
                
      

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    17.

    


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

    


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

    


    ARTICLE
14

    


    TERRORISM
RECOVERY

    


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

    


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

    


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

    


    
      	
              
                
      

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    18.

    


    ARTICLE
15

    


    NET RETAINED
LINE

    


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

    


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

    


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

    


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

    


    E.           Recoveries
from the Minnesota Workers’ Compensation Reinsurance Association shall inure to
the benefit of Reinsurers hereunder.

    


    ARTICLE
16

    


    NOTICE OF LOSS AND LOSS
SETTLEMENT

    


    A.           The
Company shall advise the Reinsurers promptly of all 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 Reinsurers. Inadvertent omission or oversight in giving such
notice shall in no way affect the liability of the Reinsurers. However, the
Reinsurers shall be informed of such omission or oversight promptly upon its
discovery.

    


    B.           Prompt
notice shall be given to the Reinsurers by the Company on any Loss Occurrence
wherein the Company’s reserve exceeds fifty percent (50%) of the Company’s Loss
retention. In addition, the Company shall promptly advise the Reinsurer of all
bodily injury losses involving the following major injuries:

    


    1.           Fatality;

    2.           Spinal
Cord Injuries (quadriplegia, paraplegia);

    3.           Brain
Damage (seizure, coma or physical/mental impairment);

    4.           Severe
Burn Injuries resulting in Disfigurement or Scarring;

    


    
      	
              
                
      

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    19.

    


    5.           Total
or Partial Blindness in one or both Eyes;

    6.           Amputation
of a Limb or Multiple Fractures;

    7.           Major
Organ (such as heart, lungs);

    8.           Permanent
disability;

    9.           Sexual
molestation or abuse.

    


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

    


    ARTICLE
17

    


    COMMUTATION
(As respects Workers’ Compensation Claims)

    


    A.           No
later than eighty four (84) months following the termination of this Contract,
the Company will submit a statement to the Reinsurers listing amounts paid, and
reserves, in respect of the excess portion of all known Workers’ Compensation
claims which occurred during the term of this Contract and which are not finally
settled and are likely to result in claims under this Contract. This statement
will form the basis of a final agreed present value for the excess portion of
all such losses reinsured under this Contract should both parties mutually agree
to commute the Workers’ Compensation coverage part of this
Contract.


     

    B.           In
determining the present value of said losses in excess of the retention, the
Company will first calculate the undiscounted value excess of the retention,
subject to the maximum amount of liability as provided in the Contract. The
Company will then calculate the present value of that portion of the
undiscounted Loss that exceeds the retention for those losses in accordance with
generally accepted actuarial practices.

    


    C.           If,
upon receipt of such statement from the Company, there is mutual agreement
between the Company and the Reinsurers as to the present value of said losses,
the Reinsurers will pay the agreed amount in excess of the retention and subject
to the maximum amount of liability as provided in each layer of coverage
provided within this Contract. In the absence of mutual agreement as to the
present value of said losses, the sole remedy to resolve disputes involving the
determination of the present value of said losses will be as
follows.

    


    
      	
              
                
      

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    20.

    


    D.           The
Reinsurers, or the Company, will request in writing that any difference be
settled by a panel of three (3) actuaries, one to be chosen by each party and
the third by the two (2) so chosen.

    


    E.           If
either party refuses or neglects to appoint an actuary within thirty (30) days
after the Reinsurers’ or Company’s request in writing that the differences be
settled by a panel of three (3) actuaries, the other party will appoint two (2)
actuaries. All the actuaries will be regularly engaged in the evaluation of
Workers’ Compensation claims and will be Fellows of the Casualty Actuarial
Society or of the American Academy of Actuaries. None of the actuaries will be
under the control of either party to this Contract.

    


    F.           Each
party will submit its case to the actuary within thirty (30) days of the
appointment of the third actuary. The decision in writing of any two (2)
actuaries, when filed with the parties hereto, will be final and binding on both
parties. The expense of the actuaries and of the commutation will be equally
divided between the two (2) parties. Said commutation will take place in Wilkes
Barre, Pennsylvania, unless some other place is mutually agreed upon by the
Company and the Reinsurers.

    


    G.           The
Reinsurers’ proportion of the amounts so determined will be considered the
amount of Loss hereunder, and the payment thereof by the Reinsurers will
constitute a complete release of the Reinsurers of their liability for such Loss
or losses.

    


    ARTICLE
18

    


    ERRORS AND
OMISSIONS

    


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

    


    ARTICLE
19

    


    OFFSET

    


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

    


    
      	
              
                
      

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    21.

    


    ARTICLE
20

    


    CURRENCY

    


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

    


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

    


    ARTICLE
21

    


    FEDERAL EXCISE TAX AND OTHER
TAXES

    


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

    


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

    


    ARTICLE
22

    


    ACCESS TO
RECORDS

    


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

    


    
      	
              
                
      

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    22.

    


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

    


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

    


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

    


    ARTICLE
23

    


    INSOLVENCY

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

    


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

    


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

    


    
      	
              
                
      

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    23.

    


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

    


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

    


    ARTICLE
24

    


    ARBITRATION

    


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

    


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

    


    
      	
              
                
      

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    24.

    


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

    


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

    


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

    


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

    


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

    


    
      	
              
                
      

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    25.

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


    
      	
              
                
      

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    26.

    


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

    


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

    


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

    


    ARTICLE
25

    


    SERVICE OF
SUIT

    


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

    


    
      	
              
                
      

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    27.

    


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

    


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

    


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

    


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

    


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

    


    
      	
              
                
      

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    28.

    


    ARTICLE
26

    


    CONFIDENTIALITY

    


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

    


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

    


    ARTICLE
27

    


    PRIVACY

    


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

    


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

    


    
      	
              
                
      

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    29.

    


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

    


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

    


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

    


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

    


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

    


    ARTICLE
28

    


    LATE
PAYMENTS

    


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

    


    
      	
              
                
      

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    30.

    


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

    


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

    


    ARTICLE
29

    


    RESERVES

    


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

    


    
      	
              
                
      

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    31.

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


    3.           Funds
Deposit;

    


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

    


    
      	
              
                
      

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    32.

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


    
      	
              
                
      

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    33.

    


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

    


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

    


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

    


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

    


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

    


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

    


    
      	
              
                
      

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    34.

    


    ARTICLE
30

    


    MODE OF
EXECUTION

    


    A.          This
Contract may be executed by:

    


    1.           an
original written ink signature of paper documents;

    


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

    


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

    


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

    


    ARTICLE
31

    


    VARIOUS OTHER
TERMS

    


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

    


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

    


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

    


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

    


    
      	
              
                
      

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    35.

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


    
      	
              
                
      

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    36.

    


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

    


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

    


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

    


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

    


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

    


    ARTICLE
32

    


    INTERMEDIARY

    


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

    


    
      	
              
                
      

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    37.

    


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

    


    
      	
              
                
      

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    1.

    


    NUCLEAR INCIDENT EXCLUSION
CLAUSE - LIABILITY - REINSURANCE U.S.A. (BRMA 35A)

     

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

      


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

      


      
        	
                 
      

              	
                Limited
      Exclusion Provision*

              


      

      


      
        
          	
                   
      

                	
                  I.

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

                	
                  (injury,
      sickness, disease, death or destruction

                
	 	 	 	(bodily
      injury or property damage


        

      

       

      
        	
                 
      

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

              


      

      


      
        	
                 
      

              	
                II.

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

              


      

      


      
        	
                 
      

              	
                III.

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

              


      

      


      
        	
                 
      

              	
                (a)

              	
                become
      effective on or after 1st May, 1960,
or

              


      

      


      
        	
                 
      

              	
                (b)

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

              


      

      


      
        	
                 
      

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

              


      

      


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

      


      
        	
                 
      

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

              


      

      


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

      


      Broad
Exclusion Provision*

      


      
        	
                 
      

              	
                It
      is agreed that the policy does not
apply:

              


      

      


      
        
          	
                   
      

                	
                  I.

                	
                  Under
      any Liability Coverage, to

                	
                  (injury,
      sickness, disease, death or destruction)

                
	 	 	 	
                  (bodily
      injury or property
damage)

                


        

      

      
        	
                 
      

              	
                 

              


      

      
        	
                 
      

              	
                (a)

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

              


      

      


      
        	
                 
      

              	
                (b)

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

              


      

      


      
        	
                 
      

              	
                II.

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

              


      

      (immediate
medical or surgical relief

      (first
aid

      
        	
                
                

              	
                 to
      expenses incurred with respect to

              	
                (bodily
      injury, sickness, disease or
death

              


      

      
        	
                 
      

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

              


      

      
        
        

      

      
        
          
             

          

        

        
          
            
              
                
                  
                    	
                          	
                            III.

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

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

                          


                  

                

              

            

          

        

      

      


      
        	
                 
      

              	
                (a)

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

              


      

       

    

    
      	
              
                
      

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    2.

     

    
      
        	
                 
      

              	
                (b)

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

              


      

      


      
        	
                 
      

              	
                (c)

              	
                the

              	
                (injury,
      sickness, disease, death or
destruction)

              


      

      
        	
                 
      

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

              


      

      


      
        	
                 
      

              	
                (a)

              	
                any
      nuclear reactor,

              


      

      


      
        	
                 
      

              	
                (b)

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

              


      

      


      
        	
                 
      

              	
                (c)

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

              


      

      


      
        	
                 
      

              	
                (d)

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

              


      

      


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

              


      

      


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

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

      (includes
all forms of radioactive contamination of property.

      


      
        	
                 
      

              	
                V.

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

              


      

      


      
        	
                 
      

              	
                (a)

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

              


      

      
        	
                 
      

              	
                (b)

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

              


      

      


      
        	
                 
      

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

              


      

      


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

      


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

       

    

    
      	
              
                
      

              TW
      No. G24397.10/G25572.10

              FINAL

            	
              

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT I
- Page 1.

    TW No.
G25572.10

    


    EXHIBIT
I

    


    CASUALTY FIRST EXCESS OF
LOSS REINSURANCE

    


    EFFECTIVE JANUARY 1,
2010

    


    issued
to

    


    PENN MILLERS INSURANCE
COMPANY

    


    AMERICAN MILLERS INSURANCE
COMPANY

    


    ARTICLE
7

    


    RETENTION AND
LIMIT

    


    A.          The
Reinsurers shall be liable to, indemnify and reinsure the Company for each and
every Loss Occurrence, for one hundred percent (100%) of the excess Net Loss
above an initial Net Loss to the Company of one million dollars ($1,000,000) but
the Reinsurers shall not be liable for more than four million dollars
($4,000,000) of Net Loss in each and every Loss Occurrence.

    


    B.           Subject
to Paragraph A. above, the Reinsurers shall be liable to, indemnify and reinsure
the Company for each and every Loss Occurrence for one hundred percent (100%) of
the Company’s Net Loss involving any Act of Terrorism, irrespective of the
number and kinds of perils involved, but the Reinsurers shall not be liable for
more than four million dollars ($4,000,000) for Net Loss arising from Acts of
Terrorism during the term of this Contract, as defined in the Article entitled
DEFINITION
OF TERRORISM.

    


    C.           As
respects to all Net Loss arising from Mold, the Reinsurers shall be liable to,
indemnify and reinsure the Company for one hundred percent (100%) of the
Company’s excess Net Loss above an initial Net Loss to the Company of one
million dollars ($1,000,000) from Mold, as such term is defined in the Company’s
Policy, but the Reinsurers shall not be liable for more than four million
dollars ($4,000,000) for all Net Loss arising from Mold during the term of the
Contract.

    


    ARTICLE
9

    


    REINSTATEMENT

    


    A.          Each
claim hereunder shall reduce the amount of the Reinsurers’ liability from the
time of the Occurrence of the Loss by the sum paid, but the sum so exhausted
shall be reinstated immediately from the time of the Occurrence of the
Loss.

    


    
      	
              
                
      

              TW
      No. G24397.10/G25572.10

              FINAL

            	
              

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT I
- Page 2.

    TW No.
G25572.10

    


    B.           For
each amount so reinstated, the Company agrees to pay an additional premium. For
the purposes of calculating the reinstatement premium, the Contract retention
and limit specified in the Article entitled RETENTION
AND LIMIT of this
Contract shall be deemed to consist of two (2) sections:

    


    Section A – The Reinsurers’ limit for
Net Loss of one million dollars ($1,000,000) in each and every Loss Occurrence,
excess of the Company’s retention of one million dollars ($1,000,000) in each
and every Loss Occurrence.

    


    Section B – The Reinsurers’ limit for
Net Loss of three million dollars ($3,000,000) in each and every Loss
Occurrence, excess of the Company’s retention of two million dollars
($2,000,000) in each and every Loss Occurrence.

    


    C.
1.      Under Section A, the Company shall pay an
additional premium calculated by multiplying forty five percent (45%) of the
reinsurance premium for this Contract by the percentage that the amount
reinstated under Section A bears to the Section A limit (one million dollars
($1,000,000)). Nevertheless, the liability of the Reinsurers under Section A
shall never be more than one million dollars ($1,000,000) in respect of any one
Loss Occurrence, nor more than three million dollars ($3,000,000) in respect of
all losses occurring during the Contract term. It is further understood that
reinstatement premium for Section A only applies to Loss Occurrences that are
recovered under Section A.

    


     C.2.       Under
Section B, the Company shall pay an additional premium calculated by multiplying
fifty five percent (55%) of the reinsurance premium for this Contract by the
percentage that the amount reinstated under Section B bears to the Section B
limit (three million dollars ($3,000,000)). Nevertheless, the liability of the
Reinsurers under Section B shall never be more than three million dollars
($3,000,000) in respect of any one Loss Occurrence, nor more than nine million
dollars ($9,000,000) in respect of all losses occurring during the Contract
term. It is further understood that reinstatement premium for Section B only
applies to Loss Occurrences that are recovered under Section B.

    


    D.           Recoveries
under Section A shall be entirely disregarded for purposes of determining the
Net Loss for purposes of Section B.

    


    E.           As
promptly as possible after the reinsurance premium earned by the Reinsurer
hereunder for the just completed coverage period has been finally determined,
the Company shall prepare and submit to the Reinsurers a final statement of
reinstatement premium due. Any reinstatement premium shown to be due the
Reinsurers (less prior payments, if any) shall be remitted by the Company with
its statement. Any return reinstatement premium shown to be due the Company
shall be remitted by the Reinsurers as promptly as possible after receipt of the
Company’s final statement.

    


    
      	
              
                
      

              TW
      No. G24397.10/G25572.10

              FINAL

            	
              

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT I
- Page 3.

    TW No.
G25572.10

    


    F.           In
the event there are any mid-term terminations in the participation of any
Reinsurer in this Contract, payment of any such reinstatement premium in full
shall be paid to the Reinsurer who incurred the loss that generates the
reinstatement premium.

    


    ARTICLE
10

    


    PREMIUM

    


    A.          The
premium payable to Reinsurers shall be calculated by applying a rate of two
point three zero zero percent (2.300%) to the Company’s Subject Matter Premium
Income.

    


    B.           The
term “Subject Matter Premium Income” shall mean the Company’s gross net premiums
earned on the Business Covered hereunder less premiums paid on reinsurance, if
any, recoveries under which would reduce the Net Loss to this
Contract.

    


    C.           The
Company shall pay the Reinsurers a deposit premium of one million forty five
thousand one hundred fifty eight dollars ($1,045,158), in four (4) equal
installments of two hundred sixty one thousand two hundred eighty nine dollars
and fifty cents ($261,289.50) each on January 1, April 1, July 1 and October 1,
2010. As promptly as possible after the termination of this Contract, however no
longer than sixty (60) days, the Company shall render a report to the Reinsurers
showing the actual reinsurance premium due hereunder, calculated as provided in
Paragraph A. of this Article; and, if the premium so calculated is greater than
the previously paid deposit premium, the balance shall be remitted by the
Company with its report. However, in no event shall the premium to the
Reinsurers for the Contract be less than eight hundred thirty six thousand one
hundred twenty seven dollars ($836,127).

    


    
      	
              
                
      

              TW
      No. G24397.10/G25572.10

              FINAL

            	
              

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
II - Page 1.

    TW No.
G25572.10

    


    EXHIBIT
II

    


    CASUALTY SECOND EXCESS OF
LOSS REINSURANCE

    


    EFFECTIVE JANUARY 1,
2010

    


    issued
to

    


    PENN MILLERS INSURANCE
COMPANY

    


    AMERICAN MILLERS INSURANCE
COMPANY

    


    


    ARTICLE
7

    


    RETENTION AND
LIMIT

    


    A.          The
Reinsurers shall be liable to, indemnify and reinsure the Company for each and
every Loss Occurrence, for one hundred percent (100%) of the excess Net Loss
above an initial Net Loss to the Company of five million dollars ($5,000,000)
but the Reinsurers shall not be liable for more than five million dollars
($5,000,000) of Net Loss in each and every Loss Occurrence. Coverage as provided
in this Exhibit II shall not cover the Company’s Net Loss involving any Act of
Terrorism as defined in the Article entitled DEFINITION
OF TERRORISM.

    


    B.           Coverage
as provided in this Exhibit II of this Contract does not apply to any loss,
damage, cost, claim or expense, of the Company or its insured(s) including but
not limited to B(1) – B(4). below, whether preventative, remedial or otherwise,
directly or indirectly arising out of, relating to, caused by or contributed to
by any mold, mildew, spores, fungus, wet or dry rot, or any of their scent or
by-products, or of any materials containing them, at any time even if there is
any other cause or event contributing concurrently or in any other sequence to
the loss:

    


    1.           Any
claim relating to supervision, instructions, recommendations, warnings or advice
given or which should have been given in connection with the above;
or

    2.           Any
claim if a failure to investigate, detect or remediate mold, mildew, spores,
fungus, wet or dry rot or any of their scent or by products, or any of their
materials containing them; or

    3.           Any
alleged or actual obligation of the Company and/or its insured(s) to share
damages with or repay someone else who must pay damages because of such injury
or damage, either in equity or in tort; or

    4.           Any
costs and/or expenses incurred by the Company and/or its insured(s) in
investigating or defending any claim or suit seeking damages for, or determining
Policy Obligations relating to, such loss, damage, cost, claim or
expense.

    


    
      	
              
                
      

              TW
      No. G24397.10/G25572.10

              FINAL

            	
              

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
II - Page 2.

    TW No.
G25572.10

    


    


    ARTICLE
9

    


    REINSTATEMENT

    


    A.          Each
claim hereunder shall reduce the amount of the Reinsurers’ liability from the
time of the Occurrence of the Loss by the sum paid, but the sum so exhausted
shall be reinstated immediately from the time of the Occurrence of the
Loss.

    


    B.           For
each amount so reinstated, the Company agrees to pay an additional premium
calculated by multiplying one hundred percent (100%) of the annual reinsurance
premium hereon by the percentage that the amount reinstated bears to the limit
(i.e., five million dollars ($5,000,000)) of this Contract. Nevertheless, the
liability of the Reinsurers shall never be more than five million dollars
($5,000,000) in respect of any one Loss Occurrence, nor more than ten million
dollars ($10,000,000) in all in respect of all losses occurring during the
Contract period.

    


    C.           A
provisional statement of reinstatement premium due the Reinsurers shall be
prepared by the Company and submitted to the Reinsurers as soon as practicable
after payment of a claim hereunder. The provisional reinstatement premium shall
be based on one hundred percent (100%) of the estimated annual reinsurance
premium hereunder. The amount of reinstatement premium due Reinsurers shall be
offset against the loss payment due the Company with only the net amount due to
be remitted by the debtor party.

    


    D.           As
promptly as possible after the annual reinsurance premium hereunder has been
finally determined, the Company shall prepare and submit to the Reinsurers a
final statement of reinstatement premium due. Any reinstatement premium shown to
be due the Reinsurers (less prior payments, if any) shall be remitted by the
Company with its statement. Any return reinstatement premium shown to be due the
Company shall be remitted by the Reinsurers as promptly as possible after
receipt of the Company’s final statement.

    


    E.           In
the event there are any mid-term terminations in the participation of any
Reinsurer in this Contract, payment of any such reinstatement premium in full
shall be paid to the Reinsurer who incurred the loss that generates the
reinstatement premium.

    


    ARTICLE
10

    


    PREMIUM

    


    A.          The
premium payable to Reinsurers shall be calculated by applying a rate of zero
point nine six zero percent (0.960%) to the Company’s Subject Matter Premium
Income.

    


    
      	
              
                
      

              TW
      No. G24397.10/G25572.10

              FINAL

            	
              

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
II - Page 3.

    TW No.
G25572.10

    


    B.           The
term “Subject Matter Premium Income” shall mean the Company’s gross net premiums
earned on the Business Covered hereunder less premiums paid on reinsurance, if
any, recoveries under which would reduce the Net Loss to this
Contract.

    


    C.           The
Company shall pay the Reinsurers a deposit premium of four hundred thirty six
thousand two hundred forty dollars ($436,240), in four (4) equal installments of
one hundred nine thousand sixty dollars ($109,060) each on January 1, April 1,
July 1 and October 1, 2010. As promptly as possible after the termination of
this Contract, however no longer than sixty (60) days, the Company shall render
a report to the Reinsurers showing the actual reinsurance premium due hereunder,
calculated as provided in Paragraph A. of this Article; and, if the premium so
calculated is greater than the previously paid deposit premium, the balance
shall be remitted by the Company with its report. However, in no event shall the
premium to the Reinsurers for the Contract be less than three hundred forty
eight thousand nine hundred ninety two dollars ($348,992).

    


    
      	
              
                
      

              TW
      No. G24397.10/G25572.10

              FINAL