Exhibit 10.1


 


AGGREGATE EXCESS OF LOSS

REINSURANCE AGREEMENT


 


between


 


COAST NATIONAL INSURANCE COMPANY

SECURITY NATIONAL INSURANCE COMPANY


 


and


 


INTER-OCEAN REINSURANCE (IRELAND) LIMITED


 

















 


TABLE OF CONTENTS


 


	
  ARTICLE I
  - PARTIES TO THIS AGREEMENT

  	
   

  
	
  ARTICLE II -
  BUSINESS REINSURED

  	
   

  
	
  ARTICLE III
  - -COMMENCEMENT AND TERMINATION

  	
   

  
	
  ARTICLE IV - TERRITORY

  	
   

  
	
  ARTICLE V - EXCLUSIONS

  	
   

  
	
  ARTICLE VI -
  REINSURANCE LIMITS

  	
   

  
	
  ARTICLE VII –
  CO-REINSURANCE

  	
   

  
	
  ARTICLE VIII -
  DEFINITIONS

  	
   

  
	
  ARTICLE IX –
  INURING REINSURANCE

  	
   

  
	
  ARTICLE X
  - EXTRA CONTRACTUAL OBLIGATIONS AND EXCESS JUDGMENTS

  	
   

  
	
  ARTICLE XI -
  REINSURANCE PREMIUM

  	
   

  
	
  ARTICLE XII
  – ADDITIONAL PREMIUM

  	
   

  
	
  ARTICLE XIII
  – REINSURER’S MARGIN

  	
   

  
	
  ARTICLE XIV-
  REPORTS AND SETTLEMENTS

  	
   

  
	
  ARTICLE XV
  – CURRENCY

  	
   

  
	
  ARTICLE XVI
  - EXPERIENCE ACCOUNT

  	
   

  
	
  ARTICLE XVII -
  COMMUTATION

  	
   

  
	
  ARTICLE XVIII
  - ACTUARIAL REVIEW

  	
   

  
	
  ARTICLE XIX
  - SALVAGE AND SUBROGATION

  	
   

  
	
  ARTICLE XX
  - ERRORS AND OMISSIONS

  	
   

  
	
  ARTICLE XXI
  - OFFSET AND SECURITY

  	
   

  
	
  ARTICLE XXII
  - ACCESS TO RECORDS

  	
   

  
	
  ARTICLE XXIII
  - RESERVES AND TAXES

  	
   

  
	
  ARTICLE XXIV -
  INSOLVENCY

  	
   

  
	
  ARTICLE XXV
  – COLLATERALIZATION

  	
   

  
	
  ARTICLE XXVI –
  CONDITIONS

  	
   

  
	
  ARTICLE XXVII
  – CHANGE OF CONTROL

  	
   

  
	
  ARTICLE XXVIII
  – CHANGES IN CONDITIONS

  	
   

  
	
  ARTICLE XXIX –
  AMENDMENTS

  	
   

  
	
  ARTICLE XXX –
  SERVICE OF SUIT

  	
   

  
	
  ARTICLE XXXII –
  GOVERNING LAW

  	
   

  
	
  ARTICLE XXXIII
  – ARBITRATION

  	
   

  
	
  ARTICLE XXXIV –
  INTERMEDIARY

  	
   

  
	
  SIGNATURE
  PAGE

  	
   

  
	
  NUCLEAR
  INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - No. 1B

  	
   

  
	
  NUCLEAR INCIDENT
  EXCLUSION CLAUSE—

  	
   

  
	
  PHYSICAL
  DAMAGE—REINSURANCE—NO. 2

  	
   

  
	
  NUCLEAR
  INCIDENT EXCLUSION CLAUSE - REINSURANCE - No. 4

  	
   

  



 

















 


AGGREGATE EXCESS OF  LOSS REINSURANCE AGREEMENT


(hereinafter referred to as “Agreement”)


 


This
Agreement is made and entered into by and between COAST NATIONAL INSURANCE
COMPANY, a California corporation, and SECURITY NATIONAL INSURANCE COMPANY, a
Florida corporation (hereinafter collectively referred to as “Company”) and
INTER-OCEAN REINSURANCE (IRELAND) LIMITED, Dublin, Ireland (hereinafter
referred to as “Reinsurer”).


 


WITNESSETH:


 


The
Reinsurer hereby reinsures the Company to the extent and on the terms and
conditions and subject to the exceptions, exclusions and limitations
hereinafter set forth and nothing hereinafter shall in any manner create any
obligations or establish any rights against the Reinsurer in favor of any third
parties or any persons not parties to this Agreement.


 


ARTICLE I - PARTIES
TO THIS AGREEMENT 


 


A.This
Agreement is solely between the Company and the Reinsurer.  When more than one reinsured is named as a
party to this Agreement, the first reinsured company named shall be the agent
of the other reinsured companies as to all matters pertaining to this
Agreement.  Any payments by the
Reinsurer to any of the parties comprising the Company shall constitute payment
due from the Reinsurer to the Company under this Agreement.


 


B.                                     The
retention of the Company and the liability of the Reinsurer and all other
benefits accruing to the Company as provided in this Agreement or any
amendments hereto, shall apply to the reinsured companies comprising the
Company as a group and not separately to each of the reinsured companies named
in this Agreement.


 


C.                                     Performance
of the obligations of each party to this Agreement shall be rendered solely to
the other party; however, if the Company becomes insolvent, the liability of
the Reinsurer shall be modified to the extent set forth in the INSOLVENCY
CLAUSE Article.


 


ARTICLE II - BUSINESS REINSURED


 


A.                                   Subject to the terms, conditions, exclusions and
limitations hereafter set forth, the Reinsurer shall indemnify the Company for
Ultimate Net Loss amounts incurred by the Company under Policies issued or
renewed during the Term of this Agreement, in respect of each Covered
Underwriting Year and classified by the Company as Automobile Liability
and Physical Damage business.


 


B.                                     This Agreement does not cover business written by
any companies or entities acquired by, or merged with, the Company prior to or
subsequent to the effective date of this Agreement, unless there is mutual
written agreement between the Company and the Reinsurer to include such
business under this Agreement.


 


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ARTICLE III —
COMMENCEMENT AND TERMINATION


 


A.                                   This Agreement shall take effect as of 12:01
a.m., Eastern Standard Time, January 1, 2001 and shall continue in full
force and effect until 11:59 p.m., Eastern Standard Time, December 31,
2003.


 


B.                                     Notwithstanding the expiration of this Agreement,
this Agreement shall continue to apply to all unfinished business hereunder to
the end that all obligations and liabilities incurred by each party hereunder
prior to such expiration are fully performed and discharged or are otherwise
commuted as provided in the COMMUTATION Article.


 


ARTICLE IV - TERRITORY


 


The
Reinsurer’s liability shall be limited to losses occurring within the
territorial limits covered by the Policies reinsured hereunder.


 


ARTICLE V - EXCLUSIONS


 


This
Agreement does not apply to and specifically excludes:


 


1.                                       Business derived from any Pool, Association,
Syndicate, Exchange, Plan, Fund or other facility directly as a member,
subscriber or participant, or indirectly by way of reinsurance or assessments
except, this exclusion shall not apply to the Company’s participation in any
residual market mechanisms, including but not limited to Assigned Risk Plans,
and Joint Underwriting Associations.


 


2.                                       Liability of the Company arising from its
participation or membership, whether voluntary or involuntary, in any
insolvency fund, including any guarantee fund, association, pool, plan or other
facility which provides for the assessment of, payment by, or assumption by the
Company of a part or the whole of any claim, debt, charge, fee or other
obligations of an insurer, or its successors or assigns, which has been
declared insolvent by any authority having jurisdiction.


 


3.                                       Liability excluded by the provisions of the
following clauses attached hereto.  The
word “Reassured” used therein means “Company.”


 


Nuclear Incident Exclusion
Clause Liability - Reinsurance - No. 1B


Nuclear Incident Exclusion
Clauses - Physical Damage - Reinsurance - No. 2


Nuclear Incident Exclusion
Clause - Reinsurance - No. 4


 


4.                                       War risk, bombardment, invasion, insurrection,
rebellion, revolution, military or usurped power, or confiscation by order of
any government or public authority, as excluded under a standard policy
containing a standard war exclusion clause.


 


5.                                       Financial Guarantees or Financial Insurance
(including residual value or similar types of coverage), and Insolvency and
Credit Insurance business.


 


2

















 


6.                                       Policies issued by the Company to insurance or
reinsurance companies (each hereafter referred to as “insurer”) which provides
insurance against liability of the insurer for any damages resulting from
alleged or actual tortious conduct by the insurer in the handling of claims
made against any of its policyholders or in the handling of any other business
matters with any of its policyholders.


 


7.                                       All liability beyond circumscribed policy
provisions, including but not limited to punitive, exemplary or consequential
damages or compensatory damages, any expenses related thereto, resulting from a
claim of an insured or assignee against the Company. However, this
exclusion shall not apply to liabilities reinsured hereunder as provided under
the EXTRA CONTRACTUAL OBLIGATIONS AND EXCESS JUDGMENT Article.


 


8.                                       “Pollution”, “pollutants”, “pollution clean up
and removal” or “debris removal” liabilities arising out of the Company’s
Policies except to the extent that such liabilities are covered and defined
under the current standard policy forms issued by Insurance Services Office,
Inc. for each type of policy written by the Company and otherwise reinsured
under this Agreement.


 


9.                                       Vehicles
used for racing.


 


10.                                 Liability
for vehicles leased or rented to others, including but not limited to insureds
primarily engaged in the business of renting or leasing vehicles. This
exclusion does not apply to any leased vehicles insured by the Company in
accordance with its underwriting guidelines.


 


11.                                 Ambulances
in municipalities with a population of 25,000 or more, except when used as
funeral cars.


 


12.                                 Fire
trucks and police emergency trucks in municipalities with a population of
25,000 or more.


 


13.                                 All
vehicles classified as “public automobiles” except limousines and vehicles used
as school or church buses.


 


14.                                 Vehicles
used by truckers operating regularly or frequently beyond a 200 mile radius.


 


15.                                 Newspaper
delivery in towns of with a population of 100,000 or more.


 


16.                                 Vehicles
engaged in the transportation and distribution of fireworks, fuses,
nitroglycerine, explosives, ammunition, ammonium nitrate, natural or artificial
fuel gas, butane, propane or liquefied petroleum gases or gasoline.


 


17.                                 As
respects Recreational and Unlicensed Motor Vehicles:


 


(a)                                  are
involved in the organized racing or speed contest of any unlicensed vehicle; or


(b)                                 own
a three-wheel recreational vehicle.


 


3

















 


18.                                 All risks, lines or classes of business, perils
and exposures specifically excluded under inuring reinsurance and/or Policies
reinsured hereunder.


 


19.                                 Declaratory Judgment Expenses.


 


ARTICLE VI - REINSURANCE LIMITS


 


Retention


 


A.                                   The Reinsurer shall not be liable for Ultimate
Net Losses hereunder until Company’s Underwriting Year Loss and LAE Ratio
exceeds the amounts set forth herein (“Retention”).  As respects Covered Underwriting Year 2001, the Retention shall
be 64.9%.


 


B.                                     As respects Covered Underwriting Years 2002 and
2003, the Retention shall be determined and mutually agreed to by the parties
hereto by February 28th of the Covered Underwriting Year and
shall be equal to the sum of the Company’s mutually agreed Business Plan
Underwriting Year Loss and LAE Ratio plus 1.50%.  The Company shall deliver to the Reinsurer the Underwriting Year
Business Plan Document, as described under Paragraph A of the WARRANTY Article,
including its projected Business Plan Underwriting Year Loss and LAE Ratio to
the Reinsurer by January 31st 
of the Covered Underwriting Year.


 


C.                                     In the event that the parties hereto are
unable to mutually agree upon the Retention by the later of February 28th,
or February 28th plus the number of business days utilized, if
any, under the “Extended Delivery Period” as described under paragraph C of the
Warranty Clause, of the Covered Underwriting Year, the projected Underwriting
Year Loss and LAE Ratio shall be determined by an independent, nationally known
actuarial firm mutually acceptable to the Company and the Reinsurer (which
neither party shall unreasonably withhold from the other).  The cost of the actuarial work shall be
borne equally by both parties to the Agreement.


 


Reinsurance Limits


 


The
Reinsurer shall then be liable for Ultimate Net Losses in excess of the
Retention, however, the Reinsurer’s maximum limit of liability as respects each
Covered Underwriting Year shall be subject to the Covered Underwriting Year
Limits and Aggregate Limits set forth below:


 




	
  Underwriting

  Year

  	
   

  	
  Covered Underwriting

  Year Limit

  	
   

  	
  Aggregate

  Limit

  	
   

  
	
  2001

  	
   

  	
  $

  	
  12,175,000

  	
   

  	
  $

  	
  12,175,000

  	
   

  
	
  2002

  	
   

  	
  $

  	
  12,175,000

  	
   

  	
  $

  	
  24,350,000

  	
   

  
	
  2003

  	
   

  	
  $

  	
  12,175,000

  	
   

  	
  $

  	
  24,350,000

  	
   

  






 


4

















 


ARTICLE VII – CO-REINSURANCE


 


A.                                   For
each Covered Underwriting Year, the Company shall retain net and unreinsured
for its own account the following Ultimate Net Loss amounts (hereinafter
Company’s Co-Reinsurance Participation):


 


1.               10% of:


 


a)                                      The
lesser of 72.00% or the Covered Underwriting Year Loss and LAE Ratio, less


b)                                     The
Covered Underwriting Year Retention, multiplied by


c)                                      The
Covered Underwriting Year NWP, plus


 


2.               If the Covered
Underwriting Year Loss and LAE Ratio exceeds 72.00%, 50% of:


 


a)                                      The
Covered Underwriting Year Loss and LAE Ratio, less


b)                                     72.00%,
multiplied by


c)                                      The
Covered Underwriting Year NWP.


 


B.                                     For
Covered Underwriting Years 2002 and 2003, the Company’s Co-Reinsurance
Participation percentage under Paragraph 2 above may be amended so as to remain
in accordance with the terms and conditions of reinsurances that inure to this
Agreement, however, for Covered Underwriting Year 2002 the Company’s
Co-Reinsurance Participation percentage under Paragraph 2 above shall be
subject to a minimum of 25%, and for Covered Underwriting Year 2003 the
Company’s Co-Reinsurance Participation percentage under Paragraph 2 above shall
be subject to a minimum of 10%.


 


C.                                     It
is understood and agreed that the resulting dollar amount to which the
Company’s Co-Reinsurance Participation will be applied under Paragraph 1 and
Paragraph 2 above will be determined for each Covered Underwriting Year
subsequent to the determination of the Retention for each Covered Underwriting
Year.


 


ARTICLE VIII - DEFINITIONS


 


A.                                   “Covered
Underwriting Year” shall mean the 12 month period beginning
January 1st through and including December 31st,
with the 1st Covered Underwriting Year being from January 1,
2001 through December 31, 2001 and each 12 month period thereafter shall
be a separate Covered Underwriting Year.


 


B.                                     The
“Underwriting
Year Loss and LAE Ratio” shall be determined by dividing the
Company’s “Ultimate Net Loss” for the Covered Underwriting Year by the
Company’s “Net Written Premium” for the Covered Underwriting Year.


 


C.                                     “LAE” (“Loss
Adjustment Expenses”) shall mean all expenses incurred by the
Company in the investigation, appraisal, adjustment, settlement or defense of
specific claims covered under Policies of the Company reinsured hereunder
(including salaries and expenses of in house counsel(s) while involved in
controlling and/or handling of a covered claim associated therewith), but not
including office expenses of the Company, salaries and expenses of its
officials and employees, or any other expenses not allocable to specific claims
covered under the Policies that are reinsured under this Agreement.


 


5

















 


D.                                    “IBNR”
(“Incurred But Not Reported”) as used herein shall refer to that
amount of reserves for outstanding losses and LAE arising from covered losses
that have already occurred during the term of this Agreement but have not yet
been reported to the Company as claims recoverable under policies reinsured
hereunder.  Such amounts shall
contemplate the ultimate valuation of such losses and LAE.


 


E.                                      “Net Written
Premium” for the respective Covered Underwriting Year shall mean the
direct written premium less cancellations and returns and less premiums paid in
respect of all other inuring reinsurances. 
Net Written Premium shall be gross of Premiums to this Agreement.


 


F.                                      “Policy” or “Policies” shall
mean the Company’s binders, contracts and Policies providing insurance on the
risks reinsured under this Agreement.


 


G.                                     “Ultimate
Net Loss” is defined as the aggregate sum of amounts paid by the
Company in settlement of losses, including Loss Adjustment Expenses (LAE),
Extra Contractual Obligations and Excess Judgements awards, plus reserves for
outstanding losses and LAE, including reserves for incurred but not reported
claims, all as respects covered losses for which the Company is liable to pay
under the Policies reinsured hereunder net after all inuring reinsurance,
whether collectible or not for any reason including, but not limited to,
novations and rescission, and all salvages and recoveries.  In the event of the insolvency of the
Company, “Ultimate Net Loss” shall be as otherwise defined herein except it
shall include the sum or sums which the Company has incurred for which it is
liable instead of the sum or sums paid by the Company for which it is liable,
and payment by the Reinsurer shall be made to the liquidator, receiver, or statutory
successor of the Company in accordance with the INSOLVENCY CLAUSE Article.


 


ARTICLE IX – INURING REINSURANCE


 


A.                                   For
the purpose of determining the Ultimate Net Loss recoverable under this
Agreement, it is hereby agreed that all underlying reinsurances in effect as of
the inception date of this Agreement shall at all times during the currency of
this Agreement be deemed in place and in full effect whether purchased or not,
whether fully subscribed or not, whether collectible or not, for any reason including,
inter alia, insolvency, dispute, rescission, statute, or ruling court of law.


 


B.                                     It
is agreed and understood that the underlying term Quota Share reinsurance
underwritten by Overseas Partners Re Ltd. shall be deemed in place and in full
in effect as of the inception date of this Agreement through and including
December 31, 2002.


 


ARTICLE X - EXTRA
CONTRACTUAL OBLIGATIONS AND EXCESS JUDGMENTS


 


A.                                   This
Agreement shall indemnify the Company, within the limits of this Agreement, for
Extra Contractual Obligations and/or Excess Judgments awarded by a court of
competent jurisdiction against the Company that arise from Policies that are
reinsured hereunder.  Such Extra
Contractual Obligations and/or Excess Judgments shall be part of and not in
addition to, amounts recoverable hereunder. 
Moreover, the total amount of Extra Contractual Obligations and/or
Excess Judgments recoverable hereunder (whether arising separately or in
combination) shall be limited as follows:


 


•                  75% of $250,000 per occurrence,


•                  $1,000,000 per Covered Underwriting
Year,


•                  $3,000,000 for the Term of this
Agreement.


 


6

















 


B.                                     “Extra
Contractual Obligations” are defined as damages paid by the Company that are
not covered under any other provision of this Agreement, including legal costs
and expenses in connection therewith, that arise as a result of the Company’s
handling of any claim on the Policy reinsured hereunder, such liabilities
arising because of, but not limited to, the following:  failure by the Company to settle within the
policy limit, or by reason of alleged or actual negligence or bad faith or
alleged fraud in rejecting an offer of settlement or in the preparation of the
defense or in the trial of any action against its insured or in the preparation
or prosecution of an appeal consequent upon such action.


 


C.                                     “Excess
Judgments” are defined as those damages paid by the Company which amounts are
in excess of its policy limits, but otherwise within the coverage terms of the
Policy reinsured hereunder, including legal costs and expenses in connection
therewith, as a result of an action against it by its insured or its insured’s
assignee to recover damages awarded by a court of competent jurisdiction to a
third party claimant, arising out of, but not limited to, the Company’s alleged
or actual negligence or bad faith or alleged fraud in rejecting a settlement,
in discharging its duty to defend, in preparing the defense in an action
against its insured or discharging its duty to prepare or prosecute an appeal
consequent upon such action.


 


D.                                    The
date on which an Extra Contractual Obligation and/or an Excess Judgment award
is incurred by the Company shall be deemed, in all circumstances, to have
arisen on the same date as the original loss occurrence that gave rise to the
Extra Contractual Obligation and/or an Excess Judgment.


 


E.                                      However,
this Article shall not apply where the loss has been incurred due to the
fraud of a member of the Board of Directors or a corporate officer of the
Company or any other employee of the Company with claims settlement authority
acting individually or collectively or in collusion with any individual or
corporation or any other organization or party involved in the presentation,
defense or settlement of any claim covered hereunder.


 


F.                                      Recoveries,
collectibles or retentions from any form of insurance and/or reinsurance,
including but not limited to, deductibles or self-insured retentions, that
protect the Company against claims that are the subject matter of this clause,
will inure to the benefit of the Reinsurer and shall be deducted from the total
amount of Extra Contractual Obligation and/or Excess Judgment award for
purposes of determining the amount recoverable hereunder, whether collectible
or not.


 


G.                                     If
any provision of this Article shall be rendered illegal or unenforceable
by the laws, regulations or public policy of any state, such provision shall be
considered void in such state, but this shall not affect the validity or
enforceability of any other provision of this Agreement or the enforceability
of such provision in any other jurisdiction.


 


7

















 


ARTICLE XI - REINSURANCE PREMIUM


 


A “Minimum and Deposit Premium”
of $2,842,000 shall be payable by the Company to the Reinsurer for each Covered
Underwriting Year. The Minimum and Deposit Premium shall be payable in equal
quarterly installments of $710,500 at January 1st, April 1st,
July 1st and October 1st of each Covered
Underwriting Year. The Minimum and Deposit Premium shall be adjusted annually,
in accordance with the REPORTS AND SETTLEMENTS Article, at a rate of 2.03% of
“Net Written Premium”.


 


ARTICLE XII – ADDITIONAL PREMIUM


 


A.                                   The
Company shall pay to the Reinsurer Additional Premium(s) calculated as follows:


 


1.               30%
of the first $12,175,000 of Ultimate Net Loss incurred (after deduction for
co-reinsurance) in excess of the Retention, plus


2.               45%
of the second $12,175,000 of Ultimate Net Loss incurred (after deduction for
co-reinsurance) in excess of the Retention, plus Accrued Interest.


 


B.                                     Accrued
Interest shall be calculated as from inception of the Covered Underwriting Year
in which Ultimate Net Loss incurred exceeded the Retention to the date when the
Additional Premium(s) are paid to the Reinsurer.


 


C.                                     Accrued
interest shall be based on the One-Year U.S. Treasury Bill Rate as defined in
the Experience Account Article (quarterly compounded) below.


 


D.                                    The
Additional Premium due for the term of the Agreement shall not exceed, prior to
the application of accrued interest, $9,131,250.


 


ARTICLE XIII – REINSURER’S MARGIN


 


A.                                   A
Reinsurer’s Margin equal to 15.39% of the Minimum and Deposit Premium shall be
deducted from the Minimum and Deposit Premium for each Covered Underwriting
Year and any adjustments thereto and shall be paid directly to the Reinsurer as
a non-refundable Reinsurer’s Margin charge.


 


B.                                     No
margin shall be deducted from Additional Premiums, if any, due hereunder.


 


ARTICLE XIV- REPORTS
AND SETTLEMENTS


 


A.                                   The Company shall provide the Reinsurer with all
necessary data respecting premiums and losses, including reserves thereon, on
forms mutually acceptable to the Company and the Reinsurer.


 


B.                                     Within 30 days following the end of each calendar
quarter, the Company shall provide the Reinsurer with a detailed report showing
the cumulative amount of each of the following, segregated by Covered
Underwriting Year until all Ultimate Net Losses recoverable hereunder have been
settled:


 


8

















 


1.               Net Written Premium;


2.               Ultimate Net Losses incurred separated by case
losses, Loss Adjustment Expenses, any Extra Contractual Obligations, and any
Excess Judgments;


3.               Ultimate Net Losses paid, net of salvage and
recoveries, separated by case losses, Loss Adjustment Expenses, any Extra
Contractual Obligations, and any Excess Judgments; and


4.               Amounts recoverable hereunder.


 


C.                                     The Company shall include in its December 31
report the following, segregated by line of business:


 


Reserves for outstanding losses and LAE, including reserves
for incurred but not reported claims.


 


D.                                    Settlements by the Reinsurer to the Company shall
be made within 30 days of the receipt of the quarterly report.  However, in no event shall the Reinsurer be
liable for amounts exceeding the Reinsurer’s aggregate limits as set forth in
the REINSURANCE LIMITS Article.


 


E.                                      In
the event that either party hereunder fails to make payment as provided herein,
interest shall accrue on all sums unpaid from the due date of such sums unpaid
until such payment is received by the debtor party. Accrued interest shall be
based on the One-Year U.S. Treasury Bill Rate as defined in the EXPERIENCE
ACCOUNT Article (quarterly compounded) below.


 


ARTICLE XV – CURRENCY


 


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


 


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


 


ARTICLE XVI - EXPERIENCE ACCOUNT


 


A.                                   Within
30 days following the end of each calendar quarter, until all Aggregate
Ultimate Net Losses recoverable hereunder have been fully paid, commuted or
otherwise discharged, the Reinsurer shall report to the Company an experience
account calculation as set forth herein.


 


B.                                     The
experience account calculation shall be computed on a cumulative basis from the
inception of this Agreement to the date of calculation, segregated by Accident
Years, as follows:


 


9

















 


1)                                      100%
of all Minimum and Deposit Premium paid and adjustments thereto, less


2)                                      Reinsurer’s
margin (not applicable to Additional Premium), plus


3)                                      Additional
Premium(s) and accrued interest thereon, less


4)                                      100%
of recoverable cumulative Ultimate Net Losses paid in excess of the Retention, plus


5)                                      Interest,
if any, as set out in the following paragraph.


 


B.                                     The
experience account balance set forth above shall be subject to interest credit
when the balance results in a positive amount. 
The interest credit shall equal to that amount resulting from
multiplying the positive average experience account balance for the calendar
quarter times the number of days in the calendar quarter (divided by 365 or 366
days as appropriate) by a rate equal to the average One Year U.S. Treasury Bill
Rate, as published in the Federal Reserve Statistical Release G.13, and
credited to the positive balance on a quarterly basis.


 


ARTICLE XVII - COMMUTATION


 


A.                                   The Company may request commutation of all
Ultimate Net Losses incurred hereunder, for both reported and unreported
losses, at December 31, 2003 or any December 31 thereafter, by giving
the Reinsurer no less than 90 days prior written notice, by certified mail,
stating therein the effective commutation date.


 


B.                                     The
Company shall submit with its request a statement of paid and outstanding Ultimate Net Losses, which shall form the
basis of a final agreed value of all losses recoverable under this Agreement,
which valuation shall be mutually agreed to between the parties hereto.


 


C.                                     If
the parties, as outlined in paragraph B above, fail to agree, they will settle
any difference by using a panel of three actuaries, one to be chosen by each
party and the third by the two so chosen. 
If either party refuses or neglects to appoint an actuary within 5 days,
the other party shall have the option to appoint two actuaries and shall
provide to the other party written notice of its election to exercise its
option.  If the two actuaries fail to
agree on the selection of a third actuary within 5 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 of the actuaries shall be regularly engaged in the valuation of the
subject business reinsured hereunder and shall be Fellows of the Casualty
Actuarial Society.  None of the
actuaries shall be under the control of either party to this Agreement.


 


D.                                    Each
party shall submit its case to the panel of actuaries within 10 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. 
The expense of the actuaries and of the commutation shall be equally
divided between the two parties.  Said
commutation shall take place at a location mutually agreed upon by the Company
and the Reinsurer.


 


10

















 


E.                                      Payment by the Reinsurer to the Company of the
value of Ultimate Net Losses subject to commutation constitutes a complete and
final release and discharge of the Reinsurer’s liabilities and obligations,
arising under or related to this Agreement, whether such liabilities and
obligations are known or unknown at the time of commutation.


 


ARTICLE XVIII - ACTUARIAL REVIEW


 


The
Reinsurer shall have the right to review the determination of all Ultimate Net
Losses pertaining to the reinsurance provided hereunder and all claims made in
connection therewith.  If the Reinsurer
does not agree with such data and such difference is irreconcilable between the
parties to this Agreement, such difference shall be referred to an independent
actuarial firm to be agreed to by the parties to this Agreement.  The cost of the actuarial work shall be
shared equally by the parties to this Agreement.


 


ARTICLE XIX -
SALVAGE AND SUBROGATION


 


A.                                   All salvages, subrogation, recoveries or
reimbursements, after deduction of expenses applicable thereto, recovered or
received subsequent to a loss settlement under this Agreement shall be applied
as if recovered or received prior to the settlement and all necessary
adjustments shall be made by the parties hereto, provided always, that nothing
in this clause shall be construed to mean that losses under this Agreement are
not recoverable until Company’s Ultimate Net Losses has been ascertained.  Expenses hereunder shall exclude all office
expenses of the Company and all salaries and expenses of its officials and
employees.


 


B.                                     The Reinsurer shall be subrogated, as respects
any loss or losses for which the Reinsurer shall actually pay or become liable,
but only to the extent of the amount of payment by or the amount of liability
to the Reinsurer, to all the rights of the Company against any person or other
entity who may be legally responsible in damages for said loss(es).  The Company hereby agrees to enforce such
rights, but in case the Company shall refuse or neglect to do so the Reinsurer
is hereby authorized and empowered to bring any appropriate action in the name
of the Company or its policyholders, or otherwise to enforce such rights.


 


ARTICLE XX - ERRORS AND OMISSIONS


 


Errors
or omissions on the part of the Company shall not invalidate the reinsurance
under this Agreement, provided such errors or omissions are corrected promptly
after discovery thereof, but the liability of the Reinsurer under this
Agreement or any exhibits or endorsements attached thereto shall in no event
exceed the limits specified therein, nor be extended to cover any risks, perils
or classes of insurance generally or specifically excluded therein.


 


11

















 


ARTICLE XXI - OFFSET AND SECURITY


 


A.                                   Each party hereto has the right, which may be
exercised at any time, to offset any amounts, whether on account of premiums or
losses or otherwise, due from such party to another party under this Agreement
or any other reinsurance agreement heretofore or hereafter entered into between
them, against any amounts, whether on account of premiums or losses or
otherwise due from the latter party to the former party.  The party asserting the right of offset may
exercise this right, whether as assuming or ceding insurer or in both roles in
the relevant agreement or agreements.


 


B.                                     Each party hereby assigns and pledges to the
other party (or to each other party, if more than one) all of its rights under
this Agreement to receive premium or loss payments at any time from such other
party (“Collateral”), to secure its premium or loss obligations to such other
party at any time under this Agreement and any other reinsurance agreement
heretofore or hereafter entered into by and between them (“Secured
Obligations”).  If at any time a party
is in default under any Secured Obligation or shall be subject to any
liquidation, rehabilitation, reorganization or conservation proceeding, each
other party shall be entitled in its discretion, to apply, or to withhold for
the purpose of applying in due course, any Collateral assigned and pledged to
it by the former party and otherwise to realize upon such Collateral as
security for such Secured Obligations.


 


C.                                     The security interest described herein, and the
term “Collateral,” shall apply to all payments and other proceeds in respect of
the rights assigned and pledged.  A
party’s security interest in Collateral shall be deemed evidenced only by the
counterpart of this Agreement delivered to such party.


 


D.                                    Each right under this Article is a separate
and independent right, exercisable, without notice or demand, alone or together
with other rights, in the sole election of the party entitled thereto, and no
waiver, delay, or failure to exercise, in respect of any right, shall
constitute a waiver of any other right. 
The provisions of this Article shall survive any cancellation or
other termination of this Agreement.


 


E.                                      In the event of the insolvency of a party hereto,
offsets shall only be allowed in accordance with the laws of the insolvent
party’s state of domicile.


 


ARTICLE XXII - ACCESS TO RECORDS


 


The
Company shall place at the disposal of the Reinsurer and the Reinsurer shall
have the right to inspect, through its authorized representatives, at all
reasonable times during the currency of this Agreement and thereafter, the
books, records and papers of the Company pertaining to the reinsurance provided
hereunder and all claims made in connection therewith.


 


ARTICLE XXIII -
RESERVES AND TAXES


 


A.                                   The Reinsurer shall maintain legal reserves with
respect to claims hereunder.


 


B.                                     The Company will be liable for all taxes on
premiums reported to the Reinsurer hereunder and will reimburse the Reinsurer
for such taxes where the Reinsurer is required to pay the same.


 


12

















 


ARTICLE XXIV - INSOLVENCY


 


In
the event of the insolvency of the Company and the appointment of a
conservator, liquidator or statutory successor, the reinsurance provided by
this Agreement shall be payable by the Reinsurer directly to the Company or to
its liquidator, receiver or statutory successor on the basis of the liability
of the Company under the contract or contracts reinsured.  Subject to the right of offset and the
verification of coverage, the Reinsurer shall pay its share of the loss without
diminution because of the insolvency of the Company.  The liquidator, receiver or statutory successor of the Company
shall give written notice of the pendency of each claim against the Company on
a policy or bond reinsured within a reasonable time after such claim is filed
in the insolvency proceeding.  During
the pendency of such claim, the Reinsurer may, at its own expense, investigate
such claim and interpose in the proceeding where such claim is to be
adjudicated any defense or defenses which it may deem available to the Company,
its liquidator or receiver or statutory successor.  Subject to court approval, any expense thus incurred by the
Reinsurer shall be chargeable against the Company as part of the expense of
liquidation to the extent of such proportionate share of the benefit as shall
accrue to the Company solely as a result of the defense undertaken by the
Reinsurer.  The reinsurance shall be
payable as set forth above except where this Agreement specifically provides for
the payment of reinsurance proceeds to another party in the event of the
insolvency of the Company.


 


ARTICLE XXV – COLLATERALIZATION


 


To the extent the Company
requires the Reinsurer to provide Collateral in order to fulfill U.S statutory
loss reserve securitization requirements, the costs associated with the
procurement and maintenance of such Collateral shall be paid by the Reinsurer.


 


ARTICLE XXVI – CONDITIONS


 


A.                                   As
required under the Retention clause, the Company shall provide the Reinsurer
with its Underwriting Year Business Plan for the respective Covered
Underwriting Year by January 31st of the Covered Underwriting
Year.  In addition to projections for
overall financial results of the Company for the Covered Underwriting Year, the
Underwriting Year Business Plan document shall include the following Business
Practices and Loss History Information, or be accompanied by the following
Business Practices and Loss History Information:


 


•                                          Product
Overviews and Marketing  Overviews by state for all Subject
Business.


•                                          Rate Revision
Overviews by state for all Subject Business including any historical rate
changes, proposed rate changes, revisions in territory segmentation, changes in
coverage, and any changes in rating classifications.


•                                          Current
Underwriting Guidelines.


•                                          Current
Claims Handling Procedures.


•                                          Current
Underwriting Audit Procedures.


•                                          Current Loss
Reserving Process.


•                                          Inuring
Reinsurance.


•                                          Most recent
Reserve Review, including: Paid and Incurred Loss and LAE Development Triangles
(Gross and Net) separated by Underwriting Year and by State.


•                                          Historical
Net Written Premium by Underwriting Year.


 


13

















 


B.                                     To
the extent that the Company fails to implement, revises and/or deviates from
any of the above Business Practices during the Covered Underwriting Year, such
failure to implement, and/or  revision,
and/or deviation shall be deemed to be a Change in Condition as described in
paragraph 2. of the Change in Condition clause.


 


C.                                    In
the event that the Company does not provide the Reinsurer with the Underwriting
Year Business Plan document as described in paragraph A above by
January 31st of the Covered Underwriting Year, the Reinsurer
shall have the right to rescind this Agreement.  Notwithstanding the aforementioned, if due to circumstances beyond
the Company’s control, the Company is unable to deliver the Underwriting Year
Business Plan document to the Reinsurer by January 31st of the
Covered Underwriting Year the Reinsurer will afford to the Company an Extended
Delivery Period of thirty business days before the Reinsurer invokes its right
of rescission. In the event of a rescission, the Reinsurer will return to the
Company premium previously paid to the Reinsurer less a Reinsurer’s expense
charge of $415,000.


 


ARTICLE XXVII – CHANGE OF CONTROL


 


If at any time during the
continuance of this Agreement the Reinsurer or the Company undergoes a Change
of Control, then the Reinsurer or the Company shall have the option to commute
this Agreement as set forth in the Commutation Clause above. “Change of Control”
shall mean (i) a merger of the Reinsurer or the Company with another entity or
entities unless the Reinsurer or the Company is the surviving corporation
following such merger, (ii) the acquisition of voting control (directly or
indirectly) of the Reinsurer or the Company by another entity or entities, or
(iii) the entry by the Reinsurer or the Company into a legally binding
agreement (or the entry by any other persons or entities into an agreement that
would be legally binding on or in respect of the Reinsurer or the Company or
all or substantially all of its properties or assets), which agreement shall be
deemed legally binding for purposes hereof notwithstanding that it may be
conditioned upon the occurrence of certain events, such as obtaining shareholder
approval, which would result in a Change of Control under clauses (i) or (ii)
of this definition in respect of the Reinsurer or the Company. Each party to
this Agreement agrees to give the other party written notice of any Change of
Control within three (3) business days of the occurrence thereof (or, with
respect to a Change of Control referred to in (iii) above, within three (3)
business days after execution of any such agreement).


 


ARTICLE XXVIII –
CHANGES IN CONDITIONS


 


If at any time during the
continuance of this Agreement any of the following events occur with respect to
the Company:


 


1.                                       the
Company’s financial strength rating assigned by AM Best (“Best’s”) is reduced
below the rating assigned to the Company by Best’s as of the effective date of
this Agreement, or (ii) the Company for whatever reason, shall no longer be
rated by Best’s;


 


2.                                       the
Company changes its mix of business, underwriting guidelines, premium rates,
claims handling procedures, underwriting audit procedures, case reserving
process, or the levels of reinsurance protection in any manner from that in
effect at the inception of each Underwriting Year  during the term of this Agreement which materially adversely
affects this Agreement or the obligations of the  Reinsurer hereunder;


 


14

















 


3.                                       the
Company fails to remit premiums in accordance with the terms of this Agreement;


 


the parties agree that
the Reinsurer shall have the right to re-negotiate the terms of this Agreement.
Revised terms shall be subject to the mutual agreement of the parties hereto,
with the understanding that  the intent
of the parties is to agree to amend this Agreement in such a manner so as to
place each party in the same relative economic position it would have occupied
prior to such change (which neither party shall unreasonably withhold from the
other).  In the event revised terms
cannot be mutually agreed to within 60 days after the Reinsurer is notified of
such Change in Conditions, then the Reinsurer shall have the option to either
commute liabilities and obligations arising under or related to this Agreement
as set forth in the Commutation Clause above, or engage an independent,
nationally known actuarial firm to determine, based upon a Change in Conditions
as described in 2. above, the revised projected Underwriting Year Loss and LAE
Ratio and Retention for the covered Underwriting Year in which such Change in
Conditions occurred. The cost of the actuarial work shall be borne equally by
both parties to the Agreement.


 


ARTICLE XXIX – AMENDMENTS


 


This Agreement may be
changed, altered or amended as the parties may agree, provided such change,
alteration or amendment is evidenced in writing or by Endorsement to this
Agreement and signed by the parties hereto.  Such writing or Endorsement will then constitute a part of this
Agreement.


 


ARTICLE XXX – SERVICE OF SUIT


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


 


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


 


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


 


15

















 


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


 


ARTICLE XXXII – GOVERNING LAW


 


This Agreement shall be
construed, and the obligations, rights and remedies of the parties hereunder
shall be determined, in accordance with the laws of the State of New York,
U.S.A. without regard to conflict of law principles.


 


ARTICLE XXXIII – ARBITRATION


 


A.                                   As
a condition precedent to any right of action hereunder, any dispute arising out
of this Agreement, whether such dispute arises before or after the termination
of this Agreement, shall be submitted to the decision of a board of arbitration
composed of two arbitrators and an umpire, meeting in New York, New York unless
otherwise agreed.


 


B.                                     The
members of the board of arbitration shall be active or retired disinterested
officials of insurance or reinsurance companies or Underwriters at Lloyd’s of
London.  Each party shall appoint its
arbitrator and the two arbitrators shall choose an umpire before instituting
the hearing.  If the respondent fails to
appoint its arbitrator within four weeks after being requested to do so by the claimant,
the latter shall also appoint the second arbitrator.  If the two arbitrators fail to agree upon the appointment of an
umpire within four weeks after their nominations, each of them shall name
three, of whom the other shall decline two and the decision shall be made by
drawing lots.


 


C.                                     The
claimant shall submit its initial brief within 20 days from appointment of the
umpire.  The respondent shall submit its
brief within 20 days after receipt of the claimant’s brief and the claimant may
submit a reply brief within l0 days after receipt of the respondent’s brief.


 


D.                                    The
board shall make its decision with regard to the custom and usage of the
insurance and reinsurance business.  The
board shall issue its decision in writing based upon a hearing in which
evidence may be introduced without following strict rules of evidence but in
which cross examination and rebuttal shall be allowed.  The board shall make its decision within 60
days following the termination of the hearings unless the parties consent to an
extension.  The majority decision of the
board shall be final and binding upon all parties to the proceeding.  Judgment may be entered upon the award of
the board in any court having jurisdiction thereof.


 


16

















 


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


 


F.                                      Each
party shall bear the expense of its own arbitrator and shall jointly and
equally bear with the other party the expense of the umpire.  The remaining costs of the arbitration
proceedings shall be allocated by the board.


 


ARTICLE XXXIV – INTERMEDIARY


 


AM-RE Brokers, Inc., 685
College Road East, Princeton, N.J. 
08543-5212 is hereby recognized as the Intermediary by whom this
Agreement was negotiated and through whom all communications relating hereto
shall be transmitted to both parties. 
All payments may be made directly to the party to whom the payments are
due, it being understood and agreed that AM-RE Brokers shall simultaneously be
provided with copies of all correspondence, statements, or other verification
of remittances made, which pertain to or may accompany such payments between
the parties.


 


* * * * *


 


17

















 


SIGNATURE PAGE


 


IN WITNESS WHEREOF the
parties hereto have caused this Agreement to be executed in triplicate by their
duly authorized representatives.


 


 


COAST NATIONAL
INSURANCE COMPANY

SECURITY NATIONAL INSURANCE COMPANY


 


 


	
   

  	
    /s/
  Randy Sutton

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    Randy
  Sutton

  	
   

  
	
   

  	
   

  
	
  Title:

  	
    Chief
  Financial Officer/Treasurer

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
					



 


 


INTER-OCEAN
REINSURANCE (IRELAND) LIMITED


 


 


	
   

  	
    /s/
  Anne Finn

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    Anne
  Finn

  	
   

  
	
   

  	
   

  
	
  Title:

  	
    President

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
					



 


18

















 


NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY -
REINSURANCE - No. 1B


 


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


 


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


 


Limited Exclusion Provision.*


 


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


 


	
  to

  	
   

  	
  {

  	
   

  	
  injury, sickness, disease, death
  or destruction

  bodily injury or property damage

  



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


 


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


 


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


 


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


 


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


 


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


 


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


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


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


 


Broad Exclusion Provision.*


It is
agreed that the policy does not apply:


 


	
  I.                                         Under
  any Liability  Coverage, to

  	
   

  	
  {

  	
   

  	
  Injury, sickness, disease, death
  or destruction

  Bodily injury or property damage

  



 


19

















 


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


 


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


 


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


	
  to

  	
  {

  	
  Immediate medical or surgical
  relief,    

  	
  to expenses
  incurred with respect

  
	
   

  	
  {

  	
  First aid,

  	
   

  
	
  to

  	
   

  	
  Bodily injury, sickness, disease
  or death

  	
  resulting from
  the hazardous properties of 

  
	
   

  	
   

  	
  bodily injury

  	
   

  



nuclear
material and arising out of the operation of nuclear facility by any person or
organization.


 


	
  III.                                 Under
  any Liability Coverage, to

  	
   

  	
  {

  	
   

  	
  Injury, sickness, disease, death
  or destruction

  
	
   

  	
   

  	
   

  	
   

  	
  bodily injury or
  property damage

  



 


resulting
from the hazardous properties of nuclear material, if


 


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


 


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


 


	
  (c)

  	
  The

  	
   

  	
  {

  	
   

  	
  injury, sickness, disease, death
  or destruction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  bodily injury or
  property damage

  



 


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


	
  {

  	
   

  	
  injury to or destruction of
  property at such nuclear facility.

  
	
   

  	
   

  	
  property damage
  to such nuclear facility and any property thereat.

  



 


IV.                                 As
used in this endorsement:


 


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


 


(a)          any
nuclear reactor,


 


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


 


20

















 


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


 


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


 


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


With respect to injury to or
destruction of property, the word “injury” or “destruction” includes all forms
of radioactive contamination of property. 
“Property damage” includes all forms of radioactive
contamination of property.


 


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


 


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


 


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


 


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


 


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


 












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


 


21

















 


NUCLEAR INCIDENT
EXCLUSION CLAUSE—


PHYSICAL
DAMAGE—REINSURANCE—NO. 2


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(4)                                  Without
in any way restricting the operations of paragraphs (1), (2) and (3) hereof,
this Reinsurance does not cover any loss or liability by radioactive
contamination accruing to the Reassured, directly or indirectly, and whether as
Insurer or Reinsurer, when such radioactive contamination is a named hazard
specifically insured against.


 


(5)                                  It
is understood and agreed that this Clause shall not extend to risks using
radioactive isotopes in any form where the nuclear exposure is not considered
by the Reassured to be the primary hazard.


 


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


 


(7)                                  Reassured
to be sole judge of what constitutes:


 


(a)                                  substantial
quantities, and


 


(b)                                 the
extent of installation, plant or site.


 


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


 


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


 


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


 


22

















 


NUCLEAR INCIDENT EXCLUSION CLAUSE - REINSURANCE - No.
4


 


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


 


(2)                                  Without
in any way restricting the operations of Nuclear Incident Exclusion Clause No.
1B - Liability, No. 2 - Physical Damage, No. 3 - Boiler and Machinery and
paragraph (1) of this clause, it is understood and agreed that for all purposes
as respects the reinsurance assumed by the Reinsurer from the Reassured, all original
insurance policies or contracts of the Reassured (new, renewal and replacement)
shall be deemed to include the applicable existing Nuclear Clause and/or
Nuclear Exclusion Clause(s) in effect at the time and any subsequent revisions
thereto as agreed upon and approved by the Insurance Industry and/or a
qualified Advisory or Rating Bureau.


 


23

















 


ENDORSEMENT


 


Attached to and forming
part of the Aggregate Excess of Loss Reinsurance Agreement (hereinafter referred
to as the “Agreement”) between COAST
NATIONAL INSURANCE COMPANY, a California corporation, and SECURITY NATIONAL
INSURANCE COMPANY, a Florida corporation (hereinafter and thereinafter
collectively referred to as “Company”) and INTER-OCEAN REINSURANCE (IRELAND)
LIMITED, of Dublin, Ireland (hereinafter and thereinafter referred to as
“Reinsurer”).


 


It is hereby understood
and agreed by the parties hereto that effective as respects business written on
and after 12:01 a.m., Eastern Standard Time, April 1, 2001, the Agreement
is hereby amended in accordance with the following.


 


1.               The
following Companies shall be included in the description of “Company” in the
Preamble: Reliant Insurance Company, and Reliant Casualty Insurance Company.


 


2.               Paragraph
B of Article I – Parties to the Agreement shall be revised to read as
follows:


 


B.                                     Except
as provided for under Article VI – Reinsurance Limits, the liability of
the Reinsurer and all other benefits accruing to the Company as provided in
this Agreement or any amendments hereto, shall apply to the reinsured companies
comprising the Company as a group and not separately to each of the reinsured
companies named in this Agreement.


 


3.               Article VI
– Reinsurance Limits is revised to read as follows:


 


A.                                   The
Reinsurer shall not be liable for Ultimate Net Losses hereunder until Company’s
Underwriting Year Loss and LAE Ratio exceeds the amounts set forth herein
(“Company Retention”).  As respects
Covered Underwriting Year 2001, the Company Retention shall be 64.99%.


 


B.                                     As respects Covered Underwriting Years 2002 and
2003, the Company Retention shall be determined and mutually agreed to by the
parties hereto by February 28th of the Covered Underwriting
Year and shall be equal to the sum of the Company’s mutually agreed Business
Plan Underwriting Year Loss and LAE Ratio plus 1.50%.  The Company shall deliver to the Reinsurer the Underwriting Year
Business Plan Document, as described under Paragraph A of the CONDITIONS
Article, including its projected Business Plan Underwriting Year Loss and LAE
Ratio to the Reinsurer by January 31st  of the Covered Underwriting Year.


 


1

















 


C.                                     In the event that the parties hereto are
unable to mutually agree upon the Company Retention by the later of
February 28th, or February 28th plus the number
of business days utilized, if any, under the “Extended Delivery Period” as
described under paragraph C of the CONDITIONS Article, of the Covered
Underwriting Year, the projected Underwriting Year Loss and LAE Ratio shall be
determined by an independent, nationally known actuarial firm mutually
acceptable to the Company and the Reinsurer (which neither party shall
unreasonably withhold from the other). 
The cost of the actuarial work shall be borne equally by both parties to
the Agreement.


 


4.               Article VII
– Co-Reinsurance is revised to read as follows:


 


A.                                   For
each Covered Underwriting Year, the Company shall retain net for its own
account the following Ultimate Net Loss amounts in excess of the Company Retention
(hereinafter Company’s Co-Reinsurance Participation):


 


1.               10% of:


 


a)              The
lesser of 72.00% or the CNIC / SNIC Covered Underwriting Year Loss and LAE
Ratio, less


b)             The
CNIC / SNIC Covered Underwriting Year Retention, multiplied by


c)              The
CNIC / SNIC Covered Underwriting Year NWP, plus


 


2.               If
the CNIC / SNIC Covered Underwriting Year Loss and LAE Ratio exceeds 72.00%,
50% of:


 


a)              The
CNIC / SNIC Covered Underwriting Year Loss and LAE Ratio, less


b)             72.00%,
multiplied by


c)              The
CNIC / SNIC Covered Underwriting Year NWP, plus


 


3.               10% of:


 


a)              The
lesser of 70% or the Reliant Covered Underwriting Year Loss and LAE Ratio, less


b)             The
Reliant Covered Underwriting Year Retention, multiplied by


c)              The
Reliant Covered Underwriting Year NWP, plus


 


4.               If the Reliant
Covered Underwriting Year Loss and LAE Ratio exceeds, 70%, 80% of:


 


a)              The
Reliant Covered Underwriting Year Loss and LAE Ratio, less


b)             70%,
multiplied by


c)              The
Reliant Covered Underwriting Year NWP, plus


 


2

















 


5.     If the Reliant Covered Underwriting Year
Loss and LAE Ratio exceeds, 90%, 10% of:


 


a)              The
Reliant Covered Underwriting Year Loss and LAE Ratio, less


b)             90%,
multiplied by


c)              The
Reliant Covered Underwriting Year NWP.


 


B.                                     For
Covered Underwriting Years 2002 and 2003, the Company’s Co-Reinsurance
Participation percentage under Paragraph 2 and Paragraph 4 above may be amended
so as to remain in accordance with the terms and conditions of reinsurances
that inure to this Agreement, however, for Covered Underwriting Year 2002 the
Company’s Co-Reinsurance Participation percentage under Paragraph 2 above shall
be subject to a minimum of 25%, and the Company’s Co-Reinsurance Participation
percentage under Paragraph 4 above shall be subject to a minimum of 50%. For
Covered Underwriting Year 2003 the Company’s Co-Reinsurance Participation
percentage under Paragraph 2 and Paragraph 4 above shall be subject to a
minimum of 10%.


 


C.                                     It
is understood and agreed that the resulting dollar amount to which the Company’s
Co-Reinsurance Participation will be applied under Paragraph 1,  Paragraph 2, Paragraph 3, Paragraph 4, and
Paragraph 5 above will be determined for each Covered Underwriting Year
subsequent to the determination of the CNIC / SNIC Covered Underwriting Year
Retention , and the Reliant Covered Underwriting Year Retention  for each Covered Underwriting Year.


 


5.               Article VIII-
Definitions is revised to read as follows:


 


A.                                    “Covered
Underwriting Year” shall mean the 12 month period beginning January 1st
through and including December 31st, with the 1st
Covered Underwriting Year being from January 1, 2001 through
December 31, 2001 and each 12 month period thereafter shall be a separate
Covered Underwriting Year. With regard to Reliant Insurance Company and Reliant
Casualty Insurance Company the 1st Covered Underwriting year shall
be from April 1, 2001 through December 31, 2001.


 


B.                                     The
“Underwriting
Year Loss and LAE Ratio” shall be determined by dividing the
Company’s “Ultimate Net Loss” for the Covered Underwriting Year by the
Company’s “Net Written Premium” for the Covered Underwriting Year.


 


C.                                     The
“CNIC /
SNIC Covered Underwriting Year Loss and LAE Ratio” shall be
determined by dividing the Coast National Insurance Company and the Security
National Insurance Company “Ultimate Net Loss” for the Covered Underwriting
Year by the Coast National Insurance Company and the Security National
Insurance Company “Net Written Premium” for the Covered Underwriting Year.


 


3

















 


D.                                    The
“Reliant
Covered Underwriting Year Loss and LAE Ratio” shall be determined by
dividing the Reliant Insurance Company and the Reliant Casualty Insurance
Company “Ultimate Net Loss” for the Covered Underwriting Year by the Reliant
Insurance Company and the Reliant Casualty Insurance Company “Net Written
Premium” for the Covered Underwriting Year.


 


E.                                      “LAE”
(“Loss Adjustment Expenses”) shall mean all expenses incurred by the
Company in the investigation, appraisal, adjustment, settlement or defense of
specific claims covered under Policies of the Company reinsured hereunder
(including salaries and expenses of in house counsel(s) while involved in
controlling and/or handling of a covered claim associated therewith), but not
including office expenses of the Company, salaries and expenses of its
officials and employees, or any other expenses not allocable to specific claims
covered under the Policies that are reinsured under this Agreement.


 


F.                                      “IBNR”
(“Incurred But Not Reported”) as used herein shall refer to that amount of
reserves for outstanding losses and LAE arising from covered losses that have
already occurred during the term of this Agreement but have not yet been
reported to the Company as claims recoverable under policies reinsured
hereunder.  Such amounts shall
contemplate the ultimate valuation of such losses and LAE.


 


G.                                    “Net
Written Premium” for the respective Covered Underwriting Year shall mean
the direct written premium less cancellations and returns and less premiums
paid in respect of all other inuring reinsurances.  Net Written Premium shall be gross of Premiums to this Agreement.


 


H.                                    “CNIC / SNIC
Covered Underwriting Year Net Written Premium” for the respective
Covered Underwriting Year shall mean the direct written premium for the Coast
National Insurance Company and the Security National Insurance Company less
cancellations and returns and less premiums paid in respect of all other
inuring reinsurances.  Net Written
Premium shall be gross of Premiums to this Agreement.


 


I.                                         “Reliant
Covered Underwriting Year Net Written Premium” for the respective Covered
Underwriting Year shall mean the direct written premium for the Reliant
Insurance Company and the Reliant Casualty Insurance Company less cancellations
and returns and less premiums paid in respect of all other inuring
reinsurances.  Net Written Premium shall
be gross of Premiums to this Agreement.


 


J.                                        “CNIC / SNIC
Covered Underwriting Year Retention” shall be mutually agreed by the
parties hereto as described under paragraph B of the REINSURANCE LIMITS
Article and shall be equal to the mutually agreed Business Plan
Underwriting Year Loss and LAE ratio for Coast National Insurance Company and
Security National Insurance Company plus 1.50%.


 


4

















 


K.                                    “Reliant
Covered Underwriting Year Retention” shall be mutually agreed by the
parties hereto as described under paragraph B of the REINSURANCE LIMITS
Article and shall be equal to the mutually agreed Business Plan
Underwriting Year Loss and LAE ratio for Reliant Insurance Company and Reliant
Casualty Insurance Company plus 1.50%.


 


L.                                     “Policy”
or
“Policies” shall mean the Company’s binders, contracts and Policies
providing insurance on the risks reinsured under this Agreement.


 


M.                                  “Ultimate
Net Loss” is defined as the aggregate sum of amounts paid by the Company in
settlement of losses, including Loss Adjustment Expenses (LAE), Extra
Contractual Obligations and Excess Judgements awards, plus reserves for
outstanding losses and LAE, including reserves for incurred but not reported
claims, all as respects covered losses for which the Company is liable to pay
under the Policies reinsured hereunder net after all inuring reinsurance,
whether collectible or not for any reason including, but not limited to, novations
and rescission, and all salvages and recoveries.  In the event of the insolvency of the Company, “Ultimate Net
Loss” shall be as otherwise defined herein except it shall include the sum or
sums which the Company has incurred for which it is liable instead of the sum
or sums paid by the Company for which it is liable, and payment by the
Reinsurer shall be made to the liquidator, receiver, or statutory successor of
the Company in accordance with the INSOLVENCY CLAUSE Article.


 


6.               Article IX:
Inuring Reinsurance is revised to read as follows:


 


A.                                   For
the purpose of determining the Ultimate Net Loss recoverable under this
Agreement, it is hereby agreed that all underlying reinsurances in effect as of
the inception date of this Agreement shall at all times during the currency of
this Agreement be deemed in place and in full effect whether purchased or not,
whether fully subscribed or not, whether collectible or not, for any reason
including, inter alia, insolvency, dispute, rescission, statute, or ruling court
of law.


 


B.                                     It
is agreed and understood that the underlying term Quota Share reinsurance
underwritten by Overseas Partners Re Ltd. shall be deemed in place and in full
in effect as of the inception date of this Agreement through and including
December 31, 2002. It is further agreed that the application of the
aggregate reinsurance limit as defined under Article V – Retention and
Limit Paragraph D 3 of this underlying term Quota Share agreement shall not be
considered in the calculation of the Company’s Ultimate Net Loss for this
Agreement.


 


5

















 


C.                                     It
is agreed and understood that the underlying term Quota Share reinsurance
underwritten by GMAC Reinsurance Corporation and National Union Fire Insurance
Company of Pittsburgh, PA. shall be deemed in place and in full in effect as of
April 1, 2001 through and including March 31, 2003. It is further
agreed that the application of the aggregate reinsurance limit as defined under
Article XVI – Aggregate Reinsurance Limit of this underlying term Quota
Share agreement shall not be considered in the calculation of the Company’s
Ultimate Net Loss for this Agreement.


 


Nothing
herein contained shall alter, vary or extend any provision or condition of this
Agreement other than as above stated.


 


* * * * * * *


 


6

















 


IN WITNESS WHEREOF the
parties hereto have caused this Endorsement to be executed in quadruplicate by
their duly authorized representatives.


 


 


COAST NATIONAL
INSURANCE COMPANY

SECURITY NATIONAL INSURANCE COMPANY


 


 


	
   

  	
    /s/
  Jeffrey J. Dailey

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    Jeffrey
  J. Dailey

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
    Chief
  Operating Officer

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attested:

  	
   

  	
   

  
						



 


 


RELIANT
INSURANCE COMPANY

RELIANT CASUALTY INSURANCE COMPANY


 


 


	
   

  	
    /s/
  Jeffrey J. Dailey

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    Jeffrey
  J. Dailey

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
    Chief
  Operating Officer

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attested:

  	
   

  	
   

  
						



 


 


INTER-OCEAN
REINSURANCE (IRELAND) LIMITED


 


 


	
   

  	
    /s/
  Anne Finn

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    Anne
  Finn

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
    President

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attested:

  	
   

  	
   

  
						



 


7

















 


DRAFT


 


ENDORSEMENT II


 


Attached to and forming
part of the Aggregate Excess of Loss Reinsurance Agreement (hereinafter
referred to as the “Agreement”) between COAST
NATIONAL INSURANCE COMPANY, a California corporation, SECURITY NATIONAL
INSURANCE COMPANY, a Florida corporation, RELIANT INSURANCE COMPANY of
Philadelphia, Pennsylvania and RELIANT CASUALTY INSURANCE COMPANY of
Independence Ohio (hereinafter and thereinafter collectively referred to as
“Company”) and INTER-OCEAN REINSURANCE (IRELAND) LIMITED, of Dublin, Ireland
(hereinafter and thereinafter referred to as “Reinsurer”).


 


I.                                         It
is hereby understood and agreed by the parties hereto that effective as
respects business written on and after 12:01 a.m., Eastern Standard Time,
November 21, 2001, the Agreement is hereby amended in accordance with the
following:


 


The
name of Reliant Insurance Company as indicated in the description of the
“Company” in the Preamble has changed to Bristol West Insurance Company;
therefore, any reference in the Agreement to “Reliant” shall hereinafter
collectively be referred to as “Bristol West and Reliant”.


 


II.                                     Effective
as respects business written on and after 12:01 a.m., Eastern Standard Time,
January 1, 2002, the following Articles in the Agreement are hereby
amended as follows:


 


1.               Paragraphs
A and B of Article VI – Reinsurance Limits are revised to read as follows:


 


A.                                                           The
Reinsurer shall not be liable for Ultimate Net Losses hereunder until Company’s
Underwriting Year Loss and LAE Ratio exceeds the amounts set forth herein
(“Company Retention”).


 


B.                                                             The Company Retention for Underwriting Year 2002
will be equal to a 66.10% Underwriting Year Loss and LAE Ratio.  The Coast National Insurance Company and
Security National Insurance Company’s Underwriting Year Retention shall be
equal to 66.60% for Covered Underwriting Year 2002.  The Bristol West and Reliant Covered Underwriting Year Retention
shall be equal to 63.40% for Covered Underwriting Year 2002.


 


1

















 


2.               Article VII
– Co-Reinsurance is revised to read as follows:


 


A.                                                           For
Covered Underwriting Year 2002, the Company shall retain net for its own
account the following Ultimate Net Loss amounts in excess of the Company
Retention (hereinafter Company’s Co-Reinsurance Participation):


 


1.                                       10%
of:


 


a)              The
lesser of 70% or the CNIC / SNIC Covered Underwriting Year Loss and LAE Ratio, less


b)             The
CNIC / SNIC Covered Underwriting Year Retention, multiplied by


c)              The
CNIC / SNIC Covered Underwriting Year NWP, plus


 


2.                                       If
the CNIC / SNIC Covered Underwriting Year Loss and LAE Ratio exceeds 70%, 12%
of:


 


a)              The
lesser of 72% or the CNIC / SNIC Covered Underwriting Year Loss and LAE Ratio, less


b)             70%,
multiplied by


c)              The
CNIC / SNIC Covered Underwriting Year NWP, plus


 


3.                                       If
the CNIC / SNIC Covered Underwriting Year Loss and LAE Ratio exceeds 72%, 40%
of:


 


a)              The
CNIC / SNIC Covered Underwriting Year Loss and LAE Ratio, less


b)             72%,
multiplied by


c)              The
CNIC / SNIC Covered Underwriting Year NWP, plus


 


4.                                       10%
of:


 


a)              The
lesser of 70% or the Bristol West and Reliant Covered Underwriting Year Loss
and LAE Ratio, less


b)             The
Bristol West and Reliant Covered Underwriting Year Retention, multiplied by


c)              The
Bristol West and Reliant Covered Underwriting Year NWP, plus


 


5.                                       If
the Bristol West and Reliant Covered Underwriting Year Loss and LAE Ratio for
the portion of the Covered Underwriting Year from 1/1/02 through 6/30/02
exceeds, 70%, 80% of:


 


a)              The
Bristol West and Reliant Covered Underwriting Year Loss and LAE Ratio, less


b)             70%,
multiplied by


c)              The
Bristol West and Reliant Covered Underwriting Year NWP, plus


 


2

















 


6.                                       If
the Bristol West and Reliant Covered Underwriting Year Loss and LAE Ratio for
the portion of the Covered Underwriting Year from 1/1/02 through 6/30/02
exceeds, 90%, 10% of:


 


a)              The
Bristol West and Reliant Covered Underwriting Year Loss and LAE Ratio, less


b)             90%,
multiplied by


c)              The
Bristol West and Reliant Covered Underwriting Year NWP, plus


 


7.                                       If
the Bristol West and Reliant Covered Underwriting Year Loss and LAE Ratio for
the portion of the Covered Underwriting Year from 7/1/02 through 12/31/02
exceeds, 70%, 80% of:


 


a)              The
Bristol West and Reliant Covered Underwriting Year Loss and LAE Ratio, less


b)             70%,
multiplied by


c)              The
Bristol West and Reliant Covered Underwriting Year NWP, plus


 


8.                                       If
the Bristol West and Reliant Covered Underwriting Year Loss and LAE Ratio for
the portion of the Covered Underwriting Year from 7/1/02 through 12/31/02
exceeds, 80%, 10% of:


 


a)              The
Bristol West and Reliant Covered Underwriting Year Loss and LAE Ratio, less


b)             80%,
multiplied by


c)              The
Bristol West and Reliant Covered Underwriting Year NWP


 


It is
understood and agreed that for purposes of calculating the Company’s
Co-Reinsurance participation under Paragraph 5. and Paragraph 6. above that the
Bristol West and Reliant Covered Underwriting Year Loss and LAE Ratio shall be
determined by dividing the Bristol West and Reliant  Ultimate Net Loss for the portion of the Covered Underwriting
Year from 1/1/02 through 6/30/02 by the Bristol West and Reliant Net Written
Premium for the portion of the Covered Underwriting Year from 1/1/02 through
6/30/02.


 


It is
also understood and agreed that for purposes of calculating the Company’s
Co-Reinsurance participation under Paragraph 7. and Paragraph 8. above that the
Bristol West and Reliant Covered Underwriting Year Loss and LAE Ratio shall be
determined by dividing the Bristol West and Reliant Ultimate Net Loss for the
portion of the Covered Underwriting Year from 7/1/02 through 12/31/02 by the
Bristol West and Reliant Net Written Premium for the portion of the Covered
Underwriting Year from 7/1/02 through 12/31/02.


 


3

















 


B.                                                             For
Covered Underwriting Year 2003, the Company’s Co-Reinsurance Participation
percentage under Paragraph 2, Paragraph 3, Paragraph 5 and Paragraph 7 above
may be amended so as to remain in accordance with the terms and conditions of
reinsurances that inure to this Agreement, however, for Covered Underwriting
Year 2003 the Company’s Co-Reinsurance Participation percentage under Paragraph
2, Paragraph 3, Paragraph 5 and Paragraph 7 above shall be subject to a minimum
of 10%.


 


C.                                                             It
is understood and agreed that the resulting dollar amount to which the
Company’s Co-Reinsurance Participation will be applied under Paragraph 1,
Paragraph 2, Paragraph 3 , Paragraph 4, Paragraph 5, Paragraph 6, Paragraph 7
and Paragraph 8 above will be determined for each Covered Underwriting Year
subsequent to the determination of the CNIC / SNIC Covered Underwriting Year
Retention, and the Bristol West and Reliant Covered Underwriting Year Retention
for each Covered Underwriting Year.


 


3.               Article IX:
Inuring Reinsurance is revised to read as follows:


 


A.                                                           For
the purpose of determining the Ultimate Net Loss recoverable under this
Agreement, it is hereby agreed that all underlying reinsurances in effect as of
the inception date of this Agreement shall at all times during the currency of
this Agreement be deemed in place and in full effect whether purchased or not,
whether fully subscribed or not, whether collectible or not, for any reason
including, inter alia, insolvency, dispute, rescission, statute, or ruling
court of law.


 


B.                                                             It
is agreed and understood that the underlying term Quota Share reinsurance
underwritten by AXA Re shall be deemed in place and in full in effect as of the
inception date of this Agreement through and including December 31, 2002.
It is further agreed that the application of the aggregate reinsurance limit as
defined under Article V – Retention and Limit Paragraph D 3 of this
underlying term Quota Share agreement shall not be considered in the
calculation of the Company’s Ultimate Net Loss for this Agreement.


 


C.                                                             It
is agreed and understood that the underlying term Quota Share reinsurance
underwritten by GMAC Reinsurance Corporation and National Union Fire Insurance
Company of Pittsburgh, PA. shall be deemed in place and in full in effect as of
April 1, 2001 through and including June 30, 2002. It is further
agreed that the application of the aggregate reinsurance limit as defined under
Article XVI – Aggregate Reinsurance Limit of this underlying term Quota
Share agreement shall not be considered in the calculation of the Company’s
Ultimate Net Loss for this Agreement.


 


D.                                                            It
is agreed and understood that the underlying term Quota Share reinsurance
underwritten by Federal Insurance Company, Alea (Bermuda) Ltd. and National
Union Fire Insurance Company of Pittsburgh, PA. shall be deemed in place and in
full effect as of January 1, 2002 through and including December 31,
2004.  It is further agreed that the
application of the annual reinsurance limit and aggregate reinsurance limit as defined
under this underlying term Quota Share agreement shall not be considered in the
calculation of the Company’s Ultimate Net Loss for this Agreement.


 


4

















 


4.               Article XVII
– Commutation: shall be replaced in its entirety by the following:


 


A.                                                           Company
may request commutation of all Ultimate Net Losses for both reported and
unreported losses incurred under this Agreement on or after December 31,
2003, by giving Reinsurer no less than 30 days prior written notice, by
certified mail, stating therein the effective commutation date.


 


B.                                                             As
consideration for the commutation, it is agreed that the Reinsurer shall
release to the Company 100% of the positive amount of the Experience Account
balance computed as set forth in the EXPERIENCE ACCOUNT Article, and in no
event shall the Reinsurer’s obligation exceed the amount computed therein.


 


C.                                                             The
release of such amount by the Reinsurer to the Company constitutes a complete
and final release and discharge of the Reinsurer’s liabilities and obligations,
arising under or related to this Agreement, whether such liabilities and
obligations are known or unknown at the time of commutation.


 


Nothing
herein contained shall alter, vary or extend any provision or condition of this
Agreement other than as above stated.


 


* * * * * * *


 


5

















 


IN WITNESS WHEREOF the
parties hereto have caused this Endorsement to be executed in quadruplicate by
their duly authorized representatives.


 


 


COAST NATIONAL
INSURANCE COMPANY

SECURITY NATIONAL INSURANCE COMPANY

BRISTOL WEST INSURANCE COMPANY

RELIANT CASUALTY INSURANCE COMPANY


 


 


	
   

  	
    /s/
  Randy Sutton

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    Randy
  Sutton

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
    Treasurer

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attested:

  	
  Kathleen Mazotas

  	
   

  
						



 


 


INTER-OCEAN
REINSURANCE (IRELAND) LIMITED


 


 


	
   

  	
    /s/
  Anne Finn

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    Anne
  Finn

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
    President

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attested:

  	
  Caroline Carroll

  	
   

  
						



 


6

















 


DRAFT


 


ENDORSEMENT III


 


Attached to and forming
part of the Aggregate Excess of Loss Reinsurance Agreement (hereinafter
referred to as the “Agreement”) between COAST
NATIONAL INSURANCE COMPANY, a California corporation, SECURITY NATIONAL
INSURANCE COMPANY, a Florida corporation, BRISTOL WEST INSURANCE COMPANY of
Philadelphia, Pennsylvania and RELIANT CASUALTY INSURANCE COMPANY of
Independence Ohio (hereinafter and thereinafter collectively referred to as
“Company”) and INTER-OCEAN REINSURANCE (IRELAND) LIMITED, of Dublin, Ireland
(hereinafter and thereinafter referred to as “Reinsurer”).


 


It is
hereby understood and agreed by the parties hereto that effective as respects
business written on and after 12:01 a.m., Eastern Standard Time,
February 5, 2002, the Agreement is hereby amended in accordance with the
following:


 


The name of
Reliant Casualty Insurance Company as indicated in the description of the
“Company” in the Preamble has changed to Bristol West Casualty Insurance
Company; therefore, any reference in the Agreement to “Bristol West and Reliant”
shall hereinafter collectively be referred to as “Bristol West”.


 


Nothing
herein contained shall alter, vary or extend any provision or condition of this
Agreement other than as above stated.


 


IN WITNESS WHEREOF the
parties hereto have caused this Endorsement to be executed in quadruplicate by
their duly authorized representatives.


 


COAST NATIONAL
INSURANCE COMPANY

SECURITY NATIONAL INSURANCE COMPANY

BRISTOL WEST INSURANCE COMPANY

BRISTOL WEST CASUALTY INSURANCE COMPANY


 


 


	
   

  	
    /s/
  Randy Sutton

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    Randy
  Sutton

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
    Treasurer

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attested:

  	
    Kathleen
  Mazotas

  	
   

  
						



 


 


INTER-OCEAN
REINSURANCE (IRELAND) LIMITED


 


 


	
   

  	
    /s/
  Anne Finn

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    Anne
  Finn

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
    President

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attested:

  	
    Caroline
  Carroll

  	
   

  
						



 

















 


ENDORSEMENT IV


 


Attached to and forming
part of the Aggregate Excess of Loss Reinsurance Agreement (hereinafter
referred to as the “Agreement”) between COAST
NATIONAL INSURANCE COMPANY, a California corporation, SECURITY NATIONAL
INSURANCE COMPANY, a Florida corporation, BRISTOL WEST INSURANCE COMPANY of
Philadelphia, Pennsylvania and RELIANT CASUALTY INSURANCE COMPANY of
Independence Ohio (hereinafter and thereinafter collectively referred to as
“Company”) and INTER-OCEAN REINSURANCE (IRELAND) LIMITED, of Dublin, Ireland
(hereinafter and thereinafter referred to as “Reinsurer”).


 


It is
hereby understood and agreed by the parties hereto that effective as respects
business written on and after 12:01 a.m., Eastern Standard Time,
January 1, 2002, paragraph E has been added to Article IX – Inuring
Reinsurance and shall read as follows:


 


A.                                   For
the purpose of determining the Ultimate Net Loss recoverable under this
Agreement, it is hereby agreed that all underlying reinsurances in effect as of
the inception date of this Agreement shall at all times during the currency of
this Agreement be deemed in place and in full effect whether purchased or not,
whether fully subscribed or not, whether collectible or not, for any reason
including, inter alia, insolvency, dispute, rescission, statute, or ruling
court of law.


 


B.                                     It
is agreed and understood that the underlying term Quota Share reinsurance
underwritten by AXA Re shall be deemed in place and in full in effect as of the
inception date of this Agreement through and including December 31, 2002.
It is further agreed that the application of the aggregate reinsurance limit as
defined under Article V – Retention and Limit Paragraph D 3 of this
underlying term Quota Share agreement shall not be considered in the calculation
of the Company’s Ultimate Net Loss for this Agreement.


 


C.                                     It
is agreed and understood that the underlying term Quota Share reinsurance
underwritten by GMAC Reinsurance Corporation and National Union Fire Insurance
Company of Pittsburgh, PA. shall be deemed in place and in full in effect as of
April 1, 2001 through and including June 30, 2002. It is further
agreed that the application of the aggregate reinsurance limit as defined under
Article XVI – Aggregate Reinsurance Limit of this underlying term Quota Share
agreement shall not be considered in the calculation of the Company’s Ultimate
Net Loss for this Agreement.


 


1

















 


D.                                    It
is agreed and understood that the underlying term Quota Share reinsurance
underwritten by Federal Insurance Company, Alea (Bermuda) Ltd. and National
Union Fire Insurance Company of Pittsburgh, PA. shall be deemed in place and in
full effect as of January 1, 2002 through and including December 31,
2004.  It is further agreed that the application
of the annual reinsurance limit and aggregate reinsurance limit as defined
under this underlying term Quota Share agreement shall not be considered in the
calculation of the Company’s Ultimate Net Loss for this Agreement.


 


E.                                      It
is agreed and understood that the underlying term Personal Lines Automobile
Liability Excess of Loss Reinsurance Agreement, American Re-Insurance Company
placement slip number: 19443-0000, underwritten by American Re-Insurance
Company shall be deemed in place and full effect as of the inception date of
this Agreement through and including December 31, 2001, and shall not be
considered in the calculation of the Company’s Ultimate Net Loss for the 2002
and 2003 Covered Underwriting Years.


 


Nothing
herein contained shall alter, vary or extend any provision or condition of this
Agreement other than as above stated.


 


IN WITNESS WHEREOF the parties hereto have caused this
Endorsement to be executed in quadruplicate by their duly authorized
representatives.


 


COAST NATIONAL
INSURANCE COMPANY

SECURITY NATIONAL INSURANCE COMPANY

BRISTOL WEST INSURANCE COMPANY

RELIANT CASUALTY INSURANCE COMPANY


 


 


	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attested:

  	
   

  	
   

  
						



 


 


INTER-OCEAN
REINSURANCE (IRELAND) LIMITED


 


 


	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attested:

  	
   

  	
   

  
						



 


2

















 


ENDORSEMENT V


 


Attached to and forming
part of the Aggregate Excess of Loss Reinsurance Agreement (hereinafter
referred to as the “Agreement”) between COAST NATIONAL INSURANCE COMPANY, a California
corporation, SECURITY NATIONAL INSURANCE COMPANY, a Florida corporation,
BRISTOL WEST INSURANCE COMPANY of Philadelphia, Pennsylvania and BRISTOL WEST
CASUALTY INSURANCE COMPANY of Independence Ohio (hereinafter and thereinafter
collectively referred to as “Company”) and INTER-OCEAN REINSURANCE (IRELAND)
LIMITED, of Dublin, Ireland (hereinafter and thereinafter referred to as
“Reinsurer”).


 


I       Effective as respects business written on
and after 12:01 a.m., Eastern Standard Time, January 1, 2003, the
following Articles in the Agreement are hereby amended as follows:


 


1.               Paragraphs A and B
of Article VI – Reinsurance Limits are revised to read as follows:


 


A.                                   The
Reinsurer shall not be liable for Ultimate Net Losses hereunder until Company’s
Underwriting Year Loss and LAE Ratio exceeds the amounts set forth herein
(“Company Retention”)


 


B.                                     The
Company Retention for Underwriting Year 2003 will be equal to a 59.00%
Underwriting Year Loss and LAE Ratio.


 


2.               Article VII –
Co-Reinsurance is revised to read as follows:


 


A.                                   For
Covered Underwriting Year 2003, the Company shall retain net for its own
account the following Ultimate Net Loss amounts in excess of the Company
Retention (hereinafter Company’s Co-Reinsurance Participation):


 


1.               10% of:


 


a)              The
lesser of the Quota Share Loss Corridor Attachment Point or the 2003 Covered
Underwriting Year Loss and LAE Ratio, less


b)             The
2003 Covered Underwriting Year Retention, multiplied by


c)              The
2003 Covered Underwriting Year NWP, plus


 


2.               If
the 2003 Covered Underwriting Year Loss and LAE Ratio exceeds the Quota Share
Loss Corridor Attachment Point, 60% of:


 


a)              The
2003 Covered Underwriting Year Loss and LAE Ratio, less


b)             the
Quota Share Loss Corridor Attachment Point, multiplied by


c)              The
2003 Covered Underwriting Year NWP.


 


[LOGO]


 


1

















 


For
purposes of determining the Company’s Co-Reinsurance Participation, the Quota
Share Loss Corridor Attachment Point shall be defined as the greater of 70% or
80% less Unallocated Loss Adjustment Expenses for Covered Underwriting Year
2003.  The definition of Unallocated
Loss Adjustment Expenses shall be the same as the definition of Unallocated
Loss Adjustment Expenses in the underlying term Quota Share reinsurance
agreement referenced in Article IX - Inuring Reinsurance Paragraph D, of
this Agreement.


 


Nothing herein contained
shall alter, vary or extend any provision or condition of this Agreement other
than as above stated.


 


IN WITNESS WHEREOF  the parties hereto have caused this Endorsement
to be executed in quadruplicate by their duly authorized representatives.


 


COAST
NATIONAL INSURANCE COMPANY

SECURITY NATIONAL INSURANCE COMPANY

BRISTOL WEST INSURANCE COMPANY

BRISTOL WEST CASUALTY INSURANCE COMPANY


 


	
   

  	
    /s/
  Randy Sutton

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    Randy
  Sutton

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
    CFO

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
    4/25/03

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attested:

  	
    /s/
  [ILLEGIBLE]

  	
   

  
						



 


 


INTER-OCEAN
REINSURANCE (IRELAND) LIMITED


 


	
   

  	
    /s/
  Anne Finn

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    Anne
  Finn

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
    President

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
    22nd
  April 2003.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attested:

  	
    Caroline
  Carroll

  	
   

  
						



 


2