##### 



Exhibit 10.1

|       |  |                                                                                                                                                    |  |                                                                                                                                                               
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|(SEAL) |  | STATE BOARD OF ADMINISTRATIONOF FLORIDA1801 Hermitage Boulevard-Suite 100Tallahassee, Florida 32308
(850) 488-4406Post Office Box 13300
32317-3300 |  | JEB BUSH
GOVERNOR
AS CHAIRMANTOM CALLAGHER
CHIEF FINANCIAL OFFICER
AS TREASURERCHARLIE CRISTATTORNEY GENERALAS SECRETARYCOLEMAN STIPANOVICH
EXECUTIVE DIRECTOR

REIMBURSEMENT CONTRACTEffective: June 1, 2003
(Contract)

between

PHILADELPHIA INDEMNITY INSURANCE
COMPANY
Bala Cynwyd, PA
(Company)

NAIC # 18058

and

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA)
WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

PREAMBLE

The Legislature of the State of Florida has enacted Section 215.555, Florida
Statutes Statute, which directs the SBA to administer the FHCF. This
Contract is subject to the Statute and to any administrative rule adopted
pursuant thereto, and is not intended to be in conflict therewith.

In consideration of the promises set forth in this Contract, the parties agree
as follows:

ARTICLE I - SCOPE OF AGREEMENT

As a condition precedent to the SBAs obligations under this Contract, the
Company, an Authorized Insurer or an entity writing Covered Policies under
Section 627.351, Florida Statutes, in the State of
Florida, shall report to the SBA in a specified format the business it writes
which is described in this Contract as Covered Policies.

The terms of this Contract shall determine the rights and obligations of the
parties. This Contract provides reimbursement to the Company under certain
circumstances, as described herein, and does not provide or extend insurance or
reinsurance coverage to any person, firm, corporation or other entity. The SBA
shall reimburse the Company for its Ultimate Net Loss on Covered Policies in
excess of the Companys Retention as a result of each Loss Occurrence
commencing during the Contract Year, to the extent funds are available, all as
hereinafter defined.

FHCF-2003K

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ARTICLE II - PARTIES TO THE CONTRACT

This Contract is solely between the Company and the SBA which administers the
FHCF. In no instance shall any insured of the Company or any claimant against
an insured of the Company, or any other third party, have any rights under this
Contract, except as provided in Article XIV. The SBA will only disburse funds
to the Company, except as provided for in Article XIV of this Contract.

ARTICLE III - TERM

This Contract shall apply to Loss Occurrences which commence during the period
from 12:01 a.m., Eastern Time, June 1, 2003, to 12:01 a.m., Eastern Time, June
1, 2004 (Contract Year).

The Company must designate a coverage level, make any required selections
within this Contract, and return this fully executed Contract (two originals)
to the FHCF Administrator so that the Contract, including schedules, is
received by the FHCF Administrator no later than 5 p.m., Central Time, June 2,
2003 (the first business day following June 1, 2003). Failure to do so will
result in a referral to the Office of Insurance Regulation within the
Department of Financial Services for administrative action. Furthermore, the
Companys coverage level under this Contract will be deemed as follows:



|(1) |  | For Companies that are a member of a National Association of Insurance
Commissioners (NAIC) group, the same coverage level selected by the other
Companies of the same NAIC group shall be deemed. If executed Contracts
for none of the members of an NAIC group have been received by the FHCF
Administrator, the coverage level from the prior Contract Year shall be
deemed.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | For Companies that are not a member of an NAIC group under which other
Companies are active participants in the FHCF, the coverage level from the
prior Contract Year shall be deemed.                                                                                                                                                                                          
|   
|(3) |  | For New Participants that are a member of an NAIC group, the same
coverage level selected by the other Companies of the same NAIC group
shall be deemed.                                                                                                                                                                                                                        
|   
|(4) |  | For New Participants, as that term is defined in Article V(21) herein,
that are not a member of an NAIC group under which other Companies are
active participants in the FHCF, the 45% coverage level shall be deemed.                                                                                                                                                          

The SBA shall not be liable for Loss Occurrences which commence after the
effective time and date of expiration or termination. Should this Contract
expire or terminate while a Loss Occurrence covered hereunder is in progress,
the SBA shall be responsible for such Loss Occurrence in progress in the same
manner and to the same extent it would have been responsible had the Contract
expired the day following the conclusion of the Loss Occurrence in progress.

ARTICLE IV - LIABILITY OF THE FHCF



|(1) |  | The SBA shall reimburse the Company, with respect to each Loss Occurrence
commencing during the Contract Year for the Reimbursement Percentage
elected, this percentage times the amount of Ultimate Net Loss paid by the
Company in excess of the Companys Retention, plus 5% of the reimbursed
losses for Loss Adjustment Expense Reimbursement.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The Reimbursement Percentage will be 45% or 75% or 90%, at the Companys
option as elected under Schedule A attached to and forming part of this
Contract, unless it must be adjusted for some or all Companies in the FHCF
as provided in (3) below.                                                                                                
|   
|(3) |  | In determining reimbursements under this Article, the SBA shall:                                                                                                                                                                                                                                                                                     



| | (a) |  | First, reimburse Companies qualified as limited apportionment
companies under
Section 627.351(2)(b)3., Florida Statutes, for the amount (if any) of
reimbursement due under the individual Companys Contract, but not to
exceed the lesser of $10 million or an amount equal to 10 times the
individual Companys Reimbursement Premium for the Contract Year. This
provision does not apply if the projected Balance of the Fund as of
December 31 of the
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

FHCF-2003K

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| |     |  | Contract Year, exclusive of any bonding capacity of the FHCF, exceeds $2
billion. Further, if the Company is a member of an NAIC group, the
Company may not receive reimbursement under this provision if any other
member of the NAIC group has received reimbursement under this
provision.                                                                                                                                                                                                                                                                                                                                                          
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Next, reimburse each of the Companies for the amount (if any) of
reimbursement due under the individual Companys Contract, but not to
exceed an amount equal to the Projected Payout Multiple times the
individual Companys Reimbursement Premium for the Contract Year,
provided, however, that entities created under Section 627.351, Florida
Statutes, shall be further reimbursed in accordance with subsection (c)
below. If the Company qualifies as a limited apportionment company
under Section 627.351(2)(b)3., Florida Statutes, any amount payable
under this provision shall be reduced by the amount (if any) payable
under (a) above.
|
| | (c) |  | Thereafter, reimburse each entity created by Section 627.351,
Florida Statutes, for a pro rata share of any remaining Actual
Claims-Paying Capacity of the FHCF based on the proportion determined
by dividing such entitys remaining reimbursable losses under Covered
Policies from Covered Events for the Contract Year by the total
remaining reimbursable losses under Covered Policies from Covered
Events for the Contract Year, for which any remaining FHCF balance or
bond proceeds are sufficient, up to a limit of $11 billion for any one
Contract Year, in accordance with Section 215.555(4)(c)1., Florida
Statutes.                   



|(4) |  | Reimbursement amounts shall not be reduced by reinsurance paid or payable
to the Company from other sources; however, the Company shall not allow
recoveries from such other sources, except reinsurance recoveries from
affiliated Companies and/or reinsurers, taken together with reimbursements
under this Contract, to exceed 100% of the Companys losses under Covered
Policies from Covered Events. If such recoveries and reimbursements
exceed 100% of the Companys losses under Covered Policies from Covered
Events, and if there is no agreement between the Company and its
reinsurer(s) to the contrary, any amount in excess of 100% of the
Companys losses under Covered Policies from Covered Events shall be
returned to the SBA.                                                                                                                       
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(5) |  | The SBA shall notify the Company of the FHCFs estimated Borrowing
Capacity, the projected Balance of the Fund as of December 31, and the
Companys estimated share of total Reimbursement Premium to be paid to the
FHCF for the Contract Year. In May and October of each year, the SBA
shall publish in the Florida Administrative Weeklya statement of the
FHCFs estimated Borrowing Capacity and the Balance of the Fund as of
December 31.                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(6) |  | The obligation of the SBA with respect to all Contracts covering a
particular Contract Year shall not exceed the Balance of the Fund as of
December 31 of that Contract Year, together with the maximum amount the
SBA is able to raise through the issuance of revenue bonds or other means
available to the SBA under Section 215.555, Florida Statutes, up to a
limit of $11 billion for any one Contract Year in accordance with Section
215.555(4)(c)1., Florida Statutes. The obligations and the liability of
the SBA are more fully described in Rule 19-8.013, Florida Administrative
Code (F.A.C.). If Reimbursement Premiums are used for debt service in the
event of a temporary shortfall in the collection of emergency assessments,
then the amount of the Premiums so used will be reimbursed to the SBA when
sufficient emergency assessments are received.

ARTICLE V - DEFINITIONS



|(1) |  | Actual Claims-Paying Capacity of the FHCF                                                                                                                                                                                                                                                                      
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | This term means the sum of the Balance of the Fund as of December 31 of a
Contract Year, plus any reinsurance purchased by the FHCF, plus the amount
the SBA is able to raise through the issuance of revenue bonds up to a limit
of $11 billion pursuant to Section 215.555(4)(c)1. and (6), Florida
Statutes.

FHCF-2003K

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|(2)  |  | Actuarially Indicated                                                                                                                                                                                                                                                                                                                                            
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                                                                                                                                                                                                                  
|     |  | This term means, with respect to Premiums paid by Companies for
reimbursement provided by the FHCF, an amount determined in accordance with
the definition provided in Section 215.555(2)(a), Florida Statutes.                                                                                                                                                  
|     |  |                                                                                                                                                                                                                                                                                                                                                                  
|(3)  |  | Additional Living Expense (ALE)                                                                                                                                                                                                                                                                                                                                  
|     |  |                                                                                                                                                                                                                                                                                                                                                                  
|     |  | ALE losses covered by the FHCF are not to exceed 20 percent of the insured
value of mobile homes or personal Residential Structures or 40 percent of
the insured value of contents covered under a tenants policy or a
condominium unit owners policy. ALE losses do not include losses for fair
rental value, loss of rents, or business interruption.         
|     |  |                                                                                                                                                                                                                                                                                                                                                                  
|(4)  |  | Administrator                                                                                                                                                                                                                                                                                                                                                    
|     |  |                                                                                                                                                                                                                                                                                                                                                                  
|     |  | This term means the entity with which the SBA contracts to perform
administrative tasks associated with the operations of the FHCF. The present
Administrator is Paragon Reinsurance Risk Management Services, Inc., 3600
West 80th Street, Minneapolis, Minnesota 55431. The telephone number is
(800) 689-3863, and the facsimile number is (800) 264-0492.    
|     |  |                                                                                                                                                                                                                                                                                                                                                                  
|(5)  |  | Authorized Insurer                                                                                                                                                                                                                                                                                                                                               
|     |  |                                                                                                                                                                                                                                                                                                                                                                  
|     |  | This term is defined in Section 624.09(1), Florida Statutes.                                                                                                                                                                                                                                                                                                     
|     |  |                                                                                                                                                                                                                                                                                                                                                                  
|(6)  |  | Borrowing Capacity                                                                                                                                                                                                                                                                                                                                               
|     |  |                                                                                                                                                                                                                                                                                                                                                                  
|     |  | This term means the amount of funds which are able to be raised by the
issuance of revenue bonds or through other financing mechanisms, less bond
issuance expenses and reserves.                                                                                                                                                                                
|     |  |                                                                                                                                                                                                                                                                                                                                                                  
|(7)  |  | Citizens Property Insurance Corporation (Citizens)                                                                                                                                                                                                                                                                                                               
|     |  |                                                                                                                                                                                                                                                                                                                                                                  
|     |  | This term means an entity formed under Section 627.351, Florida Statutes and
refers to both Citizens Property Insurance Corporation High Risk Account
(formerly the FWUA) and Citizens Property Insurance Corporation Personal
Lines and Commercial Lines Accounts (formerly the FRPCJUA).                                                                       
|     |  |                                                                                                                                                                                                                                                                                                                                                                  
|(8)  |  | Contract                                                                                                                                                                                                                                                                                                                                                         
|     |  |                                                                                                                                                                                                                                                                                                                                                                  
|     |  | This term means this Reimbursement Contract for the current Contract Year.                                                                                                                                                                                                                                                                                       
|     |  |                                                                                                                                                                                                                                                                                                                                                                  
|(9)  |  | Covered Event                                                                                                                                                                                                                                                                                                                                                    
|     |  |                                                                                                                                                                                                                                                                                                                                                                  
|     |  | This term means any one storm declared to be a hurricane by the National
Hurricane Center, which causes insured losses in Florida, both while it is
still a hurricane and throughout any subsequent downgrades in storm status
by the National Hurricane Center. Any storm, including a tropical storm,
which does not become a hurricane is not a Covered Event.
|     |  |                                                                                                                                                                                                                                                                                                                                                                  
|(10) |  | Covered Policy                                                                                                                                                                                                                                                                                                                                                   
|     |  |                                                                                                                                                                                                                                                                                                                                                                  

| | (a) |  | Covered Policy, as defined in Section 215.555(2)(c), Florida
Statutes, is further clarified to mean only that portion of a binder,
policy or contract of insurance (Policy Contract) that insures real or
personal property located in the State of Florida to the extent such
Policy Contract insures a Residential Structure, as defined in
definition (27) herein, or the contents of a Residential Structure,
located in the State of Florida, or ALE coverage as defined in
definition (3) herein.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Due to the specialized nature of the definition of Covered
Policies, Covered Policies are not limited to only one line of
business in the Companys annual statement required to be filed by
Section 624.424, Florida Statutes. Instead, Covered Policies are
found in several lines of business on the Companys annual statement.
Covered Policies will at a minimum be reported in the Companys
statutory annual statement as:                                                                     
| |     |  | - Fire                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |  | - Allied Lines                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |  | - Farmowners Multiple Peril                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |  | - Homeowners Multiple Peril                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |  | - Commercial Multiple Peril (non liability portion, covering
condominiums and apartments)                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |  | - Inland Marine                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (c) |  | Note that where particular insurance exposures are reported on an
annual statement is not dispositive of whether or not the exposure is
a Covered Policy. This definition applies only to                                                                                                                                                                                                                                                                                                              

FHCF-2003K

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| |     |  | the first-party property section of Policy Contracts pertaining strictly
to the structure, its contents, or ALE coverage.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (d) |  | Covered Policy also includes any collateral protection insurance
policy covering personal residences which protects both the borrowers
and the lenders financial interest, in an amount at least equal to
the coverage for the dwelling in place under the lapsed homeowners
policy, if such policy can be accurately reported as required in
Section 215.555(5), Florida Statutes. A Company will be deemed to be
able to accurately report data if the required data, as specified in
the Premium Formula adopted in Section 215.555(5), Florida Statutes,
is available.
| |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (e) |  | See Article VI of this Contract for specific exclusions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|(11) |  | Estimated Claims-Paying Capacity of the FHCF                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |  | This term means the sum of the projected Balance of the Fund as of December
31 of a Contract Year, plus any reinsurance purchased by the FHCF, plus the
most recent estimate of the Borrowing Capacity of the FHCF, determined
pursuant to Section 215.555(4)(c), Florida Statutes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(12) |  | Excess Insurance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |  | This term, for the purposes of the FHCF, means insurance protection for
large commercial property risks that provides a layer of coverage above a
primary layer that acts much the same as a very large deductible. The
primary layer is insured through another policy. The excess policy does
not reimburse losses unless the losses exceed the primary layer. Several
excess policies may be used to cover high value properties, each with
different but coordinating primary layers. Excess Insurance policies that
include coverage for non-habitational property or non-Florida property are
not covered by the FHCF. As a result of the application of Rule
19-8.029(5)(c), F.A.C., exposure under an Excess Insurance policy that
would otherwise be reportable to the FHCF, but does not exceed the
attachment point of the Excess Insurance policy, would never trigger a
reimbursement from the FHCF, and is therefore not covered by the FHCF.
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(13) |  | Florida Department of Financial Services (Department )                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |  | This term means that Florida regulatory agency charged with regulating the
Florida insurance market and administering the Florida Insurance Code.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(14) |  | Florida Insurance Code                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |  | This term means those chapters in Section 624.01, Florida Statutes, which
are designated as the Florida Insurance Code.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(15) |  | Formula or the Premium Formula                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |  | This term means the Formula approved by the SBA for the purpose of
determining the Actuarially Indicated Premium to be paid to the FHCF. The
Premium Formula is defined as an approach or methodology which leads to the
creation of premium rates. The resulting rates are therefore incorporated
as part of the Premium Formula and are the result of the approach or
methodology employed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(16) |  | Fund Balance or Balance of the Fund as of December 31                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |  | These terms mean the Net assets: Unrestricted as indicated on the
unconsolidated FHCF Statement of Net Assets for the then current Contract
Year, to which is added: reported FHCF losses (including Loss Adjustment
Expense) for the then current Contract Year, whether paid or unpaid by
FHCF, as of December 31, and from which is subtracted: any reinsurance
recovered prior to, or recoverable as of, December 31; any obligations paid
or expected to be paid with bonding proceeds or receipts from emergency
assessments; amounts needed for administration for the then current State
of Florida fiscal year which have not been spent and which are not
reflected on the FHCF Statement of Net Assets; and the amount of mitigation
funds appropriated for the then current State of Florida fiscal year.                                                                                                                                    
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(17) |  | Ground-up or Gross Direct Losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |  | These terms mean all losses under the Covered Policy definition prior to
the application of the Companys FHCF Retention and FHCF reimbursement
percentage.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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|(18) |  | Insurer Group                                                                                                                                                                                                                                                                                                                                                                                                                                      
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |  | For purposes of the coverage option election in Section 215.555(4)(b),
Florida Statutes, Insurer Group means the group designation assigned by the
National Association of Insurance Commissioners (NAIC) for purposes of
filing consolidated financial statements. A Company is a member of a group
as designated by the NAIC until such Company is assigned another group
designation or is no longer a member of a group recognized by the NAIC.
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(19) |  | Loss Occurrence                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |  | This term means the sum of individual insured losses incurred under Covered
Policies resulting from the same Covered Event. Losses means direct
incurred losses under Covered Policies and excludes Loss Adjustment
Expenses.                                                                                                                                                                                                                    
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(20) |  | Loss Adjustment Expense Reimbursement                                                                                                                                                                                                                                                                                                                                                                                                              
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| | (a) |  | Loss Adjustment Expense Reimbursement shall be 5% of the
reimbursed losses under this Contract as provided in Article IV,
pursuant to Section 215.555(4)(b)1., Florida Statutes.                   
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |  |                                                                                                                                                                                                    
| | (b) |  | To the extent that loss reimbursements are limited to the Payout
Multiple applied to each Company, the 5% Loss Adjustment Expense is
included in the total Payout Multiple applied to each Company.
| |     |  |                                                                                                                                                                                                    

|(21) |  | New Participant(s)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |  | This term means all Companies which are granted a certificate of authority
by the Department after the beginning of the FHCFs Contract Year on June 1
and begin writing Covered Policies on or after the beginning of the
Contract Year, or which already have a certificate of authority and begin
writing Covered Policies on or after the beginning of the Contract Year. A
Company that removes exposure from either Citizens entity, as that term is
defined in (7) above, pursuant to an assumption agreement effective after
June 1 and had written no other Covered Policies on or before June 1 is
also considered a New Participant.
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(22) |  | Office of Insurance Regulationmeans that office within the Department of
Financial Services and which was created in Section 20.121(3), Florida
Statutes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(23) |  | Payout Multiple                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |  | This term means the multiple derived by dividing the Claims-Paying Capacity
of the FHCF by the total industry Reimbursement Premium for the FHCF for
the Contract Year billed as of December 31 of the Contract Year. The
multiple is finally determined once Reimbursement Premiums have been billed
as of December 31 and the amount of bond proceeds has been determined.                                                                                                                                                                                                                                                                   
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(24) |  | Premium                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |  | This term means the same as Reimbursement Premium.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(25) |  | Projected Payout Multiple                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |  | The Projected Payout Multiple is used to calculate a Companys projected
payout pursuant to Section 215.555(4)(d)2.b., Florida Statutes. The
Projected Payout Multiple is derived by dividing the estimated single
season Claims-Paying Capacity of the FHCF by the estimated total industry
Reimbursement Premium for the FHCF for the Contract Year. The Companys
Reimbursement Premium as paid to the SBA for the Contract Year is
multiplied by the Projected Payout Multiple to estimate the Companys

coverage from the FHCF for the Contract Year.                                                                                    
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(26) |  | Reimbursement Premium                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |  | Reimbursement Premium is the Premium determined by multiplying each $1,000
of insured value reported by the Company in accordance with Section
215.555(5)(b), Florida Statutes, by the rate as derived from the Premium
Formula, as described in Rule 19-8.028, F.A.C.                                                                                                                                                                                                                                                                                                                                                                         
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(27) |  | Residential Structures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |  | This term means personal lines residential, commercial lines residential, and
mobile home dwelling units used as a home or residence for other than transient
occupancy, as that term is defined in Section 83.43(10), Florida Statutes.
These include the primary structure and appurtenant structures insured under
the same policy and any other structures covered under
endorsements associated with a policy covering a residential structure, the
principal function of which at the time of loss was as a                                                                                                                              

FHCF-2003K

6



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##### 





|     |  | primary or secondary residence. Covered Residential Structures do not
include: hotels, motels, timeshares, or other similar structures that are
rented out daily, weekly, or monthly; homeowner associations, if no
habitational structures are insured under the policy; shelters, camps, or
retreats; commercial health care facilities and nursing homes, unless the
facility is part of a structure primarily consisting of other residences or
the facility is a separate structure that is used solely by the occupants
(or their guests) of a habitational structure covered under the same policy;
or boats insured under a separate policy or endorsement.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(28) |  | Retention                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    
|     |  | The Companys Retention means the amount of hurricane losses incurred by the
Company below which the Company is not entitled to reimbursement from the
FHCF. The Company is eligible for reimbursement only after its paid covered
losses exceed its Retention level. The Companys Retention level is
established in accordance with the provisions of Section 215.555(2)(e),
Florida Statutes. The Companys Retention shall be determined by
multiplying the Retention Multiple by the Companys Reimbursement Premium
for the Contract Year.                                                                                                                   
|    
|(29) |  | Retention Multiple                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



| | (a) |  | The Retention Multiple is applied to the Companys Reimbursement
Premium to determine the Companys Retention. The Retention Multiple
for the Contract Year shall be equal to $3 billion, adjusted to reflect
the percentage growth in FHCF exposure for Covered Policies since 1998,
divided by the estimated total industry Reimbursement Premium at the
90% Reimbursement Percentage level for the Contract Year as determined
by the SBA.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | The Retention Multiple as determined under (29)(a) above shall be
adjusted to reflect the
Reimbursement Percentage elected by the Company under this Contract as
follows:                                                                                                                                                                                                                                                                    
|

| | 1. |  | If the Company elects a 90% Reimbursement Percentage, the
adjusted Retention Multiple is 100% of the amount determined under
(29)(a) above;   
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | If the Company elects a 75% Reimbursement Percentage, the
adjusted Retention Multiple is 120% of the amount determined under
(29)(a) above; or
|
| | 3. |  | If the Company elects a 45% Reimbursement Percentage, the
adjusted Retention Multiple is 200% of the amount determined under
(29)(a) above.   



|(30) |  | Ultimate Net Loss
|---- |  | -----------------



| | (a) |  | This term means the Companys actual loss (excluding loss
adjustment expense) arising from each Loss Occurrence during the
Contract Year, provided, however, that the Companys loss shall be
determined in accordance with the deductible levels reported to the
FHCF for the exposure sustaining the loss.                                                                                                                                                      
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Salvages and all other recoveries, excluding reinsurance
recoveries, shall be first deducted from such loss to arrive at the
amount of liability attaching hereunder.                                                                                                                                                                                                                                                                                             
|
| | (c) |  | All salvages, recoveries or payments recovered or received
subsequent to a loss settlement under this Contract shall be applied as
if recovered or received prior to the aforesaid settlement and all
necessary adjustments shall be made by the parties hereto.                                                                                                                                                                                                  
|
| | (d) |  | Nothing in this clause shall be construed to mean that losses under
this Contract are not recoverable until the Companys Ultimate Loss has
been ascertained.                                                                                                                                                                                                                                                                                                     
|
| | (e) |  | The SBA shall be subrogated to the rights of the Company to the
extent of its reimbursement of the Company. The Company agrees to
assist and cooperate with the SBA in all respects as regards such
subrogation. The Company further agrees to undertake such actions as
may be necessary to enforce its rights of salvage and subrogation, and
its rights, if any, against other insurers as respects any claim, loss,
or payment arising out of a Covered Event.

FHCF-2003K

7



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##### 



ARTICLE VI  EXCLUSIONS

This Contract does not provide reimbursement for:



|(1)  |  | Any losses not defined as being within the scope of a Covered Policy.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(2)  |  | Any policy which excludes wind or hurricane coverage.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    
|(3)  |  | Any Excess Insurance policy that contains coverage for non-habitational
property or non-Florida property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    
|(4)  |  | Any liability of the Company attributable to losses for fair rental
value, loss of rents, or business interruption.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    
|(5)  |  | Any collateral protection policy that does not meet the definition of
Covered Policy as defined in Article V(10) herein.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    
|(6)  |  | Any reinsurance assumed by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    
|(7)  |  | Any exposure for: hotels, motels, timeshares, or other similar
structures that are rented out daily, weekly, or monthly; homeowner
associations, if no habitational structures are insured under the policy;
shelters, camps or retreats; and boats insured under a separate policy or
endorsement.                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    
|(8)  |  | Commercial healthcare facilities and nursing homes, unless the facility
is part of a structure primarily consisting of other residences.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    
|(9)  |  | Any exposure under commercial policies covering only appurtenant
structures or structures that do not function as a habitational structure
(e.g. a policy covering only the pool of an apartment complex).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    
|(10) |  | Any liability of the Company for extra contractual obligations and excess
of original policy limits liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    
|(11) |  | Losses in excess of the sum of the Balance of the Fund as of December 31
of the Contract Year and the amount the SBA is able to raise through the
issuance of revenue bonds or by the use of other financing mechanisms, up
to the limit pursuant to Section 215.555(4)(c), Florida Statutes.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    
|(12) |  | Any liability assumed by the Company from Pools, Associations, and
Syndicates. Exception: Covered Policies assumed from Citizens Property
Insurance Corporation High Risk Account or Citizens Property Insurance
Corporation Personal Lines and Commercial Lines Accounts under the terms
and conditions of an executed assumption agreement between the Authorized
Insurer and either Citizens entity is covered by this Contract.                                                                                                                                                                                                                                                                                                     
|    
|(13) |  | All 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 or 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.
|    
|(14) |  | Any liability of the Company for loss or damage caused by or resulting
from nuclear reaction, nuclear radiation, or radioactive contamination
from any cause, whether direct or indirect, proximate or remote, and
regardless of any other cause or event contributing concurrently or in any
other sequence to the loss.                                                                                                                                                                                                                                                                                                                                                                                                               
|    
|(15) |  | The FHCF does not provide coverage for water damage which is generally
excluded under property insurance contracts and has been defined to mean
flood, surface water, waves, tidal water, overflow of a body of water, or
spray from any of these, whether or not driven by wind.                                                                                                                                                                                                                                                                                                                                                                                                                                                       

ARTICLE VII - MANAGEMENT OF CLAIMS AND LOSSES

The Company shall investigate and settle or defend all claims and losses. All
payments of claims or losses by the Company within the terms and limits of the
appropriate coverage parts of Covered Policies

FHCF-2003K

8



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##### 



shall be binding on the SBA, subject to the terms of this Contract, including
the provisions in Article XIII relating to inspection of records and audits.

ARTICLE VIII  PAYMENT ADJUSTMENTS



|(1) |  | Offsets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Section 215.555(4)(d)1., Florida Statutes, provides the SBA with the right
to offset amounts due and payable to the SBA from the Company against any
reimbursement amounts due and payable to the Company from the SBA as a
result of the liability of the SBA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(2) |  | Reimbursement Adjustments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the
right to seek the return of excess loss reimbursements or advances which
have been paid to the Company along with interest thereon. Excess loss
reimbursements or advances are those payments or advances made to the
Company by the SBA on the basis of incorrect exposure submissions or
resubmissions, incorrect calculations of Reimbursement Premiums or
Retentions, payments in excess of the projected payout, incorrect proof of
loss reports, incorrect calculation of reinsurance recoveries, or subsequent
readjustment of policyholder claims, including subrogation and salvage, or
any combination of the foregoing. The Company will be sent an invoice
showing the due date for adjustments along with the interest due thereon
through the due date. Interest will continue to accrue if not paid by the
due date.

ARTICLE IX - REIMBURSEMENT PREMIUM



|(1) |  | The Company shall, in a timely manner, pay the SBA its Reimbursement
Premium for the Contract Year. The annual Reimbursement Premium for the
Contract Year shall be calculated in accordance with Section 215.555,
Florida Statutes, with any rules promulgated thereunder, and with Article
X(2).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Since the calculation of the Actuarially Indicated Premium assumes that
the Companies will pay their Reimbursement Premiums timely, interest
charges will accrue under the following circumstances. A Company may
choose to estimate its own Premium installments. However, if the
Companys estimation is less than the provisional Premium billed, an
interest charge will accrue on the difference between the estimated
Premium and the final Premium. If a Company estimates its first
installment, the Administrator shall bill that estimated Premium as the
second installment as well, which will be considered as an estimate by the
Company. No interest will accrue regarding any provisional Premium if
paid as billed by the FHCFs Administrator, except in the case of an
estimated second installment as set forth in this Article. Also, if a
Company makes an estimation that is higher than the provisional Premium
billed but is less than the final Premium, interest will not accrue.
However, if the Premium payment is not received from a Company when it is
due, an interest charge will accrue on a daily basis until the payment is
received. Interest will also accrue on Premiums resulting from
submissions or resubmissions finalized after December 1 of the Contract
Year. An interest credit will be applied for any Premium which is
overpaid as either an estimate or as a provisional Premium. Interest
shall not be credited past December 1 of the Contract Year. The
applicable interest rate for interest credits will be the projected
average rate earned by the SBA for the FHCF for the first six months of
the Contract Year. The applicable interest rate for interest charges will
accrue at this rate plus 3%.

FHCF-2003K

9



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##### 



ARTICLE X - REPORTS AND REMITTANCES



|(1) |  | Exposures
|--- |  | ---------



| | (a) |  | If the Company writes Covered Policies on or before June 1 of the
Contract Year, the Company shall report to the SBA, unless otherwise
provided in Rule 19-8.029, F.A.C., no later than the statutorily
required date of September 1 of the Contract Year, by ZIP Code or other
limited geographical area as specified by the SBA, its insured values
under Covered Policies as of June 30 of the Contract Year as outlined
in the Data Call adopted for the Contract Year under Rule 19-8.029,
F.A.C., and other data or information in the format specified by the
SBA.                                                                                                                                                                                                                                                                                                                           
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | If the Company first begins writing Covered Policies after June 1
but prior to December 1 of the Contract Year, the Company shall report
to the SBA, no later than March 1 of the Contract Year, by ZIP Code or
other limited geographical area as specified by the SBA, its insured
values under Covered Policies as of December 31 of the Contract Year as
outlined in the Supplemental Instructions for New Participants section
of the Data Call adopted for the Contract Year under Rule 19-8.029,
F.A.C., and other data or information in the format specified by the
SBA.                                                                                                                                                                                                                                                                                                                   
|
| | (c) |  | If the Company first begins writing Covered Policies on or after
December 1 but through and including May 31 of the Contract Year, the
Company shall not report its exposure data for the Contract Year to the
SBA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (d) |  | The requirements in (a) and (b), above, that reports are due on
September 1 and March 1, as applicable, means that the report shall be
in the physical possession of the FHCFs Administrator in Minneapolis
no later than 5 p.m., Central Time, on September 1 or March 1, as
applicable. If September 1 or March 1 is a Saturday, Sunday or legal
holiday, then the applicable due date will be the day immediately
following September 1 or March 1, as applicable, which is not a
Saturday, Sunday or legal holiday. For purposes of the timeliness of
the submission, neither the United States Postal Service postmark nor a
postage meter date is in any way determinative. Reports sent to the
SBA in Tallahassee, Florida, will be returned to the sender. Reports
not in the physical possession of the FHCFs Administrator by 5 p.m.,
Central Time, on the applicable due date are late.
|
| | (e) |  | Confidentiality of exposure reports. Pursuant to the provisions of
Section 215.557, Florida Statutes, the reports of insured values under
Covered Policies by ZIP Code submitted to the SBA pursuant to Section
215.555, Florida Statutes, are confidential and exempt from the
provisions of Section 119.07(1), Florida Statutes, and Section 24(a),
Art. I of the State Constitution.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             



|(2) |  | Reimbursement Premium
|--- |  | ---------------------



| | (a) |  | If the Company writes Covered Policies on or before June 1 of the
Contract Year, the Company shall pay the FHCF its Reimbursement Premium
in installments due on or before August 1, October 1 and December 1 of
the Contract Year in amounts to be determined by the FHCF. However, if
the Companys Reimbursement Premium for the prior Contract Year was
less than $5,000, the Companys full provisional Reimbursement Premium,
in an amount equal to the Reimbursement Premium paid in the prior year,
shall be due in full on or before August 1 of the Contract Year. The
Company will be invoiced for amounts due, if any, beyond the
provisional Reimbursement Premium payment, on or before December 1 of
the Contract Year. In addition, the full annual provisional
Reimbursement Premium as billed and any outstanding balances will be
due on August 1, or the date that control is transferred if after
August 1, for any Company where control of the Company has been
transferred through any legal or regulatory proceeding to a state
regulator or court appointed receiver or rehabilatator prior to
December 1 of the Contract Year.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | If the Company first begins writing Covered Policies after June 1
but prior to December 1 of the Contract Year, the Company shall pay the
FHCF a provisional Reimbursement Premium of $1,000 upon execution of
this Contract. The Administrator shall calculate the Companys actual                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

FHCF-2003K

10



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##### 





| |     |  | Reimbursement Premium for the period based on its actual exposure as
of December 31 of the Contract Year, as reported on or before March 1.
To recognize that New Participants have limited exposure during this
period, the actual Premium as determined by processing the Companys
exposure data shall then be divided in half, the provisional Premium
shall be credited, and the resulting amount shall be the total Premium
due for the Company for the remainder of the Contract Year. However, if
that amount is less than $1,000, then the Company shall pay $1,000. The
Premium payment is due no later than May 1 of the Contract Year. The
Companys Retention and coverage will be determined based on the total
Premium due as calculated above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (c) |  | If the Company first begins writing Covered Policies on or after
December 1 but through and including May 31 of the Contract Year, the
Company shall pay the FHCF a Reimbursement Premium of $1,000 upon
execution of this Contract. The Company shall pay no other
Reimbursement Premium for the Contract Year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | (d) |  | The requirement that the Reimbursement Premium is due on a certain
date means that the Premium shall be in the physical possession of the
FHCF no later than 5 p.m., Eastern Time, on the due date applicable to
the particular installment. If remitted by check to the FHCFs Post
Office Box, the check shall be physically in the Post Office Box
550261, Tampa, FL 33655-0261, as set out on the invoice sent to the
Company. If remitted by check by hand delivery, the check shall be
physically on the premises of the FHCFs bank in Tampa, Florida, as set
out on the invoice sent to the Company. If remitted electronically,
the wire transfer shall have been completed to the FHCFs account at
its bank in Tampa, Florida, as set out on the invoice sent to the
Company. If the applicable due date is a Saturday, Sunday or legal
holiday, then the applicable due date will be the day immediately
following the applicable due date which is not a Saturday, Sunday or
legal holiday. For purposes of the timeliness of the remittance,
neither the United States Postal Service postmark nor a postage meter
date is in any way determinative. Premium checks sent to the SBA in
Tallahassee, Florida, or to the FHCFs Administrator in Minneapolis,
Minnesota, will be returned to the sender. Reimbursement Premiums not
in the physical possession of the FHCF by 5 p.m., Eastern Time, on the
applicable due date are late.



|(3) |  | Claims and Losses
|--- |  | -----------------



| | (a) |  | In General
| | --- |  | ----------
|

| | 1. |  | Claims and losses resulting from Loss Occurrences commencing
during the Contract Year shall be reported by the Company and
reimbursed by the FHCF as provided herein and in accordance with the
Statute, this Contract, and any rules adopted pursuant to the
Statute. For a Company participating in a quota share primary
insurance agreement(s) with Citizens Property Insurance Corporation
High Risk Account, Citizens and the Company shall report only their
respective portion of losses under the quota share primary insurance
agreement(s). Pursuant to Section 215.555(4)(c), Florida Statutes,
the SBA is obligated to pay for losses not to exceed the Actual
Claims-Paying Capacity of the FHCF, up to a limit of $11 billion for
any one Contract Year in accordance with Section 215.555(4)(c)1.,
Florida Statutes.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|

| | (b) |  | Loss Reports
| | --- |  | ------------

|
|
|
|
|
|
|

FHCF-2003K

11



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##### 





| |    |  | date by the Company with respect to each Loss Occurrence commencing
during the Contract Year. If the Companys Retention must be
recalculated as the result of an exposure resubmission, and if the
recalculated Retention changes the FHCFs reimbursement obligations,
then the Company shall submit additional reports of claims and losses
for recalculation of the FHCFs obligations.                                                                                                                                                                                                                                                                                                                                                                                                
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 4. |  | Such reports shall include the actual or anticipated
reinsurance recoveries from non-affiliated insurers and/or
reinsurers on the Companys Ultimate Net Loss, and a certification
that such recoveries, together with the actual or anticipated
reimbursement from the FHCF, shall not exceed 100% of the Companys
losses under Covered Policies from Covered Events.                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | 5. |  | The SBA will determine and pay, as soon as practicable after
receiving Proof of Loss Reports described and adopted in Rule
19-8.029, F.A.C. the reimbursement amount due based on losses paid
by the Company to date and adjustments to this amount based on
subsequent quarterly information. The adjustments to reimbursement
amounts shall require the SBA to pay, or the Company to return,
amounts reflecting the most recent determination of losses.                                                                                                                                                                                                                                                                                                                                
|
| | 6. |  | Initial or quarterly reports received on or before the due
date for that report will be reimbursed within 30 days following the
due date or as soon as practicable after the receipt of the report
and verification of the reported losses. Those received after the
initial or quarterly reporting due date will be reimbursed within 30
days following the due date or as soon as practicable after the
receipt of the report and verification of the reported losses.                                                                                                                                                                                                                                                                                                                   
|
| | 7. |  | If a Covered Event occurs during the Contract Year, but after
December 31, Companies shall report their losses as soon as
practicable thereafter and the FHCF shall begin to reimburse
Companies for paid losses as soon as the losses are reported and the
FHCF has established the availability of the moneys to pay the
reimbursements. The FHCF shall determine the schedule for reporting
losses for Covered Events after December 31 by taking into
consideration the date or dates of the Covered Events occurrence;
its size; severity; wind speeds; forward track; occurrence of
tornadoes or flooding as a result of the Covered Event; geographical
area impacted; and ability of adjusters to assess the damage.                                                              
|
| | 8. |  | All loss reports received will be compared with the FHCFs
exposure data to establish the facial reasonableness of the reports.
Preliminarily, the FHCF will examine the reported losses to
determine whether reported losses exceed reported exposure in the
affected counties; whether the Company has reported a low
concentration of exposure in the affected counties; and whether the
Ground-up Loss as a percentage of exposure in affected counties is
significantly higher than the average. Companies meeting these
tests for reasonableness will be scheduled for reimbursement.
Companies not meeting these tests for reasonableness will be handled
on a case-by-case basis and will be contacted to provide specific
information regarding their individual book of business.
|

| | (c) |  | Loss Reimbursement Calculations
| | --- |  | -------------------------------

|
|
|
|
|

FHCF-2003K

12



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##### 





| |    |  | the amount of the Companys payout, based on the Payout Multiple, as
calculated in accordance with Section 215.555(4)(c) and (4)(d)2.b.,
Florida Statutes, and as defined in Article V(23) of this Contract.
For purposes of the projected payout calculation, the actual Premium
paid for that Contract Year, as referenced in Section
215.555(4)(d)2.b., Florida Statutes, shall be the Premium billed by
the FHCF as of December 31 of the Contract Year. Thereafter, payments
for additional reimbursable losses will be available only to entities
created under Section 627.351, Florida Statutes, and will be based on a
pro rata share of the outstanding losses to the extent of any funds
available up to the $11 billion limitation. In order to determine the
amount available for payment of reimbursable losses on a pro rata basis
for entities created under Section 627.351, Florida Statutes, the SBA
will review reported loss information from all Companies and determine
that all Companies which received payments for reimbursable losses but
which did not exceed their projected payout have settled all, or
substantially all, of their claims eligible for reimbursement. The SBA
will then determine the remaining amount of Claims-Paying Capacity and
will pay entities created under Section 627.351, Florida Statutes, on a
pro rata basis, up to the $11 billion limitation. Reimbursements for
all Covered Events occurring during the same Contract Year will be made
in accordance with this section (3)(c)2. of Article X.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 3. |  | Depletion of cash, but not of Claims-Paying Capacity. This
section of Article X provides procedures for reimbursing Companies
for losses from Covered Events in those situations in which the SBA
determines, pursuant to Section 215.555(6)(a), Florida Statutes, and
Rule 19-8.013, F.A.C., that reimbursable losses for Covered Events
will exhaust the Balance of the Fund as of December 31 of the
Contract Year in which the Covered Event has occurred but will not
exceed the amount the SBA is able to raise through the issuance of
bonds, reinsurance purchased, or the incurrence of other
indebtedness. In that situation, each Company sustaining
reimbursable losses will receive the amount of reimbursement due
under the Contract up to the amount of the Companys projected
payout, as calculated in accordance with Section 215.555(4)(c) and
(4)(d)2.b, Florida Statutes, and as defined in Article V(25) of this
Contract. Thereafter, payments for additional reimbursable losses
will continue to be made based on the loss reports required pursuant
to this Contract from entities created under Section 627.351,
Florida Statutes.                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | 4. |  | Losses payable from cash. This section of Article X provides
procedures for reimbursing Companies for losses from Covered Events
in those situations in which the SBA determines that the
reimbursable losses will not exhaust the Balance of the Fund as of
December 31 of the Contract Year in which the Covered Event has
occurred. In that situation, each Company sustaining reimbursable
losses will receive the amount of reimbursement due under the
Contract. Thereafter, payments for additional reimbursable losses
will continue to be made based on the loss reports required pursuant
to this Contract from entities created under Section 627.351,
Florida Statutes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | 5. |  | Reserve established. When a Covered Event occurs in a
subsequent Contract Year when reimbursable losses are still being
paid for a Covered Event in a previous Contract Year, the SBA will
establish a reserve for the outstanding reimbursable losses for the
previous Contract Year, based on the length of time the losses have
been outstanding, the amount of losses already paid, the percentage
of incurred losses still unpaid, and any other factors specific to
the loss development of the Covered Events involved.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|

| | (d) |  | Commutation
| | --- |  | -----------
|

| | 1. |  | Not less than 36 months or more than 60 months after the end
of the Contract Year, the Company shall report to the FHCF all
claims and losses, both reported and unreported, for the Contract
Year which are not finally settled and which may be reimbursable
losses under this Contract. The Company and the SBA or their
respective representatives may, by mutual agreement, determine the
capitalized value of all claims and losses, both reported and
unreported, resulting from Loss Occurrences commencing during the
Contract Year,
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

FHCF-2003K

13



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##### 





| |    |  | and the Company shall provide the SBA with a copy of a written opinion
on such capitalized value by the Companys certifying actuary.
Payment by the SBA of its proportion of any amount or amounts so
mutually agreed and certified by the Companys certifying actuary
shall constitute a complete and final release of the SBA in respect of
all claims and losses, both reported and unreported, under this
Contract.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | If agreement on capitalized value cannot be reached within 60
days after the Company reports its claims and losses to the FHCF,
the Company and the SBA may mutually appoint an actuary or appraiser
to investigate, determine and capitalize such claims or losses. If
both parties then agree, the SBA shall pay its proportion of the
amount so determined to be the capitalized value of such claims or
losses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | 3. |  | If the parties fail to agree, then any difference shall be
settled by a panel of three actuaries, one to be chosen by each
party and the third by the two so chosen. If either party does not
appoint an actuary within 30 days, the other party may appoint two
actuaries. If the two actuaries fail to agree on the selection of a
third actuary within 30 days of their appointment, each of them
shall name two, of whom the other shall decline one and the decision
shall be made by drawing lots. All the actuaries shall be regularly
engaged in the valuation of property claims and losses and shall be
members of the Casualty Actuarial Society and of the American
Academy of Actuaries. None of the actuaries shall be under the
control of either party to this Contract. Each party shall submit
its case to its actuary within 30 days of the appointment of the
third actuary. The decision in writing of any two actuaries, when
filed with the parties hereto, shall be final and binding on both
parties.
|
| | 4. |  | The reasonable and customary expense of the actuaries and of
the commutation (as a result of 2. and 3. above) shall be equally
divided between the two parties. Said commutation shall take place
in Tallahassee, Florida, unless some other place is mutually agreed
upon by the Company and the SBA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        



|(4) |  | Advances
|--- |  | --------



| | (a) |  | The SBA may make advances for loss reimbursements as defined
herein, at market interest rates, to the Company in accordance with
Section 215.555(4)(e), Florida Statutes. The market interest rate
shall be determined with reference to the then current interest rate
earned on the FHCFs investments on the date an advance is made. All
interest charged will commence on the date the SBA issues a check for
an advance and will cease at midnight on the date upon which the FHCF
has received the Companys loss reimbursement report for the Covered
Event for which the advance was issued qualifying the Company for
reimbursement equal to or exceeding the amount(s) of the advance(s).
If, upon audit, it is determined that the Company received funds in
excess of those to which it was entitled, the interest as to those sums
will not cease on the date of the receipt of the loss reimbursement
report but will continue until the Company reimburses the FHCF for the
overpayment. The Companys final reimbursement shall be reduced by an
amount equal to the amount of the advance(s) and the interest thereon.
The specific type of advances enumerated in the Statute follow.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|

| | 1. |  | Advances to Companies to prevent insolvency.
| | -- |  | --------------------------------------------
|

| | a. |  | Section 215.555(4)(e)1., Florida Statutes, provides
that the SBA shall advance to the Company amounts necessary to
maintain the solvency of the Company, up to 50 percent of the
SBAs estimate of the reimbursement due to the Company. In
determining insolvency for this advance, a Company will be
considered insolvent if it is unable to pay its policyholders for
justifiable claims.                       
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | The requirements for an advance to a Company to prevent
insolvency are that the Company demonstrates that it is likely to
qualify for reimbursement, that the Company demonstrates that the
immediate receipt of moneys from the SBA is likely to prevent the
Company from becoming insolvent, and that the Company provides
the information in (4)(b) below to aid in the SBAs determination
to grant an advance.

FHCF-2003K

14



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| | c. |  | The SBAs final decision regarding an application for
an advance to prevent insolvency shall be based on whether or
not, considering the totality of the circumstances, including the
SBAs obligations to provide reimbursement for all Covered Events
occurring during the Contract Year, granting an advance is
essential to allowing the entity to continue to pay additional
claims for a Covered Event in a timely manner.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|

| | 2. |  | Advances to entities created pursuant to Section 627.351, Florida
Statutes.
| | -- |  | ---------------------------------------------------------------------------
|

| | a. |  | Section 215.555(4)(e)2., Florida Statutes, provides
that the SBA may advance to an entity created pursuant to Section
627.351, Florida Statutes, up to 90% of the lesser of the SBAs
estimate of the reimbursement due or the entitys share of the
actual aggregate Reimbursement Premium for that Contract Year,
multiplied by the current available liquid assets of the FHCF.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | The requirements for an advance to entities created
pursuant to Section 627.351, Florida Statutes are that the entity
must demonstrate to the SBA that the advance is essential to
allow the entity to pay claims for a Covered Event and that the
entity provides the information in (4)(b) below to aid in the
SBAs determination to grant an advance.                         
|
| | c. |  | The SBA must determine that its assets are sufficient
and sufficiently liquid to fulfill its obligations to other
Companies under the Contract prior to granting an advance.                                                                                                                                                                                                      
|

| | 3. |  | Advances to limited apportionment companies.
| | -- |  | --------------------------------------------
|

| | a. |  | Section 215.555(4)(e)3., Florida Statutes, provides
that the SBA may advance the amount of estimated reimbursement
payable to limited apportionment companies.                                                                                       
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | The requirement for an advance to limited apportionment
companies is that they make an application to the SBA and provide
the SBA with a report of their exposures and losses in order to
determine Retention levels and loss reimbursements payable.
|
| | c. |  | The SBA must determine that its assets are sufficient
and sufficiently liquid to fulfill its obligations to other
Companies under the Contract prior to granting an advance.                                                                         
|

| | (b) |  | Companies shall request a specific amount for the advance from the
SBA and, for those Companies or entities designated in (4)(a)1. and
(4)(a)2. above, shall provide the SBA with the following information,
determined in accordance with statutory accounting principles, which
are the rules and procedures governing insurer financial reporting for
regulatory purposes:
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|

| | 1. |  | Current assets;                                                                                                                                                                                                                                                                                                                                                                                                                
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Current liabilities other than liabilities due to the Covered
Event;                                                                                                                                                                                                                                                                                                                                                           
|
| | 3. |  | Current liabilities due to the Covered Event, paid and
unpaid, submitted on the Proof of Loss Report, Form FHCF-L1B, as
adopted in Rule 19-8.029, F.A.C.;                                                                                                                                                                                                                                                                      
|
| | 4. |  | Evidence of estimated Retention breached by payment of paid
losses from the Covered Event;                                                                                                                                                                                                                                                                                                                                     
|
| | 5. |  | Current surplus as to policyholders;                                                                                                                                                                                                                                                                                                                                                                                           
|
| | 6. |  | Estimate of expected liabilities due to the Covered Event;                                                                                                                                                                                                                                                                                                                                                                     
|
| | 7. |  | Estimate of other expected liabilities not due to the Covered
Event;                                                                                                                                                                                                                                                                                                                                                           
|
| | 8. |  | Amount of reinsurance available to pay claims for the Covered
Event under other reinsurance treaties;                                                                                                                                                                                                                                                                                                                          
|
| | 9. |  | Estimated amount of payout from the FHCF, determined in
accordance with Section 215.555(4)(b), Florida Statutes. This
estimate is necessarily predicated on the Companys Premium which in
turn is predicated on its exposure. Therefore, if the Covered Event
occurs in June, July, or August, the Company will need to provide
its exposure data prior to September 1 in order that the appropriate
calculations may be made.
|

| | (c) |  | The information outlined herein shall be supplied in the form of a
letter, signed by two executive officers of the Company, with the
supporting information attached.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (d) |  | In determining whether or not to grant an advance, the SBA shall:                                                                                                    
|

| | 1. |  | Carefully review and consider all the information submitted
by such Companies;
| | -- |  | ------------------------------------------------------------------------------

FHCF-2003K

15



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##### 





| | 2. |  | Consult with all relevant regulatory agencies seeking all
relevant information about the Companys financial and solvency
condition;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------
|
| | 3. |  | Carefully review its currently available liquid assets; and                                                                         
|
| | 4. |  | Review the damage caused by the Covered Event and when that
Covered Event occurred.                                                 
|

| | (e) |  | Any amount advanced by the SBA shall be used by the Company only to
pay claims of its policyholders for the Covered Event or Covered Events
which have precipitated the immediate need to continue to pay
additional claims as they become due. The advance is a reimbursement
which allows the Company to continue to pay claims in a timely manner.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) |  | Delinquent Premium Payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Failure to submit a Premium or Premium installment when due is a violation
of the terms of this Contract and Section 215.555, Florida Statutes.
Interest on late payments shall be due as set forth in Article IX(2) of this
Contract. In addition, the SBA will refer any Company failing to submit
such payments to the Department for administrative action or will take other
action as appropriate pursuant to Section 215.555(10) and (11), Florida
Statutes.                               
|   
|(6) |  | Inadequate Data Submissions                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    |  | If exposure data or other information required to be reported by the Company
under the terms of this Contract is not received by the FHCF in the format
specified by the FHCF and is inadequate to the extent that the FHCF requires
resubmission of data, the Company will be required to pay the FHCF a
resubmission fee of $1,000. The $1,000 fee is also applicable to exposure
resubmissions made as a result of audits of the Companys exposure and of
audits of the Companys claims data.
|   
|(7) |  | Delinquent Submissions                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |  | Failure to submit an exposure submission or resubmission by the due date is
a violation of the terms of this Contract and of the Statute. The SBA will
refer any Company failing to submit such submissions or resubmissions to the
Department for administrative action or will take other action as
appropriate pursuant to Section 215.555(10) and (11), Florida Statutes.                                                                                                                     

ARTICLE XI - TAXES

In consideration of the terms under which this Contract is issued, the Company
agrees to make no deduction in respect of the Premium herein when making
premium tax returns to the appropriate authorities. Should any taxes be levied
on the Company in respect of the Premium herein, the Company agrees to make no
claim upon the SBA for reimbursement in respect of such taxes.

ARTICLE XII - ERRORS AND OMISSIONS

Any inadvertent delay, omission, or error on the part of the SBA shall not be
held to relieve the Company from any liability which would attach to it
hereunder if such delay, omission, or error had not been made.

ARTICLE XIII - INSPECTION OF RECORDS

The Company shall allow the SBA to inspect, examine, and audit, at reasonable
times, all records of the Company relating to the Covered Policies under this
Contract, including Company files concerning claims, losses, or legal
proceedings regarding subrogation or claims recoveries which involve this
Contract, including premium, loss records and reports involving exposure
data on Covered Policies and applicable ceded reinsurance contracts. All
discovered errors, inadvertent omissions, and typographical errors associated
with the data reporting of insured values shall be corrected to reflect the
proper values. This right shall survive the termination of this Contract. The
Company shall retain its records in accordance with the requirements for
records retention regarding exposure reports and claims reports outlined
herein, and in any administrative rules adopted pursuant to Section 215.555,
Florida Statutes. Companies writing covered collateral protection policies, as
defined in definition (10) of Article V herein, must be able to provide
documentation that the policy covers personal residences, protects both the

FHCF-2003K

16



---



##### 



borrowers and lenders interest, and that the coverage is in an amount at
least equal to the coverage for the dwelling in place under the lapsed
homeowners policy. Failure to provide any of the information required for
audits, constitutes a violation of Section 215.555, Florida Statutes, and shall
result in a referral to the Department.



|(1) |  | Auditing Requirements for Exposure Audits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Company shall retain complete and accurate records, in policy level
detail, of all exposure data submitted to the SBA in any Contract Year until
the SBA has completed its audit of the Companys exposure submissions. The
Company shall also retain complete and accurate records of any completed
exposure audit for any Contract Year in which the Company incurred losses
until the completion of the loss reimbursement audit for that Contract Year.
The records to be retained shall include the audit file which supports the
exposure reported to the SBA and any other information which would allow for
a complete audit of the Companys reported exposure data. The audit file
shall be prepared according to the SBA Audit File Specifications outlined in
the Data Call. The Company must also have available, at the time of the
audit, a copy of its underwriting manual, a copy of its rating manual, and
staff to respond to the questions of the SBA or its agents. The Company is
also required to retain declarations pages and policy applications to
support reported exposure. To meet the requirement that the application
must be retained, the Company may retain either the actual application or
may retain the actual application in an electronic format.
|   
|(2) |  | Auditing Requirements for Loss Reports                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    |  | The Company shall retain complete and accurate records of all reported
losses and/or advances                      submitted to the SBA until the SBA has completed
its audit of the Companys reimbursable losses. The records to be retained
are set forth as part of the Proof of Loss Report, Form FHCF-L1B, adopted in
Rule 19-8.029, F.A.C. The Company must also retain the required exposure
audit file for the Contract Year in which the loss occurred, and must have
available any other information which would allow for a complete audit of
the Companys losses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(3) |  | Audit Procedures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



| | (a)    |  | The FHCF will send an audit notice to the Company providing the
commencement date of the audit, the site of the audit, any
accommodation requirements of the auditor, and the reports and data
which must be assembled by the Company and forwarded to the FHCF upon
request. The Company shall be prepared to choose one location in which
to be audited, unless otherwise specified by the SBA.                                                                                                              
| | ------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b)    |  | The reports and data are required to be forwarded to the FHCF as
set forth in an audit notice letter. The information is then forwarded
to the auditor. If the FHCF receives accurate and complete records as
requested, the auditor will contact the Company to inform the Company
as to what policies or other documentation will be required once the
auditor is on site. Any records not required to be provided to the
auditor in advance shall be made available at the time the auditor
arrives on site.
|
| | (c)    |  | At the conclusion of the auditors audit and the management review
of the auditors report, findings, recommendations, and work papers,
the FHCF will forward a preliminary draft of the audit report to the
Company and require a response from the Company by a date certain as to
the audit findings and recommendations.                                                                                                                                                                                   
|
| | (d)    |  | If the Company accepts the audit findings and recommendations, and
there is no recommendation for resubmission of the Companys exposure
data, the audit report will be finalized and the audit file closed.                                                                                                                                                                                                                                                                                                   
|
| | (e)    |  | If the Company disputes the audits findings, the areas in dispute
will be resolved by a meeting or a conference call between the Company
and FHCF management.                                                                                                                                                                                                                                                                                                                                                 
|
| | (f) 1. |  | The recommendation of a loss reimbursement audit could require
the Company to resubmit its loss reports or exposure data.                                                                                                                                                                                                                                                                                                                                                                                      
|
| | 2.     |  | If the recommendation of the audit is to resubmit the Companys exposure
data for the Contract Year in question, then the FHCF will send the
Company a letter outlining the process for resubmission and including a
deadline to resubmit. The resubmission will include a data                                                                                                                                                                                                                                

FHCF-2003K

17



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##### 





| |     |  | file to be submitted to the FHCFs Administrator and an audit file to be
submitted to the offices of the SBA. The resubmission is also required to be
accompanied by a detailed written description of the specific changes made to
the resubmitted data. Once the resubmission is received by the FHCFs
Administrator, the FHCFs Administrator calculates a revised Reimbursement
Premium for the Contract Year which has been audited. The SBA shall then
review the resubmission with respect to the audits findings, and accept the
resubmission or contact the Company with any questions regarding the
resubmission. Once the SBA has accepted the resubmission as a sufficient
response to the audit findings, the FHCFs Administrator will send the
Company an invoice for any Reimbursement Premium and interest due or to
refund Reimbursement Premium, as the case may be. Once the resubmission has
been approved, the audit file is closed.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 3.  |  | If the recommendation of the audit is either to resubmit the
Companys exposure data for the Contract Year in question or giving
the option to pay the estimated Premium difference, then the FHCF
will send the Company a letter outlining the process for resubmission
or for paying the estimated Premium difference and including a
deadline for the resubmission or the payment to be received by the
FHCFs Administrator. If the Company chooses to resubmit, the same
procedures outlined in Article XIII(3)(f)2. apply.                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (g) |  | If the Company continues to dispute the audits findings and/or
recommendations and no resolution of the disputed matters is obtained
through discussions between the Company and FHCF management, then the
process within the SBA is at an end and further administrative remedies
may be obtained under Chapter 120, Florida Statutes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | (h) |  | The auditors list of errors is made available in the audit report
sent to the Company. Given that the audit was based on a sample of the
Companys policies rather than the whole universe of the Companys
Covered Policy exposure, the error list is not intended to provide a
complete list of errors but is intended to indicate what Covered Policy
information needs to be reviewed and corrected throughout the Companys
book of Covered Policy business to ensure more complete and accurate
reporting in the resubmission if required and for any future
submissions.                                                                                                                                                                                                                                                                                                                                                                            



|(4) |  | Costs of the Audits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The costs of the audits shall be borne by the SBA. However, in order to
remove any incentive for a Company to delay preparations for an audit, the
SBA shall be reimbursed by the Company for any audit expenses incurred in
addition to the usual and customary costs of the audits, which additional
expenses were incurred as a result of the Companys failure, despite proper
notice, to be prepared for the audit or as a result of a Companys failure
to provide requested information for the audit. All requested information
must be complete and accurate. The Company shall be notified of any
administrative remedies which may be obtained under Chapter 120, Florida
Statutes.

ARTICLE XIV - INSOLVENCY OF THE COMPANY



|In the event of the insolvency of the Company, the SBA shall pay directly to
the Florida Insurance Guaranty Association for the benefit of Florida
policyholders of the Company the net amount of all reimbursement moneys owed to
the Company. As used in this Article, the net amount of all reimbursement
moneys means that amount which remains after any offsets as specified in
Article VIII herein and after reimbursement for (1) preliminary or duplicate
payments owed to private reinsurers or other inuring reinsurance payments to
private reinsurers that satisfy statutory or contractual obligations of the
insolvent Company attributable to Covered Events to such reinsurers; or (2)
funds owed to a bank or other financial institution to cover obligations of the
insolvent Company under a credit agreement that assists the insolvent Company
in paying claims attributable to Covered Events. Such private reinsurers or
banks or other financial institutions shall be reimbursed or otherwise paid
prior to payment to the Florida Insurance Guaranty Association, notwithstanding
any law to the contrary. The Florida Insurance Guaranty Association shall pay
all claims up to the maximum amount permitted by Chapter 631, Laws of
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

FHCF-2003K

18



---



##### 





|Florida; thereafter, any remaining moneys shall be paid pro rata to claims not
fully satisfied. This Article does not apply to a joint underwriting
association, a risk apportionment plan, or any other entity created under
Section 627.351, Florida Statutes.                                                                                                                                                                                                                   
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|ARTICLE XV - TERMINATION                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|The FHCF and the obligations of both parties under this Contract can be
terminated only as may be provided by law or applicable rules.                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|ARTICLE XVI - VIOLATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Pursuant to the provisions of Section 215.555(10), Florida Statutes, any
violation of the terms of this Contract by the Company constitutes a violation
of the Insurance Code of the State of the Florida. Pursuant to the provisions
of Section 215.555(11), Florida Statutes, the SBA is authorized to take any
action necessary to enforce any administrative rules adopted pursuant to
Section 215.555, Florida Statutes, and the provisions and requirements of this
Contract.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|ARTICLE XVII - APPLICABLE LAW                                                                                                                                                                                                                                                                                                                                                                                                                                                      



|(1) |  | Applicable Law: This Contract shall be governed by and construed
according to the laws of the State of Florida in respect of any matter
relating to or arising out of this Contract.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Notice of Rights: Pursuant to Chapter 120, Florida Statutes, and the
Uniform Rules of Procedure, codified as Chapters 28-101 through 28-110,
F.A.C., a person whose substantial interests are affected by a decision of
the SBA regarding the FHCF may request a hearing with the SBA by filing a
petition within 21 days of receipt of the written notice of the decision.
Any person who fails to file a petition within 21 days shall have waived
his or her right to a hearing. The hearing may be a formal hearing or an
informal hearing pursuant to the provisions of Sections 120.569 and
120.57, Florida Statutes. The petition must be filed (received) in the
office of the Senior FHCF Officer-Florida Hurricane Catastrophe Fund,
State Board of Administration, P.O. Box 13300, Tallahassee, FL 32317-3300,
within the 21day period.
|   
|    |  | All petitions shall contain:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|
|
|
|
|
|
|
|
|
|
|
|
|
|
|

Upon receipt of a petition, the SBA shall review the petition for compliance
with the SBAs requirements and timeliness. The petition will be denied for
lack of compliance and for failure to timely file. If the SBA elects to
request that an administrative law judge of the Division of Administrative
Hearings be assigned to conduct the hearing, the SBA will forward the
petition and all materials filed with the SBA to the Division and shall
notify the petitioner or petitioners of its action. Once this decision
becomes final, the petitioners rights to appeal will be governed by Section
120.68, Florida Statutes.

FHCF-2003K

19



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##### 



Approved by:

Florida Hurricane Catastrophe Fund
By: State Board of Administration of the State of Florida

|                                         |                             |  |              | 
|---------------------------------------- | --------------------------- |  | ------------ | 
|By:                                      | Linda Lettera/for           |  | 7.9.03       | 
|                                         |                             |  |              | 
|                                         | Coleman Stipanovich         |  | Date         | 
|                                         | Executive Director          |  |              | 
|                                         |                             |  |              | 
|Approved as to legality:                
|                                         |                             |  |              | 
|By:                                      | Thomas A. Beenck/for        |  | July 9, 2003 | 
|                                         |                             |  |              | 
|                                         | Linda Lettera               |  | Date         | 
|                                         | General Counsel             |  |              | 
|                                         | FL Bar ID#311911            |  |              | 
|                                         |                             |  |              | 
|PHILADELPHIA INDEMNITY INSURANCE COMPANY |                             |  |             
|                                         |                             |  |             
|                                         | Company                     |  |              | 
|                                         |                             |  |              | 
|By:                                      | Christopher J. Maguire, EVP |  | 5/30/03      | 
|                                         |                             |  |              | 
|                                         | Christopher J. Maguire      |  | Date         | 
|                                         | Executive Vice President    |  |              | 

FHCF-2003K

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Schedule A

to the

REIMBURSEMENT CONTRACT
Effective: June 1, 2003
(Contract)

between

PHILADELPHIA INDEMNITY INSURANCE COMPANY
Bala Cynwyd, PA
(Company)

and

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA)
WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

Contract Year

This Schedule A shall be applicable for the Contract Year from 12:01 a.m.,
Eastern Time, June 1, 2003, to 12:01 a.m., Eastern Time, June 1, 2004.

Reimbursement Percentage

For purposes of determining reimbursement (if any) due the Company under this
Contract and in accordance with the Statute, the Company has the option to
elect a 45% or 75% or 90% Reimbursement Percentage under this Contract. The
Reimbursement Percentage elected by the Company for the Contract Year from
12:01 a.m., Eastern Time, June 1, 2002, to 12:01 a.m., Eastern Time, June 1,
2003, was as follows:

The Company hereby elects the following Reimbursement Percentage for the
Contract Year from 12:01 a.m., Eastern Time, June 1, 2003, to 12:01 a.m.,
Eastern Time, June 1, 2004, (the individual executing this Contract on behalf
of the Company shall place his or her initials in the box to the left of the
percentage elected for the Company):

|                    |  |                     |  |              
|------------------- |  | ------------------- |  | -------------
|[  ]     45%     OR |  | [  ]     75%     OR |  | [CJM]     90%

Note that the choice indicated immediately above is for the 2003-2004 Contract
Year.

If the Company is a member of an NAIC group, all members of the group must
elect the same Reimbursement Percentage. If the Company is a member of an NAIC
group, the individual executing this Contract on behalf of the Company, by
placing his or her initials in the box below, affirms that the Company has
elected the same Reimbursement Percentage as all members of the NAIC group:

[CJM]

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The Company shall not be permitted to change its Reimbursement Percentage
during the Contract Year. The Company shall, however, be permitted to change
its Reimbursement Percentage election at the beginning of a new Contract Year,
except that:



|(1) |  | The Company shall not be permitted to reduce its Reimbursement Percentage
if a Covered Event required the issuance of revenue bonds, until the bonds
have been fully repaid; 
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | If the Company is a member of a group, all members of the NAIC group must
continue to elect the same Reimbursement Percentage;                                               
|   
|(3) |  | If the Company is a joint underwriting association or an assigned risk
plan under Section 627.351, Florida Statutes, the Company must elect the
90% Reimbursement Percentage.

Reporting Exposure for a Single Structure, with a Mix of Commercial
Habitational and Commercial Non-Habitational Exposure, Written on a Commercial
Policy

The following section is applicable to all Companies with exposure for
single structures with a mix of commercial habitational and commercial
non-habitational exposure written under a Commercial Policy. If the Company
does not write this type of exposure and this section does notapply, please
initial the N/Abox below which completes this section of Schedule A. If the
Company doeswrite this type of exposure, please read below and initial the
appropriate box on the next page to complete this section of Schedule A.

[    ]

N/A


Commercial-Residential Class Code

If a single structure is used for both habitational and non-habitational
purposes and the structure has a commercial-residential class code (based on a
classification plan on file with and reviewed by the Administrator), the entire
exposure for the structure should be reported to the FHCF under the Data Call,
and the FHCF will reimburse losses for the entire structure as well.

Commercial Non-Residential/Business Class Code

If a single structure is used for both habitational and non-habitational
purposes and the structure has a commercial non-residential or business class
code (based on a classification plan on file with and reviewed by the
Administrator), the habitational portion of that structure should be identified
and reported to the FHCF under the Data Call. Initial the CARVINGbox on the
next page if the Company will be able to carve out and report its incidental
habitational exposure and the Company agrees to report losses on such
incidental habitational exposure.

However, in recognition of the unusual nature of commercial structures with
incidental habitational exposure and the undue hardship some companies may face
in having to carve out such incidental habitational exposure, as well as the
losses to such structures, the FHCF will accommodate these companies by
allowing them to exclude the entire exposure for the single structure from
their Data Call submission, providing the following three conditions are met:



|(1) |  | The decision to not carve out and report the incidental habitational
exposure shall apply to all such structures insured by the Company;                                                 
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | If the incidental habitational exposure is not reported to the FHCF, the
Company will not report losses to the structure and the FHCF will not
reimburse any losses to the structure; and

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|(3) |  | The Company must communicate its decision to not carve out and report the
incidental exposure by the individual executing this Contract on behalf of
the Company placing his or her initials in the NOT CARVINGbox below.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|        |  |    |  |            
|------- |  | -- |  | -----------
|[  ]    |  | OR |  | [CJM]      
|CARVING |  |    |  | NOT CARVING

By initialing the CARVING or NOT CARVINGbox above, the Company is making an
irrevocable decision for the corresponding Contract Year Data Call submission
and any subsequent resubmissions.

Important Note: Since this will impact your Data Call submission, please share this decision with
the individual(s) responsible for compiling your Data Call submission.

FHCF-2003K

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