PHILADELPHIA INSURANCE COMPANY
Bala Cynwyd, Pennsylvania
PHILADELPHIA INDEMNITY INSURANCE COMPANY
Bala Cynwyd, Pennsylvania
 PROPERTY FOURTH PER RISK EXCESS OF LOSS
REINSURANCE AGREEMENT




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TABLE OF CONTENTS
 ARTICLE
    
    
    
    PAGEI
    
    BUSINESS COVERED
    
    
    1II
    
    TERM
    
    
    1III
    
    SPECIAL TERMINATION
    
    
    2IV
    
    DEFINITIONS
    
    
    3Building
    
    
    3Declaratory Judgment Expense
    
    
    4Extra Contractual Obligations/Loss in Excess of Policy Limits
    
    
    4Loss Adjustment Expense
    
    
    5Loss Occurrence (NMA 2244/BRMA 27A)
    
    
    5Net Earned Premium
    
    
    6Policy or Policies
    
    
    6Risk
    
    
    6Terrorism
    
    
    7Ultimate Net Loss
    
    
    7V
    
    TERRITORY (BRMA 51A)
    
    
    8VI
    
    EXCLUSIONS
    
    
    8VII
    
    COVERAGE
    
    
    10VIII
    
    REINSTATEMENT
    
    
    11IX
    
    REINSURANCE PREMIUM
    
    
    11X
    
    NOTICE OF LOSS AND LOSS SETTLEMENTS
    
    
    12XI
    
    AGENCY AGREEMENT
    
    
    12XII
    
    SALVAGE AND SUBROGATION
    
    
    12XIII
    
    ERRORS AND OMISSIONS (BRMA 14C)
    
    
    13XIV
    
    OFFSET
    
    
    13XV
    
    CURRENCY (BRMA 12A)
    
    
    13XVI
    
    TAXES (BRMA 50C)
    
    
    13XVII
    
    FEDERAL EXCISE TAX (BRMA 17A)
    
    
    14XVIII
    
    UNAUTHORIZED REINSURANCE (BRMA 55C)
    
    
    14XIX
    
    NET RETAINED LINES (BRMA 32E)
    
    
    16XX
    
    TRIA INUREMENT
    
    
    16XXI
    
    SPECIAL ACCEPTANCES
    
    
    17XXII
    
    MORTGAGEE REINSURANCE ENDORSEMENTS
    
    
    17XXIII
    
    THIRD PARTY RIGHTS (BRMA 52C MODIFIED)
    
    
    18




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ARTICLE
    
    
    
    PAGEXXIV
    
    SEVERABILITY
    
    
    18XXV
    
    GOVERNING LAW (BRMA 71A)
    
    
    18XXVI
    
    ACCESS TO RECORDS (BRMA 1E)
    
    
    18XXVII
    
    INSOLVENCY
    
    
    19XXVIII
    
    ARBITRATION
    
    
    19XXIX
    
    SERVICE OF SUIT
    
    
    21XXX
    
    MODE OF EXECUTION
    
    
    22XXXI
    
    INTERMEDIARY
    
    
    22Nuclear Incident Exclusion Clause  Physical Damage  Reinsurance  U.S.A.War Exclusion




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PROPERTY FOURTH PER RISK EXCESS OF LOSS
REINSURANCE AGREEMENT
  PHILADELPHIA INSURANCE COMPANY
PHILADELPHIA INDEMNITY INSURANCE COMPANY
Bala Cynwyd, Pennsylvania
  THE SUBSCRIBING REINSURER(S) EXECUTING THE
INTERESTS AND LIABILITIES AGREEMENT(S)
ATTACHED HERETO
 ARTICLE I
 BUSINESS COVERED
  ARTICLE II
 TERM
 A.
    
    This Contract shall become effective at 12:01 a.m., Eastern Standard Time, January 1, 2008 as
respects losses occurring at or after that time and date, and shall continue in effect until
12:01 a.m., Eastern Standard Time, January 1, 2009.
 B.
    
    Upon termination of this Contract, the entire liability of the Reinsurer for losses occurring
subsequent to the date of termination shall cease concurrently with the date of termination of
this Contract.
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C.
    
    Notwithstanding the above, the Company shall have the option to elect run-off coverage for
Policies in force at the expiration of this Contract. If the Company chooses to run off
liability, the Company will notify the Reinsurer prior to January 31, 2009. If run-off of
liability is chosen, the Reinsurer shall continue to be liable for Ultimate Net Loss incurred
by the Company under all Policies in force at the time and date of expiration until each
Policys next anniversary, renewal or expiration, but in no event shall the Reinsurers
liability continue for more than 12 months after the expiration date plus odd time, not to
exceed a total of 18 months. The premium for the run-off coverage shall be the premium rate
stated in paragraph A of the REINSURANCE PREMIUM ARTICLE times its Net Earned Premium for the
run-off period for the Policies in force as of December 31, 2008.
 D.
    
    If this Contract expires while a Loss Occurrence covered hereunder is in progress, the
Reinsurers liability hereunder shall, subject to the other terms and conditions of this
Contract, be determined as if the entire Loss Occurrence had occurred prior to the expiration
of this Contract, provided that no part of such Loss Occurrence is claimed against any renewal
or replacement of this Contract.
 ARTICLE III
 SPECIAL TERMINATION
 A.
    
    The Company may terminate this Contract at any time by the giving of 10-days notice in
writing to the Reinsurer upon the happening of any one of the following circumstances:
 1.
    
    A State Insurance Department or other legal authority orders the Reinsurer to cease
writing business; or
 2.
    
    The Reinsurer has become insolvent or has been placed into liquidation or
receivership (whether voluntary or involuntary), or there has been instituted against it
proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator,
trustee in bankruptcy or other agent known by whatever name, to take possession of its
assets or control of its operations; or3.
    
    The Reinsurers policyholders surplus has been reduced by whichever is greater,
either 25% of the amount of surplus at the inception of this Contract or 25% of the
amount at the latest anniversary, or has lost any part of, or has reduced its paid in
capital; or4.
    
    The Reinsurer has become merged with, acquired or controlled by any company,
corporation or individual(s) not controlling the partys operations at the inception of
this Contract; or5.
    
    The Reinsurer has reinsured its entire liability under this Contract without the
terminating partys prior written consent; or6.
    
    The Reinsurer ceases writing new or renewal business.
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7.
    
    The Reinsurer has been assigned an A.M. Bests rating of less than A- or a
Standard & Poors Insurer Financial Strength Rating of less than A-.
 B.
    
    Notwithstanding any other termination provision of this Contract, if this Contract is
terminated under the provisions of this Article, the Company shall have the right to terminate
liability for losses occurring subsequent to termination of this Contract. In such event, the
Reinsurer shall return the unearned portion, if any, less any commission allowed thereon, of
premiums paid hereunder and the minimum premium provisions, if any, shall be waived.
 C.
    
    Additionally, the Company, at its sole discretion, may elect to commute the Reinsurers
liabilities for loss and Loss Adjustment Expenses, whether known and unknown, on Policies
covered under this Contract. In the event the Company and the Reinsurer cannot agree on the
capitalized value of the Reinsurers liabilities on the Policies covered under this Contract,
the two parties shall mutually appoint an actuary to resolve the matter of valuation. If the
two parties cannot agree on the appointment of an actuary, a selection process based on the
ARBITRATION ARTICLE will be employed. Payment by the Reinsurer of the amount ascertained will
constitute full and final release of the Reinsurers liabilities hereunder.
 D.
    
    The Company may request special funding for any Reinsurers participation if this Contract is
terminated for reasons set forth in subparagraph A.1-7 above. If the Company elects to
exercise its special funding option, said Reinsurer will, within 30 calendar days of the date
of the Companys request to do so, provide the Company with a cash advance, trust agreement,
escrow account for the benefit of the Company, letter of credit, or a combination thereof
acceptable to the Company to fund the Reinsurers share of the reserves hereunder for losses
(including loss and loss expense paid by the Company but not recovered from the Reinsurer,
loss and loss expense reported and outstanding, loss and loss expenses incurred but not
reported) and unearned premium, as if it were an unauthorized Reinsurer and subject to the
UNAUTHORIZED REINSURANCE ARTICLE. This paragraph D shall not apply to Reinsurers who, at the
inception of this Contract, have been assigned an A.M. Bests Financial Strength Rating of A+
or higher or a Standard & Poors rating of A+ or higher or to Underwriting Members of Lloyds,
London.
 ARTICLE IV
 DEFINITIONS
 A.
    
    Building
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B.
    
    Declaratory Judgment Expense
  C.
    
    Extra Contractual Obligations/Loss in Excess of Policy Limits
 1.
    
    Extra Contractual ObligationsThis Contract shall protect the Company for any Extra Contractual Obligations which as
used herein shall mean any punitive, exemplary, compensatory or consequential damages,
other than Loss in Excess of Policy Limits, paid or payable by the Company as a result
of an action against it by its insured, its insureds assignee or a third party
claimant, by reason of alleged or actual negligence, fraud or bad faith on the part of
the Company in handling a claim under a Policy subject to this Contract.An Extra Contractual Obligation shall be deemed to have occurred on the same date as the
loss covered or alleged to be covered under the Policy.2.
    
    Loss in Excess of Policy LimitsThis Contract shall protect the Company for any Loss in Excess of Policy Limits which
as used herein shall mean an amount that the Company would have been contractually
liable to pay had it not been for the limit of the original Policy as a result of an
action against it by its insured or its insureds assignee or a third party claimant.
Such loss in excess of the limit shall have been incurred because of failure by the
Company to settle within the Policy limit, or by reason of alleged or actual negligence,
fraud, or bad faith in rejecting an offer of settlement or in the preparation of the
defense or in the trial of any action against its insured or in the preparation or
prosecution of an appeal consequent upon such action.3.
    
    This paragraph C shall not apply where an Extra Contractual Obligation and/or Loss
in Excess of Policy Limits has been incurred due to the fraud committed by a member of
the Board of Directors or a corporate officer of the Company acting individually or
collectively or in collusion with a member of the Board of Directors or a corporate
officer or a partner of any other corporation or partnership.4.
    
    Recoveries from any form of insurance or reinsurance which protects the Company
against claims which are the subject matter of this paragraph C shall inure to the
benefit of this Contract.
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D.
    
    Loss Adjustment Expense
  E.
    
    Loss Occurrence (NMA 2244/BRMA 27A)
 1.
    
    The term Loss Occurrence shall mean the sum of all individual losses directly
occasioned by any one disaster, accident or loss or series of disasters, accidents or
losses arising out of one event which occurs within the area of one state of the United
States or province of Canada and states or provinces contiguous thereto and to one
another. However, the duration and extent of any one Loss Occurrence shall be limited
to all individual losses sustained by the Company occurring during any period of
168 consecutive hours arising out of and directly occasioned by the same event except
that the term Loss Occurrence shall be further defined as follows:
 a.
    
    As regards windstorm, hail, tornado, hurricane, cyclone, including
ensuing collapse and water damage, all individual losses sustained by the Company
occurring during any period of 72 consecutive hours arising out of and directly
occasioned by the same event. However, the event need not be limited to one state
or province or states or provinces contiguous thereto.b.
    
    As regards riot, riot attending a strike, civil commotion, vandalism
and malicious mischief, all individual losses sustained by the Company occurring
during any period of 72 consecutive hours within the area of one municipality or
county and the municipalities or counties contiguous thereto arising out of and
directly occasioned by the same event. The maximum duration of 72 consecutive
hours may be extended in respect of individual losses which occur beyond such
72 consecutive hours during the continued occupation of an assureds premises by
strikers, provided such occupation commenced during the aforesaid period.c.
    
    As regards earthquake (the epicenter of which need not necessarily be
within the territorial confines referred to in the introductory portion of
subparagraph 1) and fire following directly occasioned by the earthquake, only
those individual fire
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losses which commence during the period of 168 consecutive hours may be included
in the Companys Loss Occurrence.d.
    
    As regards freeze, only individual losses directly occasioned by
collapse, breakage of glass and water damage (caused by bursting of frozen pipes
and tanks) may be included in the Companys Loss Occurrence.
 2.
    
    Except for those Loss Occurrences referred to in subparagraphs a and b above, the
Company may choose the date and time when any such period of consecutive hours commences
provided that it is not earlier than the date and time of the occurrence of the first
recorded individual loss sustained by the Company arising out of that disaster, accident
or loss and provided that only one such period of 168 consecutive hours shall apply with
respect to one event.3.
    
    However, as respects those Loss Occurrences referred to in subparagraphs a and b
above, if the disaster, accident or loss occasioned by the event is of greater duration
than 72 consecutive hours, then the Company may divide that disaster, accident or loss
into two or more Loss Occurrences provided no two periods overlap and no individual
loss is included in more than one such period and provided that no period commences
earlier than the date and time of the occurrence of the first recorded individual loss
sustained by the Company arising out of that disaster, accident or loss.4.
    
    No individual losses occasioned by an event that would be covered by 72 hours
clauses may be included in any Loss Occurrence claimed under the 168 hours provision.
 F.
    
    Net Earned PremiumNet Earned Premium as used herein is defined as gross earned premium of the Company during
the term of the Contract for the classes of business reinsured hereunder, less the earned
portion of premiums ceded by the Company for reinsurance which inures to the benefit of this
Contract.G.
    
    Policy or PoliciesPolicy or Policies as used herein shall mean the Companys binders, policies and contracts
providing insurance and reinsurance on the classes of business covered under this Contract.H.
    
    RiskRisk as used herein shall mean what constitutes one Risk as established by the Company at
the time of acceptance, provided:
 1.
    
    A building and its contents, regardless of the number of insureds or Policies
involved, including time element coverages, shall never be considered more than one Risk.
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2.
    
    When two or more Buildings and their contents are situated at the same general
location, the Company shall identify on its records at the time of acceptance by the
Company those individual Buildings and their contents that are considered to constitute
each Risk; if such identification is not made, all of the Buildings and their contents
situated at the same general location shall be considered one Risk.3.
    
    When there are known and named extensions of coverage involving other risk
locations (including but not limited to suppliers extensions, customer extensions and
interdependencies and whether triggered by physical loss at the risk location or another
location) that are included and formally recorded on the Companys records at the time of
acceptance of the Risk, all such known and named extensions of coverage shall be included
in calculation of the one Risk.
 I.
    
    TerrorismTerrorism as used herein shall mean:
 1.
    
    An activity, including the threat of an activity or any preparation for an
activity, that (a) causes either (i) damage to property or (ii) injury to persons and (b)
appears to be intended to: (i) intimidate or coerce a civilian population or (ii)
disrupt any segment of an economy or (iii) influence the policy of a government by
intimidation or coercion or (iv) affect the conduct of a government by destruction,
assassination, kidnapping or hostage-taking or (v) advance a political, religious or
ideological cause; provided, however, that an act of Terrorism for purposes of this
definition shall not include any act or threat as described above perpetrated by an
official, employee or agent of a foreign state acting for or on behalf of such state.2.
    
    Any act authorized by a governmental authority for the purpose of preventing,
terminating, countering or responding to any act or threat of terrorism or for the
purpose of preventing or minimizing the consequences of any act or threat of Terrorism.3.
    
    An activity that involves the use, release or escape of nuclear materials, or
directly or indirectly results in nuclear reaction or radiation or radioactive
contamination, and it appears that one purpose of the terrorism was to release such
materials.4.
    
    An activity that is carried out by means of the dispersal or application of
pathogenic or poisonous biological or chemical materials or an activity where pathogenic
or poisonous biological or chemical materials are released, and it appears that one
purpose of the terrorism was to release such materials.
 J.
    
    Ultimate Net LossThe term Ultimate Net Loss shall mean the actual loss, including any pre-judgment interest
which is included as part of the award or judgment, Loss Adjustment Expense, 100% of Loss in
Excess of Policy Limits, and 100% of Extra Contractual Obligations, paid or to be paid by the
Company on its net retained liability after making deductions for all recoveries, salvages,
subrogations and all claims on inuring reinsurance, whether
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collectible or not; provided, however, that in the event of the insolvency of the Company,
payment by the Reinsurer shall be made in accordance with the provisions of the INSOLVENCY
ARTICLE. Nothing herein shall be construed to mean that losses under this Contract are not
recoverable until the Companys Ultimate Net Loss has been ascertained.
 ARTICLE V
 TERRITORY (BRMA 51A)
  ARTICLE VI
 EXCLUSIONS
  A.
    
    Reinsurance assumed by the Company other than reinsurance of primary business assumed from
affiliated companies;
 B.
    
    Nuclear incident per the Nuclear Incident Exclusion Clause  Physical Damage  Reinsurance
attached hereto;
 C.
    
    Self-insurance or self-insured obligations, howsoever styled, of the Company, its affiliates
or subsidiaries, or any insurance wherein the Company, its affiliates or subsidiaries are
named as the insured party, either alone or jointly with some other party, notwithstanding
that no legal liability may arise in respect thereof by reason of the fact that the Company,
its affiliates or subsidiaries, may not be obligated by law to pay a claim to itself, its
affiliates or subsidiaries;
 D.
    
    Any loss or liability accruing to the Company directly or indirectly from any insurance
written by or through any pool or association including pools or associations in which
membership by the Company is required under any statutes or regulations;
 E.
    
    Any liability of the Company arising from its participation or membership in any insolvency
fund;
  G.
    
    Risks written on a layered basis, whether primary or excess of loss, or policies written with
a deductible or franchise of more than $500,000; however, this exclusion shall not apply to
policies which provide a percentage deductible or franchise in connection with windstorm,
earthquake or flood;
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H.
    
    Pollution to the extent excluded in the Companys policies. Nevertheless, if the insured
elects to purchase any buy back or additional coverage options, such options shall not be
covered hereunder; however, this exclusion shall not apply:
 1.
    
    When a judicial entity having legal jurisdiction invalidates the Companys
Pollution exclusion, thereby obligating the Company for liability when such liability for
Pollution was intended to be excluded by the Companys exclusion.2.
    
    In respect of any Policy written in a state whose insurance regulatory authorities
have prohibited the Company from including a Pollution liability exclusion in its
Policies.
 I.
    
    Insurance against earthquake, except when written in conjunction with fire and otherwise
eligible perils;
 J.
    
    Insurance on growing crops;
 K.
    
    Insurance against flood, waves, tidal waves, overflow of any body of water, or their spray,
all whether driven by wind or not, except when written in conjunction with fire and otherwise
eligible perils;
 L.
    
    Business classified by the Company as crime and fidelity when written as part of a package
policy;
 M.
    
    Credit insurance;
 N.
    
    Business classified as boiler and machinery;
 O.
    
    Mortgage impairment insurance and similar kinds of insurance, howsoever styled, providing
coverage to an insured with respect to its mortgagee interest in property or its owner
interest in foreclosed property;
 P.
    
    Difference in conditions insurance and similar kinds of insurance, howsoever styled;
 Q.
    
    Any incident that involves the use, release or escape of pathogenic or poisonous biological
or chemical materials or of nuclear materials, or to any incident that directly or indirectly
results in nuclear reaction or radiation or radioactive contamination. However, this
exclusion does not apply to the Terrorism Annual Aggregate Limit as stated in paragraph B of
the COVERAGE ARTICLE.
 R.
    
    Losses with respect to overhead transmission and distribution lines and their supporting
structures, other than those on or within 1,000 feet of the insured premises. However, public
utilities extension and/or suppliers extension and/or contingent business interruption
coverage are not subject to this exclusion, provided these are not part of a transmitters or
distributors policy.
 S.
    
    Offshore property Risks;
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T.
    
    Inland marine business with respect to the following:
 1.
    
    Cargo insurance when written as such with respect to ocean vessels;2.
    
    Faulty Film, tape, processing and editing insurance and cast insurance;3.
    
    Drilling rigs for natural fuels;4.
    
    Furriers customers policies;5.
    
    Insurance on livestock under so-called mortality policies;6.
    
    Mining equipment while underground;7.
    
    Registered mail and armored car insurance;
 U.
    
    Loss of, damage to, or failure of, or consequential loss resulting therewith (including but
not limited to earnings and extra expense) of satellites, spacecraft, and launch vehicles,
including cargo and freight carried therein, in all phases of operation (including but not
limited to pre-launch, launch, and in-orbit).
 V.
    
    Mobile homes unless written as part of a commercial multiple peril policy.
 W.
    
    Watercraft, other than watercraft insured under a standard homeowners policy or when written
as part of contents coverage under a commercial multiple peril policy.
   ARTICLE VII
 COVERAGE
 A.
    
    The Reinsurer shall be liable for the amount of Ultimate Net Loss in excess of the Companys
retention, being $15,000,000 each risk, each loss, subject to a limit of liability to the
Reinsurer of $35,000,000 each risk, each loss, and further subject to a limit of liability to
the Reinsurer of $35,000,000 each Loss Occurrence. The Reinsurers limit of liability in
respect to all risks, all losses shall not exceed $70,000,000.
 B.
    
    The Reinsurers liability in respect to Terrorism losses shall not exceed $35,000,000.
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C.
    
    The Company shall maintain in force other reinsurance, recoveries
under which shall inure to the benefit of this Contract.D.
    
    The Company shall be permitted to carry underlying reinsurance,
recoveries under which shall inure solely to the benefit of the
Company and be entirely disregarded in applying all of the provisions
of this Contract.
 ARTICLE VIII
 REINSTATEMENT
 A.
    
    Should all or any part of the Reinsurers limit of liability be exhausted as a result of a
loss, the sum so exhausted shall be reinstated from the date the loss commenced.
 B.
    
    For each amount so reinstated, the Company agrees to pay an additional premium at the time of
the Reinsurers payment of the loss calculated in accordance with the following formula:
 1.
    
    The amount of limit exhausted for each risk, each loss divided by $35,000,000.2.
    
    The reinsurance premium paid or payable for the term of this Contract.
  C.
    
    Nevertheless, the Reinsurers liability hereunder shall not exceed $35,000,000 in respect of
each risk, each loss in respect of any one loss, and shall be further limited to $35,000,000
each Loss Occurrence, and shall be further limited to $70,000,000 in respect of all risks, all
losses occurring during the term of this Contract.
 ARTICLE IX
 REINSURANCE PREMIUM
 A.
    
    As premium for the reinsurance provided hereunder, the Company shall pay the Reinsurer 0.635%
of its Net Earned Premium during the term of this Contract, subject to a minimum premium of
$2,994,000.
 B.
    
    The Company shall pay the Reinsurer a deposit premium of $3,327,000 in four equal
installments of $831,750 on April 1; July 1; October 1, 2008; and January 1, 2009.
 C.
    
    Within 90 days after the expiration of this Contract, the Company shall provide a report to
the Reinsurer setting forth the premium due hereunder, computed in accordance with
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paragraph A, and any additional premium due the Reinsurer or return premium due the Company
shall be remitted promptly.
 ARTICLE X
 NOTICE OF LOSS AND LOSS SETTLEMENTS
 A.
    
    The Company shall advise the Reinsurer 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 Reinsurer.
 B.
    
    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.
 C.
    
    All loss settlements made by the Company that are within the terms and conditions of the
Policy or by way of compromise, and except as otherwise provided in this Contract, shall be
binding upon the Reinsurer. Upon receipt of satisfactory proof of loss and within no more
than 25 days of receipt of the proof of loss, the Reinsurer agrees to pay or allow, as the
case may be, its share of each such settlement in accordance with this Contract.
 D.
    
    Ex-gratia payments shall be recoverable hereunder only where the Company, through written
communication prior to settlement, counsels with the Reinsurer and the Reinsurer concurs, in
writing, with the settlement proposed by the Company.
 ARTICLE XI
 AGENCY AGREEMENT
  ARTICLE XII
 SALVAGE AND SUBROGATION
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ARTICLE XIII
 ERRORS AND OMISSIONS (BRMA 14C)
  ARTICLE XIV
 OFFSET
  ARTICLE XV
 CURRENCY (BRMA 12A)
 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 XVI
 TAXES (BRMA 50C)
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ARTICLE XVII
 FEDERAL EXCISE TAX (BRMA 17A)
  A.
    
    The subscribing reinsurer has agreed to allow, for the purpose of paying the Federal Excise
Tax, the applicable percentage of the premium payable hereon (as imposed under Section 4371 of
the Internal Revenue Code) to the extent such premium is subject to the Federal Excise Tax.
 B.
    
    In the event of any return of premium becoming due hereunder, the subscribing reinsurer will
deduct the applicable percentage from the return premium payable hereon, and the Company or
its agent should take steps to recover the tax from the United States Government.
 ARTICLE XVIII
 UNAUTHORIZED REINSURANCE (BRMA 55C)
  A.
    
    As regards Policies or bonds issued by the Company coming within the scope of this Contract,
the Company agrees that when it shall file with the insurance regulatory authority or set up
on its books reserves for losses covered hereunder which it shall be required by law to set
up, it will forward to the subscribing reinsurer a statement showing the proportion of such
reserves which is applicable to the subscribing reinsurer. The subscribing reinsurer hereby
agrees to fund such reserves in respect of known outstanding losses that have been reported to
the subscribing reinsurer and allocated Loss Adjustment Expense relating thereto, losses and
allocated Loss Adjustment Expense paid by the Company but not recovered from the subscribing
reinsurer, plus reserves for losses incurred but not reported, as shown in the statement
prepared by the Company (hereinafter referred to as subscribing reinsurers obligations) by
funds withheld, cash advances or a Letter of Credit. The subscribing reinsurer shall have the
option of determining the method of funding provided it is acceptable to the insurance
regulatory authorities having jurisdiction over the Companys reserves.
 B.
    
    When funding by a Letter of Credit, the subscribing reinsurer agrees to apply for and secure
timely delivery to the Company of a clean, irrevocable and unconditional Letter of Credit
issued by a bank and containing provisions acceptable to the insurance regulatory authorities
having jurisdiction over the Companys reserves in an amount equal to the subscribing
reinsurers proportion of said reserves. Such Letter of Credit shall be issued for a period of
not less than one year, and shall be automatically extended for one year from its date of
expiration or any future expiration date unless 30 days (60 days where required by
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insurance regulatory authorities) prior to any expiration date the issuing bank shall notify
the Company by certified or registered mail that the issuing bank elects not to consider the
Letter of Credit extended for any additional period.
 C.
    
    The subscribing reinsurer and Company agree that the Letters of Credit provided by the
subscribing reinsurer pursuant to the provisions of this Contract may be drawn upon at any
time, notwithstanding any other provision of this Contract, and be utilized by the Company or
any successor, by operation of law, of the Company including, without limitation, any
liquidator, rehabilitator, receiver or conservator of the Company for the following purposes,
unless otherwise provided for in a separate Trust Agreement:
 1.
    
    To reimburse the Company for the subscribing reinsurers obligations, the payment
of which is due under the terms of this Contract and which has not been otherwise paid;2.
    
    To make refund of any sum which is in excess of the actual amount required to pay
the subscribing reinsurers obligations under this Contract;3.
    
    To fund an account with the Company for the subscribing reinsurers obligations.
Such cash deposit shall be held in an interest bearing account separate from the
Companys other assets, and interest thereon not in excess of the prime rate shall accrue
to the benefit of the subscribing reinsurer;4.
    
    To pay the subscribing reinsurers share of any other amounts the Company claims
are due under this Contract.
  D.
    
    The issuing bank shall have no responsibility whatsoever in connection with the propriety of
withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that
withdrawals are made only upon the order of properly authorized representatives of the
Company.
 E.
    
    At annual intervals, or more frequently as agreed but never more frequently than quarterly,
the Company shall prepare a specific statement of the subscribing reinsurers obligations, for
the sole purpose of amending the Letter of Credit, in the following manner:
 1.
    
    If the statement shows that the subscribing reinsurers obligations exceed the
balance of credit as of the statement date, the subscribing reinsurer shall, within
30 days after receipt of notice of such excess, secure delivery to the Company of an
amendment to the Letter of Credit increasing the amount of credit by the amount of such
difference.2.
    
    If, however, the statement shows that the subscribing reinsurers obligations are
less than the balance of credit as of the statement date, the Company shall, within
30 days after receipt of written request from the subscribing reinsurer, release such
excess
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credit by agreeing to secure an amendment to the Letter of Credit reducing the amount of
credit available by the amount of such excess credit.
 ARTICLE XIX
 NET RETAINED LINES (BRMA 32E)
 A.
    
    This Contract applies only to that portion of any Policy which the Company retains net for
its own account (prior to deduction of any underlying reinsurance specifically permitted in
this Contract), and in calculating the amount of any loss hereunder and also in computing the
amount or amounts in excess of which this Contract attaches, only loss or losses in respect of
that portion of any Policy which the Company retains net for its own account shall be
included.
 B.
    
    The amount of the Reinsurers 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 reinsurer(s),
whether specific or general, any amounts which may have become due from such reinsurer(s),
whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.
 ARTICLE XX
 TRIA INUREMENT
 A.
    
    As respects any insured loss, as defined in the Terrorism Risk Insurance Act of 2002,
including the Terrorism Risk Insurance Extension Act of 2005, and any other extensions or
amendments thereto (TRIA), for which the Reinsurer makes a payment to the Company under this
Contract, the following provisions shall apply.
 B.
    
    If the sum of
 1.
    
    Financial assistance provided under TRIA to the Company and its affiliates, if any,
(as affiliate is defined in TRIA) with respect to all insured loss that applies to
each program year, as defined in TRIA and2.
    
    Amounts due from all reinsurance which the Company and its affiliates, if any,
purchase, including but not limited to this reinsurance, all other treaty reinsurance and
all facultative reinsurance, and whether collectible or not, under which there is a
recoverable for any such insured loss
  Page 16




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C.
    
    Upon receipt of payment under TRIA by the Company and its affiliates, if any, the Company
shall pay to or credit the Reinsurer under this Contract with the Reinsurers share of such
excess amount determined in accordance with the preceding paragraph.
 ARTICLE XXI
 SPECIAL ACCEPTANCES
 A.
    
    Business not within the terms of this Contract may be submitted to the Reinsurer for special
acceptance and, if accepted by the Reinsurer, shall be subject to all of the terms of this
Contract, except as modified by the Special Acceptance.
 B.
    
    Renewal of Policies, which have previously received a Special Acceptance under prior
Contracts, are deemed to be covered hereunder.
 C.
    
    Further, should a reinsurer become party to this Contract subsequent to the acceptance of any
business not normally covered hereunder, that reinsurer will automatically accept the special
acceptances as being part of this Contract.
 ARTICLE XXII
 MORTGAGEE REINSURANCE ENDORSEMENTS
 A.
    
    To induce a mortgagee named in a policy of the Company to accept such policy, the Company and
the Reinsurer may agree to name such mortgagee as a third party beneficiary in a Mortgagee
Reinsurance Endorsement made a part of this Contract. For each such mortgagee Reinsurance
Endorsement so issued, the Company shall indemnify the Reinsurer for any and all liability,
loss, cost, or expense the Reinsurer may sustain or incur in excess of its obligations under
this Contract by reason of the issuance of such Mortgagee Reinsurance Endorsement.
 B.
    
    If the Reinsurer becomes liable to a mortgagee under any Mortgagee Reinsurance Endorsement,
the Reinsurer shall, to the extent of its liability:
 1.
    
    Benefit pro-rata in reductions of the Companys loss by salvage, subrogation,
compromise, or otherwise.2.
    
    Be automatically subrogated to all of the mortgagees rights against the Company
under the policy.3.
    
    Be completely discharged from its obligation to make any payment to the Company
under this Contract and be entitled to set off against any amount due from the Reinsurer
to the Company under this or any other agreement for any amounts for which the Reinsurer
would not be liable except for the existence of such Mortgagee Reinsurance Endorsement.
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C.
    
    The Reinsurer shall have the right to cancel any Mortgagee Reinsurance Endorsement by notice
to the mortgagee.
 D.
    
    Prior to the termination date, the Company shall advise the Reinsurer as to which of the
above options shall apply.
 ARTICLE XXIII
 THIRD PARTY RIGHTS (BRMA 52C MODIFIED)
  ARTICLE XXIV
 SEVERABILITY
  ARTICLE XXV
 GOVERNING LAW (BRMA 71A)
  ARTICLE XXVI
 ACCESS TO RECORDS (BRMA 1E)
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ARTICLE XXVII
 INSOLVENCY
 A.
    
    In the event of the insolvency of the Company, this reinsurance shall be payable directly to
the Company or to its liquidator, receiver, conservator or statutory successor, with
reasonable provision for verification, on the basis of the liability of the Company without
diminution because of the insolvency of the Company or because the liquidator, receiver,
conservator or statutory successor of the Company has failed to pay all or a portion of any
claim. It is agreed, however, that 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 Company indicating the Policy or bond reinsured, which claim would involve a
possible liability on the part of the Reinsurer, within a reasonable time after such claim is
filed in the conservation or liquidation proceeding or in the receivership, and that during
the pendency of such claim, the 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 that
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 the
approval of the Court, against the Company as part of the expense of conservation or
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.
 B.
    
    Where two or more subscribing 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.
 C.
    
    It is further agreed that, in the event of the insolvency of the Company, the reinsurance
under this Contract shall be payable directly by the Reinsurer to the Company or its
liquidator, receiver, conservator, or statutory successor, except as provided by
Section 4118(a) of the New York Insurance Law or except (1) where this Contract specifically
provides another payee of such reinsurance in the event of the insolvency of the Company or
(2) where the Reinsurer with the consent of the direct insured or insureds has assumed such
Policy obligations of the Company as direct obligations of the Reinsurer to the payees under
such Policies and in substitution for the obligations of the Company to such payees.
 D.
    
    In the event of the insolvency of any company or companies listed in the designation of
Company under this Contract, this Article shall apply only to the insolvent company or
companies.
 ARTICLE XXVIII
 ARBITRATION
 A.
    
    As a condition precedent to any right of action hereunder, any irreconcilable dispute arising
out of the interpretation, performance or breach of this Contract, including the formation or
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validity thereof, whether arising before or after the expiry or termination of the Contract,
shall be submitted for decision to a panel of 3 arbitrators. Notice requesting arbitration
will be in writing and sent by certified mail, return receipt requested, or such reputable
courier service as is capable of returning proof of receipt of such notice by the recipient to
the party demanding arbitration.
 B.
    
    One arbitrator shall be appointed by each party. If either party fails to appoint its
arbitrator within 30 days after being requested to do so by the other party, the latter, after
10 days notice by certified mail or reputable courier as provided above of its intention to do
so, may appoint the second arbitrator.
 C.
    
    The two arbitrators shall, before instituting the hearing, appoint an impartial third
arbitrator who shall preside at the hearing. If the 2 arbitrators are unable to agree upon
the third arbitrator within 30 days of their appointment, the Company shall petition the
American Arbitration Association to appoint the third arbitrator. If the American Arbitration
Association fails to appoint the third arbitrator within 30 days of being requested to do so,
either party may request a district court judge of the federal district court having
jurisdiction over the geographical area in which the arbitration is to take place, or if the
federal court declines to act, the state court having general jurisdiction in such area to
select the third arbitrator from a list of 6 individuals (3 named by each arbitrator
previously appointed). All arbitrators shall be disinterested active or former senior
executives of insurance or reinsurance companies or Underwriters at Lloyds, London.
 D.
    
    Within 30 days after notice of appointment of all arbitrators, the panel shall meet and
determine timely periods for briefs, discovery procedures and schedules for hearings. The
panel shall be relieved of all judicial formality and shall not be bound by the strict rules
of procedure and evidence. Unless the panel agrees otherwise, arbitration shall take place in
Bala Cynwyd, Pennsylvania, but the venue may be changed when deemed by the panel to be in the
best interest of the arbitration proceeding. Insofar as the arbitration panel looks to
substantive law, it shall consider the law of the State of Pennsylvania. The decision of any
2 arbitrators when rendered in writing shall be final and binding. The panel is empowered to
grant interim relief as it may deem appropriate.
 E.
    
    The panel shall make its decision considering the custom and practice of the applicable
insurance and reinsurance business as promptly as possible following the termination of the
hearings. Judgment upon the award may be entered in any court having jurisdiction thereof.
 F.
    
    If more than one subscribing reinsurer is involved in arbitration where there are common
questions of law or fact and a possibility of conflicting awards or inconsistent results, all
such subscribing reinsurers shall constitute and act as one party for purposes of this Article
and communications shall be made by the Company to each of the subscribing reinsurers
constituting the one party; provided, however, that nothing therein shall impair the rights of
such subscribing reinsurers to assert several, rather than joint defenses or claims, nor be
construed as changing the liability of the subscribing reinsurers under the terms of this
Contract from several to joint.
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G.
    
    Each party shall bear the expense of its own arbitrator and shall jointly and equally bear
with the other party the cost of the third arbitrator. The remaining costs of the arbitration
shall be allocated by the panel. The panel may, at its discretion, award such further costs
and expenses as it considers appropriate, including but not limited to attorneys fees, to the
extent permitted by law. However, the panel may not award any exemplary or punitive damages.
 ARTICLE XXIX
 SERVICE OF SUIT
  A.
    
    In the event of the failure of the subscribing reinsurer to pay any amount claimed to be due
hereunder, the subscribing 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 the subscribing
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. The subscribing reinsurer, once the appropriate court is selected, whether such court
is the one originally chosen by the Company and accepted by subscribing reinsurer or is
determined by removal, transfer, or otherwise, as provided for above, shall comply with all
requirements necessary to give said court jurisdiction and, in any suit instituted against it
upon this Contract, shall abide by the final decision of such court or of any appellate court
in the event of an appeal.
 B.
    
    Service of process in such suit may be made upon the agent for the service of process
(agent) named below, depending on the jurisdiction where the Company chooses to bring suit:
 1.
    
    If the suit is brought in the State of California, the law firm of Mendes and
Mount, 445 South Figueroa, 38th Floor, Los Angeles, California 90071 shall be
authorized and directed to accept service of process on behalf of the subscribing
reinsurer in any such suit;2.
    
    If the suit is brought in the State of New York, the law firm of Mendes and Mount,
750 Seventh Avenue, New York, New York 10019 shall be authorized and directed to accept
service of process on behalf of the subscribing reinsurer in any such suit;3.
    
    If the suit is brought in any state other than California or New York, either of
the agents described in subparagraphs 1 or 2 above shall be authorized and directed to
accept service of process on behalf of the subscribing reinsurer in any such suit; or
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4.
    
    If the subscribing reinsurer has designated an agent in the subscribing reinsurers
Interests and Liabilities Agreement attached hereto, then that agent shall be authorized
and directed to accept service of process on behalf of the subscribing reinsurer in any
suit. However, if an agent is designated in the subscribing reinsurers Interests and
Liabilities Agreement and the agent is not located in California as respects a suit
brought in California or New York as respects a suit brought in New York, in keeping with
the laws of the states of California and New York which require that service be made on
an agent located in the respective state if a suit is brought in that state, the
applicable office of Mendes and Mount stipulated in subparagraphs 1 and 2 above must be
used for service of suit unless the provisions of paragraph C of this Article apply.
 C.
    
    Further, pursuant to any statute of any state, territory or district of the United States
that makes provision therefor, the subscribing 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 its true and lawful attorney upon whom
may be served any lawful process in any action, suit or proceedings instituted by or on behalf
of the Company or any beneficiary hereunder arising out of this Contract, and hereby
designates the above-named as the person to whom the said officer is authorized to mail such
process or a true copy thereof.
 ARTICLE XXX
 MODE OF EXECUTION
  ARTICLE XXXI
 INTERMEDIARY
 th
 Page 22




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IN WITNESS WHEREOF
 
 PHILADELPHIA INSURANCE COMPANY
PHILADELPHIA INDEMNITY INSURANCE COMPANY
 ByPrinted NameTitle
 Page 23




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NUCLEAR INCIDENT EXCLUSION CLAUSE  PHYSICAL DAMAGE REINSURANCE  U.S.A.
 1)
    
    This Agreement does not cover any loss or liability accruing to the Reinsured, directly or
indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers
formed for the purpose of covering Atomic or Nuclear Energy risks.
 2)
    
    Without in any way restricting the operation of paragraph (1) of this Clause, this Agreement
does not cover any loss or liability accruing to the Reinsured, directly or indirectly and
whether as Insurer or Reinsurer, from any Insurance against Physical Damage (including
business interruption or consequential loss arising out of such Physical Damage) to:
 I.
    
    Nuclear reactor power plants including all auxiliary property on the site, orII.
    
    Any other nuclear reactor installation, including laboratories
handling radioactive materials in connection with reactor
installations, and critical facilities as such, orIII.
    
    Installations for fabricating complete fuel elements or for
processing substantial quantities of special nuclear material, and
for reprocessing, salvaging, chemically separating, storing or
disposing of spent nuclear fuel or waste materials, orIV.
    
    Installations other than those listed in paragraph 2) III above using
substantial quantities of radioactive isotopes or other products of
nuclear fission.
 3)
    
    Without in any way restricting the operations of paragraphs 1) and 2) hereof, this Agreement
does not cover any loss or liability by radioactive contamination accruing to the Reinsured,
directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property
which is on the same site as a nuclear reactor power plant or other nuclear installation and
which normally would be insured therewith except that this paragraph 3) shall not operate
 a)
    
    where the Reinsured does not have knowledge of such nuclear reactor power plant or
nuclear installation, or
  4)
    
    Without in any way restricting the operations of paragraphs 1), 2) and 3) hereof, this
Agreement does not cover any loss or liability by radioactive contamination accruing to the
Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive
contamination is a named hazard specifically insured against.
 5)
    
    It is understood and agreed that this Clause shall not extend to risks using radioactive
isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the
primary hazard.
 6)
    
    The term special nuclear material shall have the meaning given it in the Atomic Energy Act
of 1954, or by any law amendatory thereof.
 7)
    
    Reinsured to be sole judge of what constitutes:
 a)
    
    substantial quantities, andb)
    
    the extent of installation, plant or site.
  a)
    
    all policies issued by the Reinsured on or before 31st, December 1957, shall be
free from the application of the other provisions of this Clause until expiry date or
31st, December 1960, whichever first occurs whereupon all the provisions of this Clause
shall apply,
  12/12/57
N.M.A. 1119
BRMA 35B




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WAR EXCLUSION




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##### 



INTERESTS AND LIABILITIES AGREEMENT
  HANNOVER RUCKVERSICHERUNG AG    PROPERTY FOURTH PER RISK EXCESS OF LOSS
REINSURANCE AGREEMENT
  PHILADELPHIA INSURANCE COMPANY
PHILADELPHIA INDEMNITY INSURANCE COMPANY
Bala Cynwyd, Pennsylvania
And any additional company established or acquired by the Company
    IN WITNESS WHEREOF
  HANNOVER RUCKVERSICHERUNG AG




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##### 



INTERESTS AND LIABILITIES AGREEMENT
  QBE REINSURANCE CORPORATION    PROPERTY FOURTH PER RISK EXCESS OF LOSS
REINSURANCE AGREEMENT
  PHILADELPHIA INSURANCE COMPANY
PHILADELPHIA INDEMNITY INSURANCE COMPANY
Bala Cynwyd, Pennsylvania
And any additional company established or acquired by the Company
    IN WITNESS WHEREOF
  QBE REINSURANCE CORPORATION




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##### 



INTERESTS AND LIABILITIES AGREEMENT
  UNDERWRITERS AT LLOYDS, LONDON
AS SET FORTH IN THE SIGNING PAGE(S) ATTACHED HERETO
  PROPERTY FOURTH PER RISK EXCESS OF LOSS
REINSURANCE AGREEMENT
  PHILADELPHIA INSURANCE COMPANY
PHILADELPHIA INDEMNITY INSURANCE COMPANY
Bala Cynwyd, Pennsylvania
And any additional company established or acquired by the Company
    IN WITNESS WHEREOF